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First Appeal Order No. 95 of 1974, decided on 21st February, 1983.
‑‑ Construction of documents‑Precedents‑Perusal of one document in one precedent, held, cannot be of much help in construing other docu ments unless such precedent enunciates some general principles or explains meaning of some technical terms.
Robinson v. Evans 1873 43 L J Ch 82 and Ogdens Ltd. v. Nelson (1905) A C 109 rel.
‑‑ Ss. 2 & 20‑"Arbitration agreement"‑Requirements ‑‑Arbitration clause in contract, held, to be construed keeping in view intention of parties and setting in which its words are placed.‑[Interpretation of documents].
Nawab Din v. The Punjab Province P L D 1957 (W. P.) Lab. 597 ; Muhammad Ishaque Qureshi v. Azad J & K Government P L D 1962 Azad J & K 1 and Messrs Gabole Brothers v. Government of Pakistan P L D 1972 Kar. 515 ref.
‑‑ Ss. 2 & 20‑Arbitration agreement‑Arbitration clause‑Work order for supplying material issued under signature of Deputy Chief Engineer of company containing a clause to effect that in case of dis pute order of Deputy Chief Engineer would be final‑Contention that such clause demonstrating intention of parties to refer their disputes to decision of Deputy Chief Engineer as arbitrator, held not acceptable‑Conferring such a status on signatory of work order duties assigned to him, held, must include performance of function of judicial nature and giving of a decision upon evidence laid before him‑Position of Deputy Chief Engineer like that of an engineer under whose supervision a contract performed particularly when he happened to be an employee of one of contracting parties‑Engineer in such cases in delivering his decision on questions regarding specifications of material or other allied matters is not expected to discharge judicial function‑Even if his decisions between con tracting parties characterised as final and by what ever name he is described he necessarily does not become an arbitrator‑Necessary in gredient of reference to arbitration namely working out of judicial inquriry in a judicial manners missing‑Order of Deputy Chief Engineer conclusive in his capacity as engineer and not as arbitrator'.
Macnaghten v. Rameshwar Singh 30 C. 831 ; Hormusji and Daruwalla v. District Local Board A I R 1934 Sind 200 and Des Ram v. Sect of State A 1 R 1936 Sind 201 rel.
Raja Muhammad Akram for Appellant.
Ch. Mohammad Tufail Basra for Respondent.
Date of hearing : 21st February, 1983.
These 9 cases (F. A. O. No. 95/74 and C. R. Nos. 297/75 to 6303/75 which. involve similar questions of facts and law are disposed of through this single judgment which shall remain on the file of F. A. O. No. 95 of 1974.
2. The facts are that in each case, in pursuance of a written work order, the respondents supplied certain building materials to Messrs Con force Limited (hereinafter called the appellant). The work orders were issued under the signatures of Mr. S. I. H. Shah the then Deputy Chief Engineer of the appellant Company. These work orders embody the description of the material and other conditions of supply. Clause (6) there of is reproduced below :‑
"In case of dispute the order of the undersigned will be final." It appears that regarding the payment of the cost of the materials some dis putes arose between the parties. On the assumption, that this clause cons titutes an arbitration agreement, the respondents moved the Civil Court under section 20 of the Arbitration Act, for a direction that the arbitration agreement be filed in the Court and a reference made to the Deputy Chief Engineer of the Company, requiring him to make his award.
3. The appellant contested the application and inter alia urged that the clause relied upon by the respondent could not be categorized as arbitration clause. This plea was turned down by the Civil Court and the respondent's application allowed.
4. Against the orders of the Civil Court, on the basis of valuation, in 7 cases the appellant went in revision before the learned District Judge and in one case preferred an appeal before this Court. The learned Additional District Judge, who heard the revision petitions, was of the view that this clause was reflective of the intention of the parties, to get their disputes decided through arbitration. The revision petitions filed by the appellant were thus dismissed on 1st February 1975.
