P L D 1959 (W (PLP)

(a) Pakistan Mining Concession Rules, 1949 r. 80 proviso, item (2)‑Words "cancellation of . . . . lease . . . . for any breach of provisions thereof "‑Refer to breach of other terms of lease and not to violation of Rule 9 (6). Held, that the words "or any breach of the provisions thereof" in sub‑clause (2) of proviso of Rule 80 clearly refer to the other terms of the lease and not to Rule 9 (6). Therefore, a dispute arising out of cancellation of a lease for default in paying the rent and royalty was covered by clauses 2 to 5 of Rule 80 of the Pakistan Mining Concession Rules, 1949 and was thus referable to two arbitrators and not to the Central Government. (b) Arbitration Act (X of 1940) S. 9‑Differences between parties bona fide‑Government, having made default in appointing their arbitrator, allowed to appoint one during proceedings in Court. Jamiatrai for Plaintiff. Ihsanul Haq for Defendant. JUDGMENT This order will dispose of the objections of the defendants filed on 14‑9‑1954 against an award filed on 19‑4‑1954 by Mr. E. V. Castellino the sole Arbitrator for making it a rule of the Court. Briefly, the facts leading to the impugned award are that the Government on 27‑1‑1951 granted a Coal Mining Lease No. 130 in Machh, Baluchistan to the plaintiffs for thirty years on the terms and conditions contained in Pakistan Mining Concession Rules, 1949. The defendant Government under these rules is entitled to cancel the lease if the lessee fails to pay rents and royalties on the due dates. It appears that a sum of Rs. 98‑13‑0 was due from the plaintiffs as part rent and royalties for the half year ending 31st December 1952 and Rs. 40 as advanced dead rent for the first half of the year 1953 both payable on 1st January 1953, but they failed to pay this amount within six months, the stipulated period, and committed breach. Consequently the defendants cancelled the lease on the 1st of January 1954. The plaintiffs challenged the right of the Government to cancel the lease and called upon the defendants to appoint an Arbitrator under clauses (1), (5) and (6) of Rule 80 of the Pakistan Mining Concession Rules, 1949 for settlement of disputes between the parties. They also informed them on 18‑1‑54 about the appointment of Mr. E. V. Castellino as their Arbitrator, but the defendants disputed their right to refer the disputes arising out of this lease to the decision of private arbitrators, and contended that the matter could only be referred to the Central Government for decision and refused to appoint any arbitrator on their behalf. Thereupon the plaintiff's arbitrator on 6‑3‑1954 informed the defendants that he will act as the sole Arbitrator and will proceed to hear the matter on the 20th of March 1954. The defendants did not appear before him. Mr. Castellino, after giving due notice to the defendants, gave an award in favour of the plaintiffs on the 6th of April 1954. He held that the plaintiffs had not committed breach of the terms of the lease and that the order of cancellation was arbitrary, wrongful and unjust. He further awarded a sum of Rs. 2,00,000 as com pensation to the plaintiffs for the loss sustained by them on account of the arbitrary, wrongful and unjust action of the Government. The defendant Government have now challenged the award inter alia on the grounds that the dispute about cancellation of the lease was exclusively referable to the Central Government under Rule 80 of the Pakistan Mining Concession Rules, 1949 and is not covered by provisos 1, 2, 5 and 6 ; that the plaintiffs have no right to invoke the arbitration clause and as such the whole pro ceedings and the award so procured is a nullity and without jurisdiction ; that Mr. Castellino was not a proper and fit person to arbitrate the matter ; that the procedure adopted by the arbitra tor is not warranted by law, that the award is erroneous, mis conceived and not based on proper evidence and is not valid and The learned counsel for the parties have admitted that the lease in question was granted to the plaintiffs under the Pakistan Mining Concession Rules, 1949 and these rules are applicable to the facts of the present case. They also admitted that the relevant provision which governs the matter under consideration is Rule 80 of the said Rules. The question for determination therefore in this case is whether the dispute between the parties should have been referred to the Central Government of Pakistan or to two Arbitrators, one to be nominated by the Government and the other by the lessee for settlement. The decision of this question depends on the interpretation of Rule 80 of the Pakistan Mining Concession Rules of 1949. It is reproduced below: "Any question of dispute regarding the licence or lease, and any matter or thing connected therewith shall be referred to the Central Government