1988 PLP 1131 (MLD)

This suit has been filed by way of an application under sections 8 and 20) of the Arbitration Act, 1920, praying for the appointment of Arbitrator by the Court to adjudicate upon the disputes between the parties. The admitted facts of the case appear to be, that on 8th May,1983, the parties entered into an agreement whereby the plaintiffs agreed to purchase :: shop in the Gemini Electronics Centre on Plot No.39‑A, Abdullah Haroon Road, Karachi, on the terms and conditions mentioned in the agreement from the defendant, who agreed to sell it. Under this agreement the price of the shop was fixed at Rs.3,00,000 which was payable in three instalments. Rupees 1,00,000 were paid as advance, whereas, second instalment of Rs.1,50,000 was payable on 30th June, 1983. The last and third instalment of Rs.1,50,000 was payable on 30th October, 1983. Under the agreement, the defendant agreed to hand over the possession of the shop by 30th December, 1983 to the plaintiffs, failing which, he undertook to make a monthly compensatory allowance of Rs.3,000 till the date possession was handed over to the plaintiff. Clause 8 of the agreement,' which is relied upon by the plaintiff for the purpose of this suit reads as under:‑ "That in the event of any dispute arising out of context of this agreement the matter shall be settled admicabaly by both the parties or otherwise the same shall be referred to a referee nominated jointly by the parties of this agreement whose decision shall be binding on both the parties." It is contended by the plaintiff, that the disputes had arisen between the parties on the following issues. (1) That though the possession was not handed over on 30‑10‑'983, but it was handed over on 1st April, 1984, but the compensatory allowance, as agreed under the agreement, was not paid. (2) That in spite of clause No.6 in the agreement that the total consideration mentioned above was fixed and there was no escalation clause, the defendant made the plaintiff to pay Rs.40,000 more to get the possession. (3) That the defendant was avoiding to execute the lease deed in favour of the plaintiff. The plaintiff, therefore, served a notice upon the defendant's Advocate on 26‑8 1986, for appointment of Arbitrator to adjudicate the disputes which was not replied, and hence this suit. The defendant has resisted the appointment of Arbitrator on the following grounds:‑ (1) That there was no arbitration agreement between the parties, and clause 8 of the agreement provided for appointment of referee and not for referring the dispute for arbitration. (2) That there was no dispute between the parties. (3) That the plaintiff failed to pay all instalments due in time and failed to pay last instalment of Rs.1,50,000, and therefore, the defendant suffered loss, and the dispute arose between the parties, which was settled by oral agreement between the parties on 1‑4‑1984, whereby the sale price was raised by Rs.40,

000. It is, therefore, contended, that even if there was any arbitration clause under original agreement, there was no such arbitration clause, in the revised verbal contract and as such no arbitrator could be appointed. (4) That there was no proper notice under section 8 of the arbitration clause. (5) That the proceedings under sections 8 and 20 of Arbitration Act simultaneously were not maintainable and that the plaintiff having taken steps to involve section 8 of the said Act, could not seek relief under section

20. I have heard M/s. Akram Zubairi, learned Advocate for the plaintiff, and Iqbal Bawany, learned Advocate for the defendants. First, I will discuss as to whether there was any arbitration clause in the agreement between the parties. The execution of the agreement dated 8‑5‑1983 is not denied. The relevant clause 8 of this agreement has been reproduced above. No doubt, word referee is used in this clause and not word arbitrator, but intention of the parties has to be gathered from the wording used in the entire para or clause. The plain reading of this clause, would show, that the dispute was to be referred to the referee, for decision and that decision would be binding; upon the parties. In other words, the referee was to decide the dispute between the parties and not only to hear or record evidence of the parties for reference to other authority for decision. An arbitration agreement has been defined under section 2(a) of the Arbitration Act to mean a written agreement to submit, present or future differences to arbitrator. Thus an arbitration agreement is that agreement, whereby the parties have bound themselves to have their disputes arising out of transaction, to which such agreement is applicable, adjudicate upon and decided by a domestic tribunal and not by resort to Courts of law. 1n this context, clause 8 of the agreement cannot but be held to be an arbitration) agreement and the referee mentioned therein is in fact an arbitrator. The second question, that requires consideration is, whether there is or was dispute between the parties. Admittedly, the possession was not handed over 1 to the plaintiff in time and admittedly the compensation as required under the agreement has not been paid by the plaintiff. According to the plaintiff, the defendant was liable and responsible for delay in handing over the possession, whereas according to defendant, the plaintiff failed to make