2026 PLP 681 (CLD)

ASIM HAFEEZ, J.

Instant civil Revision, directed against order of the Civil Court, dated 26.09.2024, raises a simple but conceptually rich issue. Order under reference was passed in exercise of jurisdiction under Section 8 of the Arbitration Act, 1940 ( Act of 1940 ).

2. Dispute, herein involved, claims origin to Agreement for Engineering, Procurement and Construction dated 02.11.2015, which contained Clause 20.06 (a), hereby referred as Arbitration Clause . In essence, adjudication requires determination of the scope and moment of applicability of the Arbitration Clause, in the context of the assertions and counter assertions. Arbitration Clause reads as:- 20.6. Arbitration. (a) Any dispute arising out of or in connection with this Agreement that has not been resolved following the procedures set forth above or has been required by a Party to be referred to arbitration without reference to the above procedures shall be settled by arbitration in accordance with the Arbitration Act, 1940 (the Act) by three arbitrators appointed in accordance with the Act. The Arbitration proceedings shall be conducted and the award shall be rendered in the English language . [Emphasis supplied]

3. Facts, essential for adjudication are that a dispute arose between the parties, inter alia regarding claim of liquidated damages invoice was issued but not honored -, which dispute allegedly, for the purposes of present proceedings, qualifies as category of dispute(s) referable to the Arbitrator(s) petitioner claims that dispute could not be referred to the Arbitrator(s) directly but only after exhausting the Alternate Dispute Resolution mechanism, provided for in the Agreement by way of provisioning of Dispute Adjudication Boards (DABs). Respondent invoked Arbitration Clause, by issuing notice dated 06.08.2021, whereby same had indicated commencement of the Arbitration and nominated their Arbitrator and sought nomination by other party. And upon alleged non-compliance, respondent invoked jurisdiction of the Civil Court, seeking appointment of Arbitrator(s) through filing of application under Section 8 of the Act of 1940. Application was replied by the petitioner, wherein objection was raised regarding arbitrability of the dispute without resorting to the DABs petitioner claimed that resort to DABs is a condition precedent, and unless exhausted, no resort to the Arbitration Clause, could be made. Court allowed the application and proceeded to direct parties to submit nominations.

4. Learned counsel for the petitioner avers that resort to DABs is mandatory and such mechanism for mediation, prior to arbitration, is a well-settled commercial practice and courts liberally direct parties to reach out to DABs for resolution of disputes, treating such requirement as pre-arbitration condition. Learned counsel read Clauses 20.5 and 20.8 of the Agreement to emphasize the significance of DAB.

5. Conversely, learned counsel for respondent had textual reading of the Arbitration Clause and emphasized that said clause was drafted with mutual consent, whereby option of approaching DABs was not mandatory but discretionary, who focused on this portion of Arbitration Clause, . or has been required by a Party to be referred to arbitration without reference to the above procedures shall be settled by arbitration in accordance with the Arbitration Act, 1940

6. Heard. Arguments summed-up; Petitioner s counsel pleads that pre-arbitration step constitution of DABs and reference of dispute to them was mandatory and avoidance thereof is impermissible, contractually. Conversely, case of the respondent is that Arbitration Clause makes such option optional-cum-discretionary and any party can seek arbitration, directly.

7. There is no cavil that question of enforcement of multi-tier clause(s) in agreement, the one s requiring adoption and adherence to reference to or placement of dispute for resolution before DABs [which are construed as pre-arbitration condition(s)] before initiation of formal arbitration proceedings, are dealt with distinctively under various jurisdictions, depending upon the intent expressed, effect envisaged and consequences provided contractually. In certain jurisdictions such pre-arbitration conditions are treated as mandatory / condition precedent and in others mere discretionary, again depending upon the expression employed in the agreement or for that matter arbitration clause. Petitioners are claiming that stage of appointment of arbitrators would arrive once dispute is essentially placed before and has been considered by DABs, under the ADR mechanism agreed upon. Respondent pleaded that resort to DAB is discretionary and reference to formal arbitration is permissible in the context of the textual reading of Arbitration Clause.

8. It is pre-mature and unwarranted, in the context of facts of the case and circumstances encountered, to lift the veil and to comment or determine that whether pre-arbitration condition, in the context of present agreement, is either an admissibility issue or a jurisdictional question determination whereof calls for reading and interpretation of pre-arbitration condition(s). Particularity of admissibility and jurisdictional issue and determination thereof need not to be undertaken since proceedings before the Arbitral Tribunal has not commenced since in some jurisdiction(s) if arbitration proceedings had commenced both these issues are allowed to be examined by Arbitral Tribunal. In the case at hand, Arbitral Tribunal has not yet commenced arbitration, therefore Court is empowered but which court and whether this determination could be carried out under Section 8 of the Act of 1940 this is the bone of contention. Respondent invoked jurisdiction under Section 8 of the Act of 1940 - where objection was raised that unless pre-arbitration condition is fulfilled, no formal arbitration proceedings could commence.

9. Now the fundamental questions are; whether dispute is ripe for arbitration or not yet arbitrable; and where lies the jurisdiction to decide former question. Whether Section 8 of Act of 1940 provides an answer. For convenience provision is reproduced hereunder,

8. Power of Court to appoint arbitrator or umpire.- (1) In any of the following cases:- (a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or (b) if any appointed arbitrator or umpire neglects or refuse to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or (c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him; any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy. (2) If the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties.

10. Court proceeded to direct parties to nominate Arbitrator(s) without appreciating that dispute is not regarding the mechanism of appointment of Arbitrator(s) or numbers thereof, but whether Arbitration Clause could be resorted to or triggered without fulfilling pre-arbitration condition as claimed by the petitioner.

11. I have examined the order and conclude that Court has failed to assess, ascertain and conceptualize the scope and extent of applicability of Section 8 of Act of 1940 in the context of the controversy whether requirement of approaching DAB is mandatory or discretionary. Order is found deficient, which failed to address and appreciate that mere appointment of Arbitrator(s) would not resolve the controversy unless effectiveness of pre-arbitration clause is determined. Interpretation of Section 8 of the Act of 1940 can be undertaken by this court but such determination, in the circumstances, when jurisdictional question was not conceived, let alone discussed by the Court, would be prejudicial. Let the Court decide the scope of its jurisdiction under Section 8 of the Act of 1940. Judgments referred need no discussion in the context of customized drafting of Arbitration Clause.

12. In view of aforesaid, this Civil Revision is allowed and order dated 26.09.2024 is set aside and matter is remanded, where application of the respondent shall be deemed pending. And court while deciding the matter afresh, would determine the question that whether Section 8 provides jurisdiction to decide the controversy under reference. JK/H-1/L Revision allowed.