P L D 1964 (W (PLP)

QADEERUDDIN AHMED, J.

‑This is a Letters Patent Appeal from the order of our learned brother A. S. Faruqui, J., dated the 23rd of December 1963, by which he has stayed the proceedings of the appellant's suit under section 34 of the Arbitration Act, 1940. The appellant has filed a copy of the plaint which shows that it is entrusted with reclamation schemes, in execution of one of which tenders were invited by it for reclaiming an open ditch which was situated near the back‑waters of the sea on Queens Road, and was known as the Timber Pond. The respondent's tender for filling up the pond was accepted by it. The work was to be completed within seven months but the completion was partly dependent on the laying of pipe lines which work was to be carried out by another contractor. The respondent therefore, informed the appellant (see paragraph 8 of the plaint) as follows:‑‑ "The above will, however, depend on the other contractor completing his job. We will require at least two months to complete our job fully after the work of Part II has been completed."

2. The work could not commence as contemplated because of a Court's order issued in a suit instituted by certain fisherman against the appellant (see paragraph 10 of the plaint). It was taken in hand later and the respondent claimed damages for the delay but the appellant repudiated its liability.

3. The respondent was to be paid (see paragraphs 13 and 29 of the plaint) on the basis of "site levels". But this method was found to be impracticable for making interim payments because such levels could not be taken while the work was in progress; therefore, payment of "on account bills" was made on the basis of the number of the trucks of sand which were unloaded at the site and the "understanding" was that the bills "would be adjusted" at the time of taking the site level finally. No method of making this adjustment was agreed upon. The progress of work was again retarded for certain reasons and the respondent ultimately stopped it on the allegation that 90% of his job had been done but 10 % was not practicable (see paragraph 14 of the plaint). The appellant, therefore gave to the respondent a new contract for supplying spreading, levelling, consolidating and watering Moorum in a three inch layer on the top of the fillings. At this time the appellant raised the objection that there were undulations and depressions in the fillings. The objection appears to have created disputes and the respondent did not resume the work in spite of the insistence of the appellant on it. The parties blamed each other for their alleged faults.

4. The appellant had the level of the site measured after notice to the respondent and demanded from the latter the refund of Rs. 77,958 on the ground that this much money had been over paid.

5. The respondent sent a notice to the appellant invoking the arbitration clause which is clause No. 42 of the general conditions of the contract. That clause is as follows:‑ "Disputes and Arbitrations.‑Any dispute regarding quality of materials or workmanship, accuracy of measurements or any other question of an engineering or technical nature shall be decided by the Engineer and his decision shall be final. In the event of any question or dispute under this contract (except as to any matter the decision of which is specially provided for in these conditions) the matter in dispute shall be referred to two arbitrators in Karachi one to be nominated by the Board and one to be nominated by the contractor or in the case of the said arbitrators not agreeing then to an umpire to be appointed by the arbitrators in writing before proceeding on the reference and the decision of the arbitrators or in the event of their not agreeing of the said umpire shall be final and conclusive and the provision of the Arbitration Act, 1940 and any statutory modification thereof and the rules framed there under shall be deemed to apply to and be incorporated in this contract." To begin with the appellant demanded that the disputes which were meant to be referred to the arbitration be communicated to it but later on, by way of abundant caution, nominated its arbitrator. The disputes which have been referred to arbitration by the respondent are as follows: Rs. (a) Alleged loss suffered by the defendants because of the ad‑interim injunction 50,235.00 (b) For the alleged work done from 15‑9‑1962 to 29‑9‑62 (because payment was not made by measure‑ ment but by truck load) 67,941.87 (c) For a RCC Pipe being an extra item 750.00 (d) Security deposit refundable to the defendants 19,082.00 Total ... 1,38,008.87

6. The appellant has thereafter, instituted the suit from which this appeal has arisen. It has firstly asked in it for declaration that the disputes at (a), (b) and (d) above which have been referred to the arbitration are outside the jurisdiction of the arbitrators as well as the umpire and that the dispute at (c) does not exist because that claim of the respondent is conceded. Secondly it has claimed a decree for the refund of the abovementioned amount.

