1999 PLP 2112 (MLD)

I have heard Mr. Badar Alam; learned counsel for the defendant No.1 but could not have the benefit of hearing Mr. Rasheed Ahmed Akhund who, as stated above, in spite of service of notice of intimation of today's date of hearing has failed to appear and contest these applications. My attention has been drawn by Mr. Badar Alam to clauses GC-29-of General Conditions and SC-9 of Special Conditions of the contract between the parties which are to the following effect: -- GC-28.1 The Purchaser and the Supplier shall make every effort to resolve amicably by direct informal negotiation any disagreement or dispute arising between them under or in connection with the Contract. GC-28.2 If, after thirty (30) days from the commencement of such informal negotiations, the Purchaser and the Supplier have been unable to resolve amicably a Contract dispute, either party may require that the dispute be referred for resolution to the formal mechanisms specified in the Special Conditions of Contract. ' SC-9 Resolution of Disputes (Clause GC-28) (a) The contract will be construed under and governed by the Laws of the Islamic Republic of Pakistan. (b) In the event of any dispute arising out of the terms of this agreement, the parties undertake to make every effort to reach an amicable settlement. Except as otherwise provided in this Agreement, any difference, dispute or question arising out of or with reference to this agreement which cannot be settled amicably, shall, within 60 days from the date that either party informs the other in writing that such difference dispute or question exists, be referred to arbitration of three arbitrators. Within 60 days of the said notice, one arbitrator shall be nominated in writing by WAPDA and one arbitrator shall be nominated in writing by the supplier. The third arbitrator shall not be a citizen of Pakistan or the supplier's country or any other country unfriendly to Pakistan or the supplier and who shall not be regarded or act as umpire, shall be nominated by the President of the International Chamber of Commerce. The arbitration tribunal shall have its seat in Pakistan. The arbitration shall be conducted in accordance with the rules of procedure set forth in the Pakistan Arbitration Act, 1940 as subsequently amended. The award of the majority of the arbitrators shall be final and binding on both parties. Each party shall bear the cost of its own arbitrator and the cost of the third arbitrator shall be borne equally by both the parities. In the event of an arbitrator resigning or becoming incapable or unable to act, the party nominating such arbitrator shall be entitled to appoint another in the place of the outgoing arbitrator. Proceedings shall continue without recommencing as if such arbitrator had been originally nominated. The President of the International Chamber of Commerce shall nominate an arbitrator for a party who fails to do so." Under clause GC-28.1 of General Conditions the parties to the contract are under an obligation to resolve amicably, by direct informal negotiations, any disagreement or dispute arising between them and under clause GC-28.2 of General Conditions, if dispute or disagreement is not resolved within 30 days from commencement of such informal negotiations, the parties to the contract are required to refer the dispute for resolution to the formal mechanism provided under the Special Conditions of the Contract. Clause SC-9(a) of Special Conditions of the Contract which provides for resolution of dispute by arbitrators states that the Contract will be construed and governed by the laws of Islamic Republic of Pakistan whereas clause SC-9(b) provides for reference of disputes, differences or question arising out of or with reference to the Contract to arbitration of three arbitrators within 60 days of the failure of the parties to reach to an amicable settlement. One arbitrator is to be appointed by each party in writing and the third arbitrator is required not to be a citizen of Pakistan or the supplier country or any other country not friendly to Pakistan or the supplier and who shall not be regarded or act as umpire. Such nomination of third arbitrator is required to be made by the President of the International Chamber of Commerce. In terms of the said clause the arbitration is to be conducted in accordance with the rules and procedure set-forth in the Act and the award of majority of the arbitrators is to be binding on both the parties. The plaintiff in its counter affidavit filed to the application under section 34 of the Act (C.M.A. 3580 of 1996) have taken following objections to the grant of the same: -- (a) period of 60 days within which arbitration clause is required to be invoked