P L D 1969 Karachi 523 (PLP)

Arbitration Act (X of 1940), First Sched., para. 3‑Agreement not indicating time requisite for making award‑Arbitrators making award within four months from date of reference‑Award, in circumstances, within time and upheld. Naimuddin for Plaintiff. Muhammad Shafi for Defendant No.

1. Dorab Patel for Defendant No.

2. The defendants seek to question the award dated 13th February 1965, by which the arbitrators, namely, Mr. R. K. Doctor and Dr. Azhar Hussain, found a sum of Rs. 39,740 (Rupees thirty nine thousand seven hundred forty) due and payable by the defendants to the plaintiffs. The award was made in the following circumstances.

2. The plaintiffs are Commission Agents in cotton in Karachi, whereas the defendants Nos. 1 and 2 carry on the business of Ginners at Kacha Khuh, Tehsil Khanewal, District Multan. By agreement dated 26‑10‑1964, the defendants agreed to forward to the plaintiffs consignments of cotton bales to be sold by the plaintiffs at Karachi. The plaintiffs paid Rs. 25,000.00 (Rupees twenty‑five thousand) to the defendants as advance and further supplied to them hessian and bailing hoops of the value of Rs. 14,740.00 (Rupees fourteen thousand seven hundred forty), the total amount of Rs. 39,740'00 to be adjusted in the final account of sales of the plaintiffs' goods at Karachi.

2. Clause 15 of the said agreement provided for reference of the disputes between the parties to arbitration in the following words:‑ "Any dispute of whatsoever nature relating to or arising out of or in respect of commission agency and/or this agreement shall be referred to the arbitration of two disinterested members from the Panel of Arbitrators appointed by the Karachi Cotton Association Ltd., under Bye‑law 39 from time to time, and whose names appear as such on the register of the said Association one to be appointed by each party. In case either party fails to nominate its arbitrator within 15 days from the receipt of the notice in writing from the other party, the party giving such notice shall be entitled to nominate the second arbitrator on behalf of the defaulting party. The arbitrators will appoint an Umpire from the Panel of arbitrators before proceeding with the case. In case the arbitrators cannot agree to the nomination of an Umpire, the arbitrators shall refer to the Board of Directors of the Karachi Cotton Associa tion Ltd., who will then select an Umpire whose nomination will be final."

3. It appears that the defendants did not supply any cotton to the plaintiffs under the aforesaid agreement of commission agency, whereupon the plaintiffs demanded refund of their advance of Rs. 39,740'

00. On the defendants' failure to make payment, the plaintiffs appointed Mr. R. K. Doctor as their arbitrator, and requested the defendants, by letter dated 7th December 1964, to appoint their arbitrator in pursuance of the arbitration clause. The defendants, however, failed to take any action in this connection within the 15 days period specified by the arbitration clause, whereupon the plaintiffs appointed Dr. Azhar Hussain as arbitrator for the defendants. The arbitrators appointed Mr. Banatwalla as the Umpire and gave notice of arbitration proceedings on 4th January 1965, to the defendants, it is admitted that the defendant No. 2 did make appearance before the arbitrators on 14th January 1965, and made a counter claim for Rs. 30,000.00 against the plaintiffs. The arbitrators refused to entertain this counter‑claim on the ground (the correctness of which ground is not contested) that this counter claim was not within the scope of the arbitration then pending before the arbitrators.

4. On 13th February 1965, the arbitrators made their impugned award and directed the defendants to pay to the plaintiffs Rs. 39,740.00 with further interest at six per cent. per annum from 23‑10‑1964 up to the date of payment. The defendants have attacked this award on several grounds enumerated in their applications under sections 30 and 33 of the Arbitration Act, 1940. At the hearing of the case before me, Mr. Muhammad Shafi, the learned Advocate for defendant No. 1, stated that he had no instructions from defendant No.

1. This defendant was called by the Court and was found to be absent and the case against him, therefore proceeded ex parte. Mr. Dorab Patel, the learned counsel for defendant No. 2, rested this defendant's case on the following points only:‑ (i) that the arbitration clause in the agreement dated 26‑10‑1964 made the dispute referable to Arbitration under the Bye‑law 39 of the Karachi Cotton Association, but this bye‑law did not contain any provision for adjudication of disputes by arbitration between commission agents at Karachi and their up‑country principals, and that its operation was confined to disputes arising under direct contracts for sale either in ready or in forward, or under C. I. F., C & F and F. O. B., contracts; (ii) that notice of the nature of disputes between the parties was not given either by the plaintiffs or by the arbitrators to the defendants; (iii) that the arbitrators made delay in making the award, and in the circumstances of the case the Court should refuse to condone this delay.