of Pakistan in the appropriate Ministry whose decision shall be final provided that any dispute con cerning. (1) the right of the licensee to a prospecting licence or Mining lease, or (2) the cancellation of licence or lease for any violation of the undertaking given in accordance with Rule 9 (6), or any breach of the provisions thereof ; or (3) the price of minerals1 pre‑empted by the Government, or (4) the price of plant purchased by Government at the determi nation of the mining lease or earlier; or , (5) the compensation payable to the lessee for any loss or damage that may be proved to have been sustained by the lessee by reason of Government taking control of works, plant and premises of the lessee ; or (6) the compensation payable to the lessee on Government taking over all the rights of the lessee under any mining lease, shall be determined by two arbitrators one to be nominated by the Government and the other by the licensee or lessee ; and in the case of disagreement between the arbitrators, by a Judge of the Federal Court of Pakistan to be appointed by the arbitrators in writing and the decision of such arbitrators or such judge as umpire, as the case may be, shall be final ". This rule lays down that certain disputes arising from the licence or lease are to be referred to the Central Government of Pakistan whose decision shall be final. It also lays down that those disputes which concern (1) the cancellation of licence or lease for any vio lation of the undertaking given in accordance with Rule 9 (6), or any breach of the provisions thereof, or (2) the compensation payable to the lessee for any loss or damage that may be proved to have been sustained by the lessee by reason of Govern ment taking control of works, plant and premises of the lessee shall be determined by two arbitrators, one to be nominated by the Government and the other by the lessee; and in case of disagree ment between the arbitrators, by a Judge of the Federal Court of Pakistan to be appointed by the arbitrators in writing and the decision of such arbitrators or such Judge as umpire, as the case may be, shall be final. Mr. Ihsanul Haq, the learned counsel for, the defendants, has contended that the present case falls amongst those disputes which must be referred to the Central Government of Pakistan for decision. The learned counsel has taken me through the entire rule and forcefully argued that under the proviso of the said rule only those cases will be referred to the decision of' the two arbitrators of the parties where the lease is cancelled for breach of an undertaking stipulated in Rule 9 (6), which reads as under :‑ "The applicant who is not a national of Pakistan shall with his application furnish an undertaking that he will abstain from all political activity/activities whatsoever affecting the sovereignty or security of Pakistan or that which may be tantamount to interference in its internal affairs and that specially he will eschew all espionage". I entirely agree with him that the lease in the present case has not been cancelled for violating any of the undertakings contemplated within Rule 9 (6) of the said rules and the matter cannot be referred to arbitration under this sub‑clause of the proviso of the said rule. But there is a further hurdle in the way of the defendants. Sub‑clause (2) of the proviso reads as under :‑ "the cancellation of licence or lease for any violation of the undertaking given in accordance with Rule 9 (6), or any breach of the provisions thereof." It is not only the dispute of the cancellation of lease for any violation of the undertaking given in accordance with Rule 9 (6) but it also contemplates any dispute concerning any breach of the provisions thereof. The contention of the learned counsel for the defendants that "or any breach of the provisions thereof" refers to the undertaking given under Rule 9 (6) is without any substance. I have carefully examined the language of the above‑mentioned proviso. There is no other provision made therein and therefore its breach is not contemplated in the later portion of sub‑clause (2) of the proviso of Rule

