1998 PLP 1638 (CLC)

Similarly the defendant has not proved any part of its counterclaim nor the same was admitted by the plaintiff and hence the counterclaim of the defendant is also dismissed. The Arbitration is thus, disposed of. . 27‑7‑1992. Mr. Sajjad Ali Shah turned up at 5 p.m. and made application for reopening the case of defendant. Notice to the other side for 4‑8‑1992."

5. Against the aforesaid order of the learned Arbitrator the defendant filed an application for recalling 'of the same, which was rightly dismissed by the learned Arbitrator on the ground, that after pronouncement' of Award he has become functus officio. While arguing, it was contended by Mr. Sajjad Ali Shah that it is a case of clear hardship. So far as the defendant is concerned, not a single opportunity was awarded to him in comparison to the plaintiff, which fact was also noted by the learned Arbitrator in the following words:‑‑‑ "At the very first outset I must say that I have felt sympathy for the defendant as their absence before me on 27‑7‑1992, at 9‑30 a.m., was caused by an inadvertent mistake by the counsel in noting a wrong time. It was a good cause for re‑opening of their case if the matter had not been concluded on that day. And further I have no hesitation in agreeing with the learned counsel for the defendant that considering the circumstances of the case and the opportunities which had been granted to the plaintiff it would have been at least more appropriate and probably a bit more equitable if I had not proceeded to conclude the whole matter on 27‑7‑1992, and at least had given one more opportunity to the defendants to prove their case. It is, therefore, clear that the defendant had obtained a long date for 27‑7‑1992, at 9‑30 a.m. for its evidence but neither filed the affidavit of any witness ten days before hearing nor was present on 27‑7‑1992. The defendant very well knows the result of non‑production of witnesses and the matter could be legally concluded against them. It may have been better if I had waited but I did not wait further nor adjourned the matter and while so acting I did not commit any illegality or irregularity."

6. One of the grounds given in section 30 of the Arbitration Act, 1940 for setting aside an award is that where it appears to the Court that the same is "otherwise invalid". One more ground is, whether an arbitrator mis-conducted himself. In the instant case, it was rightly held by the learned Arbitrator that after pronouncement of the Award, he becomes functus officio. However, under such circumstances, a Court is competent to set aside an award and to remand the same where it appears that the parties were not afforded proper opportunity to produce their case. In the instant case, I am fully satisfied that due to one default of the defendant, even for which a plausible explanation was offered, he could not be non‑suited when he has preferred his counterclaim before the same arbitrator.

7. The term misconduct as referred in section 13(a) of the Arbitration Act particularly in reference to ex pane proceedings was considered by an illustrious Judge of this Court, Waheeduddin Ahmed, J. (as his Lordship then was) in Khan Bahadur Allah Bux Gabol v. Razia Begum (PLD 1960 (W.P.) Karachi 455) where it was held that an arbitrator is permitted at hearing considerable latitude in the procedure to be followed by him and that it is his paramount duty to offer the parties a reasonable opportunity to know the case against them for defending it before him. It was further held, "If he makes an Award without complying with such elementary principles of natural justice, he does it at the risk and peril of his Award being set aside on grounds 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 the party at fault and if a reasonable cause is shown, it is the duty of the Court to set aside such an Award". The said Award was set aside by this Court under section 30 of the Arbitration Act. At the same time, learned Judge refused on oral motion for referring the matter back to the same sole arbitrator on the ground that it was not permissible in law as section 30 of the Arbitration Act contains no provision to refer back the matter to the arbitrator. A learned Division Bench of Azad Jammu and Kashmir High Court had also considered the question of misconduct while setting aside an Award. After considering several reported cases, some 12 instances of misconduct were suggested which included a situation where an Award is made without having heard all the evidence; where a party was not allowed reasonable opportunity of proving his case; or where the Award indicates gross negligence or recklessness on the face of record. (See Kh. Ghulam Rasool Lone v. Azad Jammu and Kashmir Government PLD 1971 Azad J & K 127). In the case of Brook Bond (Pakistan) Ltd. Conciliator and 6 others (PLD 1977 SC 237) misconduct of an arbitrator was considered in reference td the provisions of Industrial Relations Ordinance in the following words:‑‑‑ "The term misconduct used in connection with arbitration does not necessarily imply anything in the nature of fraud or moral turpitude. In the judicial sense the misconduct of an Arbitrator means his failure to perform his essential duty, resulting in substantial miscarriage of justice between the parties. According to Atkin, J., in Williams v. Willis (83 LJKB 1296), the words ' misconducted proceedings' means such a mishandling of arbitration as is likely to cause some substantial miscarriage of justice. In the American Jurisprudence, Volume 3 on pages 964‑965 it is observed that awards which are valid on their faces may be set aside in equity for misconduct on the part of the arbitrators, and the extrinsic evidence is admissible to prove such misconduct. Conduct inconsistent with the duties imposed upon those selected as the arbitrators, either at the hearing, or in reaching their conclusions will frequently constitute misconduct as will impeach an award. "