5. In the written objections the defendant No. I had also taken the ground that he had not signed the agreement dated 26‑10‑1964, and that, consequently the arbitrators had no jurisdiction in the matter. However, at the hearing before me the defendant No. 2 filed a statement under his own signature admitting that the agreement in question did bear his signature and that this document also appeared to have been signed by the defendant No. 1, Muhammad Tufail. Consequently, the objection as to the absence of jurisdiction for want of execution of the agreement by the defendants was not pressed by the learned counsel for defendant No. 2.

6. Turning to the first objection raised by Mr. Dorab Patel, I find from the arbitration clause contained in the agreement that the disputes between the parties were not referable to arbitration under Bye‑law 39 of the Karachi Cotton Association. This clause, of course, makes provision for settlement of all the disputes by arbitration, but this arbitration is not arbitration under Bye‑law

39. What the parties agreed to was that the arbitrators should be appointed from the panel of arbitrators maintained by the Karachi Cotton Association under its Bye law

39. But this arrangement for appointment of arbitrators would not make the arbitration itself as arbitration under the bye‑laws of the Cotton Association. The arbitration clause makes reference to Bye‑law 39 only to restrict the choice of arbitrators to the persons whose names appear on the panel of arbitrators of the Karachi Cotton Association. I would, therefore, think that this particular objection of Mr. Dorab Patel does not carry any force. A plain reading of Arbitration clause makes it clear that all disputes "relating to or arising out of or in respect of commission agency", or, "the agreement" between the parties, are required to be settled by arbitration. The advance of Rs. 39,740 "clearly" appears to have been made under this contract. The arbitrators have treated this advance as having been made under the contract in question and his finding has not been shown to suffer from any error. The failure on the defendants part to consign cotton bales to the plaintiffs at Karachi and their failure to refund the sum of Rs. 39,740 did constitute a dispute within the arbitration clause and accordingly the dispute was referable to arbitration in the manner agreed between the parties. I, therefore, hold that the arbitrators were validly appointed in pursuance of this clause and they had jurisdiction to adjudicate the disputes between the plaintiffs and the defendants.

7. Mr. Dorab Patel then contended that the Karachi Cotton Association maintained three panels of arbitrators under Bye‑law 39 and the arbitration clause suffered from uncertainty and was accordingly void, to the extent that it failed to specify the particular panel from which the arbitrators had to be appointed. But I would think that if no particular panel is specified, the appointment of arbitrators could be made from any panel maintained under Bye‑law

39. It was not necessary to specify any particular panel in the arbitration clause and in the absence of such specification, the clause should be deemed to refer to all the panels kept under bye‑law

39. I cannot, therefore, accept the suggestion that there is any uncertainty in this clause.

8. I cannot also agree with the next objection raised by Mr. Dorab Patel, that both the plaintiffs and the arbitrators failed to give notice to the defendants of the nature of the disputes between the parties. The plaintiffs first made demand by a registered letter for refund of the sum of Rs. 39,

740. On 7th December 1964, the plaintiffs sent another registered notice to the defendants demanding payment of this amount, and further notifying the defendants that the matter will be referred to arbitration if the defendants did not clear off their liability. Thus the nature of the disputes between the plaintiffs and the defendants was made clear by these two letters. No further particulars were necessary to put the defendants on notice of the nature of the dispute. Moreover, this particular ground was not raised by the defendants either before the arbitrators or in the objection filed in this Court. The case of the defendants, as put up by the defendant No. 2 in the arbitration proceedings, appears to be that the sum of Rs. 39,740 should be adjusted against the amount of Rs. 30,000 which the defendants claimed from the plaintiffs. The arbitrators rightly rejected this counter claim as it was not within the stop of their arbitration. The defendants cannot be allowed at this late stage to raise this new ground which, in any case, does not have any substance.

9. With regard to the objection as to delay in making the award, I find that notice of the arbitration proceedings was given on 4th January 1955. The period of 30 days for making the award is prescribed by Bye‑law 39 of the Karachi Cotton Association. Reference of the dispute was not made under this Bye‑law, but was made under the arbitration clause contained in the agreement. This clause is silent on the time requisite for the making of the award and this time should, therefore, be four months from the date of entry upon the reference by the f arbitrators. The award was made on 13‑2‑1964 and, therefore, is within the time permissible under the Arbitration Act, 1940.

10. I would, therefore, uphold the award and direct that the award be made rule of the Court. There will be a decree in terms of the award in favour of the plaintiffs who will also have costs of these proceedings. A. E. Award made rule of Court.