1988 PLP 2359 (CLC)

3. Mr. Abid Hassan Minto, Advocate in support of the plea that the report submitted by the Referee is an "Award added that where a person is nominated to determine the questions referred to him after hearing the parties and examining the evidence, the nomination is for all intents and purposes that of an Arbitrator and the decision to be rendered by him amounts to an "Award" which is then to be processed in accordance with the provisions of Arbitration Act 1940. According to him Article 33 of Qanun‑e‑Shahadat, 1984 does not contemplate "a dispute and its settlement" but provides that statement made on information is An admission as the person to whom the dispute is referred is to make a statement on the basis of information, knowledge or belief and not on the basis of enquiry to be made by him in a judicial matter. In support of this submission reliance was placed on Akbari Begum v. Rehmat Hussain and others (A I R 1933 Allahabad 861), Chhabba Lai v. Kallu Lai and others (A I R 1946 Privy Council 72) Sadhu Ram and others v. Ude Ram (A I R 1967 Punjab 179), Sher Zaman Khan v. Noor Zaman Khan and another (PLD 1977 Lah. 672) and Muhammad Hanif Khan and another v. Ghulam Farid Khan and others (P L D 1988 Lah. 250).

4. The two brothers, namely, Tahir Mahmood and Ijaz Mahmood opposed the application and in the reply filed explained the circumstances under which the reference was made and Report was submitted. They raised preliminary objection to the maintainability of the application and urged that the preliminary objection be decided before calling upon them to file parawise reply to the said application. The objection of non‑maintainability is based on the plea that both the parties agreed before the Court to abide by the decision as well as the mode of payment to be decided and settled by the Referee and in the presence of the aforesaid agreement and the undertaking given, the parties stand estopped to challenge the decision of the Referee. It was added that the parties had clearly contemplated and provided at the very outset that the Referee after probing the matter, receiving the documents, considering the claims and counter‑claims, will settle and adjust the liabilities against assets, determine the mode of payment, the manner of discharge of liabilities and that adjustment of liabilities and payment of assets as per the determination made was agreed to be binding on the parties as the final settlement. It was further added that in view of the long drawn litigation, the parties required the Referee to settle the dispute once for all, and it was due to this very understanding that the parties in their addresses and written papers repeatedly declared that decision to be given by the Referee will be final, binding and acceptable to the parties.

5. Learned counsel added that the Referee was appointed to implement the decision given by the Arbitrators in the Award and the Referee in implementation of the said Award distributed various properties, spare parts and implements, exchanged goods and record amongst the brothers and the parties have received items and the properties so assigned and distributed by the Referee who also visited the site to physically divide and demarcate the property which was also delineated in the map supplied by the parties. The decision so made has thus been implemented in many respects without any objection and from this conduct it is apparent that the parties considered the decision of the Referee final and binding. Learned counsel also stated at the Bar (this statement was not controverted by the applicant) that during the proceedings held on 20‑6‑1987, the parties agreed that all that transpires before the Referee during the proceedings will be kept confidential and will neither be publicised nor disclosed to any one; that the Referee may not mention in his decision some of the disputed items or details of the adjustments allowed or those items respecting which the parties have made adjustment themselves. It was added that due to the aforesaid agreement disputes involving foreign exchange and cash in hand, find no mention in the Report though these disputes were also resolved by the Referee after hearing the view points of the parties. Similarly certain other adjustments made as well as the items respecting which there existed no dispute amongst the brothers e.g. plot adjacent to Fatty Acid Plant, liability to pay the amount as determined by the Court to European Green etc. have not been mentioned in the Report. These facts were pointed out to show that the parties with free consent and in their own interest agreed upon a peculiar arrangement which was then followed by the Referee for resolving the disputes existing between the parties. The case of Mahmoods, respondents in the application, is that the applicant cannot approbate and approbate as he stands estopped by deed as well as by conduct to challenge the decision and that the application is liable to be dismissed on this score alone.

