P L D 1977 Karachi 973 (PLP)

Pursuant to notice of filing of the aforesaid award the defendant has filed the objections to the award and prays for setting aside the same. The facts leading to the arbitration and passing of the award may be briefly stated By an agreement in writing dated 13-5‑66 the defendant had under taken to supply all his cotton ginned, pressed or bailed at his factory for the entire cotton season of 1966‑67 on terms and conditions mentioned in the agreement. The agreement contained an arbitration clause providing for adjudication of disputes arising out of the contract to be referred to arbitration in accordance with the by‑laws of the Karachi Cotton Association Ltd. It seems disputes arose between the parties and the matter was referred to arbitration by two arbitrators, one appointed by each party. The arbitrators passed the impugned award on 27‑12‑71 ex parte on account of the absence of the defendant on the date fixed for hearing of the parties viz. 17‑12‑

71. In their written objections filed in this Court the defendant had disclosed the facts forming the background of the arbitration proceedings. It is stated that the defendant had filed the suit bearing No. 270/69 in the High Court of West Pakistan, Karachi Bench, against the plaintiffs for the recovery of Rs. 4,35,000 being the loss suffered by the defendant on account of the alleged fraudulent action of the plaintiffs. In the aforesaid suit the present plaintiffs, being defendants, submitted an application under section 34 of the Arbitration Act and prayed for stay of the proceedings of the suit. On 19‑1‑70 the High Court granted the application and as a result the suit was ordered to be stayed. An L. P. A. filed against the aforesaid order was also dismissed in the High Court. The defendants then filed a Petition for Special Leave to Appeal (No. Id 66/70) in the Supreme Court of Pakistan and on 2‑9‑70 leave was granted. It is stated that the appeal is pending for regular hearing in the Supreme Court. During the pendency of the defendant's appeal in the Supreme Court, however, arbitration proceedings were commenced. The only objection urged against the award by Mr. Nizam Ahmed learned counsel far the defendants was that the arbitrators were guilty of legal misconduct in proceeding ex pane against the defendants on 17‑12‑

71. It was urged that the notice for the hearing of the arbitration case fixed on 17‑12‑71 was received by the defendants on 14‑12‑71 and on the same day the defendants wrote to the arbitrators requesting for the postponement on the ground that the notice was too short to attend the hearing and file the claim, specially in view of the fact that the country was involved in Indo Pakistan War. It is further argued that Instead of adjourning the case and supplying copy of the plaintiff's claim the arbitrators heard the plaintiff's evidence and passed the award on 10th day after the hearing. Upon these facts it was strenuously urged on behalf of the defendants that considering the dislocation and disturbance of normal life on account of hostilities with India, the arbitrators ought to have granted the request of the defendants specially in view of the fact that they did not pass the award there and then. Mr. Nafisuddin, learned counsel for the plaintiffs, on the other hand referred to the previous conduct of the defendants and co 3tended that it is evident from the record that the defendants were avoiding to appear before the arbitrators on one pretext or the other with the ulterior motive of frustrating the arbitration. In this connection the learned counsel pointed out that the plaintiffs appointed their arbitrator on 24‑1‑70 and defendants appointed their arbitrator on 2‑2‑

70. The arbitrators entered upon the reference on 5‑2‑70 when they ordered notice to both parties for 13‑2‑

70. On this day the plaintiffs appeared but the defendants were absent. Subsequ ently the arbitration could not proceed on account of the stay obtained by the defendants, firstly in the Suit No. 270/69 and subsequently in the L. P. A. which was dismissed on 1‑5‑

70. Upon this a fresh notice was issued but again the defendants did. not attend and in the meantime the statutory period of 4 months having expired an application under section 28 of the Arbitration Act for extension of time for the making of the award was submitted in Court by the plaintiffs on 6‑8‑

70. This application was granted on 1‑11‑71 and the period of two months was allowed for making the award. Pursuant to this on 11‑11‑71 fresh notices for appearance to the parties were issued for 26‑11‑

71. On 25‑11‑71 the defendants sent a tele graphic request for adjournment to the arbitrators on the ground of illness, upon which the case was adjourned. By notice dated 6‑12‑71 the defendants were informed by the arbitrators that the date of hearing was now fixed on 17‑12‑71 when the defendants were "requested to be present or represented through an authorised representative or file a written statement duly sign failing which we shall proceed ex pane." The notice was admittedly received by the defendants on 14‑12‑

