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Judicial Miscellaneous Application No. 40 of 1986, decided on 26th August, 1987.

---S.3 [First Sched., Condition No. 11--Arbitration agreement- Condition No. 1 of First Sched. when applicable--Arbitration agreement between parties under which dispute between parties was to be settled in accordance with arbitration procedure, not mentioning name or number of arbitrator--Provision set out in First Sched. of Arbitration Act, held, would be applicable and such dispute would be decided by a sore arbitrator.

---S.8(1)(a)--Appointment of arbitrator--Power of Court--Arbitration agreement between parties provided that disputes between parties would be settled under arbitration procedure and that arbitrator would be nominated by particular party--In case such particular party failed to nominate arbitrator in accordance with arbitration agreement, Court, held, could appoint an arbitrator.

A I R 1960 Rom. 292; A I R 1935 Cal. 588 and 1979 C L C 985 rel.

Muhammad Iqbal Malik for the Petitioner.

Saleem Akhtar Shamsi for the Respondents.

This application is filed by the applicants under Section 8 (1) and (1) of the Arbitration Act, 1940, praying therein that one of the three persons named in the application may be appointed as Arbitrator to decide the dispute, between the applicant and the respondents. The respondents have opposed the application on the ground, that there was no dispute between the parties which could be settled or decided by the Arbitrator and secondly that the arbitration clause in the agreement is vague and incapable being acted upon.

2. The brief facts leading to these proceedings are that on 20-3-1984 the work order/agreement was executed between the petitioner and respondent No. 2 for the construction of the bachelors hostel for Officers and staff of the Pak Steel Mills Corporation at Steel Town. Port Qasim, Karachi. The work was assigned to the petitioner according to the terms and conditions of the work order mentioned above. During the course of said construction, respondent No. 2 awarded the petitioner additional work of further six blocks of Bachelor's Hostel on the same terms. The petitioner submitted rates of the items, pertaining to Civil work and plumbing work, which were finalised, on the basis of the rate; already settled and the respondent did, pay 70 percent as part payment to the petitioner. However, subsequently, by letters dated 7-8-1985 and 20-8-1985 the petitioner was informed that the rates of the extra items were examined and considered by Work Award Committee and the rates were approved on the recommendations of the said Committee and that the Committee approved the rate of items only for the work pertaining to the civil work. In spite of repeated representations and reminders by the petitioner the respondent No. 2 did not settle the dispute to pay him his dues and hence this application.

3. I have heard Mr. Muhammad Iqbal Malik, learned counsel for the petitioner and Mr. Saleem Akhtar Shamsi, learned counsel for the respondents.

4. The respondents in their objection in Para 5 have stated, that a difference arose only in respect of the items regarding second lot viz. plumbing work which was covered by respondent's letter dated 20-8-1985. It is contended by the learned counsel for the respondents, that the respondents have always shown their willingness to settle the dispute and therefore, there was no reason or cause to appoint Arbitrator. It may be pointed, that even according to the respondents above admission, the difference between the parties did arise by virtue of letter of respondent dated 20-8-1985. This application was filed in this Court after more than a year and since then it has been pending in this Court for more than a year. In space of two years, the respondents, in spite of their alleged willingness, have not settled the dispute and as such it cannot be said that there was no dispute between the parties. This objection, of the respondents is, therefore, not sustainable.

5. With respect to the second objection of the respondents, reference may be made to the relevant Para 13 of the work order/ agreement which reads as under:--

"Disputes if any arising from this order shall be settled by the client in accordance with the arbitration procedures prescribed by law and without recourse to general courts of law."

According to the para one of this work order, the Construction Management Bureau which is respondent No. 2, has been termed, as client. Therefore, the client referred to in para 13 above would mean respondent No. 2.

6. It is contended by the learned counsel for the respondents that the respondent No. 2 is a Company which cannot enter into arbitration by itself, but arbitration can be held only by a natural person. It is further argued, as this natural person is not mentioned in the agreement, therefore, this clause of the agreement would notice capable of implementation.

7. The above reading of para 13 leaves no doubt that it is an arbitration agreement between the parties under which the dispute is to be settled in accordance with the arbitration procedure. The name or number of Arbitrator is not mentioned therein and therefore, under Section 3 of the Arbitration Act, the provisions set out in the first schedule, would be applicable. The condition No. 1 of this schedule provides that the such dispute will be decided by a Sole Arbitrator. The client viz. respondent No. 2 is not appointed as Arbitrator under this para of the agreement, but even under liberal construction, that can be put upon this para, at the most it can be said, that he was authorised to appoint Arbitrator. By notice dated 22-7-1987 the Advocate of the applicant called upon the respondent No. 2, either to pay the dues of the applicant or to agree to the appointment of one of the two persons mentioned in the notice as an Arbitrator. This notice was admittedly replied by the respondents vide their letter dated 5-8-1986. The fact, however, remains that the respondent did not appoint or agree to the appointment of any Arbitrator as according to them no cause of action had accrued to the petitioner for the appointment of the Arbitrator.