6. Before dealing with the respective contentions of the parties, I deem it appropriate to dispose of the question whether a party by taking preliminary objection as to the maintainability of an application can demand decision of the objection raised first and reserve the right to file the parawise reply to the application later on. In the instant case the Mahmoods, the respondents to the application, filed reply containing objections to the maintainability of the application. They insisted that objections raised should be decided before requiring them to file parawise reply to the application. Learned counsel for the respondents, however, did not cite any law or precedent to support the filing of replies in piecemeal or to substantiate the assertion that they can reserve the right to file parawise reply later. The rule is well‑settled that the parties are not entitled to file the pleadings in piecemeal except where objection to jurisdiction of the Court or Tribunal is taken and filing of the written statement or reply would amount to subjecting oneself to the jurisdiction of the Court or Tribunal. The parties, of course, are entitled to raise any objection preliminary or otherwise in their pleadings and can claim trial of any issue as preliminary issue i.e. an issue which may lead to the whole cause being either dismissed or decreed. It must however be remembered that in a majority of cases it is not conducive to the early disposal of a case by the first Court or Tribunal that preliminary objections should be decided before giving the decision on merits. It is not necessary to try issues of law first unless a satisfactory reasoned opinion is formed that the case may be wholly or partially disposed of on them. So, it is unwise to take chances because this' prolongs the proceedings (See Faqir Chand v. Bibi Zulekha: P L D 1962 Pesh .1) . Moreover, the Court in appealable cases should as far as possible decide all the issues inasmuch as a piecemeal trial might lead to protracted litigation and repeated appeals (See Sarojini Roy v. Shivaram Poddar: AIR 1957 Patna 59). Any party taking upon itself to raise preliminary objection only and failing to file parawise reply will be taking the risk of losing the right to file reply on merits subsequently if the Court finds that the objection raised as a preliminary objection merits not to be decided first and separately from the issues on merits. The cases of complete lack of jurisdiction and coram non judice are not to be equated with the other objections which might be available. Neither the piecemeal pleadings nor the piecemeal trial are to be encouraged as both tend to delay the proceedings and decision of the lis. The respondents were, therefore, not entitled to seek decision of the objections taken by them before filing the parawise reply. The respondents will, therefore, have to defend the application on the basis of the objections taken and on the basis of these assertions which remained uncontroverted during the arguments.

7. The question whether the parties intended to appoint Mr. Justice (Retired) K . M . A . Samadani as an 'Arbitrator or as a 'Referee' for having their disputes resolved and settled may now be taken up. The principles laid down by the superior Courts make clear distinction between an 'Arbitrator' and a 'Referee'. An Arbitrator is a person who decides the dispute after making an enquiry following judicial procedure and keeping in view the principles of natural justice and law of the land. The decision thus emanating from a judicial determination is known as an Award. It was also observed in Muhammad Saleem v. Muhammad Akram and others (P L D 1971 SC 516), that "If a dispute is referred to a person and if that person decides the dispute by holding an enquiry and comes to a decision, then undoubtedly, what that person decides would constitute an Award. On the other hand, if a matter is referred to a person and he is not called upon either to hold inquiry or to give a decision but by the exercise of his sagacity, knowledge or experience to bring about merely an understanding between the parties and restoring peace between them, then he would be discharging only the functions other than those of Arbitrator or Arbitrators." Even in the case of Akbari Begum v. Rehmat Hussain and others (A I R 1933 All. 861) Sulaiman, C.J. observed as under:‑ "In concurrence with the opinions of the learned Judges who have made this reference, I hold that an agreement to abide by the statement of a particular witness is in substance not a reference to arbitration. The essence of arbitration is that the arbitrator decides the case and his award is in‑the nature of a judgment which is later on incorporated into a decree of the Court. The arbitrator can either proceed on the basis of his own knowledge or make enquiries and take evidence and then give his decision on such evidence. But where parties agree to abide by the statement of a third person or a Referee the Referee merely makes a statement according to his knowledge or belief and the Court then decides the case and pronounces its judgment on the basis of such a statement and passes a decree thereon. The Referee is not authorised to make enquiries and take evidence, and then announce his decision on the basis of such evidence. He is called upon to make a statement according to his knowledge and belief. In the case of an arbitration, as the arbitrator's award is an expression of an opinion and his procedure resembles that of a Court, a party is entitled to file objections and challenge the validity of the award. The making of a statement by a referee or a third person has no resemblance to a proceeding conducted by him as if he were a Court of law, and accordingly there can be no procedure for filing objections as to its validity." In Chhabba Lal v. Kallu Lal and others (A I R 1946 PC 72) Sir John Beaumont observed as under:‑ "A reference to an outside party to decide matters in dispute . in a suit and the question of costs, is not a reference to that party for information in reference to a matter in dispute and if the reference is to be regarded as made only under section 20 then it was a bad reference."

