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High Court Appeals Nos. 22 and 27 of 1986, decided on 2nd September,1987.
‑ ‑‑ Arbitration‑ ‑Partner does not enjoy an implied authority to make a reference to arbitration on behalf of other partners in 'the absence of authorisation under the partnership deed or otherwise in accordance with law or the nature of the business should be such that arbitration is incidental or part of day‑to‑day business.
Abdul Ghani and others v. Siraj ud Din and others A I R 1939 Lah. 154; Diwan Chand v. The Punjab National Bank Ltd., Sialkot Branch A I R 1932 Lah. 291 and Rejendra Prosad v. Panna Lal‑Champa Lal and another A I R 1932 Cal. 343 ref.
‑‑‑ Arbitration‑‑‑ Agreement to refer dispute to arbitration not signed by all the partners of the firm‑‑Such agreement, held, would not supersede a partnership deed which inter alia contained an arbitration clause.
‑‑‑Arbitration‑ ‑Husband has no implied authority to sign arbitration agreement on behalf of wife‑‑All the partners not party to arbitration agreement‑‑ Award liable to be set aside.
Mst. Shamim Akhtar v. Najma Baqai and 3 others 1977 SCMR 409 distinguished.
‑‑‑S. 2 (a) ‑‑Constitution of an arbitration agreement‑‑Requirements.
There is no legal requirement that in order to constitute an arbitration agreement, there should be a formal agreement executed by the parties but what is required is that the agreement should be in writing, which may be in the form of a letter or other document provided it depicts the voluntary agreement between the parties to resolve present or future differences through arbitration.
‑‑‑Reference to uneven number of arbitrators‑ ‑ Appointment of an umpire was not a legal requirement in such a case.
‑‑‑Award‑‑When award is to be filed by an arbitrator or an umpire or on his behalf there is no time limit for filing the same.
‑‑‑ Expert's opinion‑ ‑Arbitrators are entitled to consult any person after notice to the parties and in case arbitrators wish to rely upon the opinion of an expert on a matter in dispute they are bound to provide an opportunity to the parties to refute the view expressed by the expert.‑‑[ Evidence].
‑‑‑ Award‑‑Where award was written on a plain paper and not on the requisite non‑judicial stamp "paper Court, held, could impound the award and could get the stamp duty paid as such a defect was curable.
Khalid M Ishaque for Appellants.
Muhammad Arif , Shafat Hussain and Z.U. Ahmed for 'Respondents.
Dates of hearing: 24th, 26th and 27th August, 1987.
.‑‑By this common judgment, we intend to dispose of the above High Court Appeals as they are directed against a common judgment dated 10th December, 1985 passed by a learned Single Judge of this Court in Suit No.1310 of 1980. High Court Appeal No.22 of 1986 has been filed by 10 appellants against 8 respondents, whereas High Court Appeal No.27 of 1986 has been filed by one appellant against 17 respondents.
2. The brief facts leading to the filing of the above appeals are that there is a family known as Neemwala family, which had 6 registered partnership firms, having mostly different partners in each of the partnership firms but belonging to the above Neemwala family. Each of the partnership deed has an independent arbitration clause, with some slight variations. It appears that some differences arose between the parties. On 18‑4‑1979 a document in 'Gugratil on a plain paper was executed under the caption Ikhtiarnamal appointing 5 persons as "Punch". The above document was signed by three persons allegedly on behalf of their respective families. The English version is at page 237 of the High Court Appeal No.22 of 1986. As it will have some bearing on some of the submissions made by the learned counsel for the parties, it may be advantageous to reproduce the same, which reads as follows:‑
Dated18‑4‑1979.
We the partners or shareholders of Neemwala Family have appointed the following five members as 'Punch' who will decide about our differences and shares. Their decision will be binding on all the family members of Neemwala Family.
(1) Haii Ilyas Dhabojiwala 1987
(2) Haji Usmanji Sethjiwala
(3) Haji Usmanji Tankiwala
(4) Dawood Haji Allah Bux
(5) Ahmed Bux Shakir
All the five members will remain present upto the distribution of Factory, shops and houses.
Names and signatures of Neemwala Family.
