1984 PLP 523 (MLD)

The Plaintiffs' Advocate warned the respondents:- "Please note that in the event of your failure to nominate your arbitrator as required within the specified period, the arbitrator so nominated by my clients abovenamed, shall become the sole arbitrator, enter into the reference and give award, which shall be binding on the parties." To the above notice, the respondents sent reply on 7-1-1982 wherein, they inter alia stated:

(i) that in terms of para. 11 (b) of the deed of partnership, dated 1-1-1978, all the disputes have to be first decided and settled by the partners amongst themselves, the decision of the majority to prevail, and that it is only in case of a tie that the disputes have to be referred to arbitrators, (ii) that the plaintiffs had chosen to rush to appoint an arbitrator without complying with the provisions of para. 11(b) of the partnership deed, (iii) that the other seven partners of the firm had unanimously decided and rejected the plaintiff s complaints contained in their letter, dated 12-11-1981, in a meeting held by them on 5-12-1981, a copy of which decision was sent alongwith the said reply to the plaintiffs Advocate. (iv) the demand for appointment of arbitrator made by the plaintiffs, in the circumstances, was declined by the respondents.

5. In the circumstances, the present petition ties been filed by the plaintiffs under section 8 read with section 20 of the Arbitration Act, 1940. The respondents have filed their written statement in para. 16 whereof, after referring to clause 11(b) of the partnership deed dated 7-1-1982 and stating that in terms of the said clause, all disputes have first to be decided and settled by the partners among themselves and that the decision of the majority is to prevail, and it is only in case of a tie that the disputes have to be 'referred to arbitrators, it was further pleaded by the respondents:- "The plaintiffs have not abided by the said agreement /contract and rushed to the Court without first getting disputes, if any, settled or decided in the agreed manner. The suit as such is not maintainable for reason of non-performance on the part of the plaintiffs of the said condition precedent and is hit by Order VI, rule 6 of the Code of Civil Procedure." The above-mentioned written statement has been filed by all the defendants who then were represented by Mr. S. Inayat Ali, Advocate. However at the time of the hearing while Mr. S. Irtaza Hussain Zaidi, Advocate, appeared for the plaintiffs, on behalf of the defendants Nos. 4 and

5. Mr. Suleman Qasim, Advocate and for the remaining defendants Mr. S. Inayat Ali, Advocate argued the matter.

6. Mr. Zaidi, Advocate raised the following grounds in support of the case for the plaintiffs: (i) that though there are 9 partners who entered into agreement of partnership, dated 1-1-1978, to carry on business in the name and style of M/s Four Friends Corporation, the business of the partnership was agreed to be managed by only four persons as provided in clause 7(a) of the partnership deed which reads: Clause 7(a) "The business of the partnership will be managed by following partners:

1. Mr. Mustafa s/o Haji Muhammad

2. Mr. Shahabuddin s/o Yousufuddin.

3. Mrs. Nahid w/o Muhammad Hussain and Mrs. Zulekhabai d/o Haji Suleman per hands of her constituted Attorney Mr. Muhammad Hussain.

4. Mst. Muqeet Fatima and Mr. Intesaruddin per hands of their constituted Attorney Mr. Farooq Ali." According to the learned counsel thus there are groups of the partners and that each partner should not be treated as a separate or distinct party for the purposes of appointment of arbitrator/ arbitrators. (ii) that the disputes which have arisen are primarily between the plaintiffs on the one hand and the firm i.e. the defendant No. 1 (which is controlled and managed by defendants Nos. 2 to 7) on the other hand. It was accordingly contended by the learned counsel that the plaintiff has appointed/ nominated one arbitrator on their own behalf and that the other arbitrator now should be appointed for the firm by the remaining partners i.e. the defendants Nos. 2 to 7 who are controlling the business of the firm."

7. I have considered the above contentions raised by the learned counsel and find that the same neither find support from the terms of, the partnership deed nor by any value of law. (i) As regards the first ground advanced by the learned counsel it would suffice to state that clause 7(a) of the partnership deed under which the management of the firm has been entrusted to four persons in no way can be construed so as to control the arbitration clause i.e. clause 11(b) of the partnership deed which provides that in the contingency mentioned therein, the disputes between the partners shall be decided and settled by the partners amongst themselves and the decision of majority would prevail and "in case of tie" the same shall be referred to arbitrators to be appointed by each party in accordance with and the subject to the provisions of the Pakistan Arbitration Act or any statutory modification thereof, for the time being in force. It would also be relevant to mention here that the said arbitration clause also provides:

