1980 PLP 556 (CLC)

Date of hearing : 18th March 1979. This is an application under section 30 read with sections 33 and 14 of the Arbitration Act, 1940. The facts leading to the filing of the above application are that on or about 15-i2-1977 the applicant on behalf of their principals Eurograin Limited quoted against Tender No. RECP/EXP/4(`3)/77 for export of 10,000 M/tons of Pakistan Long Grain (Punjab Irri-6) while rice 15 % broken at a price of U. S. E 333 per Metric Ton, F. O. B. Karachi on terms and conditions contained in the tender document. The above tender was accepted. However, the dispute arose between the parties before the contracted quantity of the rice was exported. The applicant, through their letter dated 5-4-1978 invoked the arbitration clause and called upon the respondent No. 1 to appoint a sole arbitrator as per arbitration clause. According to the applicant there was no response to the above notice and therefore, the applicant sent a telex dated 23-4-1978 again requesting the respondent No. 1 to appoint a sole arbitrator. In reply to the above telex, the respondent No. 1 sent a telex dated 25-4-1978 informing the applicant that action for the appointment of a sole arbitrator was being taken. .

2. It appears that after the receipt of the above telex, the applicant instead of waiting for the appointment of a sole arbitrator by the respondent No. 1 served a notice dated 15-5-1976 through their Advocate, whereby the respondent No. I were informed that the applicant had appointed one Mr. Mahboob Elahi, Director, Asian Food Industries Ltd. Trade and Industries House, West Wharf, Karachi, as their arbitrator. The respondent No. 1 were called upon to nominate their arbitrator within 14 days from the receipt of the said notice. In response to the above notice dated 15-5-1978, the respondent No. 1 through their letter dated 24-5-1978 intimated to the applicant that they had appointed Mr. Nisar un-Nabi, Finance Director. State Life Insurance Corporation as the sole arbitrator, as per clause 9 of the agreement. In reply to the respon dent No. 1's above letter dated 24-5-1978, the applicant through their letter dated 27-5-1978 stated that they had no objection if Mr. Nisar-un-Nabi would act as a co-arbitrator with Mr. Mahboob Elahi their nominated arbitrator, but they would not accept him as the sole arbitrator. After that it appears that the arbitrator entered upon the reference by issuing a notice for 24-7-1978. The petitioners have filed the present application, in which they have prayed for the following reliefs :- "(i) To declare that upon failure of the respondent No. I to appoint a sole arbitrator within time, the right to hold arbitration .under a sole arbitrator elapsed and to the extent the arbitration clause providing for a sole arbitrator the said clause may be declared to be waived and the procedure thereunder relinquished and the respondent No. 1 are estopped from appointing or claiming to appoint a sole arbitrator thereunder ; (ii) To further declare that the same arbitration clause also provides for arbitration under the Arbitration Act, 1940 and as such the respondent No. 2 shall act as co-arbitrator with Mr. Mahboob Elabi and the two arbitrators after appointing an Umpire shall proceed to conduct, finalise and give an award following the provisions of the Arbitration Act, 1940. (iii) Costs of this application may be awarded to the applicants ; (iv) Any other further relies' or reliefs may also be allowed as may be deemed fit and proper in or around the circumstances stated hereinabove."

3. In support of the above application Mr. Tahir Husain learned counsel for the applicant has contended that the respondent No. 1 having failed to appoint Sole Arbitrator within 15 days from the receipt of the aforesaid notice dated 5-4-1978 they had waived their right to nominate a sole arbitrator as per clause 9 of the arbitration agreement. In order to appreciate the above contention, it will be advantageous to reproduce herein below clause 9 of the annexure to the tender documents, which reads as follows :- "Any dispute or question of any kind arising out of or under the terms of the contract not otherwise herein provided for, any dispute relating to its construction or any portion thereof after the execution of the contract, shall be referred to the decision of a sole arbitrator to be nominated by the seller, from amongst officers of the Government of Pakistan not lower in rank than a Joint Secretary to the Government of Pakistan. The decision of the sole arbitrator shall be final and binding upon the parties. The provisions of the Arbitration Act, 1940 and the rules thereunder in any statutory modifications thereof shall be deemed to apply to and be incorporated in this contract. Upon every and any such reference, the assessment of the cost incidental to the reference and award respectively shall be in the discretion of the arbitrator. The venue of the arbitration shall be Karachi and a reference to arbitration shall be condition precedent to any action at law." It may be noticed that under the above-quoted clause the respon dent No. 1 has been given the power to nominate any officer not below the rank of Joint Secretary to the Government of Pakistan as a Sole Arbitrator. There is no provision for the appointment of two arbitrators by the parties.

4. In my view the applicant's contention that as the respondent No. 1 had failed to appoint a sole arbitrator within 15 days from the receipt of the notice dated 5th April 1978, they had waived their right to appoint a sole arbitrator is untenable. It may be observed that a party cannot substitute an arbitration clause unilaterally. Under the arbitration clause in question, it was contemplated that the disputes between the parties were to be deeded by a sole arbitrator, who was to be appointed by the respondent No.

1. Any alleged failure on the part of the respon dent No. 1 to appoint a sole arbitrator within 15 days from the receipt of the notice entitled the applicant to invoke section 8 of the Arbitration Act and to approach a competent Court for the appointment of a sole arbitrator as per arbitration clause, but it did not confer a right on the applicant to substitute the arbitration clause unilaterally. Mr. K. A. Ghani learned counsel for the respondents has drawn my attention to the case of Messrs Hafiz Abdul Aziz Cotton Ginning Factory v. Messrs Haji Ali Mohomed Abdullah & Co. and another (P L D 1966 Kar. 197) wherein it was held by Qadeerudd:n, J. (as he then was) that even a . Court is not competent to substitute the original arbitration agreement. In view of the above discussion I do not find any merit in the above application and, therefore, the same is dismissed but there will be no order as to costs. Mr. Nisar-un-Nabi. the, sole arbitrator appointed by the respondent No. I shall proceed with the reference and shall give his award within 4 months from today. M. A. K. Appeal dismissed.