8. Again, a Full Bench of the Hon'ble Supreme Court in the case of Ghulam Abbas v. Trustees of Port of Karachi (PLD 1987 SC 393) while interpreting section 30 of the Arbitration Act, held that the general rule is that an Award is final as to both fact and law but if an error of law is apparent on the face of the Award, it is good ground for setting it aside. It was further held that there is a rider to this rule, namely, that if the parties have specifically referred a question of law to arbitration then the general rule would apply and the award will be beyond reproach even if such a question is decided erroneously. It was further held that where there is intentional disregard of law, it would be deemed to be a misconduct on the part of an arbitrator as would justify setting aside the award. Reference was made to Russel on Arbitration. In the instant case, one can say that the act of learned arbitrator does not fall within the term "misconduct" as defined in section 39(a) but, to my mind, it is an objection to the legality of the Award apparent on the face of it as defined under section 16(1)(c) and, therefore, it appears justified to remit the Award to the same arbitrator for reconsideration. In the entire scheme of the Arbitration Act, 1940, there is no statutory rule imposing a mandate on an arbitrator not to proceed ex parte against any defaulting party without first giving notice of his intention to proceed in that manner and that an Award in such a manner be set aside. Nevertheless, issuance of a notice by an arbitrator expressing his intention to proceed ex parte is a rule of prudence and convenience. Even after issuance of such notice, a party, to whom proper opportunity of attending arbitration proceedings was extended, fails to appear, the arbitrator will be fully entitled to proceed ex parte and to pass any just order. This view finds favour from the observations made in the Halsbury's Laws of England, Fourth Edition, Volume 2, page 306 at para. 590 which reads as follows:‑‑‑

"

590. Times and places of meetings.‑‑‑It is the duty of an arbitrator, when called upon to act purs4ant to the agreement of reference, to appoint times and places of meeting and to give due notice thereof to the parties. Where the reference is to more than one arbitrator, they should all concur in appointing such times and places and in doing all other acts in the course of the reference, unless the agreement for arbitration provides that the decision of the majority is to be binding (Goodman v. Sayers (1820) 2 Jac and W 249 at 261). The arbitrator cannot hear one party in the absence of and without notice to the other parties (Oswald v. Earl Grey (1855) 24 LJQB 69); but where nothing was done at a meeting notice of which had not been given to the other side, the award was not thereby invalidated (Re Morphett (1845) 2 Dow and L 967). In fixing times and places of meeting it is usual for the arbitrator to consult the convenience of the parties and to comply, so far as possible, with their wishes; but it is within his discretion to fix such times and places as he may think proper (Re: Whitwham Trustees, etc. and Wrexham, Mold and Connah's Quay Rly. Co. (1895) 39 Sol Jo 692). Where the time and place of meeting appointed by the arbitrator are reasonable, and due notice has been given to the parties, but one of the parties refuses to attend, the arbitrator may proceed with the reference in his absence. Where the arbitrator proposes to proceed with the reference notwithstanding the absence of one of the parties, it is advisable that he should give that party distinct notice of his intention to do so (Waller v. King (1923) 9 Mod Rep 63; Fetherstone v. Cooper (1803) 9 Ves 67; Wod v Leake (1806) 12 Ves 412; Harcourt v. Ramsbottom (1820) 1 Jac and W 505 at 512; Scott v. Van Sandau (1844) 6 QB 237; Tryer v. Shaw (1858) 27 LJ Ex 320; Angus v. Smythies, Smythies v. Angus (1861) 2 F & F 381; Re: Hewitt and Portsmouth Waterworks Co. (1862) 10 WR 780). If reasonable excuse for not attending the appointment can be shown the Court will set aside an award made by an arbitrator who has proceeded ex parte (Gladwin v. Chilcote (1841) 9 Dowl 550)." (Emphasis added).

