1984 PLP 983 (MLD)

I will take up objections No. l to 3 and 5 urged by the learned counsel for the defendant together as they all relate to the validity of award. The main contention of learned counsel fur the defendant is that the proceedings commenced before Abbas N.Rajkotwala and M.S.Zakrya was in the nature of conciliation proceedings initiated with the object of bringing about a settlement between the parties. It is also contended that the reference to arbitrators of the dispute was invalid as it was unilaterally made by the plaintiff and in any case the arbitrators never entered upon the reference legally as on the date they allegedly took up the reference there was no existing dispute between the parties. The contention raised by the learned counsel are not without substance. It is an admitted position that the arbitrators took cognizance of the dispute on the basis of letter of plaintiff, dated 18-12-1984. It is also an admitted position that apart from the letter, dated 18-12-1980 the plaintiff did not prefer any specific claim before the arbitrators. The plaintiff's letter referred to above reads as under:- "Managing Director, Union Steel Ltd., West Wharf Road, Karachi. Dear Sir, Please refer to the contract, dated 9th January, 1980 entered into by you on behalf of Union Steel and Mr. Usman A. Ansari, you have not abide by any of the terms of contract and I shall be grateful if you will please consider the following complaints which I have with you.

1. That as per clause I, of the contract I had to pay a sum of Rs.1,00,000 (Rs.one lac only) as advance which were supposed to be refunded 4 monthly instalments, whereas the same has exceeded 10,00,000 (Rupees ten lacs only) by way of cash payment and shortage of raw material. Inspite of repeated queries you have failed to provide a cogent reason for this shortage or to make up for it by yourself.

2. That you have been promising every now and then to pay all my dues back either by selling your lands or from the profit obtained by selling the import permit, but you have failed to do so.

3. That without any reasons given to me you stopped the factory on Thursday Dec. 11, 1980, before proceeding to your lands and thus put me in a fix because of my prior commitments to the clients it, the market.

