P L D 1984 Peshawar 64 (PLP)

4 The main contention raised in support of the appeal is that the arbitration clause of the contract having been infructuous, no reference to the arbitrator could have been made. Clause 27 of the contract entered into between the parties is in the following terms :‑ "

27. Every dispute, difference or question which may at any time arise between the parties hereto or any person claiming under them, touching or arising out of or in respect of this deed or the subject‑matter thereof shall be referred to the arbitration of the Chairman, N.‑W. F. P. Forest Development Corporation and the decision of the arbitrator shall final and binding on the parties." The learned counsel contended that at the time of the execution of the agreement the N: W. F. P. Forest Development Corporation Act, 1977 (Act XI of 1977) was in force whereunder one of the Directors of the Board Was appointed as Chairman of the Corporation. However, subsequently the Corporation was re‑constituted by the N: W. F. P. Forest Development Corpo ration Ordinance, 1980 (Ordinance 11 of 1980) and the structure in so far as it related to the appointment of the Directors and the Chairman was materially changed. In the Ordinance it was provided that the Minister for Forests or in his absence a nominee of the Governor was to act as the Chairman of the Board. It is contended that the parties never intended that the Minister for Forests or in his absence a nominee of the Governor was to act as an arbitrator for resolving disputes between the parties. The person intended to act as an arbitrator was official of the Department‑‑having experience in the matter who being in the capacity of a Director was appointed as Chairman of the Corpora tion. With a view to appreciate the, argument of the learned counsel it is necessary to make a reference to the relevant provisions of law. Section 7 (1) of, the N.‑W. F. P. Forest Development Corporation Act, 1977 (Act XI of 197) is in the following terms :‑ "7 (I) Government shall appoint one of the Directors to be the Chairman of the Board, who shall be the Chief Executive of the Corporation. (2) Subject to his continuing to hold office as a Director, the Chairman shall hold office as Chairman for a term of five years and subject as aforesaid shall remain to office as Chairman thereafter until his successor in that office is appointed and may, subject as aforesaid, be appointed to hold that office for such further period or periods as Government may, in appointing him thereto, determine." The provisions of section 6 of the N.‑W. F. P. Forest Development Corpora tion Ordinance, 1980 (Ordinance 11 of 1980) are as follows:‑‑ "6.‑(1) The Board shall consist of a Chairman and Directors as herein after provided. (2) The Minister for Forests, or in his absence, a nominee of the Governor shall be the Chairman of the Board. (3) ... ... ... ... ... ... .. It is‑evident that at the time of the execution of the agreement the office of the Chairman was held by an official of the Department who being a Director of the Board was entitled to be appointed as such as envisaged under section 7 (1) of the Act of 1977. After the execution of the agreement between the parties the aforesaid Act was repealed by section 25 of the N.‑W. F. P. Forest Development Corporation Ordinance, 1980 (Ordinance II of 1980) which came into operation on 29th of March, 1980. The argument of the learned counsel, therefore, is not without substance because on the reconstitution of the N.‑W. F. P. Forest Development Corporation the arbitration clause sought to be enforced by the respondents had become ineffective, for, the appellant never intended theft Minister of Forests or in his absence a nominee of the Governor to act as an arbitrator in case dispute arose between the parties. It is also pointed out by the learned counsel that after the stay of the suit the appellant has been directed by the Department to appear before the Managing Director of the Corporation who was to act as an arbitrator in the dispute. Thus it is contended that the Managing Director is not the authorised person to act as sit arbitrator between the parties in terms of clause 27 of the arbitration agree ment. The learned counsel for the respondents did not dispute the position that the Managing Director of the Corporation was not a competent person to act as an arbitrator. In view of the submissions of the learned counsel for the appellant it is difficult to hold that the person presently holding the office of the Chairman as envisaged under section 6 (I) of Ordinance II of 1980 would be a competent person to act as an arbitrator between the parties. B Therefore, the arbitration clause having become infructuous, the learned trial Court. was not justified in directing the parties to seek reference to the arbit rator in terms of clause 27 of the arbitration agreement. In the Province of the Punjab v. Messrs Irfan & Co. (P L D 1956 (W. P.) Lah, 422), it was observed that :‑ "In my opinion, the position in the present case is somewhat similar, It is conceded by the learned Advocate‑General that there is no officer. with the designation of Secretary, Civil Supplies existing. The Civil Supplies Department was redesignated as the Food Department some time ago and there now exists a Secretary Food but not a Secretary Civil Supplies. In terms, therefore, the clause sought to be invoked by the Province does not refer to any existing officer. Then again it is. not clear whether the intention of the parties was to refer the dispute to the arbitration of the officer holding the post of Secretary, Civil Supplies at the time the contract was concluded or at the time when the dispute arose or at time of the actual reference. In my humble judgment this involves an uncertainty which vitiates the arbitration clause. I hold, therefore, that the clause is unenforceable as an arbitration clause. The order passed by the learned Civil Judge can, therefore, be sustained, though not on the grounds mentioned by him." Similarly in Messrs Hafiz Abdul Aziz Yousufani & Co. v. Messrs Haji Ali Muhammad Abdullah & Co. (P L D 1967 Kar. 698), it was held that :- "It may be pointed out that under section 34 of the Arbitration Act the question whether a suit should be stayed on account of an arbitra tion clause agreed upon by 'the parties is left to the discretion of the Court. It would, therefore, be for consideration whether the learned Additional District Judge on the facts of the present case exercised his discretion properly or not. It is not disputed by Mr. Salim Akhtar, the learned counsel for the respondent, that the Sind Cotton Ginners Association was dissolved in November 1959, and another Association had come into existence. It is therefore, quite clear that the forum to which the parties agreed to refer their disputes for arbitration no longer exists and clause 15 of the agreement between the parties cannot be implemented in the manner it was agreed upon between them. The contention, therefore, of the appellant's counsel that the arbitration clause has been frustrated appears to be well‑founded."

