P L D 1954 Sind 30 (PLP)

MUHAMMAD BACHAL, J.‑On 9th February 1952 Messrs. S. A. Rauf & Co., and Messrs. Munawar & Co., who were both members of the Pakistan Cotton Association, Karachi, entered into a con tract (Exh. 4) for the purchase and sale of 200 bales of Desi cotton deliverable in the months of February‑March 1951. The contract between the parties provides: All disputes to be referred to arbitration under rules of the Karachi Cotton Association Ltd., Karachi. All other terms and conditions subject to the bye‑laws of the Karachi Cotton Association Ltd., in force from time to time. By‑law 39 of the Karachi Cotton Association runs as follows : "Any dispute arising out of a ready transaction or out of a forward contract other than on the ‑question of class and/or staple of the cotton tendered but including the constructions of the official forword contract forms shall be referred to the arbitrdtion of any two disinterested authorised representatives of members. If one of the parties to a contract fails to appoint an arbitrator, after having received seven clear days notice from the other party to do so, the party who has appointed an arbitrator, shall have the power to appoint the second arbitrator, both of whom shall then proceed to deal with the question at issue. In case the two arbitrators are unable to agree the matter shall then be referred to an Umpire, who shall be nominated by the two arbitrators from amongst the authorised representatives of members. In the event of the two arbitrators being unable to agree as to the person of the Umpire, the Board shall proceed to appoint an Umpire from amongst the authorised representatives of members on the question of being referred to the Board. The decision of the arbitrators or the Umpire as the case may be shall be final and binding on both the parties to a contract. Note.‑"An authorised representative" for the purpose of this Bye‑law means the authorised representative registered with the Association as such under Article 14‑A." Dispute arose between the parties who appointed two arbi trators of the Karachi Cotton Association. On 20th July, 1951 the arbitrators wrote a letter (Exh. 5) to the Deputy Secretary Pakistan Cotton Association that they could not agree and therefore requested him to ask their board to appoint an Umpire and send a copy of this letter to the parties. On 26th July, 1951 the Board appointed an Umpire who issued a notice (Exh. 8), dated 2nd August 1951 to the parties for hearing on 4th August 1951, when the representatives of the parties appeared before him. He gave the award on 7th August 1951 which he forwarded under section 14(2) of the Arbitration Act at the request of the Pakistan Cotton Association. Several objections have been filed on behalf of the defendants but the learned Advocate who appears for them stated that he pressed only two of the objections which he formulated thus: (1) The appointment of the Umpire by the Pakistan Cotton Association was illegal as it was not in accordance with the arbi tration clause contained in the contract between the parties (Exh. 4) The Umpire therefore acted without jurisdiction. (2) That the award was given beyond‑time. By virtue of section 3 of the Arbitration Act, para 2 of schedule (1) of the Arbitration Act ceased to apply to a case where the rules, which prescribed no limitation, incorporated into the contract, provide that in case of difference of opinion between the arbitrators, the dispute may be referred to an Umpire. But the learned Advocate for the defendants chiefly relied on the first objection. I hold that the defendants are entitled to succeed on this objection. The appointment of the Umpire by the Pakistan Cotton Association was without jurisdiction and ultra vices. The award is therefore bad. But the learned Advocate for the plaintiffs contends that as defendant's representative appeared before the Umpire the defendant have waived their rights to object to the jurisdiction of the Umpire. He has relied on the ruling in Himalays Assurance Co., Ltd. v. Assudamal Harbhagwandas (A I R 1926 Sind 8) and Lakshmama v. Gorle Appadu and another (A I R 1932 Mad. 157.). Both the rulings refer to the waiver of irregularities during the arbitration proceeding the first ruling referring to one of the arbitrators being absent on some hearings and the second referring to a case where parties instead of abiding by the arbitration clause in the policy of insurance chose to execute a plain and simple reference under the Arbitration Act. In both these cases the arbitrators had jurisdiction to decide the subject matter of the dispute. In J. G. Smith and others v. Ludha Ghella Damodar (7 Bom. 129), the arbitrators, who were authorised to appoint an Umpire, having disagreed, referred the case to the Bombay Chamber of Commerce for the appointment of 'an Umpire. The Chamber of Commerce appointed an Umpire, who made the award and it was held that the appointment of the Umpire was invalid as the arbitrators could not delegate the power of appointment conferred on them by the contract. In Jungheim, Hopkins & Co. v. Foukelmanb ((1909) 2 K B. 948), it was held that as the arbitrators were not qualified to act as arbitrators under the contract, the award was null and void as having been made with out jurisdiction though the parties had appeared before the arbitrators. In Re Greenwood ((1839) 9 A & E 699), the arbitrators chose an Umpire by lot, and informed the parties that they had `mutually chosen' A B as Umpire. The parties assented. It was held that this assent not shown to have been given with knowledge of the facts, did not waive the irregularity. In Hodson v. Drewry ((1839) 7 Dowl. 569.), an Umpire was appointed by lot and the parties afterwards attended the reference but in ignorance of the matter of appointment. It was held that this did not amount to a waiver of the irregularity, There can be no waiver without knowledge of the material facts. The defendants did not know that the Umpire was not a member of the Karachi Cotton Association. An appearance, before an arbitrator whose appointment .is without jurisdiction and ultra vires, even though it is not made, under protest, does not amount to a waiver of the right of a party to contest that the arbitrator has no jurisdiction to act. I accordingly allow this objection raised on behalf of the defendants and set aside the award. Defendants are entitled to costs of the proceedings. A. H. Objection allowed.