7. The plaint, which from its copy that is on this record appears to run into twenty typed pages, contains the background of facts, references to the disputes that exist between the parties as well as lengthy arguments in support of the appellant's view that the reference to arbitration is bad. There is hardly anything in it in support of the substantial claim for the refund of money besides the bare allegation that on final measurement excess amount has been found to have been paid and that the respondent is bound by the conclusion because it did not attend the measurement proceedings in spite of notice to it. The contents of the plaint disclose the following possible disputes. (1) The work done by the respondent was or was not open to objection in the manner in which and at the time when it was taken (see paragraph 14 of the plaint). (2) The contract was rightly terminated or not on the ground of the alleged failure of the respondent to resume the work (see paragraph 16 of the plaint). (3) The fillings were or were not reduced in quantity as some of them may have been blown away before they were finally measured after a lapse of time, (see paragraph 19). (4) The correctness of the undisclosed method adopted for adjusting the interim payments which by the agreement of the parties were made by counting the truck loads to the formerly agreed method of taking the initial site level and then comparing it with the final site level, is open to question (see paragraphs 13 and 29). We may mention here that counsel for the respondent laid stress on this aspect. (5) The respondent bad or had not a good reason for being dissatisfied with the delay caused in the commencement of work and for claiming compensation for it. Moreover, was the respondent right or not in complaining against the impracticability of completing the unfinished work (see para graphs 11, 14 and 32). All the above disputes may not arise but if they do, as indicated during the discussion in Court, then they will have an obvious bearing on the question which have been referred to the arbitrators. The admissibility of the questions referred to arbitration from the angles indicated above has not been considered by the appellant's counsel, but their in admissibility has been urged generally on the bases of clauses 16, 33, 38 and 40 of the contract read with the first part of the arbitration clause. S. He referred to those clauses and attempted to cursorily interpret them in favour of his contention that the reference is entirely bad, requesting us simultaneously not to decide upon the maintainability of the appellant's prayer for the declaration that the reference of the disputes to arbitration was illegal. His plea for making the request was that on a finding on this question against the appellant in this appeal, one half of the suit will be automatically dismissed. We pointed out to him that his request for a finding on the validity of the reference was not separable from a finding as to the maintainability of the declaration and that he could not be saved from a possible harm unless he meant to force us to presume in these proceedings that the reference must be bad. As a way out of this impasse, we drew his attention to the observation made by the learned trial Judge that the appellant could object to the admissibility of any dispute to arbitration before the arbitrators themselves and tried to explain to him that regard could be had to his request only by leaving the question open for the present, so that no harm may be caused to the appellant's suit and no presumption be raised against the respondent, but the result of this neutrality must be the suspension of his contention that the reference is bad. If this is conceded by the appellant then there is no reason in terms of section 34 of the Arbitration Act for allowing the suit of the appellant to proceed.

9. Counsel was not at all satisfied with the above conclusion and pressed by referring the judicial precedents including Gaya Electric Supply Co. Ltd. v. State of Bihar (A I R 1953 SC 182), that we were bound to decide, before letting the proceedings to remain stayed, as to whether the reference to arbitration was valid or not. Had we been hearing him on the original side we would have framed a preliminary issue on the maintainability of the prayer that the reference be declared invalid, requested counsel for the respondent to appear amicus curiae to avoid complications in view of the provisions of section 34 of the Arbitration Act, 1940, and in this manner cut the gordian's knot.

10. The learned trial Judge has already expressed his doubt, in view of sections 32 and 33 of the Arbitration Act, 1940, as to the maintainability of the declaratory prayer made in the suit but has left off the discussion at that point. The appellant has apparently not been able to estimate the force and implications of that objection.

11. The above predicament of the appellant is the result of the attempt to completely by‑pass the Arbitration Act, 1940 and of the risk which the appellant is prepared to take, having instituted the suit, by pressing its extreme point of view in order to save the suit from the likelihood of becoming infructuous when the arbitrators give their award, because the award will not be questionable except under sections 15, 16 and 19 read with sections 32 and 33 of that Act. But the arbitrators are seized of the matter in which, at present, the claim of the respondent only is represented while on the other hand the suit contains the claim of the appellant alone, whereas the two claims are the off‑shoots of the same transaction. If the suit is not stayed and the arbitration proceedings, which can hardly be stayed by making an order in this suit, are also allowed to go on, then two conflicting decisions are likely to be given with respect to the same subject‑matter. We must avoid those ugly prospects.

12. In deference to the insistence of counsel for the appellant, we have examined clauses 16, 33, 38 and 40 of the contract as well as the arbitration clause and have satisfied ourselves that the disputes which have been referred to arbitration are not as completely and necessarily outside the jurisdiction of the arbitrators as counsel for the appellant has contended. Their admissibility to arbitration will depend, subject to the precise understanding of the language and scope of the clauses, partly upon the angles from which their supporting arguments ensure and take shape, and partly upon those aspects of them which may impress the arbitrators as important for their decision. For instance, simply the accuracy of measurement may not be considered to be decisive if the measurement is found to have been taken at a wrong time and the after loss of the material. As counsel for the appellant was not prepared or able to see such possibilities, we have indicated them to him during his arguments and have set out above some of them with reference to the plaint in paragraph 7 as the possible disputes We had to do so, at some risk of the appellant, owing to counsel's tenacious arguments addressed to us on two days. It is for the appellant now to make the best of the terms of the contract, the provisions of the Arbitration Act, 1940 and the suit. The parties are expressly allowed to object before the arbitrators to the admissibility of any dispute to the arbitration and to refer any claim to the arbitrators subject, of course, to permissibility and propriety.

13. This appeal must fail and we dismiss it with costs. A. H. Appeal dismissed.