8. Similar view was expressed in Ramji Lal v. Ram Sanehi Lal Pandey (AIR 1978 All.351). A Division Bench of this Court in Muhammad Hanif Khan and another v. Ghulam Farid Khan and others (P L D 1988 Lah.250) also pointed out that the proceedings recorded by the Court with the attending circumstances are to be gone into to find out the intention of the parties and to determine the question whether reference of the disputes was to a Referee or to an Arbitrator. It may, however, be added that it will not make any difference if the Referee does not have any personal knowledge about the situation and locality of the particular property and visits the spot in order to find out that situation and makes a statement before the Court after having obtained some personal knowledge or even after obtaining belief regarding the truthfulness of the matter. Such a statement may yet be considered to be a statement under section 20 of the Evidence Act, 1872 (Article 33 of Qanun‑e‑Shahadat 1984). See Sher Zaman Khan v. Noor Zaman Khan and another P L D 1977 Lahore 672). It will, therefore, be seen that the test laid down in these cases is whether the parties intended to have the dispute decided by the person of their own choice or the dispute was intended to be decided by the Court in accordance with the information provided by the person referred to by the parties. The intention of the parties will be gathered and determined from the nature of the dispute, the terms of the reference, the commitment or undertaking given, if any, respecting binding nature or otherwise of the report or statement to be made, the procedure to be adopted or actually adopted for resolving the dispute by the person to whom the dispute was referred and the conduct of the parties before the person appointed.

9. For determining the real nature of appointment of Mr. Justice (Retired) K.M.A. Samadani, examination of the facts and circumstances in which the disputes came to be referred appears necessary. The factual background of the disputes existing between the three brothers, namely, Ijaz Iqbal on one side, Tahir Mahmood and Ijaz Mahmood on the other side, is that before institution of the three petitions (C.O. 40‑85, C.O.4‑86 and C.O. 21‑87) under the Companies Ordinance, 1984 in this Court, the brothers were already entangled in serious litigation. These brothers are owners of landed property, both urban and rural, including agricultural land. They were also carrying on business on large scale under the names and styles of Messrs A.T.M. Corporation (Private) Limited, Messrs Extraction (Pakistan) Limited and Messrs Universal Industries Limited., and while conducting business they also incurred huge financial liabilities. The disputes arose amongst the three brothers with the result that the business was adversely affected and the Mills and Plants had to be closed down. The three brothers in 1985 agreed to resolve their disputes through the arbitration of Messrs Ch. Shah Muhammad and Ch. Muhammad Ashraf who ultimately gave their Award on 3‑7‑1985. This Award did not mature into final settlement as none of the brothers filed the Award in Court for having the same made Rule of the Court. The situation further deteriorated and the estrangement further deepened because of involvement in criminal cases of one or the other brof','er; three criminal cases were registered, one under section 380/452/506, P.P.C. vide F.I.R. No.45/85 dated 9‑2‑1985; second under section 384/380, P.P.C. vide F‑R. No. 58/86 dated 28‑1‑1986 with Police Station Peoples Colony, Faisalabad and the third under section 17, Offence of. Zina (Enforcement of Hudood) Ordinance VII of 1979 vide F.I.R. No. 63 dated 24‑5‑1984 with Police Station Hasan Abdal, District Attock. Ijaz iqbal had also filed complaints in the office of Registrar, Joint Stock companies against Messrs Universal Industries Limited and Messrs A.T.M. Corporation (Private) Limited.

10. The litigation instituted in this Court started with the filing of petition (C.0. 40‑85) seeking rectification of register of shareholders of Messrs A.T.M. Corporation (Private) Limited by striking off the names of respondents Nos.2 to

8. It may be noted that the three brothers are amongst the respondents whose names were sought to be removed from the list of shareholders. The other petition (C.O. 4‑86) was filed under section 161 (8) read with section 179 of Companies Ordinance, 1984, seeking declaration that the meeting held on 22‑9‑1986 is illegal and the Board of Directors elected on 20‑2‑1986 comprises of the validly elected Directors of Messrs A. T. M. Corporation (Private) Limited. The purpose was to oust Mian Tahir Mahmood and Mian Muhammad Shati from the Board of Directors. The third petition (C.O. 21‑87) was filed under sections 305 and 309 of Companies Ordinance. 1984 seeking winding up of :Messrs A.T.M. Corporation (Private) Limited, by Ijaz Iqbal and others on 11‑5‑1987.