71. Now it is contended by the defendants that the notice being very short, specially in view of the hostilities with India,‑the defendants wrote a letter on the same date under certificate of posting requesting for postponement. This allegation has been supported with the copy of the letter and a certificate of posting issued by the Post Office duly stamped and bearing the postal seal. In this letter the defendants had expressed their inability to reach Karachi on 17‑12‑71 due to national emergency of war ; and further bad requested for a copy of the claim filed by the plaintiffs before the arbitrators. Finally they had requested that the next hearing of the case may be fixed after 1st January, 1972 as their counsel would be out of station on account of vacation. The plaintiffs deny this allegation and contend that such a letter was not received by the arbitrators. It Is, however, to be appreciated that the certificate of posting is an official document and the address of the addressees given in the certificate is correct, consequently by the combined effect of section 114 of the Evidence Act and section 27 of the Genera) Clauses Act, it will have to be presumed that the letter must have been received by the addressees unless proved to the contrary. The only question therefore, that emerges for consideration is whether the facts of this case justified the arbitrators to proceed ex pare against the defendants. Mr. Nafisuddin relied upon Paracha Textile Mills Ltd. v. Nanick Ram Shamdas (P L D 1977 Kar. 37), which was a decision given by me. This was also a case of ex parts award. The facts were that the notice issued by the arbitrator to the defendants was returned by the postal authorities marked as 'refused' and upon the facts it was found that the notice must be deemed to have been duly served. Upon this view the question in that case was whether having refused to accept notice from the arbitrator, could the defendant plead that the award had been vitiated for want of notice to him of the particulars of the claim by the other party? I had come to the conclusion that if a peremptory hearing is fixed by the arbitrator the failure of other party to appear would amply authorise the arbitrator to proceed ex parts. The defendant in that case had not appeared before the arbitrator or communicated with him even once. The facts of the present case are clearly distinguishable. In the present ease after the stay was vacated upon the dismissal of the L. P. A. and fresh period of two months was granted, the arbitrators recommenced the proceedings on 11‑11‑71 and issued notice to the parties. The defendants responded to this notice telegraphically requesting for postponement on the ground of illness. On the second occasion when the case was fixed finally on 17‑12‑71 again it has been established that the defendants had forwarded their letter dated 14‑12‑71 requesting for postponement and a copy of the particulars of the claim by the other side. It is not known why the letter was not received by the defendants but it is quite possible that the dislocation created on account of the war, may have been responsible for the loss of the letter. It seems that the postal services were not functioning in the normal course which is evident from the fact that the n Mice despatched by the arbitrators on 6‑12‑71 was received by the Advocate of the defendants at Hyderabad on 14‑12‑71 nearly eight days after it was despatched. The arbitrators were accordingly unable to take into account the request contained in the letter and if the letter had been received by them, they might have been persuaded to postpone the hearing. The diary of the arbitration proceedings shows that the arbitrators heard the evidence of the plaintiffs on 17‑12‑71 and after perusing statement of account and other books, advised the representative of the plaintiffs to furnish further information in respect of certain loans and other expenses charged. It is further revealed by the diary of the proceedings that the plaintiffs' representative actually appeared before the arbitrators on 24‑12‑71 in regard to which the arbitrators mentioned in the diary in the following words r "necessary clarifications have been received; discussed and award to be made." The award was in fact made as stated on 27‑12‑

71. It would therefore, appear that the arbitrators did not dispose of the case on 17‑12‑71 but in fact allowed an opportunity to the plaintiffs to produce further evidence on 24‑12‑