payment in time and therefore, this delay has occurred, hence the defendant was not entitled to any compensation. Be that as it may ,there cannot be any doubt, that the dispute had arisen between the parties in context of the agreement dated 8‑5‑1983. In para.4 of the objections, even the defendant has admitted, that at certain juncture a dispute arose between the parties. Under the circumstances, I have no hesitation in holding, that there arose dispute between the parties, at least on these issues on 30‑10‑1983, when the defendant was to hand over the possession of the shop to the plaintiff. I have already held, that under clause 8 of the agreement that there was arbitration clause, but on careful reading of this clause it will be seen, that under, first part of the clause 8, in case the dispute arose between the parties, the matter had to be settled amicably by both the parties and only, in case of failure to arrive at an amicable settlement the reference was to be made to the referee for decision of the dispute. Thus, the agreement to refer the dispute for arbitration was not unconditional, but it was subject to the condition, that the parties should fail to arrive at amicable settlement of the dispute. It is contended, by the defendant, that there was oral agreement between the parties, whereby the plaintiff agreed to pay Rs.4,40,000 to the defendant and that on payment of last instalment of Rs.1,50,000 and additional Rs.40,000 on 1‑4‑1984, the possession was handed over to the plaintiff. Even plaintiff in para. 7 of the application have admitted, that apart from the above (agreement) the respondent .further agreed to provide the petitioner about 2 feet additional space m addition to the area mentioned in the last page No.1 of the said agreement subject to the payment of Rs.40,000 and the petitioner paid Rs.40,000 extra vide receipt dated 1‑4‑1984. In para. 15, it is averred by the plaintiff, that as per agreement and further undertaking dated 1‑4‑1984, the respondent was under obligation to execute sub lease in favour of the petitioner. Contentions and admissions of the parties as pointed above, leave no doubt, that after 30‑10‑1933, when the dispute, if any, arose between parties they, on 1‑4‑1984, reached an oral agreement under which the plaintiff agreed to pay Rs.40,000 more as price of the shop and the possession was handed over on that day. It is not averred, that under this oral agreement the plaintiff demanded or, defendant agreed to pay Rs.3,000 per month for his failure to hand over the possession on 30‑10‑1983. Even in the application, it is not contended by the) plaintiff, that defendant forced him to pay Rs. 20,000 mete but he "teas stated, taat1 this amount of Rs.40,000 was paid by him for additional space. Thus, I presently, the dispute if any is not with regard to the price of the shop air the I compensation as; consequence of iron‑delivery of the shop at the stipulated time which dispute appears to have been settled. between the parties by the agreement dated 1‑4‑1984, which is not in writing. I am further supported in this conclusion, by the conduct of the plaintiff himself. lie has produced certain notices served by him upon the defendant. The first notice is Annexure "B" dated 17‑10‑1984. for this notice, the defendant has raised number of grievances, but has not raised grievance that any excess price was charged from him nor did he demand the compensation for non‑delivery of the possession as per agreement. In the notice Annexure "C" dated 18‑3‑1985, the only grievance raised by the plaintiff was, that defendant had failed to arrange for the registration of sub‑lease deed, which according to the agreement dated 1‑4‑1984 had to be done within six months. Presumably, other grievance of the plaintiff, mentioned in Annexure "C", had been redressed. In the letters dated 8th July, 1985 and 10th December, 1985 the plaintiff reiterated his demand mentioned in the earlier letter. Same demand was made in the letter dated 3‑11‑1985. In all these letters there was no complaint by the plaintiff, that he had been over charged the price nor did he demand the payment of the compensatory allowance from the defendant. It was only in the notice dated 26‑8‑1986, that the defendant made a grievance of non‑payment of ?the compensation, but even in this notice, he averred, that the defendant had charged additional amount of Rs.40,000 from the plaintiff and agreed to band over the additional space. There are certain other disputes also referred to by the plaintiff' in his application. It is contended, that the respondent had illegally and dishonestly charged Rs.15,000 from the petitioner on the plea of maintenance charges non -refundable. Under para.7 of the agreement the plaintiffs had agreed to pay a sum of Rs.15,000 as non‑refundable security deposit towards .maintenance charges. The payment of this amount, therefore, cannot be considered as dispute between the parties as payment had been made in accordance with terms of the agreement. It is, further contended, that as per agreement and further agreement dated 1‑4‑1984, the respondent was under obligation to execute sub‑lease in favour of the petitioner. The defendant/respondent does not deny his obligation to execute sublease, but states, that certain problem had to be solved with the Building Control Authority, after which he would execute the