11. The situation thus prevailing between the three brothers in May 1987 was that the business of the family being conducted under the aforesaid three companies had virtually been closed down, the liabilities were mounting day by day; the feeling of estrangement and bitterness was increasing due to pending civil as well as criminal litigation and one of the brothers had initiated proceedings for having one of the companies (Messrs A.T.M. Corporation) wound up. The challenge so made by moving petition for winding up of Messrs A . T . M . Corporation (Private), Limited, the company which was to be controlled and managed by Tahir Mahmood and Ijaz Mahmood would have been replied and met by seeking liquidation of Extraction (Pakistan) Limited, the company which was to be owned and managed by Ijaz Iqbal. The parties were thus at the brink of disaster and complete collapse could be averted by timely sensible action. It was apparent that all the three brothers were likely to lose business which their family had acquired and developed through hard labour and enterprise. This aspect was highlighted on one of the dates when three company matters came up for hearing. Learned Counsel for Tahir Mahmood and Ijaz Mahmood then stated that the three brothers were conscious of the situation and that they, the three brothers, were prepared to authorise Mr. Abid Hassan Minto, Advocate, learned counsel for Ijaz Iqbal to find out a solution of the problems faced by the three brothers. Mr. Abid Hassan Minto, Advocate declined to act as mediator saying that at one stage the three brothers had confidence in him but then in view of certain developments having taken place recently, it would not be proper for him to suggest solution or to decide the matters in dispute between the three brothers. The parties then sought time to hold negotiations with the assistance of their learned counsel for finding out ways and means to resolve the disputes amicably and finally. The position noted above was alluded to in paras 2 and 3 of the application submitted by the parties jointly on 12‑1‑1988 to the honourable Chief Justice for having the company matters fixed before me.

12. The three brothers, being conscious of the disaster which would have resulted had the discord amongst them persisted and the litigation continued, ultimately agreed in their own interest to have their disputes resolved by appointing Mr. Justice (Retired) K.M.A. Samadani as Referee vide Memorandum of Settlement Ex. 'A' whereby the three brothers not only admitted the appointment of Messrs Ch. Shah Muhammad and Ch. Muhammad Ashraf as Arbitrators but also accepted the Award dated 3‑7‑1985. The Arbitrators grouped the Mills along with their assets, stocks and liabilities in three lots for division amongst the three brothers. They allocated one lot to each brother. They also determined the share of each brother in the property, division of other lands and cash in hand. The responsibility for discharging the liabilities was also fixed by them. The disputes which were stated to be outstanding and requiring resolution were outlined in the Deed of Settlement as under:‑ (a) Settlement of the issue of division of land connected at present with Fatty Acid Plant (Faisalabad). (b) Rendering of accounts by the parties and distribution of cash in hand according to ratio determined by the Arbitrators. (c) Determination of the manner of settlement, the period and mode of payment of liabilities by the parties in accordance with the decision of the Arbitrators and also transfer .of assets, implements, machinery, books and records, vehicles and other goods. For resolving these disputes the Referee was authorised to call for the accounts from the parties, determine the amount to which each or any of the parties may be entitled out of cash in hand, settle the liabilities out of the share of each party in accordance with the decision of Arbitrators and determine the outstanding payments, if any, by or to a party. The Referee was also authorised to decide any other incidental matter within the terms of the Award and this settlement and with the consent of the parties.

13. The Deed of Settlement shows that the parties on their own settled and resolved the following matters:‑ (i) The issue of division of land mentioned in clause (a) was decided and settled by agreeing that the land measuring six kanals inclusive of the passage shall go alongwith Fatty Acid Plant and the rest of the land of that Plant shall vest in Ijaz Iqbal as owner. (ii) An Indemnity Bond was agreed to be executed by or on behalf of M/s. A. T. M. Corporation by Mian Tahir Mahmood undertaking to clear the liabilities taken over by M/s. A . T . M . Corporation as finally determined by the Court. Ijaz Iqbal also undertook to execute an authority to pursue and prosecute the pending matters concerning these liabilities in favour of Mian Tahir Mahmood and also to render necessary assistance in prosecution of said litigation. (iii) The three brothers further agreed and undertook to implement and enforce this settlement and to take necessary steps for its implementation through their respective shareholders. (iv) All the cases and complaints pending before Civil, Criminal and Company Courts and Authorities between the parties concerning them and connected matters were agreed to be withdrawn by the respectivbe parties.

14. Next comes the undertaking given by the parties before this Court on 8‑6‑1987 when the memorandum of Settlement was approved. Mian Ijaz Mahmood and Mian Tahir Mahmood undertook that after distribution and allocation of the liabilities in terms of the Award/Decision dated 3‑7‑1985 and decision to be given by the Referee, if any liability remains to be discharged by them and Bank/Financial Institutions are to be satisfied with regard to any amount due and payable to them, they shall abide by the mode of payment as may be determined by the Referee and that in case of their failure to discharge any such liability, they shall place sufficient property at the disposal of the Court for the purposes of discharge of the said liability, if any, towards Mian Ijaz Mahmood and Mian Tahir Mahmood in terms of the Award/Decision dated 3‑7‑1985 and Decision of the Referee to be given by making payment in cash or by placing sufficient property at the disposal of the Court.

