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Capt. ANWAR KHAN and another--Defendants

Suit No. 119 of 1986, decided on 7th April, 1987.

---Ss. 16, 20 a 30-Award--Objections--None of the parties taking objection to jurisdiction of Arbitrator or maintainability of the claims which were admittedly beyond the scope of the agreement and not within jurisdiction of the Arbitrator in terms of arbitration agreement but Arbitrator taking objection suo motu and refusing to adjudicate upon those disputes--Arbitrator, held, should have seen that the parties had willingly and without any objection submitted their dispute beyond the scope of agreement and had proceeded till the end and, therefore, he ought not to have refused to adjudicate upon such dispute--Defendants having not objected to the findings and part of award of Arbitrator given in favour of plaintiffs, such part of award directed to remain valid and enforceable--Award remitted to Arbitrator to decide unadjudicated claim of plaintiffs and counter-claim of defendants.

Fire and General Insurance Co. v. Union of India and others AIR 1956 Cal. 11 and Pratabmull v. K.C. Sethia AIR 1960 Cal. 702 ref.

Mehmoodul Hassan and S.A.

Nizami for Applicant.

Muhammad Sharif for Opponents.

Date of hearing: 7th April, 1987.

The plaintiff and the defendants had entered into a licence agreement, dated 28-4-1970 whereby the defendants were granted the right and liberty to establish and run the business in the premises consisting of two rooms, passage, lavatory on the first floor and one room and parking space in the steel hanger on terms and condition.. mentioned therein. The licence agreement contained an arbitration clause in the following terms:--

"Any dispute, question or difference between the parties hereto or touching their respective rights, duties or liabilities under or in respect of these presents shall be referred to the Director General of Civil Aviation of Pakistan whose decision shall be final and binding on the parties."

The plaintiff claimed that licence fee was not paid by the defendants and ultimately it cancelled the licence and removed the aircraft of the defendants to another parking place. The defendants on the other hand claimed that their licence was illegally cancelled and that due to the wrongful act of the plaintiff they have suffered loss and damage. An Arbitrator was appointed but his authority was revoked and by order dated 9-4-1978 Mr. S.A. Nizami was appointed as the Sole Arbitrator by the Court. The plaintiff filed its claim before the Arbitrator. The defendants replied the claim and also filed a counter-claim. The issues were framed and evidence was recorded by the learned Arbitrator. The parties even submitted written arguments before the learned Arbitrator. During the course of hearing the learned Arbitrator first made an interim award on 28-2-1982 authorising the Deft. No. 1 to remove his aircraft lying at the airport to a place of his choice, but it seems that the defendants did not remove it. The final award was made on 22-6-1986. The plaintiff had claimed the licence fee, the parking, housing, electricity and water charges and telephone charges. The learned Arbitrator awarded that licence fee of Rs.98,015 is payable by the defendants. However, the claim for parking, landing and housing charges were considered to be outside the purview of the agreement, and therefore, the learned Arbitrator did not adjudicate upon it. The learned Arbitrator however awarded telephone, electricity and water charges. The total amount awarded against the defendants is Rs.1,12,108.48. Likewise, the defendants counter-claim in the sum of Rs.35,50,000 was also not adjudicated by the learned Arbitrator on the ground that the claim is based on the allegation that the plaintiff has committed misfeasance resulting in damages to the defendants and also on the basis that the plaintiff has not renewed the licence of the aircrafts and left them in open which has rendered them unairworthy. According to the learned Arbitrator this dispute was not within the scope of the arbitration class, and therefore no adjudication was made. The defendants have filed objections to the award but no objection has been filed by the plaintiff.

Mr. Muhammad Sharif the learned counsel has contended that the claim and counter-claim of the parties were inter-dependent and refusal to adjudicate on counter-claim was a legal misconduct on the part of the learned Arbitrator. The claim and counter-claim are two separate proceedings, and were made independent of each other. It is possible that the averments regarding counter-claim may have reference to the licence agreement between the parties, but surely it does not arise out of the agreement. I do not think that the manner in which Mr. Sharif has put it, it will amount to misconduct on the part of the learned Arbitrator.

The learned counsel for the defendants contended that in view of filing the claim and counter-claim by the parties and their conduct before the Arbitrator, a fresh submission was made before him to adjudicate upon those disputes which were outside the scope of the arbitration agreement. This contention of the learned counsel pre-supposes that the dispute relating to counter claim was not within the scope of the agreement, otherwise there was no question of making a fresh submission by the parties. In this regard it is to be noted that first the plaintiff included in his claim such disputes which were beyond the scope of the agreement. Thereafter the defendants not only replied but filed a counter-claim in respect of dispute which was not covered by the agreement. None of the parties made any objection to such claims. The parties examined their witnesses, their counsel addressed arguments and even written arguments were submitted. At no stage any of the parties objected to the jurisdiction of the Arbitrator to adjudicate upon such disputes which were outside the scope of the agreement. In these circumstances according to the learned counsel for the plaintiff a fresh submission was made by the parties. To substantiate his contention the learned counsel has referred Fire and General Insurance Co. v. Union of India and others AIR 1956 Cal. 11. In this case there was a limited agreement for arbitration to refer the dispute in respect of amount of any loss of damage. The claim was submitted before the Arbitrators which included the question of loss and damage and also the liability to pay the same. In reply the Insurance Company did not object to the jurisdiction of the Arbitrator to decide the question of liability to pay. It seems that larger submission was made before the arbitrator and no objection to the jurisdiction of the Arbitrator was taken. It was observed as follows:--

"If the point of liability to pay was beyond the jurisdiction of the Arbitrator then the Insurance Company should not have joined issue on this point but should have taken the point that the Arbitrator had no jurisdiction whatsoever to decide it.

It was finally observed that:

"Submission to arbitration in such case is not necessarily contained in the Policy itself, but may easily be enlarged and in fact was enlarged in the facts of this case, by inclusion of this question of liability to pay in the statement before the Arbitrators"--------the statement in writing of the respondent Chakarvorty before the Arbitrators and the Insurance Company's written answer before the Arbitrator to such statement together constitute further Arbitration Agreement valid within the meaning of section 2(a) of Arbitration Act apart from the arbitration clause in the policy itself and that such agreement submitted the question of who was liable to pay whom to the jurisdiction Arbitrator and the Umpire and the Umpire the rightly decided it"

The learned counsel then referred to Pratabmull Vs. K.C. Sethia AIR 1960 Cal. 702. In this case objection was taken to the award on the ground that it incorporated decision as to the existence of an implied term, and therefore, dealt with the matter not referred to the Arbitrator or not within the scope of the arbitration agreement. It was observed that "the applicant's own statement of case before the arbitrator and the respondent's statements in any event constitute a clear submission on this point to the arbitrator and they themselves therefore, constitute the arbitration agreement on this point".

The principle deduced from these authorities is that where the arbitrator is seized of a matter which is within his jurisdiction and scope of the agreement, but if during the proceeding any party makes a claim outside the scope of the agreement on which the other side joins the contest without any objection then it amounts to fresh submission and agreement to refer such dispute to the Arbitrator. A Such a party cannot challenge the award on the ground that the dispute was beyond the scope of the Arbitration Agreement or was not within the jurisdiction of the Arbitration. The main reason for such enunciation is that the parties by making such claim and joining the contest without objection agree to refer the dispute to the Arbitrator. Thus having acquiesced no party can be allowed to resile or challenge the jurisdiction.