P L D 1980 Lahore 305 (PLP)

The respondent was given a contract for electrification of Group-G University Campus for a sum of Rs. 3,88,708.03. The appellant rescinded the contract, forfeited the respondent's security and withheld payment of a sum of Rs. 40,00(, to him. The respondent blamed the appellant for failure to execute the contract in time and it was alleged that the appellant failed to abide by the terms of the contract and to provide the foreign exchange component in time. Under clause 49 of the contract all disputes between the contracting parties are referable to the Chancellor of the Punjab University as a sole arbitrator. The arbitrator did not enter upon the reference. The respondent, therefore, filed an application under sections 8 and 20 of the Arbitration Act for reference of the dispute to arbitration and for appointment of a new arbitrator. This application was opposed by the appellant for the reason that clause 49 provided for reference of the dispute between the parties to the arbitration of the Chancellor of the University and on refusal of the arbitrator appointed by the contract, the agreement to refer to arbitration became ineffective.

2. The pleadings of the parties give rise to the following issues : (1) Whether the Court has jurisdiction to appoint a sole arbitrator when the named arbitrator in the agreement has refused to act ? (2) Whether the named arbitrator has declined to act ? (3) Relief ?

3. The learned trial Judge answered Issue Nos. 1 and 2 in the affirmative. He held that the named arbitrator had declined to act. He further held that there is no provision in the contract that on refusal of the named arbitrator to act, the vacancy could not be filled. He directed the parties to give lists of persons from whom a sole arbitrator may be appointed. Hence this appeal.

4. The learned counsel for the appellant addressed arguments on Issue No. I only. He argued that the Chancellor of the University is appointed as a sole arbitrator by virtue of his office and on account of his status and skill, and as these qualities cannot be found in any other person, in case of the named arbitrator declining to act, the agreement to refer the matter to arbitration is frustrated. He relied upon District Co-operative Federation Ltd. v. Khub Chand (I) and Chief Engineer, Buildings & Roads, Jaipur and another v. Harbans Singh (2) in support of the proposition that if appointment of an arbitrator is by virtue of his office, it shall be assumed that only the person holding that office is agreed to be appointed.

5. The answer to this question is furnished by the provisions of section 8 (A) of the Arbitration Act, particularly its clause (b). This subsection reads as follows; "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 refuses 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; (1) AIR 1961 H P35????? (2) A I R 1955 Raj. 30 (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."

6. The appellant has to show from the arbitration agreement that it was intended in the present case that the vacancy should not be supplied, if the named arbitrator neglects or refuses to act. There is no such specific provision in the agreement. The contention of the appellants is that this condition is implied in the appointment of an arbitrator by virtue of office.

7. The argument of the learned counsel for the appellant is without substance. There is no difference in principle between the appointment of an arbitrator who is specifically named in the agreement and an arbitrator who is described by virtue of his office. Clause 49 comprises of a two-fold agreement i.e. (1) in agreement to refer the disputes between-parties to arbitration, and (2 an agreement to appoint a sole arbitrator by description of his office. If the intention of the contracting parties were that no other arbitrator should appointed in case of such arbitrator declining to act, the intention would b expressed in much clearer and more specific language.

8. The interpretation of clause 49 canvassed by the appellant?s learned counsel would give rise to anomalies. It is admitted that clause 49 find place usually in contracts given by the appellant University. The Chancellor of the University is the Governor of the Province who on account of the exigencies and manifold responsibilities of his high office cannot be expected to have time to act as arbitrator. The argument virtually makes the arbitration clause a dead letter.

9. It is a matter of common knowledge that in a large number o contracts to which the Government is a party, there is usually an arbitration clause in which the disputes between parties are referable to the arbitration of a sole arbitrator described by virtue of his office. If the interpretation of the appellant is accepted the power to vote and frustrate the agreement to refer matters to arbitration would vest in the arbitrator, rather than, on the' principle of bilateralism, in the parties.

10. The agreement about skill and status is also without force and has no bearing on the question raised. The contract between the parties is about an electrification project. The argument 'of skill would have some force if some Engineer had been appointed as arbitrator. As regards status it may be kept in mind that ordinarily no one would like an opponent to be made the judge of his own cause. On the principle it may be difficult to secure the assent of a contractor to appoint the other party or one of its Chief functionary as an arbitrator. The high status of a particular functionary may, however, inspire confidence in him and he may not raise objection to the appointment. The status of the named arbitrator only hastens the process of securing mutual consent to the appointment.

11. The facts in the case of Chief Engineer, Buildings and Roads, Jaipur and another v. Narbans Singh are distinguishable. There the Chief Engineer was made the sole arbitrator and Judge in case of dispute with reference to the quality or measurements of work executed or rate of progress. It was held that the intention of the parties was that the above dispute should be arbitrate by the Chief Engineer alone and by none else and that another arbitrator could not be appointed. Evidently the Chief Engineer was himself a party to the agreement and he was chosen as an arbitrator on account of his professional skill as an Engineer. In District Co-operative Federation Ltd. v. Khub Chand, it was held;? "An arbitrator is appointed by name usually because of his personal qualities and character, but where he is appointed by reference to his office it is the traits peculiar to-the office which was with the parties and it may reasonably be assumed that when an arbitrator is appointed by the parties with reference to the office, the intention is that the arbitration `should be conducted by the holder of that office and none else'."

12. I have already held that generally there appears to be no distinction between appointment of sole arbitrator by name and his appointment b virtue of office. In any case `traits peculiar to the office, are not to assumed in every such appointment. Such traits may be found in a person who for reasons of professional proficiency and skill may be in a position to give a better decision.

