P L D 1981 Karachi 28 (PLP)

It is by now a well‑settled law that in order to constitute an arbitration agreement within the meaning of section 2(a) of the Act, it is not in?cumbent that there should be a formal written agreement duly signed by the parties. An arbitration agreement within the ambit of the above section can be inferred inter alia from the correspondence between the parties, from the standard terms of contract adopted by a Government department or Corporation on the basis of which a tendered submits his tender and from. (he bye‑laws or articles of association of an association or institution which provides compulsory arbitration, of which the parties to? the dispute are members. (c) It will be, therefore, necessary to ascertain as to whether bye‑laws of the Karachi Cotton Association provide any compulsory arbitration by virtue of the fact !hat the parties to a dispute. happened to be the members of the said Association. Mr. Sami, learned counsel for the plaintiff has referred to Bye‑law 13(a) of the said Association in support of his above contention. It will be advantageous to reproduce hereinbelow the above bye‑law, which reads as follows :‑ "(13) Where there has been a compromise between members of any such obligation as aforesaid, each of them shall, in. the course of next two working days, report the compromise to the Board. If a member omits to do so, he shall be liable to be dealt with under the provisions of Bye‑Laws 16 to 28 inclusive. Anything short of a cash settlement shall be held to be a compromise for purposes of this Bye‑Law. (a) Every contract which shall be made subject to the Bye‑Laws of the Association, whether. it be entered into by two members or by a member and a non‑member or by two non‑members, shall be deemed to provide as one of the terms thereof that any difference of any nature whatsoever arising out of such contract shall be referred to arbitration in accordance with the Bye‑Laws of the Association and that holding of such an arbitration and the obtaining of an award thereunder shall be a condition precedent to the right of any party to such contract to commence legal proceedings against the other party in respect of any such difference as aforesaid, and that neither party under such contract shall ' have any right of action against the other touching upon or arising out of such contract, except, to enforce the award in such arbitrations. (b) Non‑members requesting for arbitration in case of Factory Selection Contracts under Bye‑Law No. 39‑II shall have to pay to the Karachi Cotton Association Ltd., a fee of Rs. 100 for every 100 bales or part thereof subject to a minimum of Rs.

200. No such request for arbitration will be entertained by the Association unless the prescribed fee is sent along with the letter or request for arbitration. This fee will be in addition to the fees payable to the arbitrators and/or the umpire for work done by them." A plain reading of the above bye‑law indicates that even between the two members of the Association the arbitration under the Karachi Cotton Association bye‑laws can be pressed into service only if the contract is made subject to the bye‑laws of the Association. There is no compulsory arbitration between the two members of the Association simpliciter because of their memberships. The above bye‑law even contemplates arbitration between non‑members. 5(a). The foregoing conclusion necessitates the examination of Mr. Samiuddin's contention that the sold note in question constitutes an arbitration agreement as it expressly provided that the transaction mentioned therein was subject to bye‑laws of the Association. In support of his above contention, he has referred to the case of Ram Narain Gunga Bissen v. Liladhur Lowjee 1 L R 33 Cal. 1237 (relevant passage at page 1240), wherein it has been held that a bought and sold note signed by the broker constitutes a valid arbitration agreement. In the instant case the sold note which is on the record was signed by Messrs Malik & Co. Cotton Brokers. It is addressed to the plaintiffs and not to the defendants, though the name of the defendants has been shown as the purchaser. It is the case of the defendants that this sold note was never received by the defendants. Be that as it may, the question which requires consideration is, as to whether the above‑sold note constitutes an arbitration agreement in terms of section 2(a) of the Act. A sold note signed by a broker on behalf of a vendor and a purchaser containing that the transaction is subject to bye‑laws of the Association, in my view may constitutes an arbitration agreement within the ambit of the above section, provided it is proved that B the broker concerned acted as an agent for the vendor as well as for the purchaser. The sold note in question does not indicate that it was signed by the broker on behalf of the purchaser as well. (b) It is an admitted position that the umpire has not examined the broker in question nor there is any other document on the record of the arbitration proceedings to indicate that the broker was authorised to sign on behalf of the vendor as well as by the purchaser. It has been urged by Mr. Samiuddin that as the defendants did not send any reply in response to the plaintiff's notices, of the umpire's notices and of the Karachi Cotton Association's letters, it should be presumed that the defend?ants had accepted the correctness of the sold note. His further submission was that the defendants are estopped from taking any such‑ plea. In my view merely the fact that the defendants did not send any reply to the aforesaid notices/letters would not prove the fact that the broker in question was authorised to sign on behalf of the purchaser as well. In my view the question as to whether the broker in question was authorised to sign on behalf of the defendants was a question of fact, which could have been proved by some evidence, which is wanting in the instant ease. It may .be observed that the plaintiffs have filed an additional affidavit dated 2‑3‑1980 without the permission of this Court. Along with it they have enclosed an alleged certificate issued by Messrs Malik & Co. Brokers dated 1‑3‑1980 stating therein, that they had signed the aforesaid sold note on behalf of the vendor as well as on behalf of the purchaser. In my view the above certificate cannot be taken into consideration for the simple reason that it was not part of the proceeding before the umpire. Even otherwise, mere filing of the above certificate does not prove the contents thereof without examining the author of the certificate. The effect of the lack of proof that the above sold note was signed by broker on behalf of the vendor and the purchaser has been discussed hereinbelow in para 9.