8. Under section 8 of the Arbitration Act the Court is empowered to appoint an Arbitrator or Umpire only in three cases mentioned in subsection (1) and that also after one party gives such notice to the other party and other party fails to appoint Arbitrator or Umpire as the case may be, within, 15 clear days of the service of the notice. The cases enumerated in subsection (1) of Section 8 are as under:--

(a) Where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties and all the parties do not, after differences have arisen, concur in the appointment or appointments; or

(b) if any appointed arbitrator or umpire neglects or refuse to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or

(c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him;

9. The only provisions that can be invoked and is invoked by the applicant is clause (a) of subsection (1). Under this clause the arbitration agreement is to provide that reference shall be made to Arbitrator to be appointed by consent of the parties. It is not specifically provided that the Court has got powers to appoint an Arbitrator, where Arbitrator, is to be appointed by one party and that party does not appoint Arbitrator. It cannot be the intention of the Legislature to leave other party in such a case without remedy, even when the arbitration agreement provide that the dispute would be settled in accordance with the arbitration procedure and without any recourse to Court of law.

10. Learned counsel for the respondents has relied upon certain cases in support of his contention that the arbitration clause is vague and therefore, no effect can be given to it, which I presently discuss.

11. In AIR 1960 Bombay 292 the learned Judge considered the effect of arbitration clause which read as under:--

"If any dispute may arise regarding the goods of this contract then the same shall have to be decided by the arbitration Board alone which has been constituted by the Mahajan and the Mill-owners' Association-and the decisions which they shall give shall be treated as final."

It was held in that case that from arbitration clause and affidavit filed by the applicants for stay of suit, it was not clear as to identity of the Arbitration Board and as to whether such Arbitration Board was in existence and competent to decide disputes of the nature mentioned in arbitration clause in question. Therefore, the arbitration clause was held to be vague and uncertain and could not be enforced.

12. In AIR 1935 Calcutta 588 it was held "that the dispute shall be settled by an Arbitrator named or designated in the agreement or by an Arbitrator appointed in accordance with the arbitration agreement. An agreement to refer either to X or to Y is not an agreement or a named Arbitrator, because it is not certain who the Arbitrator is 'X' cannot become the appointed Arbitrator because one of the parties makes the reference to him first.

13. In the instant case, we have already seen, that no Arbitrator is named in the Arbitration Agreement but it has only provided that the client shall settle the dispute in accordance with the arbitration procedure. An arbitration agreement is defined in Section 2(a) of the Arbitration Act to mean a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not.

14. I have already held, that the only construction that could be put on this arbitration clause is, that the client viz. respondent No. 2 would nominate the Arbitrator. No doubt this power has been given to one of the parties, though under Section 8(1) (a) of the Arbitration Act the word used is parties. But in my opinion this clause will be applicable even when such power is given in the agreement to one of the parties. In this context reference may be made to Section 12 of the Sind General Clauses Act 1970. Under clause (2) of the Section 12 "words in the singular shall include the plural, and vice versa".

15. In 1979 C L C 985 it was held that where an agreement authorised one party to appoint Arbitrator, but the Arbitrator so appointed was not acting and no new Arbitrator was appointed, the Court can appoint new Arbitrator after 15 days.

16. Considering all the facts and law discussed above, in my opinion, there appears to be no doubt that there is an arbitration clause in the agreement between the parties under which all the disputes are to be settled under the arbitration procedure and that the Arbitrator was to be nominated by the respondent No. 2, who has failed to nominate the Arbitrator in spite of lapse of more than 15 days from the date of notice. As such the application is allowed and the request of the applicant for appointment of Arbitrator by this Court is granted.

In his notice dated 22-7-1986 the applicant has suggested the names of two Arbitrators to the respondent which do not appear to have been accepted by the respondent. These names are (1) Mr. Khawaja Ali Ex-Engineer, Pakistan Steel and (2) Mr. Abdul Alim Dareshani (Retd.) District and Sessions Judge. In the present application, the applicant has also added the name of Mr. Justice (Retired) C. A. Rehman of Lahore High Court to the names of the proposed Arbitrators. As the parties belong to Karachi, it will be inconvenient for them to appear before an Arbitrator at Lahore. As already pointed, the two other names suggested by the applicant in his notice to the respondent do not appear to have been accepted by them.

Under the circumstances Mr. Justice (Retired) Agha Imdad Ali is appointed as Arbitrator to settle the disputes between the panties-

H. B.T./A-226/K Order accordingly.

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