agreement. On the receipt of Rs.40,000 no doubt it is written, that sub‑lease would be executed within six months, but admittedly this undertaking was in pursuance of oral agreement between the parties on 1‑4‑1984. No such time is mentioned in the original agreement in which arbitration clause exists. As for the oral agreement, it, cannot come within the definition of an arbitration agreement even if the parties' have by oral agreement agreed to refer the dispute to the arbitration. The arbitration agreement as defined in Arbitration Act requires it to be in writing. If there is any dispute between the parties arising out of oral agreement dated 1‑4 1983 it cannot be referred to arbitration. There appears to be no doubt as to the liability of the defendant to execute the sub‑lease, but the dispute appear to be over time within which the sub‑lease is to be executed, which as already mentioned is not provided for in original agreement, therefore, this dispute cannot be said to have arisen out of context of the agreement. There also appears to be dispute between the parties over the question as to whether the defendant agreed to provide two feet additional space, while charging additional amount of Rs.40,000 towards the sale price. Admittedly, Rs.40,000 were paid by the plaintiff under oral agreement dated 1‑4‑1984. It is Contended by the plaintiff, that under this oral agreement defendant agreed to give additional space or two feet. Be that. as it may, this dispute also cannot be said to have arisen out of original agreement and as such it cannot be referred to arbitration under clause 8 of the agreement. It may be pointed, that an agreement to submit a dispute for arbitration rests on the consent of the parties, and therefore, it can be amended. modified by mutual consent or act or conduct of the parties. It may be superseded by new agreement which will have effect of distinguishing the existing agreement. In the instant case admittedly after original agreement new oral agreement was entered into by the parties on 1‑4‑1984. Under this now agreement the plaintiff agreed to pay Rs.40,000 more towards sale price but it is contended by plaintiff, that this payment was made on the condition, that the additional space would be provided. In this new agreement, it was f:'. aver agreed, that sub‑lease would be registered within six months. Admittedly, this new agreement is not in writing as such it cannot be considered an arbitration agreement within the meaning of arbitration as defined in the Arbitration Act. Therefore, disputes if any under this oral agreement cannot be referred to the arbitrator. I have already pointed the conduct of the plaintiff which clearly shows, that he did not press his claim for the compensatory allowance, may be because of new oral agreement. This finds support from the fact, that no evidence has been produced by the plaintiff to chow, that he had made payment as per agreement. The defendant has produced photostat copy of the receipts to show, that even the last payment of Rs.1,50,000, which according to the agreement, was to be made on 30th October, 1983 was in fact made by the plaintiff on 1‑4‑1984. There appears to be some force in the contention of the learned counsel for the defendant that without payment the plaintiff could not have claimed the possession or compensatory allowance. This contention also finds support, from the fact the claim for the compensatory allowance was not made by the plaintiff in the other notices, as stated above, except the last one, which was given after more than 2 years of getting the possession: The conduct and admission of the parties tend to lead to the conclusion, that the original agreement had been replaced by new agreement and the possession of the premises was handed over to the defendant in terms of the new agreement. Thus, in my opinion, there is no dispute between the parties under the original agreement with regard to the payment of the additional amount of Rs.40,000 and compensatory allowance. I have already pointed, that Rs.15,000 as security deposit is also as per agreement and, therefore, it cannot be said that any dispute had arisen over payment of this amount. With regard to the liability of the defendant to execute the sub‑lease in terms of the agreement this liability is not disputed by the defendant, who states, that after getting the clearance from the Building Control Authority, he will get the lease deed executed. The prerequisite for reference to arbitration is that there should be a dispute between the parties. The dispute implies assertion of right by one and the repudiation of such right by the other. In the instant case, there is no repudiation by the defendant of the right of the plaintiff to have sub‑lease deed registered. I have already pointed out with regard to the other disputes, namely, the providing of additional space and of execution of the sub‑lease within six months, the disputes do not arise out of context of the original written agreement. In view of the circumstances, I find no ground for appointment of the arbitrator. As such the application is dismissed. However, it will not preclude the plaintiff from enforcing his rights, if any, through ordinary Civil Suit. The suit was disposed of by a short order dated 18‑10‑1987. Above are the reasons in support of the said order. AA./M‑420/K Order accordingly.