P L D 1978 Karachi 147 (PLP)

This is an application by the Insurance Company under section 9 of the Arbitration Act and the prayer is that the appointment of Mr. F. R. Merchant as sole arbitrator be set aside and the arbitration be proceeded with by the two arbitrators, namely, Mr. F. R. Merchant, nominated by the respondent insured and Mr. Abdur Rauf Qasuri, nominated by the Insurance Company.

2. The facts giving rise to this application are that on 23‑5‑1975 the insured having earlier failed to obtain an agreement for appointment of a sole arbitrator nominated Mr. F. R. Merchant as their arbitrator and called upon the Insurance Company to nominate their arbitrator within two calendar months in terms of arbitration clause contained is the insurance policy. The position taken up by the insurance company was that the alleged loss was not covered by the policy and accordingly they were not liable for the claim lodged by the insured. This dispute became subject‑matte: of an application under sections 11 and 33 by the insurance company being J. Misc. 51 of 1975 filed in this Court on 14‑6‑1975. On 19‑6‑1975, an ad Interim injunction was issued restraining the insured and Mr. F. R. Merchant from proceeding with the arbitration. This injunction continued to remain in force until dismissal of J. Misc. No. 51 of 1975, by judgment dated 18‑12‑1975. A High Court Appeal was filed against this judgment on 5‑1‑1976, which was admitted on 26‑3‑1976. In the meanwhile, however, on 7‑1‑1976 the insured addressed a letter to the insurance company in which i1 was stated that the insurance company having failed to nominate their arbitrator in pursuance of the insured's letter dated 23‑5‑1975, Mr. F. R. Merchant their nominee arbitrator will act as the sole arbitrator. It is in there circumstances that the present application has been filed by the insurance company.

3. It is a common ground that the insurance company had two calendar months to nominate its arbitrator following the appointment of Mr. F. R. Merchant as the arbitrator on behalf of the insured ride their letter dated 23‑5‑1975. Admittedly no further action could have been taken in the matter at least during the period 1'9‑6‑1975 and 18‑12‑1975, when as aforesaid an injunction order was in force. When the insured by their letter dated 7‑1-1976, app‑inked Mr. F. R. Merchant as the sol arbitrator, admittedly two calendar months had not expired if the period when the injunction was in force is not taken into account.

4. Mr. Abrar Hassan, the learned counsel for the insured, contended that the insurance company should have immediately after dismissal of J. Misc. No. 51 of 1975 on 18‑12‑1975 proceeded to appoint their arbitrator but they have failed to do so and in the circumstances the insured was justified in making their arbitrator as the sole arbitrator vide their letter dated 7‑1‑1976. The question, however, is whether sufficient cause has been shown to set aside the appointment of Mr. F. R. Merchant as the sole arbitrator and further time should be granted to the defaulting party to appoint their arbitrator. Now the question whether or not it was open to the insured to invoke the arbitration clause was not a question free from difficulty though of course the judgment now is that the arbitration clause was right invoked. It is also not easy to answer the question as to the manner of calculation of two calendar months for one reasonable view could be that not only the entire period when the injunction was in force be disregarded but that two calendar months should expire before the insured was entitled to appoint his arbitrator as the sole arbitrator. In this view of the matter it cannot be said that the insurance company was deliberately avoiding to appoint their arbitrator. It is possible that they were under a bona fide misapprehension that in these circumstances the occasion for them to appoint their arbitrator had not arisen. It may be noted that the High Court Appeal has been admitted and in that appeal stay was sought but the Division Bench of this Court has been pleased to issue notice to the other party.

5. I will, therefore, allow this application and set aside the appointment of Mr. F. R. Merchant as the sole arbitrator and the consequence will be that the arbitration will be proceeded with by the two arbitrators nominated by the parties, namely, Mr. F. R. Merchant and Mr. Abdul Rauf Qasuri. In the circumstances there will be no order as to costs. S. A. H. Application allowed.