5. T have heard the learned counsel for the parties and examined the record. The sole point requiring determination is as to whether or not the clause of the work order reproduced above, can be regarded as an arbitration agreement. The expression "arbitration agreement" as defined in section 2 (a) of the Arbitration Act means : ‑
"A written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not."
In this respect, the learned counsel for the appellant argued that clause (6) was like the one usually incorporated in the building contracts, describing the decision of the Building Engineer, in certain matters as final, not in his capacity as an arbitrator, but on account of his skill and knowledge of that subject. He submitted that the essential characteristic of an arbitration agreement is that it must contemplate a judicial determination and the per son to whom the dispute is referred to, is required to hold an inquiry to decide the same. He went on to argue that it was never intended that the Deputy Chief Engineer, of the appellant‑Company, would decide the matter by conducting an inquiry of judicial nature and that, therefore, the Courts below fell in error, in considering clause 6 of the work order, as an arbitration agreement.
6. On behalf of the respondent, his learned counsel adopted the reasoning which influenced the decision of the learned Courts below. He con tended that it was not necessary that a formal arbitration agreement should have been drawn between the parties. According to him the arbitration agreement as envisaged of clause 6, may be gathered from any writing of the parties, if from such writing their intention to get the dispute settled through arbitration, is discernible. In his submission, clause 6 (supra) amply demonstrates the intention of the parties to refer their disputes, to the deci sion of the Deputy Chief Engineer, as arbitrator, now substituted by another arbitrator, by the trial Court. For his these submissions he heavily relied on Nawab Din v. The Punjab Province (P L D 1957 (W. P.) Lah. 597), Muhammad lshaque Qureshi v. Azad J & K Government (P L D 1962 Azad J & KI) and Messrs Gabole Brothers v. Government of Pakistan (P L D 1972 Kar. 515).
7. Before proceeding further it appears appropriate to examine the precedents referred to on behalf of the respondent. The Lahore judgment was delivered in the case of a building contract, which clearly embodied a clause to the effect that the disputes arising between the parties would be referred to the Superintending Engineer whose order shall be final. It is to be seen that in the precedent case, the parties were not at variance as to the nature of the clause, and treated the same as an agreement for decision of their disputes through arbitration. As a matter of fact, the real controversy between them was as to whether or not in the presence of the said clause, qua section 34 of the Act, the Civil Court had jurisdiction to hear the suit. The next precedent from the Azad Jammu and Kashmir jurisdiction, relates to a case of the Forest Department, in which too there was no dispute on the existence of the arbitration agreement. The Chief Conservator of Forests was the named arbitrator. 'The appellant before the Court, however, objected to the acting of department's official as an arbitrator but his objection was turned down and it was maintained that when an employee of one of the parties is agreed upon by them as an arbitrator, subsequently, the other party cannot be allowed to resile from the agreement and question such nomination. As regards the Karachi ruling, in a money suit filed against the Government of Pakistan, the latter applied to the Court under section 34 of the Arbitration Act, and this decision largely embraces the discussion on the scope thereof. This ruling as well the other two precedents, do not render any assistance, in solving the controversy emanating in this case.
8. The learned counsel for the appellant has also cited some precedents at the bar, but it is to be remembered that while deciding a case like the one in hand, which essentially rests on the consideration of the language used in A. clause 6' in the context in which it occurs, the perusal of one document in one precedent, cannot be of much help in construing other documents, unless as was said in Robison v. Evans ((1873) 43 L J Ch. 82) such precedent enunciates some general principles or explains the meaning of some technical terms. Lord Macnagh ten in Ogdens Ltd. v. Nelson (1905 A C 109) observed : ‑
"I entirely agree with the Lord Chancellor, that cases on the construc tion of other contracts do not help us at all in this matter."