(1) Haji Ilyasji Essaji Sd/
(2) Haji Ahmedji Usmanji Sd/‑
(3) Abdul Karim Yaqoobeji Sd/‑
It further appears that 4 punches gave their decision on 5‑5‑1978. The fifth punch did not sign the same on account of dis‑agreement with the other punches. It may be observed that respondents Nos. 6 and 7, ' who are contesting respondents have denied the factum of giving of the above decision by the aforesaid 4 punches. Their version is that respondent No.6 filed suit No.586 of 1980 on 5‑6‑1980 for dissolution of the partnership firm, namely, Pakistan Dying and Printing Mills and obtained an ad interim injunction on 7‑6‑1980 and got the same served on the appellants. Whereupon, the appellants filed an application under section 34 of the Arbitration Act in the aforesaid suit. After that on 25‑8‑1980 the alleged award was filed in the Court after allegedly fabricating the same. Be that as it may, the above award was registered as suit No.1310 of 1980. Respondents Nos.6 and 7 filed the objections to the award and no other party filed any objection.
Learned Single Judge after hearing the objections passed the above judgment dated 10th December, 1985 setting aside the award inter alia on the following grounds:‑--
(i) One of the arbitrators did not participate in the arbitration proceedings.
(ii) That an Umpire was not appointed.
(iii) That the valuation of the factory of Pakistan Dying and Printing was‑ left to the 3rd persons instead of assessing the same themselves.
The appellants being aggrieved by the above judgment have filed the above two appeals as stated hereinabove.
3‑A. In support of the above appeals Mr. Khalid M. Ishaque, Advocate assisted by Mr. Arif Hussain, Advocate, who has appeared in High Court Appeal No.27 of 1986 has urged as follows:‑----------
(i) That all the arbitrators participated in the arbitration proceeding and, therefore, the award was valid.
(ii) That there was no requirement of appointing an umpire by the arbitrators.
(iii) That there was no period of limitation prescribed for filing of an award by the arbitrators and in the instant case the award was filed at the direction of the arbitrators by Haji Ahmed one of the parties to the arbitration, it was not barred by time.
(iv) That the arbitrators had not left the valuation to the 3rd persons but have carried out the same themselves though they had consulted the experts.
(v) That the learned Single Judge was not justified in setting aside the award.
3‑B. On the other hand Mr. Z.U. Ahmed, Advocate, assisted by Mr. Shafat Hussain, Advocate has contended as under:‑---
(i) That in addition to the grounds found favour with the learned Single Judge for setting aside the award, the award was also liable to be set aside on the following grounds:
(1) That admittedly respondent No.7 was not a party to the arbitration agreement, her husband could not have signed the alleged arbitration agreement on her behalf.
(2) That the alleged arbitration agreement was not signed by all the 18 partners and, therefore, is not binding.
(3) That there was in fact no arbitration agreement apart from the arbitration clauses in the partnership deeds and the document relied upon by the appellants could have been at the most construed as a document authorising mediation.
(4) That the award was not on a stamp paper and, therefore, could not have been accepted.
4. In our view, it will be appropriate to take up the above first and second submissions made by Mr. Z.U. Ahmed as the same go to the root of the matter. It may be observed that before the learned Single, Judge respondent No.7 had inter alia raised the plea that she had not entered into any arbitration agreement nor she had authorized her husband in this behalf but the learned Single Judge did not accept the above contention and held that normally in our society the women do not have any say in the matters, and their affairs are managed by the male members. He, therefore, has held that the above agreement is binding on respondent No.7.
It may be observed that respondents Nos. 6 and 7 have filed objections to the appeals though have not filed formal cross‑objections under Order 41 Rule 22 C.P.C. However, it may be stated that it is open to a respondent to support the judgment in view of Order 41 Rule 22, C.P.C. even on a ground which might have been decided against him by the trial Court. We, have therefore, examined the above submission. It may be mentioned that respondent No.6 is the husband of respondent No.7. The former is a partner in two firms out of the 6 partnership firms in question, whereas respondent No.7 is a partner in one firm out of the above 6 firms, which is a different firm from the two firms in which her husband, respondent No.6, is a partner. Each of the partnership is a registered partnership containing a separate arbitration clause. We are unable to agree with the learned Single Judge that respondent No.6 being the husband of respondent No.7 could have signed the arbitration agreement on her behalf though he was not even a partner in the partnership in which respondent No.7 was one of the partners. In our view, in law respondent No.7 has an independent legal status. An husband does not enjoy any implied authority to bind his wife in respect of her individual property without having any authority from her. It may be pointed out that even a partner in a registered firm does not have an implied authority to bind the other partners as to an arbitration reference.