13. I agree with the learned trial Court that the parties did not intend that only the Chancellor and none else could arbitrate in the matter. I maintain the finding of the learned trial Court on Issue No. 1.

14. This disposes of the appeal, but the learned counsel for the appellant raised a new point that the learned trial Court has not followed the procedure provided by section 20 of the Arbitration Act. He argued that under section 20, before making an order of reference, the learned Court should have ordered the agreement to be ailed.

15. In the present case the agreement signed by the parties was never filed. After framing the Issue on 6-7-1971, the learned Judge had directed the appellant to file original agreement. The appellant did not place on record the contract executed by the parties or even its copy. Only copy of clause 49 (Arbitration clause) was filed. No objection to this procedure was taken as the respondent also admits this arbitration clause.

16. Section 20 (1), Arbitration Act provides that any party to an arbitration agreement can apply to the Court that the agreement be filed in Court. Subsection (3) of section 20 provides that the Court shall direct notice to be given to the parties to the agreement other than the applicant, requiring them to show cause why the agreement should not be filed. Subsection (4) lays down that where no sufficient cause is shown, the Court shall order the agreement to be filed. Section 39 (1) (iv), Arbitration Act provides that appeal shall lie inter alia from order of filing an arbitration agreement.

17. It will be amply clear from. the facts given above that the agreement is in possession of the appellant and he, was ordered to file the same in Court but failed to file the original. agreement. On the other hand be file the arbitration clause which is admitted correct by both the parties. This is sufficient compliance with section

20. In the ultimate analysis the Court had only to enforce this clause under subsection (4) of section

20. In Firm Duni Chand Ram Parkash v. Firm Prem Chand Maya Dass (1) the point for decision was whether an agreement to refer the matter to arbitration can be ordered to be `filed in Court' before the institution of any suit where it has been lost or accidentally destroyed or because it happens to be in possession of the opposite-party. A Division Bench of the? Lahore High Court answered this question in the affirmative and dissented from the decision in Mst. Khodeja and Fazal Karim v. Ghulam Nabi (1). Abdul Rahman, J. who wrote the judgment with which Harries, C. J. agreed observed as follows; ??????????? (1) A I R 1945 Lah. 264 I am not prepared to place such a narrow construction on section 20, Arbitration Act, and am of the view that the word `filed' in the section was not used by the Legislature in the sense that the written agreement must be physically produced in Court before it can be accepted or ordered to be acted upon. If the parties are proved to have agreed to submit their present or future differences to arbitration by means of a written document, that agreement, can be, in my judgment, as effectively ordered to be filed in Court whether the particular piece of paper on which it is written is available or not. I see no reason or principle to hold why a party who wishes to enforce a written agreement of that kind should not be able to prove it by secondary evidence, when evidence of that nature is permitted or admissible under the provisions ,of Evidence Act.

18. Lastly the learned counsel contended that the learned trial Court has arbitrarily exercised its discretion by ignoring the panel of arbitration submitted by the appellant and appointing Mr. Ehsan-ul-Haq Shah, Executive Engineer II, Provincial Buildings Division, Lahore. The order-,of appointmen of Mr. Ehsan-ul-Haq Shah is not appealable. An appeal is competent against the order of filing of the award. The order of appointment follows such an order but is not included in that order. Reference may, with advantage, be made to Messrs D. Gobindram v. Messrs Shamji Kalidas & Co. (2). It was held in that case that "the powers and duties of the Court in subsection (4) of section 20 are of two distinct kinds. The first is the judicial function to consider whether the arbitration agreement should be filed in Court or not, that may involve dealing with objections to the existence and validity of agreement itself. Once that is done, and the Court has decided that the agreement must be filed, the first part of its powers and duties is over, It is significant that an appeal under section 30 lies only against the decision on this part of subsection (4)". This part of the order is, however, revisable.

19. The appellant had suggested four names for appointment, three of whom are Engineers and one is Principal, University Law College, Lahore. The respondent on the other hand suggested names of three Engineers. As the parties did not agree to any particular name, the learned trial Court appointed a man of his own choice i.e., Mr. Ehsan-ul-Haq Shah who is an Engineer. ?he only common qualification of persons suggested by both parties was that the majority of them were Engineers. For this reason, it appears the learned Court appointed an arbitrator who had that qualification.

20. The objections of the learned counsel for the appellant against this appointment are that: (1) the arbitrator should have been at least of similar status as the Chancellor, and (2) opportunity of raising objections against to name suggested by Court should have been given to the appellant before appointment. Both these contentions are without force. Out of the four names suggested by the appellant, one is an Ex-Vice-Chancellor of the Engineering University, other is a Chief Engineer, the third one is a Principal of Law College and the fourth is, a Superintending Engineer. While suggestion his own panel, the appellant has not kept into consideration the principle that the status of the arbitrator should be equal to that of the Chancellor. (1) I L R 1 Lab. 45??????? (2) A 1 R 1961 S C 1285

21. The Court has acted legally, in the- absence of agreement between the parties, in appointing an arbitrator of its own choice. I made an effort' that the parties -may agree to the appointment of some other arbitrator. Ii suggested the name of the vice-chancellor of the appellant University. The learned counsel for the respondent did not appear to be averse to this suggestion but the learned counsel for the appellant stated that the Vice-Chancellor has declined to accept the responsibility as he would not be able to spare time for this job.

22. I do not find any merit in this appeal which is dismissed with costs. s. A. H.??????????? Appeal dismissed.