9. It is true that the definition of the term "Arbitration Agreement" only requires a written agreement, which need not be incorporated in a, formal document and may be evidenced by a variety of ways, including the incorporation of a clause in a contract. Such clause is, however to be construed keeping in view, the intention of the parties and the setting in which its words are placed. The work order incorporating clause 6, contains the specifications of the materials together with the conditions of supply. It is signed by Mr. S. I. H. Shah as Deputy Chief Engineer of the appellant‑Company. I do not think that he was intended to be clothed with the status of an arbitrator. No doubt, the intention of the parties to have their disputes concluded by his decision is there, but that by itself would not constitute clause 6 as an arbitration clause. Here, I agree with the appel lant 's learned counsel that for conferring such status on the signatory of the work order, the duties assigned to him must include the performance of functions of judicial nature and giving of a decision upon the evidence laid before him. Such a position however, does not obtain in the instant case.
10. To me the position of Mr. S. I. H. Shah, appears to be like that of an architect or an engineer under whose supervision a contract is performed, particularly, when such engineer happens to be an employee of one of the contracting parties. In such like cases, the engineer in delivering his deci sion, on the questions regarding specification of the material or other allied matters, is not expected to discharge judicial functions. Even if his deci sion between the contracting parties, is characterised as final, and by what ever name he is described, he necessarily does not become an arbitrator. To elucidate this point, I may refer here to Machaghten v. Rameshwar Singh (30 Cal. 831) in which the decision given on the basis of the following clause :‑
"At the expiration of the period of the lease, in the event of a new lease not being given, the said lessor shall be at liberty to resume direct possession of the land demised, and to take over all the buildings then standing thereon at a 'valuation arrived at by three arbitrators." contained in the lease‑deed was not considered as an award, in con templation of section 525 of C. P. C. of 1882. Again in Hormusji and Daruwalla v. District Local Board, Karachi A I R 1934 Sind 200 the clause in the agreement provided "The President of the Board will be the Judge for (interpretation) of the meaning and intention of the contract and for any complaint (grievance) which the contractor may have and his decision will be considered final."
On examination of considerable case law and authorities on the subject, it was maintained that this clause did not constitute an arbitration agreement and the test laid down was that the parties must have intended to have their disputes determined in a quasi‑judicial manner. This judgment was followed in Des Ram v. Secy. of State (A I R 1936 Sind 201) wherein a contract between the Secretary of State and the applicant before the Court, included a clause to the effect that .‑
"Except where otherwise specified in the contract, the decision of the Superintending Engineer of the Division for the time being shall be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specification, designs, drawings, and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter of things, whatsoever in any way arising out of, or relating to, the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the works, or the execution or failure to execute the same, whether arising, during the progress of the work., or after the completion or abandonment thereof, or the contract by the con tractor, shall be final, conclusive and binding on the contractor."
The contention that this clause constituted a submission within the meaning of section 4 of the Arbitration Act, 1899, was repelled and it was held :‑
It is well‑settled that a mere agreement between two persons to be concluded by the decision of a third does not by itself constitute such third person an arbitrator. To give him that character it should be intended that such third person should determine the disputes in a quasi‑judicial manner."
In Hudson's Building and Engineering Contracts (10th Edition) it is laid. down :‑
"It is important to distinguish between arbitrations, on the one hand, and valuations, appraisements and certificates, on the other since in the latter cases the provisions of the Arbitration Acts are not applic able. If a person is appointed owing to his skill and knowledge of the particular subject, to decide any questions, whether of fact or of value, by the use of his skill and knowledge and without taking any evidence or hearing the parties, he is not, prima facie, an arbitrator."
11. On perusal of clause 6 in the light of these authorities and the law on the subject, 1 feel, that in this case the necessary ingredient of re ference to arbitration, namely, working out of judicial inquiry, in a judicial manner, is missing and the order of the Deputy Chief Engineer is made conclusive, in his capacity as an engineer and not as an arbitrator. The, view taken by the Courts below thus, cannot be upheld.
12. For the foregoing reasons the impugned orders are set aside, the appeal as well as the revision petitions are accepted and the respondent's application under section 20 of the Arbitration Act dismissed but .in the circumstances of the case, I am persuaded to leave the parties to bear their) own costs. ,
Appeal and Revision Petition accepted.
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