Mr. Z. U. Ahmed has referred to the following cases in furtherance of his above submission:
(i) Abdul Ghani and others v. Siraj‑ud‑Din and others A I R 1939 Lah. 154, in which a learned Single Judge of the Lahore High Court held that reference to arbitration in a pending suit without joining one of the partners to the reference though he was a party to the suit, was not valid and, therefore, the award was invalid.
(ii) Diwan Chand v. The‑Punjab National Bank Ltd., Sialkot Branch A I R 1932 Lah. 291. In the above case a learned Single Judge of the Lahore High Court held that one partner of a firm cannot enter‑into an agreement to refer on behalf of the firm unleg5s all parties join in it.
(iii) Rajendra Prosad v. Panna Lal‑Champa Lal and another A I R 1932 Cal. 343, in which a Division Bench of the Calcutta High Court held that it is not a part of the authority of one partner of firm to refer a suit to which the firm is a party to arbitration. His prima facie authority does not extend so far.
5. We are inclined to hold that even a partner does not enjoy a n implied authority to make a reference to arbitration on behalf of the other partners in the absence of authorization under the partnership deed or otherwise in accordance with law or the nature of the business should be such that arbitration is incidental or part of day‑to‑day business. In the instant case as pointed out hereinabove, respondent No.6 is one of the partners in two different firms, whereas respondent No.7 is a partner in a different firm, namely, M/s. Aziz Corporation, which has altogether 3 partners including respondent No.7 (the other two partners are Abdul Aziz son of Haji Ahmed and Muhammad Yaseen son of Haji Ilyas). The partnership deed is dated 2nd February, 1973 and is at page 229 of the first appeal, which contains clause 15 providing arbitration, which reads as follows:‑--
"That in case of any difference or dispute among the partners either during the continuance of the partnership or after the dissolution the same shall be referred to three arbitrators to be appointed by the partners, each partner appointing one arbitrator, whose decision shall be binding upon all the partners. In case of disagreement among the arbitrators, the same dispute shall be referred to an Umpire to be nominated by all the arbitrators jointly, whose decision shall be final and binding upon all the parties."
None of the above 3 partners is signatory to the above quoted Iqrarnama under which the arbitration was held. It is true that two of the above three partners have not filed any objection to the award but this fact alone would not debar respondent No.7 from raising the above plea. We are inclined to hold that the above Iqrarnama has not superseded the above partnership deed which inter alia contains an arbitration clause. It is also an admitted position that at no point of time 5 punches issued notice to respondent No.7 in relation to the alleged arbitration reference.
We are, therefore, of the view that the award is liable to e set aside inter alia on the ground that respondent No.7 was not a party to the alleged arbitration agreement and respondent 'No.6 as her husband had no implied authority to sign the same.
6. Adverting to the submission that the above quoted Iqrarnama has not been signed by all the partners and, therefore, cannot be an arbitration agreement, it may be pertinent to refer to clause (a) of section 2, which define 'arbitration agreement' as follows:
'Arbitration Agreement' means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not."
In order to constitute a binding arbitration agreement the following two ingredience must be present:
(i) written agreement.
(ii) for submission of present or future differences to arbitration.
In the present case Iqrarnama is a written document but is not signed by all the partners of this firm. The learned Single Judge has relied upon the case of Mst. Shamim Akhtar v. Najma Baqai and 3 others, reported in 1977 S C M R 409, in which the Honourable Supreme Court while construing section 2(a) of the Arbitration Act held that arbitration agreement means written agreement to submit present or future differences to arbitration and that neither naming of the arbitrator nor the signing of the agreement was required as long as its terms and conditions are readily ascertainable and that the arbitration was freely agreed to between the parties. In the above Supreme Court's case, two letters written by the parties were accepted as the arbitration agreement in terms of the above quoted section 2(a) of the Arbitration Act. In the present case we have already held hereinabove that respondent No.7 had not agreed to arbitration and that her husband had no authority to enter into arbitration agreement on her behalf and, therefore, the above case is not applicable. However, we may observe that there is no legal requirement that in order to constitute an arbitration agreement, there should be a formal agreement executed by the parties but what is required is that the agreement should be in writing, which may be in the form of a letter or other document provided it depicts the voluntary agreement between the parties to resolve present or future' differences, through arbitration.