" .. in case of tie between the arbitrators the arbitrators will elect an Umpire, whose decision will be final and binding on all the partners." The intent, as would appear from the words used in the arbitration clause, which is to be construed strictly, would lead to the conclusion that in the first instance as a condition precedent all the disputes enumerated in clause 7(b), are to be decided and settled by the partner, amongst themselves, majority decision to prevail and that only in case of tie, the disputes are to be referred to arbitrators to be appointed by each party. Merely because the management has been entrusted by some of the partners /parties to a given set of persons, would not have the effect of effacing the existence of partners as parties to the partner ship deed of which the arbitration clause in an integral part. The first contention of the learned counsel for the plaintiffs thus' does not succeed. (ii) As regards the second ground raised by the learned counsel I find that the same also cannot be sustained in the fact of the language used in the arbitration clause under which reference of all disputes arising between the "partners of the respective representatives of any deceased partner" touching "these presents or the construction or application thereof " .in the given circumstances, are to be referred to arbitration for decision. The firm as such cannot be treated as a party to the partnership deed. I need not here enter into the question that there may be circumstances when a partner may have a right to file a suit or action against the firm. However, for the purposes of deciding the limited question in the present case it would suffice to observe that the learned counsel for the plaintiffs was unable to show that there any arbitration agreement as defined in section 2(a) of the Arbitration Act, 1940 between them (i.e. the plaintiffs and the firm) for settlement of disputes or differences by referring the same to arbitration. The second ground raised by the learned counsel for the plaintiffs thus also fails.

8. A last attempt was made by the learned counsel for the plaintiffs to show that under clause 11(b) of the Partnership Deed, reference was required to be made to a sole arbitrator in accordance with para. 1 of the First Schedule to the Arbitration Act, 1940. It is not necessary to examine this argument in detail as it would seen that the said pare. 1 to which reference was made by the learned counsel, itself provides that unless otherwise expressly provided the reference shall be to a sole arbitrator. A bare reading of the arbitration clause which has already been reproduced above would show that the parties have expressly agreed to refer the disputes and differences, to more than one arbitrator. Indeed the plaintiffs had themselves nominated one arbitrator and called upon the remaining partners to nominate another arbitrator vide letter, dated 28-12-1981 sent by them through their own Advocate. Reference to the plaintiffs letter has been made by me to point out the fallacy in the arguments advanced, the legality of the contents of the said letter, however, has not been dealt with here.

9. Mr. S. Inayat Ali, Advocate, on the other hand argued that even if reference is to be made, then each party under the arbitration clause would be entitled to appoint/ nominate his/her separate arbitrator. Thus according to the learned counsel the reference in the case would be to 9 arbitrators.

10. Mr. Suleman Qasim, Advocate for the defendants Nos. 4 and 5, however, submitted that in terms of the arbitration clause the majority of the parties have already given a decision as communicated to the plaintiffs through their Advocates on 7th January, 1982, whereby they had informed the plaintiffs, i.e. Mst. Muqeet Fatima and Mr. Intesarud din, that their complaint was baseless, unjustified and contrary to facts and that there was no dispute which would be referred to the arbitrators within the meaning of clause 11(b) of the Partnership Deed. As regards the arguments of the learned counsel for the defendants Nos. 4 and 5, I may observe here that in the joint written statement filed by them (alongwith the other defendants) vide para. 7, it has expressly been pleaded by them that the disputes have to be first decided and settled by the partners amongst themselves, the decision of the majority to prevail and it is only in case of a tie that the disputes were to be referred to arbitrators and that: " .the Plaintiffs have not abided by the said agreement contract and rushed to Court without first getting disputes, if any settled or decided in the agreed manner. This suit as such is not maintainable." In view of the express plea thus taken in the written statement it is not open to Mr. Suleman Qasim, Advocate for the defendants Nos. 4 and 5 for the first time to raise the plea during the arguments that the disputes had already been settled by the majority of the partners and, therefore, there was nothing left to be decided by reference to the arbitrators. The plaintiffs have also not raised any plea in the application/ suit that the condition precedent has been fulfilled so as to give them cause for filing of the petition in the Court under section 20 of the Act. I am conscious of the rule that the parties need not plead the performance of a condition precedent as it is implied in the pleadings. Here, however, is a case where the defendants have raised the plea that the condition precedent has not been fulfilled. In the circumstances it was for the plaintiffs to have discharged the onus which they have miserably failed to do.

11. For the reasons discussed above, I am satisfied that sufficient cause exists for declining to give direction for the filing of the arbitration agreement in Court. Accordingly this suit is dismissed. The parties, however, are left to bear their own costs. M.I. Suit dismissed.