1989 PLP 1428 (CLC)

3. The material objections are (1) that the plaintiff Afsar Ali had not served a notice of 15 days upon the defendant M/s. Mahboob Sons informing them that the Arbitrator appointed by them namely Mr. Quddos Ashraf had neglected or refused or was incapable of acting and therefore they should appoint another Arbitrator within that period. As such the plaintiff was not entitled to appoint or treat Mr. Khawar M. Hasan as the Sole Arbitrator. (2) That the reference was restricted to the following terms: (1) The share of Mr. Afsar Ali in the future receipts from Pakistan Steel is whether limited to the receipts against "Extra Works" or whether it covers the refunds of electric charges also. (2) Whether the refund from Income Tax Department is also payable to Mr. Afsar Ali. (3) If the aforesaid document limits the payment to the extent of "Extra Work" only, then the refund of electric charges or refund of Income Tax whether can be classified as "Extra Work" items, but the arbitrator has exceeded his authority.

4. It was conceded by Mr. Bilal A. Khawaja that the plaintiff Afsar Ali had not given a notice of 15 days as required under section 9 of the Arbitration Act to the defendant that his Arbitrator had neglected, refused or was incapable of acting and therefore he should appoint another Arbitrator.

5. In PLD 1964 Dacca 166 Abdul Khaleq v. Province of East Pakistan, in similar situation, it has been held as follows:‑ "Under this subsection the conditions precedent to the appointment by a party of his arbitrator as the sole arbitrator are: (1) that the party proposing to exercise this power must have served notice on the other party calling upon him to appoint his arbitrator, (2) that a period of fifteen clear days must have elapsed after the service of the said notice, and (3) that the other party must have failed to make an appointment within the aforementioned period. There are some other conditions laid down in other provisions, which, too, must be fulfilled, but there is no dispute raised before as regarding any of them. The controversy in the present case centres round the three requirements serialized above. It is not disputed that the appellant appointed his arbitrator as the sole arbitrator without serving the above‑mentioned notice upon Government although he could do that only after service of such notice and failure of Government to nominate their arbitrator within a period of fifteen clear days thereafter. Mr. Khandkar, however, contends that the letter written by his client informing the District Controller, as asked for by him, of the appointment and name of his arbitrator alongwith the points to be referred to arbitration and the communication subsequently made by the sole arbitrator to Government notifying the date, time, place, etc., of his sitting taken together may be regarded as sufficient or substantial compliance with the aforementioned requirement of section 9(b). We are unable to accept this contention of the learned Advocate. The notice contemplated by the said section is one that has to be served prior and not subsequent to the appointment of the sole arbitrator and appears to be intended to give the other party an opportunity not only to make its own nomination but possibly also to give a second thought to its stand and arrive at an amicable settlement. So, a communication intimating the fact and name of a party's arbitrator and the points‑at‑issue to the other party coupled with the notice served by the sole arbitrator which apparently deprives the latter of the aforementioned opportunity cannot. we are afraid, be regarded as a substitute either in fact or in substance for the prior notice, referred to above. We, therefore, agree with the learned lower Court that non‑service of the said notice has vitiated the appointment of the sole arbitrator and as such the proceeding taken and the award made by him are without jurisdiction and void." In another case, which is from Indian jurisdiction, Shankar Lal Lachhmi Narain v. Phulchand Fatehchand reported in 126 Indian Cases 1930 a contract contained an arbitration clause under which each party was to nominate one arbitrator. Each party nominated an arbitrator but on the 14th October, 1925, the plaintiff's arbitrator refused to act. The remaining arbitrator, without giving time to the plaintiff to appoint a fresh arbitrator passed, on the 30th October, 1925, what he termed an award, as sole arbitrator; it was held:‑ "That the arbitration clause implied a power to nominate a fresh arbitrator if the original arbitrator refused to act and the award of the sole arbitrator without giving the plaintiff an opportunity to nominate fresh arbitrator was invalid."

6. Mr. Bilal Khawaja, however, pointed out that the conduct of the defendant was most unbecoming in that in spite of repeated requests by the plaintiff's Arbitrator neither he nor the Arbitrator nominated by him co‑operated with him in the making of the award. With the result that the plaintiff's Arbitrator was compelled to give the award on being appointed as the Sole Arbitrator by the plaintiff.

7. Mr. Muhammad Anis next submitted that there is no reference to the Arbitrator to determine as to what was the amount due to plaintiff Afsar Ali from M/s. Mahboob Sons nor he was called upon to make an order for payment of money. All that he was required to do was to interpret the clauses of the compromise application and to declare as to whether the items of electricity charges, refund and Income Tax refund were included in terms "Extra Work" or not and that he should have stopped there.

8. I asked Mr. Mohammad Anis if the Arbitrator had stopped there, then how the .plaintiff Afsar Ali could have recovered this amount because the application under Order 23, Rule 1, CPC was not apparently an executable decree not being one under Order 23, Rule 3, CPC but it was only for withdrawal of suit under Order 23 Rule 1, CPC. Mr. Muhammad Anis replied to this that the amount was already lying in Suit No.455/83 filed by Ikram Sons against Afsar Ali and Mahboob Sons and the plaintiff could withdraw that amount from this Court in that suit after the clarification was given by the Arbitrator.

9. In the particular circumstances of this case whereas I agree that as the plaintiff did not give notice to the defendant for appointment his Arbitrator as required under section 9 of the Arbitration Act and therefore the Sole Arbitrator so appointed by the plaintiff requires to be removed by the Court but I feel that looking to the conduct of the defendant and the special circumstances of the case it is in the interest of justice that a Sole Arbitrator be appointed by the Court. Hence whereas I set aside the award and remove plaintiff's arbitrator I appoint Mr. Justice (Rtd.) Fakharuddin H. Shaikh as Sole Arbitrator and refer these three issues enumerated above to him. I also direct the Sole Arbitrator so appointed to clarify as to how much amount would be due to the plaintiff as refund of electricity charges and refund of Income Tax dues so that the said amount may be claimed by the plaintiff from the Nazir, (if the finding is in his favour) from the amount lying in Suit No.455/83. Rs.20,000 shall be paid to the Sole Arbitrator as fee, which will be shared by the parties in half and half. Award set aside. A.A./A‑535/K.