5. The learned counsel also contended that the defendants having submitted to the jurisdiction of the Court the suit was not liable to be stayed under section 34 of the Arbitration Act, 1940, because in response to the summons issued to the defendants their counsel appeared in the trial Court on 16‑12‑1981 and without expressing his intention of seeking a reference to the arbitrator sought an adjournment for filing the 'Wakalat Nama'. It is also contended that in view of the allegation of fraud against the defendants and the claim for damages for loss of reputation it was not a fit case for a reference to the arbitrator and the matter should, have been adjudicated upon by the civil Court. However, in view of my finding that the arbitration clause having become infructuous no reference could have been made to the arbitrator, the above submissions of the learned counsel need not to be adverted to.

6. In regard to the limitation it may be mentioned that the appeal was filed within the period of limitation before the learned District Judge, Abbot tabad, which was admitted to full hearing and came up for consideration on 16‑3‑1982. On the said date the learned District Judge opined that since his pecuniary jurisdiction extended upto Rs. 50,000 only and the present suit having beta valued at Rs. 29,11,135 the appeal was beyond his jurisdiction. The learned counsel contends that the appeal was filed before the District Judge in the bona fide belief that the appeal would lie to that Court since the application for stay under section 34 of the Arbitration Act, 1940, was decided independently of the suit as a miscellaneous application and perhaps this was the reason that the value of the suit for the purposes of court‑fee and jurisdic tion was not inserted in the memorandum of appeal. Though the contention of the learned counsel is not supported by the provisions of section 39 of the' Arbitration Act, it appears that the appeal was filed, within the period of limitation, before the District Judge under an honest though mistaken belief that the appeal was competent before that Court. In the circumstances it would not be just and, proper to penalize the appellant for the wrong advice tendered by his counsel. In this view of the matter the appellant would be C entitled to the benefit of section 5 of the Limitation Act, 1908, and the time spent in the Court wrongly approached would be deducted in his favour. In the circumstances the delay in filing the appeal in this Court is, therefore, condoned.

7. In the result, the appeal is accepted and the impugned order of the trial Court dated 30‑3‑1982 is set aside. The trial Court to proceed with the suit in accordance with law. No order as to costs. M. Y. H. Appeal accepted.