10. A Division Bench of Punjab High Court in the case of Prem Nath L. Marsaran Dass and another v. OM Parkash L. Ram Kishen Dass Aggarwal (AIR 1956 Punjab 187) held that law permits an arbitrator considerable latitude in the procedure adopted by him at the hearing and that he should afford the parties a reasonable opportunity of being heard and an award passed in violation of this essential requirement will be liable to be set aside. In the case of Messrs Lovely Benefit Chit Fund and Finance (Pvt.) Ltd. Purun Dutt Sood and others (AIR 1983 Delhi 413) a Single Judge of Delhi High Court followed the rule laid down by a Division Bench of Calcutta High Court in Bhowanidas Ramgobind 'v. Harsukhdas Balkishandas (AIR 1924 Cal. 524), case of Premnath Harsaran Dass (supra), Udaichand Panna Lall v. Debibux Jewanram (AIR 1920 Calcutta 853), Pratapsingh v. Kishnprasad & Co. Ltd. (AIR 1932 Bombay 68), and the rule of Juggilal Kamlapat (Supra = see also AIR 1955 Calcutta 354) and held that "from these authorities, it is apparent that an arbitrator ought not to proceed ex parte against a party if he has failed to appear at one of the sittings. The arbitrator should fix another date for hearing and give notice to defaulting party, of his intention to proceed ex parte on a specified date, time and place. Even after notice if the defaulting party does not take part in the proceedings, the arbitrator may proceed in his absence". (Emphasis added). The cases of Bhowanidas, Juggilal and Udaichand (as noted earlier) were followed, in addition to the case of Dori Lal v. Lal Sheo (AIR 1954 Allahabad 244) by a Single Judge of Calcutta High Court, who very elaborately summarised five principles governing the arbitrator's right as follows:‑‑‑ ' ....Broadly stated, the principles governing the arbitrator's right to proceed ex parte were: (i) If a party to an arbitration agreement had failed to appear at one of the sittings, the arbitrator could not or, at least ought not to, proceed ex parte against him at that sitting. (ii) Where non‑appearance was accidental or casual, the arbitrator should ordinarily proceed in the ordinary way, fixing another date of hearing and awaiting the future behaviour of the defaulting party. (iii) If, on the other hand, it appears that the defaulting party had absented himself for defeating the object of the reference, the arbitrator should issue a notice that he intended at specified time and place to, proceed with the reference and that if the party concerned did not attend he would proceed in his absence. (iv) But if after making such peremptory appointment issuing such a notice the arbitrator did not in fact proceed ex parte on the day fixed, but fixed another subsequent date, he could not proceed ex parse on such subsequent date, unless he issued a similar notice in respect of that date as well. (v) If he issued a similar notice and the party concerned did not appear, an award made ex parte would be in order. But, if he did not issue such notice on the second occasion but nevertheless proceeded ex parte, the award would be liable to be set aside in spite of a notice of peremptory 'hearing having been given in respect of the earlier date, subject, however, to the condition that prejudice was caused to the party against whom the ex parte order was made. But this duty to give notice of the intention to proceed ex parte was not an absolute one. Where a party by its conduct had made his position clear that he would not attend in any event then the formality need not be followed... " The abovementioned principles were endorsed by a Division Bench of Calcutta High Court in Lohia Jute Press Ltd. v. The New India Assurance Co. (AIR 1988 Calcutta 174).

11. The upshot of the above discussion is that Award, dated 27th July, 1992 is set aside and is remanded back to the learned Arbitrator, who will proceed with the arbitration from the stage as of 27th July, 1992 after giving notice to the plaintiff. However, the defendant shall pay a further sum of Rs.25,000 to the learned Arbitrator as his fee.

12. The suit stands disposed of in the above terms. A.A./P‑51/K Case remanded