15. This Court, after recording the respective undertakings, directed the parties to appear before the Referee on 10‑6‑1987 and directed the Referee to submit his Report by 5th July, 1987. The parties thereafter obtained many adjournments to enable the Referee to resolve the disputes referred to him and for making Report which was ultimately submitted in the month of March, 1988 and the same was placed on record as Mark 'X'. It will be recalled that the parties before the Referee submitted claims and counter‑claims extending over 26 items and admittedly produced accounts, documents and record in support of respective versions. Mr. Abid Hassan Minto, Advocate in view of the procedure adopted by the Referee argued that the Report submitted is an Award as the Referee gave his Report after holding enquiry and examining the documents produced by the parties.

16. It is true that Mr. Justice (Retired) K.M.A. Samadani had no personal knowledge of the disputes referred to him and as such he held necessary enquiry to acquaint himself with the controversy) existing between the parties and then gave his decision. Thus, the matters in dispute were not and could not have been referred to a Referee for their resolution in terms of Article 33, Qanun‑e‑Shahadat 1984. The Decision given by the Referee in implementation of the Award dated 3‑7‑1985 in view of the guidelines provided by the precedents noted in the paras above, is thus an 'Award' and parties to the reference have the right to file objections against the same in accordance with the provisions of Arbitration Act, 1940, unless they otherwise have waived their right or under general principles of law stand estopped to challenge the Award.

17. In the instant case on account of conduct and understanding reached the parties stand estopped to challenge the Decision/Report of the Referee. The reasons for coming to this conclusion are manifold. The intention to treat the Decision of the Referee as final and binding is apparent from the situation prevailing at the time of acceptance' of the Award dated 3‑7‑1985. The main job of the Referee was to implement the determination made by the Arbitrators in .the Award and the parties gave undertaking to abide by the Award as well as the mode of payment and the discharge of liabilities as determined by the Referee. The parties participated and acted throughout the proceedings on the basis that Mr. Justice (Retired) K.M.A. Samadani was settling the disputes finally. Some of the decisions made by Mr. Samadani were implemented during proceedings and in view of the understanding developed and authorization given, the same were not even made part of the Report. It was stated by learned counsel for Mahmoods and this statement was not controverted by the other side that jewellery, guns, watches, record, spare parts, tools and equipment and other goods had already been divided between the parties according to the decision given by the Referee: The plot of the Fatty Acid Plant had also been demarcated and the same alongwith the house standing thereon had 'been undertaken to be transferred to Ijaz Mahmood. Learned counsel in this connection also rightly referred to the agreement arrived at by the parties before the Referee and duly noted in the proceedings of 20th June, 1987. The parties agreed that the proceedings being held by the Referee and all that transpires before him shall be kept confidential and shall not be publicised and communicated to any one and that some of the matters need not be even mentioned in the Report to be submitted to the Court. Had the parties not considered themselves bound by the decision to be given by Mr. Samadani, they would not have firstly implemented some of the decisions given during the proceedings without waiting for the decision on other issues and likewise would not have agreed that) some of the matters, for example, foreign exchange, cash in hand etc, need not form part of the Report to be submitted. The requirement) of law is that the Arbitrator is to give his decision on each issue referred to him alongwith his reasons but contrary to this the parties authorised the Referee not to mention decisions respecting certain disputed items in the Report.

18. Moreover, the parties as is apparent from the Deed of Settlement Ex. 'A' agreed to withdraw all Court cases and complaints at the time of making reference to the Referee. Had the parties not intended to treat the decision final and binding, the agreement to withdraw cases would not have preceded the decision of the Referee. Again the parties admittedly delivered the signed transfer deeds alongwith share‑scripts of these Companies to the Referee for delivery to the party entitled as per the Award. All this would not have been done if the parties had to avail the right of taking objections to the Report of the Referee. This conduct shows that the intention of the parties was to have the disputes resolved finally and once for all.

19. Another important feature is that the Report has not been challenged in toto but only in part and misconduct has not been alleged. The objection at best pertains to the merits of the decision rendered in respect of some of the items only. Obviously the determination made on merits by an Arbitrator cannot ordinarily be challenged. The other objection that certain payments made in discharge of liabilities have not been noticed by the Referee cannot be gone into as admittedly Mr. Samadani was authorised not to make mention of some of the disputes settled and the adjustment allowed.

20. For the reasons given above it is held that the applicant is not entitled, rather stands estopped to challenge the Report of the Referee. The objection application, therefore, fails and is hereby dismissed. A . A . / M‑869/ L Application dismissed