71. How ever, it is nobody's case that the further notice was given for the next hearing to the defendants. I find great force in the contention on behalf of the defendants that since the proceedings could not be completed on 17‑12‑71 in so far as the plaintiffs were not ready with their entire evidence, the arbitrators might air well have ‑given an opportunity to the defendants to appear and represent their case before them. In Paracha Textile Mills' case referred to above, I had noticed a decisions of this Court reported as Allah Bakhsh Gabole v. Razia Begum (P L D 1960 Kar. 455) which is more pertinent for the decision of this case. In that case the facts were that upon receiving notice intimating appointment of arbitrator under section 9 of the Arbitration Act, the defendant through hell counsel challenged the validity of the arbitration agreement and called upon the arbitrator to refrain from interfering in the matter. On the date of hearing fixed by the arbitrator the plaintiff filed his claim and in view of the absence of the defendant, requested the arbitrator to proceed ex parts. But the arbitrator chose to give further opportunity to defendant and did not take ex pare proceedings. Upon a fresh notice issued to the defendant served directly on defendant and also through her counsel, the counsel informed the arbitrator telegraphically inviting the arbitrator to correspond with his client through him and once again reiterated his request for terms of reference. In spite of receiving this telegram, the arbitrator adjourned the hearing after a few days and passed award ex parts. Upon those facts Waheeduddin, J. (as he then was) came to the conclusion that the arbitrator was wrong in proceeding ex parte against the defendant and made the following remarks at page 468 of the report :‑ "it further appears to me that although an arbitrator Is allowed considerable latitude in the procedure to be followed by him at the hearing; it is his paramount duty to afford the pasties a reasonable opportunity to know the case against them for defending it before him. He cannot condemn a party without letting him know the case against him. If he makes an award without complying with such elementary principles of justice, he does so at the risk and peril of his award being set aside on ground of misconduct. In my opinion, in order to justify an arbitration proceeding ex parte a very strong case must be made out of wilful delay of a party at fault and if a reasonable cause is shown it is the duty of the Court to set aside such an award." The two cases from the Indian Jurisdiction cited by Mr. Nafisuddin himself express the same view. In Juggilal v. General Fibre Dealers Ltd. (A I R 1955 Cal. 354), view was expressed that if a party to an arbitration agreement fails. to appear at one of the sittings, the arbitrator cannot or at least, ought not to, proceed ex parte against him at that sitting. It was held that it appears from the circumstances of the case that a particular party is determined not to appear before the arbitrators in any event, when he has openly repudiated either the reference itself or the particular arbitrators and has shown no desire to resent, the arbitrators are not required to issue a notice of intention to proceed ex parte against such recusant person and may proceed ex parts and make a valid award without issuing notice. However, in Paracha Textile Mills' cafe I had not gone to that extent but expressed opinion that an arbitrator would be justified to proceed ex parte after issuing a peremptory notice for hearing. The second case cited by the learned counsel reported in A I R 1959 All. 711 follows the decision in the aforesaid case of Juggilal. The substance of the view held in these two decisions is that the arbitrator can justifiably proceed ex parte only upon reaching the conclusion from the circumstances of the case that the defaulting party either expressly or by conduct has made it clear not to appear before the arbitrator in any event. However, applying the principles laid down in the aforesaid decisions, it is difficult to hold in this case that the defendants had manifested any B intention to defy the arbitration proceedings or an intention not to appear at all events. In my view it is not necessary to take, into consideration the past conduct of the defendants prior to the dismissal of their L. P. A. by the High Court. The defendants had every right to agitate the question of stay of their suit before the various forms and their anxiety to have a decision on that matter is understandable. The only relevant period to determine their conduct is after 1‑11‑71 when the Court finally granted two months time for the arbitration. The very first notice, the defendants acknowledged telegraphically asking for postponement. In response to the second notice they sent a letter which appears, in all probabilities to have been misplaced and not received by the arbitrators. In this letter they had expressed their anxiety to participate in the arbitration proceedings and requested for a copy of the claim filed by the plaintiffs. As pointed out earlier, the notice was received by the defendants on 14‑12‑71 for the hearing fixed on 17‑12‑

71. There is no doubt that there was dislocation of normal life during this period when this country was involved in the worst crises of its history as 17th December, 1971 was the day when the East Pakistan fell to the Indian Forces. The arbitrators ought to have taken into consideration these extraordinary and traumatic circumstances. Besides it seems that the arbitrators did not immediately proceed to page the award on the same day but adjourned the matter sine die to enable the representative of the plaintiffs to produce further evidence. In such circumstances it was expected of the arbitrators to give an opportunity to the defendants. I have therefore, come to the conclusion that the arbitrators misconducted the proceedings by proceeding ex parts in the manner stated above. In the result, the award is liable to be set aside and is hereby set aside. In the circumstances of the case there will be no order as to coats. S.A. H. Award set aside.