P L D 1967 Lahore 204 (PLP)

K. E. CHAUHAN, J.‑On the 23rd of October 1947, an agreement was entered into between the General Manager (Food), Northern Western Railway, of the one part and H. Ghulam Mohy‑ud‑Din of the other part. H. Ghulam Mohy‑ud‑Din is appellant before us. The agreement was for making certain supplies to the Railway Administration. Clause 11 of this agreement read as follows :‑ "In the event of any question or dispute arising under these conditions or in connection with the contracts (except as to any matters the decision of which is specifically provided for in these conditions), the same shall be referred to an arbitrator, to be nominated by the General Manager of the N. W. Railway. The decision of the arbitrator shall be final, conclusive and binding on the parties under the provisions of the Indian Arbitration Acts 1899 and 1940 and the rules thereunder."

2. Disputes having arisen between the parties, the same were referred to an arbitrator (Mr. Chughtai) who was nominated by the General Manager, N. W. Railway, on the 19th of December 1949. Mr. Chughtai conducted the proceedings in which both the parties were duly associated and took actual part, Mr. Chughtai was promoted, as a General Manager on the 9th of July 1952, and even thereafter continued the proceedings. Finally he gave his award on the 1st of August 1953, whereby he burdened the appellant with an amount of Rs. 24,321‑10‑0 to be paid to the respondent. The respondent filed an application on the 28th of October 1953, under section 14 of the Arbitration Act, 1940, for' filing the award and for making it a rule of the Court. The appellant filed objections under section 30 of the Arbitration Act, which formed the subject‑matter of various issues which were framed in the case. Ultimately the learned civil Judge accepted the objections by means of his order dated the 17th of February 1959, and set aside the award and did not make it a rule of the Court. The respondent filed an appeal which was accepted by a learned Single Judge of this Court by means of his order dated the 16th of May 1960, whereby the order of the learned Civil Judge. was set aside and the award was made a rule of the Court. The appellant has come up in Letters Patent Appeal against the aforesaid judgment and order of the learned Single Judge. The learned counsel for the appellant has raised a number of contentions, which we will presently dispose of.

3. The first point raised by the learned counsel for the appellant was, that clause 11 of the Arbitration Agreement did not authorize the Railway Administration to appoint any of its own employees as an arbitrator, and that this clause should be so read as to exclude the railway employees from being appointed as arbitrators. There is no force in this contention. The terms of clause 11 of the Agreement are very wide and the qualification which the learned counsel is suggesting cannot be read into this. Moreover, it appears that when the General Manager of the Railway, appointed Mr. Chughtai as an arbitrator, no objection was raised that an employee of the Railway Administra tion could not be appointed as such. The scope of clause 11 was fully clear to the parties and it is too late to suggest that the power to nominate any person as an arbitrator excluded the nomination of any of the employees of the respondent.