7. As regards Mr. Z.U. Ahmed's contention that in fact the above quoted document is in the nature of mediation agreement and not an arbitration agreement, it may be observed that he has referred to the case of Ch. Muhammad Saleem and others v. Muhammad Akram and others, reported in P L D 1971 S C 516, in which the Honourable Supreme Court has held that a retired Deputy Commissioner, who was referred a dispute relating to Agricultural land was in fact acting as a mediator and not an arbitrator. Since we have already held hereinabove that the arbitration agreement was not valid for the aforesaid reason, it is not necessary for us to record any finding on the above submission. But it will suffice to observe that it is a debatable point, whether the above Iqrarnama can be construed as an arbitration agreement in supersession of six arbitration clauses of six registered partnership firms. It may be pointed out that the above document defines five persons named therein as punches and not as arbitrators. Furthermore, it requires that all the five punches should remain present upto the time of the distribution of factory, shops and houses.
8. Adverting to Mr. Khalid M. Ishaque's first contention that all the arbitrators have participated in the arbitration proceedings, it may be observed that he has referred to the diaries maintained by the arbitrators which indicate that the parties suggested the names of two firms for assessing the value of the factory in dispute but the punches in addition to consulting the two firms named by the parties had also consulted a 3rd firm namely M/s. Mohammadi Weaving and Printing and thereafter on 18‑5‑1979 as per diary of the above date, the punches estimated the value of the factory with land, building, machinery etc. at Rs.30,50,000. There is also a separate document of the above date signed by 5 punches about the above valuation of the factory in question. After the above date the punches met thrice on 16‑6‑1979, 30‑6‑1979 and 5‑7‑1979. On the last date 4 punches gave their decision as the 5th punch did not agree with them. It may be observed as per above diaries all the 5 punches were present on the various dates though the diaries are not signed by any of the punches or any of the partners. We may observe that been if we were to hold that all the 5 punches participated in the arbitration proceeding and that the above Iqrarnama was an arbitration agreement, the award could not have been given by 4 arbitrators as the contents of the above quoted Iqrarnama indicate that the parties intended that there should be a unanimous decision, which was to be implemented by all the, 5 punches personally. They were to remain present upto the distribution of the factory, shops and houses as pointed out hereinabove. The last but one para of the above Iqrarnama may again be quoted for ready reference which reads as follows:‑---
"All the five members will remain present upto the distribution of factory, shops and houses."
It is; therefore, evident that the above award is not in terms of the above Iqrarnama.
9. As regards the second submission of Mr. Khalid M. Ishaque, Advocate that there was no requirement to appoint an umpire, it may be observed that in the arbitration clauses contained in 6 partnership deeds, there is a requirement of the appointment of an umpire. No such requirement is mentioned in the above quoted Iqrarnama. Para 2 of the first schedule to the Arbitration Act provides that if the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments. In the instant case as per the aforesaid Iqrarnama, the reference was to an un‑even number and, therefore, there was no legal requirement to appoint an umpire if it is to be held that above Iqrarnama was valid and binding and was in supersession of the arbitration clauses in the partnership deeds.
10. Reverting to Mr. Khalid M. Ishaque's submission that there was no delay in the filing of the above, we may observe that if the award is to be filed by an arbitrator or an umpire or on his behalf there is no time limit provided for filing of the same. In the instant case from the document on record, it is evident that Haji Ahmed was authorised by the 4 punches to file the award in the Court which he did on 25‑10‑1980. The above contention of Mr. Khalid M. Ishaque seems to be correct. The award was not filed after the expiry of the limitation period.
11. As regards the last submission that the arbitrators have not delegated their power but consulted the experts on the question of valuation, it may be observed that the arbitrators are entitled to consult any person after notice to the parties and in case they wish to rely upon the opinion of an expert on a matter in dispute they are bound to provide an opportunity to the parties to refute the view expressed by the expert. In the present case, the arbitrators could consult the 3 owners of 3 dying and printing mills as to the valuation of the dying and printing mill in question, but in our view they were bound to provide an opportunity to the parties concerned to place on record any material contrary to the valuation given by the above 3 owners. This was not done. No opportunity was given to any of the parties to produce any material on the valuation of the above mill.
12. Adverting to Mr. Z.U. Ahmed contention's that the award was invalid as it was on a plain paper and not on the requisite non‑judicial stamp paper, it may be observed that the Court can impound the above award and can get the stamp duty paid. The above defect is curable.
13. The upshot of the above discussion is that we are inclined to maintain the judgment under appeal though on some what different reasonings on certain points referred to hereinabove. The appeals, are, therefore, dismissed but there will be no order as to costs.
M. B. A. /49/ H‑K Appeals dismissed.
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