as provided under SC-9 of Special Conditions has already expired in the year 1995 and no party to the suit invoked it within the said period. (b) period of 30 days for resolving the dispute amicably by informal negotiations as provided in clause GC-28 of General Conditions of the Contract having expired is no longer applicable. (c) SC-9 of Special Conditions provides that the third arbitrator shall not be a citizen of Pakistan or from supplier country or any other country unfriendly to Pakistan or the supplier and who shall not be required to act as umpire, who shall be nominated by the President of the International Chamber of Commerce. On the contrary, Condition 2 of the First Schedule as provided under section 3 of the Act, requires that the arbitrators themselves shall appoint an umpire in their discretion. (d) SC-9 of Special Conditions of the Contract is applicable only to the foreign contractors or suppliers or creditors of the WAPDA and not the plaintiff. In respect of first two objections, it may be stated that the same are mis conceived and fallacious inasmuch as it is the plaintiff who has approached this Court for claiming the relief s contained in the plaint and under the provisions of clauses GC-28 and SC-9 of the Contract, it was incumbent upon the plaintiff to, before coming to the Court, resort to negotiations as provided under the said clause. A perusal of the plaint would reflect that no attempt for a negotiated settlement of the dispute was made by the plaintiff before approaching this Court by filing the instant suit and as such the plaintiff cannot be allowed to take up the said objections. In respect of objection (c), it may be stated that clause SC-9 of Special Conditions itself provides that the third arbitrator shall not be required to act as umpire and as such reference to Condition-2 of the First Schedule as provided under section 3 of the Act is misplaced. For objection (d) it may be stated that nothing can be more atrocious to say that clause SC-9 of Special Conditions of the Contract relates to the foreign contractors or suppliers or creditors of WAPDA and not to the plaintiffs. There is nothing in clause SC-9 of Special Conditions to warrant to come to the said conclusion. On the contrary the said clause provides that the Contract will be construed under and governed by laws of Islamic Republic of Pakistan and the arbitration shall be conducted in accordance with the rules and procedure set-forth in the Act. In this view of the matter, I am of the considered opinion that the objections to the grant of application under section 34 of the Act, as stated above, are not maintainable. It may be stated that where a patty enters into an agreement with another party to refer any future dispute arising between them under the agreement to the arbitration for its resolution, the Courts generally would not allow continuation of legal proceedings unless there is material before it to come to the conclusion that such private forum for resolution of the dispute is not I A likely to decide the same fairly and justly. Another ground on which stay of proceedings may be refused by the Court is where bias which disqualifies a person to act as an arbitrator is alleged by a party opposing reference to arbitration. In the instant case no such plea, as stated above, has been taken by the plaintiff in its counter-affidavit and as such I am of the view that the plaintiff after having agreed to refer the disputes arisen under the contract between the patties, to arbitration is not competent to fall back on its promise. If any case law is required on this point, reliance can be placed on the cases: Macdonald Layton & Company Ltd. v. Messrs. Uzin Export Import Enterprises (PLD 1989 Karachi 645) and Director Housing, A.-G.'s Branch, Rawalpindi (1997 SCMR 8 988). In view of my above discussion, I am satisfied that there is no sufficient reason to hold that as to why this matter should not be referred to for arbitration in accordance with the agreement/contract. Consequently, C.M.A. 3580 of 1996 is granted and proceedings of this suit are stayed under section 34 of the Act. In so far as C.M.A. 5011 of 1996 is concerned, in view of my above observations, the same is dismissed as misconceived. C.M.A. 3327 of 1996. Dismissed for non-prosecution C.M.A. 2170 of 1997. This is an application under Order 8, Rules 1 and 10 read with section 151, C.P.C. and Rule 158 of the Sindh Chief Court Rules (OS) for setting aside the order, dated 4-12-1996 whereby the defendant No.1 was debarred from filing the written statement. In view of my order on C.M.As. Nos. 3580 of 1996 and 5011 of 1996, no orders on this application are called for. Q.M.H./A-275/K Order accordingly