80. The words "or any breach of the provisions thereof" in this sub‑clause clearly refer to the other provisions of the licence or the lease entered into between the parties. Admittedly the coal mine leases are issued in the standard form prescribed in the Second Schedule Part III of the said Rules. Mr. Jamiatrai, the learned counsel for the plaintiffs, is perfectly right in his argument that the lease in dispute was granted subject to the provisions relating to rents and royalties etc. contained in Part V, VI, VII, VIII, and IX, of the said Schedule. Under the conditions laid down in these Parts, the lessee is bound to pay rents and royalties on due dates. The lessor is entitled to cancel the lease if they are not paid within six months of the due dates or if there is breach of the undertaking given under Rule 9 (6) of the .said Rules. The learned counsel for the defendants has further referred to clause 72 of Part IX of the said Schedule which deals with arbitrations. Undoubtedly this clause also applies to the lease in dispute. A persual of this sub‑clause leaves no doubt in my mind that the words "or any breach of the provisions thereof" in sub‑clause (2) of proviso o A Rule 80 clearly refer to the other terms of the lease and not to Rule 9 (6). Clause 72 of Part IX reads as under :‑ "If at any time during the continuance of this lease or after the determination thereof any question or dispute shall arise regarding this lease or any matter or thing connected therewith or the powers, duties or liabilities of the Lessee hereunder or the amount or payment of any payment of any rent or royalty then and in all such cases the matter in difference shall be referred to the Central Government in the appropriate Ministry whose decision will be final provided that any dispute concerning the right of the lessee to a mining lease or cancellation of this deed for any violation of the undertaking given in accordance with Rule 9 (6) of Pakistan Mining Concession Rules, 1949, or any breach of its provisions or any dispute connected with the price of the said mineral pre‑empted by Government or price of plant purchased by Governor‑General at the expiration or sooner determination of this lease or compensation payable to the lessee in terms of clause 58 or compensation payable to the lessee on Government taking over all the rights of the lessee under the mining lease shall be determined by two arbitrators, one to be nominated by the Governor‑General and the other by the lessee and in case of disagreement between the arbi trators by a Judge of the Federal Court of Pakistan to be appointed as an umpire by the arbitrators in writing and the decision of such arbitrators or the Judge of the Federal Court as umpire, as the case may be, shall be final. And it is further mutually agreed that such arbitration shall be a condition precedent to the commencement of any action ‑ at law and that, the provisions of the Indian Arbitration Act, 1940, and of the Rules thereunder and any statutory modification thereof (as adapted in Pakistan) shall be deemed to apply and be uncorroborated in this Lease. The venue of Arbitration shall be Karachi". This clause fully amplifies the intention and spirit behind rule

80. In view of this sub‑clause I have not the slightest hesitation to hold that the dispute in the present case is covered by clauses 2 to 5 of Rule 80 of the Pakistan Mining Concession, Rules, 1949. Under these circumstances, in my opinion, the contention of the defendants that the disputes between the parties ought to have been referred to the Central Government and not to the arbitrators of the two parties is without any basis and cannot be upheld. I therefore hold that the defendant Government was not justified in refusing to appoint an arbitrator when they were called upon to do so by the plaintiffs through their counsel's letter dated 18‑1‑1954. During the hearing of this matter the defendants have moved this Court under section 9 of the Arbitration Act to allow them to appoint their arbitrator in case the Court comes to the conclusion that the disputes were to be decided by the arbitrators to be appointed by the parties. Mr. Jamiatrai, the learned counsel for the plaintiffs, has, however, urged that the conduct of the defendants is such that they should not be given any latitude and the powers vested in this Court under section 9 of the Arbitration Act should not be exercised in their favour. In my opinion the contention of the learned counsel is not correct. The differences between the parties whether the dispute should) have been referred to the Central Government or to the twos arbitrators appointed by the parties was bona fide and I am' inclined to the view that the matter was not free from doubt and the request of the defendants that they should be allowed to appoint their own arbitrator is not without justification. The plaintiffs have alre ady appointed Mr. E. V. Castellino, as their arbitrator. I have not been able to discover any fault so fir as this appointment is concerned. I will therefore allow the defendants to appoint an arbitrator on their behalf within one month of the announcement of this order. The two arbitrators appointed by the parties will thereafter enter on the reference and will act in accordance with Rule 80 and Clause 72 of Part IX of Schedule III of the Pakistan Mining Concession Rules, 1949. For the reasons given above, I set aside the award and refuse to make it a rule of the Court. The defendants will, however, bear the costs of this petition. A. H. Award set aside.