4. That you instructed your staff that finished rolled material lying in the yard should not be delivered to me or taken out of the gates for delivery to the buyers who have already made the payments for the goods thus spoiling my reputation in the market and causing grievous damage to me as well as to the name of Union Steel. The loss of market confidence caused by this act is bound to reflection in future sales and profits. In view of the circumstances mentioned above I hereby request you formally to settle all outstanding accounts within one week e.g. before December 25 , 1980. Meanwhile through a copy of this letter I am informing the Arbitrators requesting them to fix a date to deal with tire dispute between us and either find a solution or give their final verdict. It shall be pertinent at this stage to draw your attention to clause 9. of our contract according to which fire decision of the Arbitrators is binding on both of us and enforceable by the Court of law". From reading; of the above letter it in clear that the complaint of plaintiff related to lire suns of Rs. ten lac received by the defendant as advance which was in excess of Rs. one lac mentioned in tire agreement, dated 9th January, 1980. It is also alleged ill the letter that the defendant had promised to repay tire above amount try selling his land front the profit received by him by selling the import permit but lie failed to do so and that the defendant without prior intimation to the plaintiff closed his factory on 11th December, 1980 and instructed his staff to withhold delivery of finished rolled material lying in the factory which caused great embarrassment to the plaintiff because of his commitments to various buyers, besides causing loss of reputation and damages. The defendant was therefore, called upon in the said letter to settle the outstanding account with the plaintiff before 25th December, 1980. It was further mentioned in the letter that a copy of this letter was being sent to the arbitrators with the request to fix a date with the object of finding a solution or give their find verdit. It is on the basis of this letter of plaintiff that on 211th December, 1980, a letter was addressed on behalf of Abbas Rajkolwala to the defendant asking the defendant to call al his office on 4.30 p.m. the Monday the 24th December, 1980 to unable him to resolve the dispute. It is not disputed that the .letter, dated 20th December, 1980 was addressed only to defendant and was issued oil behalf of one of the arbitrators (Abbas Rajkotwala) only and is signed by some one oil his behalf. It is however, not in dispute that the meeting proposed in this letter on 22nd December, 1980 did take place in which the plaintiff, the defendant and the two arbitrators took part. The case of the plaintiff is that this meeting and all subsequent meetings were only in the nature of conciliation proceedings whereas the plaintiff and the arbitrators contend that these were arbitration proceedings. The meeting proposed on 27th December, 1980, however was riot held and according to the diary of the arbitrators, dated 27-12-1980 it was adjourned to 7th January, 1981 at 4.30 p.m. The contention of the defendant is that no minutes were written on that date and that the minutes produced in Court were written subsequently. This allegation made by the defendant is, however not very material as it is admitted that on 7th January, 1981, to which date the meeting was adjourned on 27-12-1980, did take place in which the plaintiff, the defendant and the two arbitrators were present. There are however, several other significant , facts in this case which lend support to the contention of defendant that proceeding which was going on before Abbas N. Rajkutwala arid M.S. Zakrya was in the nature of conciliation proceedings and not the arbitration proceedings. It is an admitted position that on 29-12-1980 the plaintiff filed an application in this Court under section 20 of the Arbitration Act fur appointment of arbitrators in the dispute in accordance with the agreement, dated 9-1-1980. In his application under section 20 of the Arbitration Act the plaintiff has relied on two certificates, dated 24th December, 1980 issued by the defendant. The case of defendant with regard to three document is that plaintiff alongwith one of the arbitrators S.M.Zakrya called at his mill premises on 24 -12-1980 and after inspection of the account books obtained two certificates from him relating to the stock of the finished goods with the defendant and the raw material so far received by the defendant from the plaintiff. The plaintiff's case oil the other hand is that these certificates were obtained in course of arbitration proceedings as the arbitrator decided that one of them should go and inspect the record of defendant. 'there is however, nothing on record to show that any such course was authorised during the course arbitration proceedings. In fact S.M. Zakrya, who according to the defendant had accompanied the plaintiff to the office of Defendant ill his cross-examination firstly denied that these certificates, dated 24-12-1980 were issued in his presence at the premises of' the defendant but later when lie was confronted with the diary sheet of the proceedings, dated 7-1-1981, stated that the two certificates were issued in his presence at the mill of defendant where he was called by the defendant. This statement of S.M. Zakrya belies the assertion of plaintiff that the arbitrators had decided that one of them should go and inspect the account of defendant. In fact, such a case was never put to the arbitrators by the plaintiff when they appeared in Court as witnesses, although plaintiff had notice of' the case set up by the defendant in this regard as in paragraph 18 of his application under section 33 of the Arbitration Act the defendant had categorically stated that on 24-12-1980 S.M. Zakrya with Usman of the plaintiff visited the factory of the defendant arid inspected the account book arid in reply the-rely the plaintiff stated in his objection as follows: "