4. The next argument raised by the learned counsel for the appellant was that if, clause 11 included a power on the part of the General Manager N. W. Railway to appoint any employee of the respondent as an arbitrator then it was against the rules of natural justice. This contention equally has no force. It is well‑settled that an arbitration clause cannot be attacked merely because it contemplates the appointment of one of the employees of a party to be an arbitrator. The law is fully discussed;‑ Ives & Barker v. Williams ((1894) 2 Ch. 478). In that case it was held that an arbitration clause referring disputes to the Engineer of one party cannot be disregarded on the ground that the Engineer is in substance a Judge in his own case unless there is sufficient reason to suspect that he will act unfairly. In the said case Lindley, L. J. in delivering his judgment said: It is obvious that the sub‑contractors must prove great deal more than that the engineers have formed an opinion already upon the subject of the dispute: They must attack the character of the Engineers to such an extent, and in such manner as to show that the Engineers will probably be guilty of some misconduct in the matter of arbitration, that they will not act fairly. That is really what the evidence must establish. Having chosen to put themselves in that position, the sub‑contractors cannot complain of the legitimate con sequence of their bargain, but they could complain of the illegitimate consequence, and if it were true that these Engineers were in collusion with the 'contractor so as to act unfairly or so as to lead the Court to suppose that they would act unfairly, there would be some ground for saying that this arbitration clause ought not to be enforced." "It must be borne in mind that they are not arbitrators in the ordinary sense of the word. They are arbitrators chosen and selected by the parties, selected with the knowledge that to some extent they must have an interest in the direction of their employers. It is well‑known they must have it, and I think the words of Lord Justice Brown in the case of Jackson v. Barry Railway Co., (1893) 1 Ch. 238 (246), at the commencement of his judgment, are highly instructive as to what the position of Engineers or arbitrators ,is~ in a case like the present. He says: "It is an essential feature in the contract between the plaintiff and the railway company that a dispute such as that which has arisen between the plaintiff and the company's Engineer should be finally decided not by a stranger or a wholly unbiased person but by the Company's Engineer himself. Technically, the controversy is one between the plaintiff and the railway company; but virtually, the Engineer on such an occasion, must be the Judge, so to speak, in his own quarrel. Employers find it necessary in their own interests, it seems, to impose such terms on the contractors whose tenders they accept, and the contractors are willing, in order that their tenders should be accepted, to be bound by such terms. It is no part of our duty to approach such curiously colored contracts with a desire to upset them or to emancipate the contractor from the burden of a stipulation which, however erroneous, it was worth his while to agree to bear. To do so, would be to attempt to dictate to the commercial world the conditions under which it should carry on its business. To an adjudication in such a peculiar reference, the engineer cannot be expected,, nor was it intended, that he should come with a mind free from the human weakness of a preconceived opinion. The perfectly open judgment, the absence of all previously formed or pronounced views, which is an ordinary arbitrator are natural and to be looked for, neither party to the contract proposed to exact from the arbitrator of their choice. They knew well that he possibly or probably must be committed to a prior view of his own, and that he might not be impartial in the ordinary sense of the word. What they relied on was `his professional honor, his position, his intelligence'."

5. Respectfully applying the above law we hold that there is nothing wrong in clause 11 of the Arbitration Agreement or in the appointment of Mr. Chughtai as an arbitrator. There are numerous cases where employees of a party were appointed or were authorized to be appointed as an arbitrator, and it was held that this could be done. Reference in this connection may be made to Jubilee Chamber of Commerce Ltd., Rawalpindi through Lala Baij Nath Malhotra, Manager v. Lala Amrit Shah (A I R 1940 Lah. 180), Messrs Mc. Kenzies, Ltd. v. Messrs Sulleman & Co. (A I R 1933 Sind 75), M. A. Ghani Sooft & Sons v. The Federation of Pakistan (P L D 1957 Lah. 363), Messrs c. Kenzies Ltd. v. Messrs Sulleman & Co. (140 1 C 626 ), Mulchand Sobharaj and another v. Radhakishin Parumal and others (90 1 C 932) and Kovur Parvathamma v. Kovur Subamma and another (A I R 1943 Cal. 162).

6. The third Abjection raised by the learned counsel for the appellant was that when Mr. Chughtai was ‑appointed as an arbitrator he was a Chief Engineer. It is submitted that later on Mr. Chughtai was himself promoted as General Manager on the 9th of July 1952, and that he could not act as an arbitrator thereafter. The actual argument is that under clause 11 of the Arbitration Agreement, nomination of an arbitrator was to be made by the General Manager and since Mr. Chughtai on the 9th of July 1952, occupied such a position that he could nominate an arbitrator, he himself could not continue with his earlier assignment of an arbitrator. There is no force in this contention. Clause 11 of the Arbitration Agreement authorises the General Manager to appoint any person as an arbitrator. The person so appointed will not cease to be an arbitrator if he is promoted or otherwise any change comes into his official status. Moreover, the appointment here was not ex officio but was of the person of Mr. Chughtai, and therefore, the criticism of the learned counsel is all misconceived.