6. Reverting to Mr. Kamal Mansoor Alam's contention that as the umpire had entered upon the reference before the two arbitrators had entered upon the reference and before there was zany disagreement, the award is bad in law, it may be observed that Mr. Saujiuddin, learned counsel for the plaintiff has rightly urged that in the absence of any such plea in the defendant's objections to the award, the defendant, cannot be permitted to urge the above point. ??????

7. It was also urged by Mr. Kamal MansoorJAlam that the award is collusive for the reason ; '‑ (i) that the plaintiff had filed photostat copies of the alleged notices sent by the umpire, which could not have been with the plaintiffs ; (ii) that on the first date of hearing, namely on 30‑7‑1978 when both the parties did attend the arbitration proceedings the Umpire had adjourned the case to 8‑8‑1978,jbut whereas on 8‑8‑1978, when the defendants were not present the umpire proceeded with the matter. Apart from the fact that the above all aged grounds have not been raised by the defendants in their objections, in my view Merely the fact that the plaintiffs have filed photostat copies f the above notices are that the umpire did not adjourn the proceeding on 8-8-1978 in the absence of the defendants would not prove the factum that the award is collusive.

8. It was urged by Mr. Kanrral Mansoor Alam that the claim of the plaintiffs comprised of two items, namely, Rs. 33,0581'76 being the amount of the alleged balance of the price of the Cotton and. Rs. ,32,554.02 being the amount of interest thereon and that t,1ne umpire misconducted himself or the proceeding by granting interest at the; rate of 14 % from the date of the award even on the amount of interest.? Whereas Mr. Samiuddin has , referred to the case of Messrs Pervez Industrial Corporation v. Messrs New Lahore Transport Corporation and 3 others P L D 1377 Kar. 37, to show that by virtue of by ?law No. 162 the empire was competent to grant interests from the date of the award. It will suffice to observe that in the above Karachi case the point in issue was not, as to, whether the arbitrators were competent to grant interest upon interest but the point in issue; was as to whether the Arbitrators could grant interest on the amount found due. It was held that in view of bye‑law 162 of the Karachi Cotton Association a arbitrators could award interest from the date of the award on the due amount. A perusal of the aforesaid bye‑law 162 indicates that the interest can be awarded on the amount of the price at 9% and not at 14% and not on the amount of alleged interest. It has been consistenly held by the Courts that an arbitrator or an umpire is not competent to award interest on the amount of damages. In this regard reference can be made to the case of Messrs Pakistan Builders Co., Karachi v. Pakistan (1) the case of Messrs lbad & Co. v. Province of Sind through Secretary to the Government Communication and Works Department (2), and the case of Messrs A. Z. Company v. Messrs S. Mauls Bakhsh Muhammad Bashir (3). The plaintiffs' claim for the above alleged amount of interest, namely, Rs. 32,554'02, was a claim in the nature of damages, and, therefore, the ratio decidendi of the above‑referred cases, can be pressed into? service and thus the award is bad to the extent of granting of interest upon interest. 9(a). After having held th4t the objections were barred by time, the same are liable to be dismissed. However, in my view section 17 of the Arbitration Act empowers Court either to remit an award or to set aside even in a case where no objections to the award have been filed. It will be advantageous' to reproduce section 17 of the Act, which reads as follows;- "

17. Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award." A plain reading of the above‑quoted section indicates that a Court is not obliged to make an award a rule of the Court even in a case in which an application for setting aside the award has not been filed within the time? prescribed under' the Limitation Act.' The Court may on sufficient cause either remit the award or set aside the lame. The question, therefore, which arises for consideration is as to whether there is any sufficient cause not to make the instant award 'a rule of the Court. The umpire has filed the present award alongwith ' a partition under?????????????????????????????????????????????????????? 282 of the Sind Chief Court Rules (O. S.) read with section 1';d the Arbitration Act in the Form No. 12‑B in Appendix A to the aforesaid rules. It may be advantageous to quote aforesaid rule 282 and Form ' 12‑B, which read as follows :‑‑ ?? "282,‑(1) The arbitrators or umpire shall cause the award of a signed copy of it to be filed in Court by forwarding the same under a sealed cover addressed to the Registrar ; (O. S.) with a petition in Form No. 12‑B: in Appendix A requesting the same to, be filed. The . . . arbitrators or umpire shall also send together with the award or copy the arbitration agreement and the reference, if in their possession, the ? depositions and documents which may have been taken and proved, the opinion pronounced by .the Court on a special case, submitted by? them, if any and also a copy of the notice given to the parties to?gether with receipts or acknowledgments thereof. ? (1) P L D 1961 Kar: 365.? (2) P L D' 1980 Kar. 207 (3) P L D 1965 S C 505 (2) If the Court makes an order under section 38 of the Act directing the award to be delivered, it shall further direct that the arbitrator or umpire shall also deliver the documents mentioned in sub‑rule (i), if in their possession to the applicant who shall cause the award to be filed in Court by forwarding the same together with the aforesaid documents under a sealed cover to the Registrar (O. S.) with a petition in Form No. 12‑B in Appendix A. (3) When an award made Without intervention of a Court has been so filed, the accompanying petition shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested under the reference as plaintiff or plaintiffs and the remainder as defendant or defendants." FORM 12‑B Petition accompanying Award, (Rule 282) (Clause title as in Form No. 12). Pursuant to the provisions of section 14(2) of the Arbitration Act, 1940, and rule 2820) of the Sind Chief Court Rules, and at the request of A. B. we the said XY, who ware appointed arbitrators empire beg to forward herewith the accompanying award together with the documents mentioned below and request that the award be filed in Court.

2. A. B. (or C. D., as the case may be) has made payment to us as under Arbitration fees Rs. ??????.. Arbitration charges Rs??????.. Cost and charges of filing award Rs . . . . . .

3. The Nazir's receipt regarding deposit of Rs. 5 in Court in pursu?ance of the provisions of rule 283 (2) of the said rules is herewith sub‑ submitted. Dated the 19 , (Sd.) Petitioners Documents accompanying the petition :‑‑ (1) The arbitration agreement dated .............................. (2) The reference dated ................................................ (3) The depositions of ................................................ (4) The documents proved .......................................... (5) The opinion pronounced by the Court on a special case submitted, if any. (6) Copy of notice given to the parties under section 14(l) of the said Act together with receipts or acknowledgments thereof." (b) A perusal of the above rule and the form indicates that along with the petition for filing of an award, the arbitrator or the umpire is expect to file inter alia the arbitration agreement. In my view if no arbitration agreement has been filed with such petition and the Court comes to the conclusion that no arbitration agreement was filed and/or proved before the arbitrator or umpire, and that the question as to whether there was any arbitration agreement is doubtful, the Court may decline to make the award a rule of the Court. In the instant case the question as to whether there was an arbitration agreement or not will depend on the finding of fact, as to whether the broker had acted for the vendor alone ‑or for both the parties. The umpire has not examined the broker nor there is any indication to that effect in the sold note issued by the broker. Furthermore, there is nothing on the record to indicate that the plaintiff had examined any witness in support of their claim before the umpire to prove the alleged due amount or to prove the photostat copy of the account i.e. document marked E‑

2. It seems that it is a case of no evidence. In view of the above discussion I set aside the award and remit the disputes to the umpire, who will hear the matter afresh and the parties shall be free to raise whatever pleas, which they may wish to raise including the question as to whether there was any arbitration agreement between the parties within the ambit of section 2(a) of the Arbitration Act. The objections stand disposed of in the above terms with no order as to costs. M. Y. .H.?