25. As regards para. 18, the arbitrators among themselves proceeded to decide the method of inspection of account books and the same were looked into by them" Apart front it tire main contention raised in the application under section 20 of the Arbitration Act, filed by the plaintiff, was that as a result of supplementary agreement between the parties, the plaintiff and the defendant were entitled to join utilization of the import licences issued to the defendant and on an interlocutory application of plaintiff in this behalf the Court restrained the defendant from transferring the import licences to any other person except with the leave of the court. The two arbitrators when asked by the defendant's counsel in cross examination that the main dispute between the parties related to utilization of Import Licences issued to defendant, they categorically stated that no such dispute was raised before them by the plaintiff. On 11-11-1980 when the application under section 20 of Arbitration Act came up for hearing in Court the learned counsel for the plaintiff made a statement that the matter was likely to be settled between the parties amicably and obtained adjournment upto 18-1-1981. It is not without significance that on 11-1-1981 when the learned counsel for the plaintiff made the above statement in Court the parties lead appeared before S.M. Zakrya and Abbas Rajkotwala on 7-1-1981 and 10-1-1981 and some proceedings had taken place before them and no further date was fixed. Neither the arbitrators were informed by the plaintiff about the pending application under section 20 of the Arbitration Act, nor the Court was .informed on 11-1-1981 that the dispute between the parties is already before the arbitrators who had entered upon it. The two arbitrators gave their award on 11-1-1981 but the parties continued to appear in suit No.1291/80 until May, 1981. In fact the defendant submitted his objections to the application under section 20 of the Arbitration Act and alleged suppression of facts on the part of the plaintiff and further stated that the wastage claimed by the plaintiff was not correct as during the course of proceedings for a compromise between the parties which took place through efforts of Mr. M.S. Zakrya and Abbas N. Rajkotwala the applicant had agreed to entrance percentage of wastage of the basis of actual wastage. The learned counsel for the plaintiff is unable to explain the filing and continuation of proceedings under section 20 of the Arbitration Act in these circumstances by the plaintiff. he only stated that the plaintiff was apprehending removal of stuck of finished goods and raw material by tire defendant and, therefore, he had to file the application under section 20 of the Arbitration Act. I am unable to accept the contention of the learned counsel for the plaintiff. The fact that tire plaintiff instituted an application under section 20 of the Arbitration Act for reference of the dispute between the parties to the arbitrators oil 29th December, 1980 suggested that no arbitration proceedings were pending on that date. Further, the fact that on 11th January, 1981 the learned counsel fur the plaintiff made a statement in court that then dispute is likely to be settled between the parties and the parties continued to appear in the case until May, 1981 in spite of the fact that they were also appearing simultaneously before the two arbitrators support the contention of the learned counsel fur the defendant that the proceedings before S.M. Zakrya arid Abbas N.Rajkotwala were riot arbitration proceedings but were conciliation proceedings initiated with the object of' finding a. settlement between two parties. The defendant in his objections to the applications under section 20 of the Arbitration Act filed in Court on 27th January, 1981, took a clear stared with regard to the proceedings which were going on before the arbitrators. The two arbitrators who were examined in the case admitted that in the letter-dated 20th December, 1980 wherein the defendant was asked to appear before Abbas N.Rajkotwala, no particulars of the dispute were mentioned and that the plaintiff had nut submitted any former claim before them. The two arbitrators also categorically stated that the dispute relating to sharing of import licences by the plaintiff which were issued to the defendant was not at all raised before them. The above facts coupled with the conduct of one of the arbitrators S.M.Zakrya, in calling during the course of proceedings at the office of the defendant, alongwith the plaintiff in connection with the obtaining of certificates, dated 24-12-1980 clearly indicate that he was not acting in his capacity as an arbitrator in the case. In this connection the letter, dated 18th December, 1980, written by the plaintiff to the defendant, copy whereof was forwarded to the two arbitrators and which is basis of the alleged arbitration proceedings is also very significant. This letter clearly indicates till intention on the part of the plaintiff to arrive at a settlement with the defendant and fur, that purpose he gave him time upto 25th December, 1980. The plaintiff had requested the two arbitrators to fix a date for finding a solution of the dispute or give their decision. Therefore, on 20-12-1980 when one of the arbitrators called the defendant to appear before him on 22-12-1980 there could not be any question of entering upto the reference by the arbitrators. Taking into consideration till these circumstances and the conduct of the arbitrators and the parties in the case I am of the view that the proceedings which took place before .the two arbitrators from 22-10-1980 to 10-1-1981 were nut arbitration proceedings and therefore the decision given by Abbas N.Rajkotwala and S.M. Zakria is not the award which could be confirmed by the Court. In the case of Muhammad Salim v. Muhammad Akram P L D 1971 S C 516 in somewhat similar circumstances the Supreme Court pointed out the difference between the award and a decision by a person who has been referred to dispute by the parties for bringing out the settlement. I respectfully quote here the following passage from the above cases which in my humble opinion is relevant: "From what hits been said above it will be manifest that the main question that falls to be decided in this case is as to whether the parties agreed to appoint Maulvi Akhtar Ali as an Arbitrator to adjudicate upon their disputes and whether he made an award. In other words, as to what is the true legal character, of the document Exh.D/1. The must important characteristic of an award, of course, is that it must emanate from a judicial determination. If a dispute is referred to a person and if drat person decides that dispute by holding era enquiry and coming to a decision then undoubtedly what that person decides would constitute an award. On the other hand, if a matter is referred to a person and he is not called upon either to hold an enquiry or to give a decision but by the exercise of his sagacity, knowledge or experience to bring about merely an understanding between the parties and restoring peace between them then he would only be discharging functions other than those of an arbitrator. But in order to determine this question one mast not look merely at the form adopted or the expressions employed but rather at the substance of what the parties to the dispute really intended the person approached in that behalf to do and how that person acted in that particular matter". In view of my above conclusion it is not necessary to decide other, contentions raised by the defendant. I accordingly refuse to confirm the alleged award set aside the same and dismiss suits Nos. 4 of 1981 and 149 of 1982. There, will be however, no order as to costs. M . Y . H . Award not confirmed.