7. The fourth point raised by the learned counsel for the appellant was that clause 11 of the Arbitration Agreement authorised only one of the parties (namely the respondent through its General Manager of N. W. Railway) to nominate an arbitrator and did not give any choice to the appellant to appoint an arbitrator. In this way, the learned counsel submitted that the agreement was enforceable at the instance of one party only and lacked mutuality and was, therefore, void. He referred to section 2(i) of the Contract Act for this purpose. The argument to say with respect to the learned counsel is no doubt ingenious but without any substance. Firstly the provision of law, namely, section 2(i) of the Contract Act to which reference was made says that an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract (and not void). Secondly without conceding even if it be assumed that section 2(i) does apply to the agreement in question, the agreement being merely voidable, the choice was only once for the appellant to have rescinded it. Kunja Lal Bhuiya v. Hara Lal Bhuiya (G) may be referred to for this purpose. The appellant at no stage of the arbitration rescinded this agreement. On the other hand C the conduct of the appellant id not taking objection to the appointment of the arbitrator and in submitting to his jurisdic tion, leading evidence before him and taking the choice of a favourable decision from the said arbitrator shows that he accepted the appointment of Mr. Chughtai as an arbitrator and ratified clause 11 of the Arbitration Agreement. Thirdly, on the true construction of the said clause it cannot be said that the agreement was enforceable at the instance of respondent alone. if a dispute arose then not only the respondent but also the appellant could have invoked the said clause and enforced it by asking the General Manager to appoint an arbitrator. Read in this way the whole basis of the criticism of the learned counsel goes away.

8. The fifth point raised by the learned counsel was that the arbitrator in this case had given the award after 4 months of his entering upon the. reference and the same as such was void being in violation of paragraph 3 of the 1st Schedule attached to the Arbitration Act, 1940, provisions whereof were to be considered as implied terms of the Arbitration Agreement as laid down in section 3 of the Act. No doubt the award in this case was given beyond four months, but the point to be noticed is that the provisions of the 1st Schedule simply became the terms of the Arbitration Agreement and did not acquire a status higher than that. The proposition is well‑settled that if the terms of any agreement are not complied with in this respect, the consequence is not that the award becomes invalid, If from the conduct of the parties concerned it can be inferred that they agreed to the proceedings being continued beyond the period stipulated, then the objection loses all the significance. This proposition was thrinshed out fully in a Division Bench ruling of this Court reported in Haji Sattar Haji Muhammad and 9 others v. Abdul, Karim Haji Issa and 3 others (P L D 1958 Kar. 378), where it was laid down that the provisions of the 1st Schedule do not acquire any greater status than becoming implied terms of the Arbitration Agreement. It has been laid down .in numerous rulings that when a party continues to take part in arbitration proceedings after the period stipulated in the agreement for concluding those proceedings, and does not take objection to their continuation, then he cannot raise this objection afterwards. Reference can be made to Meman Tayab Sharif and another v. Kasam Adamji, Haji Abdul Latif Ebrahim Bavani and others (P L D 1955 Sind 224), Bibi Patto Kumari Saheba v. Upendra Nath Ghosh (50 1 C 52 ), Messrs Habib & Sons v. Messrs Virk Co. (P L D 1957 Kar. 245), Donald Campbell & Co. v. Jeshraj Girdhari Lal (AIR 1920 P C 123), Asa v. Mst. Bhuran (A I R 1936 Lah. 466), Madura Mills Cos., Ltd. v. N. M. S. Krishana Ayyar (A I R 1937 Mad. 405), Nani Bala Saha w/o Narayan Chandra Saha v. Ram Gopal Saha and another, minors, represented by pleader guardian Babu Kumar Gurukrama Muzurndar, and another (A I R 1945 Cal. 19) and Madipalli Venkatachellam v. Madipalli Suryanarayanamurty and others (A I R 1941 Mad. 129). In view of the above weight of authorities we hold that the award cannot .become invalid in the instant case due to the mere fact that it was not given , within four months, the reason being that the appellant did not raise this objection at the proper time and rather 'acquiesced in the continuance of the Arbitration proceedings, led evidence and took the chance of a favourable decision and when the decision has gone against him he cannot be allowed to say that the arbitration proceedings extended beyond the time ‑limit implied in the Arbitration Agreement. If the terms of an agreement can be changed by the parties by their mutual consent (as for example by writing) then it is obvious that the terms about time matter could also be changed with their consent implied from the conduct. In the instant case the consent of the appellant in continuation of these proceedings is obvious because he raised no objection with regard to it at any stage of the case before the arbitrator" and it is the finding of the learned appellate Court as well.

9. No other point was raised before us.

10. For the reasons given above there is no force in this appeal which is hereby dismissed with costs throughout. K. M. A. Appeal dismissed.