1983 PLP 3273 (CLC)

Ss. I1 & 12‑‑Appointment of Umpire‑‑Arbitration agreement providing that in case of disagreement of arbitrators Umpire has to be appointed by Government Appointment of Umpire by arbitrators who were not authorised to do so, h1ed, improper and illegal and his authority can be reversed by Court. (e) Arbitration Act (X of 1940)‑ Ss. 11 & 12‑Appointment of Umpire not made according to procedure specified in agreement‑No valid reason being shown for deviation from specified procedure‑Authority of Umpire revoked and direction issued to appoint Umpire in terms of agreement. Intertrade Ltd., Karachi v. Trading Corporation Ltd. of Pakistan P L D 1976 Kar. 496 ref. A. K. Lakhan for Plaintiff: Syed Ahmad Faruqi for Defendants. This is an application under sections 1 I and 12 of the Arbitration Act for removal of the Umpire. On 29‑5‑1973, the plaintiff and the defendant entered into an agreement relating to construction work which contains an arbitration clause, relevant portion of which is reproduced as follows: " .:‑ in case of the said two arbitrators not agreeing, the case shall be referred to the Award of Umpire who shall be an officer of the Department, not below the rank of a Chief Engineer to be appointed by the Government in Administrative Department." As dispute between the parties arose and arbitrators were not appointed, the plaintiff filed an application under section 20 of the Arbitration Act. On 20th May, 1979 the following order was passed :‑ "Mr. Osman Ghani Rashid, Advocate‑General states that the defendants have appointed Mr. Ghulam Muhammad Junejo as their arbitrator and he has not refused to act and is still willing to act. So far as the plaintiffs are concerned Mr. Osman Ghani Rashid, Advocate‑General has no objection if Mr. Shamsul Arfin, Deputy Secretary Home Department is appointed as arbitrator on behalf of the plaintiffs, in view of the fact that five names given by the Department are not acceptable to the plaintiffs. I, therefore, by consent appoint Mr. Shamsul Arfin, Deputy Secretary, Home Department as arbitrator on behalf of the plaintiffs. Let Mr. Ghulam Muhammad Junejo and 'Mr. Shamsul Arfin, Deputy Secretary, Home Department now proceed with the arbitration. The application stands disposed of ." The arbitrators appointed an Umpire and proceeded with the matter. Ultimately one of the arbitrators addressed a letter to the Court that as the arbitrators have failed to agree, the matter may be referred to the Umpire. In view of this statement made by one of the arbitrators, on 29‑8‑1982, the matter was ordered to be decided by the Umpire. Accordingly the Umpire issued notice to the parties for appearance. Thereafter, the defendant filed this application for revoking the authority of the Umpire, on the ground that the appointment is not in terms of the agreement between the parties, and the arbitrators have acted beyond their jurisdiction in appointing the Umpire. Before referring to the arbitration clause stated above, some facts relating to the proceedings before the arbitrators should be stated here. After the appointment of arbitrators on 20‑5‑79, it seems that on 2‑7‑1979, the arbitrators held a meeting and appointed an Umpire. It has been submitted by the defendants and not controverted by the plaintiff that appointment of Umpire was never communicated to the parties concerned. The first notice was issued to the parties for filing claim on 9‑7‑1979. The plaintiff filed claim on that day and the matter was fixed for written statement on 24‑7‑1979. Since then the matter proceeded before the arbitrators and on several occasions extension of time was sought for making the award. The present application was filed after the Umpire by a notice dated 19‑9‑1982 called upon the parties to appear before him on 29‑9‑1982. As 29‑9‑1982 was declared a public holiday hearing was adjourned to 13‑10‑1982. On that date the defendant raised objection to the validity of the appointment of the Umpire., Consequently, the Umpire adjourned the hearing and has also made a reference to this effect. A perusal of the arbitration clause makes it clear that the Umpire was to be appointed in case of disagreement between the two arbitrators. It further provided that Sind Government was to appoint an Umpire who was to be an officer of the Department, not below the rank of the Chief Engineer. Therefore, before proceeding with the matter the arbitrators were not required to appoint an Umpire. The learned counsel for the plaintiff contended that Umpire was appointed as far back as on 2‑7‑1979 and the defendants were aware of the appointment and as they did not object, during the entire proceeding, they are debarred from objecting at this stage, or alternatively have waived their right to object. The defendants in their affidavit have stated that they were never intimated of the appointment of the Umpire, and it was not within their knowledge. Mr. Lakhan has not been able to point out, that the Umpire was appointed with the consent and knowledge of the defendant. Mr. Lakhan then stated that the Umpire namely Ghulam Muhammad Junejo was an employee of the Sind Government, and as he was aware of the appointment, it should be presumed that the defendants were also aware. The contention is devoid of any force. Any person appointed as an arbitrator has no concern with the parties, whether he is an employee of the party or not. He has his own independent capacity, as an arbitrator in which capacity he has to decide the matter. If in that capacity he acquires any knowledge then it cannot b attributed to be the knowledge of the party, who appointed him. In these circumstances, the knowledge of the arbitrator cannot be termed as knowledge of the defendants. The arbitration agree ant provides for a specific procedure for appointment of an Umpire. He was to be appointed in case of difference between the arbitrators. The Umpire was to be appointed by the respondents, a whose qualification and designation were also mentioned. Sanctity attached to such agreement has to be maintained and no party, unless valid cause shown, is to be allowed to deviate from such agreement. Mr. Syed Ahmed Farooqui, the learned counsel for the defendant has referred to Intertrade Ltd., Karachi v. Trading Corporation Ltd. of Pakistan P L D 1976 Ka;. 496, where it was observed that the provision of section 20 (4) of Arbitration Act "directs the Court to make an order of reference to the arbitrator appointed by the parties whether in the agreement or otherwise." The Courts have always preserved the sanctity of the contract. If the terms of reference provide the manner in which Umpire is to be appointed, then such appointment has to be made in the same manner, unless there are compelling reasons to avoid it. Any deviation made from the agreed procedure will nullify the appointment. The appointment of Umpire is a judicial act of great importance and cannot be delegated, The Courts have always required strict compliance of the procedure provided for appointment of Umpire. In European and American Steamship Co. v. Croskey (1860) 29 L J C 155 two arbitrators were to select a third, each named a different person. The arbitrators then selected one of the two proposed names by drawing a lot. Such appointment was held to be bad as the procedure adopted by them was not proper and according to procedure. In the present case the arbitrators were not even authorised to appoint an Umpire. As the appointment of the Umpire is improper and illegal, his authority can be revoked by the Court. The next question which requires consideration is, who should be appointed as an Umpire. The principle as enunciated in the case of Inter. trade Ltd., Karachi‑will equally apply to the appointment of the Umpire an the procedure for appointment of Umpire as specified in the agreement, has to be followed. No valid reason has been shown for deviation for this procedure. In the present case, while revoking the authority of the Umpire, I direct the defendants to appoint Umpire in terms of the agreement, within a period of two weeks. The application is granted. M7Y. H. Application granted.