P L D 1957 (W (PLP)

WAHIDUDDIN, J.

This is an appeal against the judg ment of our learned brother, Inamullah, J., setting aside the award. Briefly stated the facts are that under an oral contract the appellant agreed to sell 100 bales of ISS/R Nankana Cotton at Rs. 125 per maund to the respondents ; the goods were agreed to be delivered by 25th January 1952. One of the terms of the contract was that it was factory selection contract, and if any dispute arose between the parties then it would be referred to arbitration according to by-law 140 of the Karachi Cotton Association Ltd. Apparently the appellants were unable to supply the goods by 25th January 1952 and, therefore, by written agreements between the parties, the condition for the supply of goods was extended from time to time on four occasions, the last written agreement being dated 20th March 1952, signed by both the parties, the time for delivery of the goods was extended up to 31st March 1952 ; and there it was also mentioned that all other terms as per original contract, including the arbitration clause, were binding on the parties. It appears that the appellant, in accordance with the terms of the contract was ready and willing to perform their part of the contract but the respondents failed to take delivery of the goods and, therefore, a breach of contract was committed by them On 25th July 1952 the appellants informed the res pondents that as they had failed to pay the damages suffered by them, Mr. Abdur Rahman was appointed as their arbitrator and the respondents were called upon to appoint their own arbitrator within fifteen days from the receipt of the said letter. The respondents failed to appoint their arbitrator, and on 12th August 1952 the appellants appointed Mr. Zahiruddin as arbitrator on behalf of the respondents, under by-law No. 39 of the Karachi Cotton Association, and an intimation to that effect was sent to the respondents by letter dated 12th August 1952. Both the arbitrators entered on the reference and issued notices to the parties to appear before them on 4th September 1952. Both the appellants and the respondents appeared before the arbitrator and Mr. Muhammad Bashir, representative of the respondents, admitted the claim of the appellants, and expressed that as soon as payment is received by them from one Messrs A. S. Malik, the amount due to the appellants would be paid immediately. The proceedings were then adjourned to 8th September 1952, and on 15th September 1952 the arbitrators came to the conclusion that as the claim of the appellants was admitted, there was no other alternative but to proceed with the award. On 27th September 1952 the arbitrators gave an award in favour of the appellants holding the res pondents liable to pay Rs. 18,720 as damages for breach of contract. The arbitrators then informed the parties on 28th September 1952, about the pronouncement of the award. On 23rd December 1952 an application was made by the two arbitrators under section 14 (2) to make the award Rule of the Court. The respondents appeared before the learned trial judge and on 1st April 1953 raised objections against the filing of the award on two grounds. Firstly that there was no valid agreement between the parties to refer the matter in dispute to arbitration, and secondly on the ground that admittedly the contract being a factory selection contract the arbitrators were to be appointed under by-law 140 of the Karachi Cotton Association and, as the appellants appointed an arbitrator under by-law 39 of the Karachi Cotton Association, the reference to arbitration was bad in law and, therefore, the award made by the arbitrators was void and of no effect. The learned trial Judge considered the matter and upheld the objections of the respondents and for reasons given in the judgment set aside the award. The matter has been argued before us at length by the learned counsel for the parties. The learned counsel for appellants has urged that the view taken by the learned judge below that as the arbitrators in this case were not appointed in pursuance of by-law 140 of the Karachi Cotton Associa tion, the award of the arbitrators is void, is incorrect. The learned counsel drew our attention to the proceedings of the arbitrators and pointed out that the respondents appeared before the arbitrators and participated in the arbitration proceedings and, therefore, even if the appointment of the arbitrators was against the terms of agreement between the parties, the respondents had waived their objection and the irregularity if any in the appointment of the arbitrator was cured for that reason. The learned counsel placed reliance on the authorities In re : All India Groundnut Syndicate Ltd. (A I R 1945 Bom. 497) and Madipalli Venkatachellam v. Madipalli Suryana rayanamurty and others (A I R 1941 Mad. 129), in support of his contention. Although the facts of those cases were different and the question involved was not about the initial appointment of the arbitrators, but the observations of the learned judges support the contention of the appellants. In A I R (1945) Bom. 497 the learned judge, Blagden J. observed as follows :- "If a party to submission appears before the arbitrator and merely takes part in a preliminary discussion, he does not thereby waive his right to object to the jurisdiction of the arbitrator before the arbitrator actually enters upon the consideration of the matters upon which be makes his awards. If after objecting to the jurisdiction and such objec tion having been overruled, he proceeds with the case, under protest, to defend himself, he does not lose his right thereafter to say that the arbitrators acted without authority. But if a party takes part in the proceedings before the arbitrators on the assumption that the proceedings were before a competent tribunal, he cannot be allowed to contend that the whole of the proceedings were coram non judice." In A I R 1941 Mad. 129 it was held :- "A Court would be unwilling to assist a party who with full knowledge of the circumstances, allows an arbi tration to proceed and takes part in it and then seeks to evade it later on by raising a number of objections which have never occurred to him before." In the last mentioned authority reliance was placed on an authority of their Lordships of the Privy Council in Chowdhury Murtaza Hussain v. Mst. Bibi Bachunnissa (3 I A 209). In that case a matter was referred to arbitration and the agreement between the parties was that the arbitrators would give their decision after taking into consideration a certain will mentioned in the arbitration agreement. The will in question referred to another will. The other will was not produced before the arbitrators and the arbitrators gave their award without considering the will in question. An objection was raised before the Court that the award in such circumstances was without jurisdiction, as the arbitrator had acted against the terms of reference. Their Lordships at page 220, while discussing this question, observed as follows: "On the whole, therefore, their Lordships think that the appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrators proceeding to make their award, did submit to the arbitration going on ; that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself ; and that it is too late for him, after the award has been made, and on the application to file the award, to insist on this objection to the filing of the award." Applying the above mentioned test in the present case, there is no doubt in our minds that the respondents in the present case knew fully well that the arbitrators ought to have been appointed under by-law 40 of the Karachi Cotton Association; that they were not so appointed but appointed under by-law 39 of the said Association. They could have raised objections to the jurisdiction of the arbitrators to proceed with the matter; they did not choose to do so and allowed them to proceed with the arbitration proceedings and permitted them to give an award in respect of the matters in dispute between the parties. After participating in the arbitration proceedings and by not raising any objection to the jurisdiction of the arbitrators, in our opinion, they waived their objection to the jurisdiction of the arbitrators to deal with the matter, and any irregularity in the appointment of the arbitrators on account of this conduct of the respondents was cured. They could not, at the time of the hearing of objections in the trial Court be allowed to agitate the question about the defect in the appointment and jurisdiction of the arbitrators to decide the matter. Even our learned brother Inamullah J. in Sind Cotton Exporters v. A. B. Sadiq Brothers (P L D 1955 Sind 268) has taken a similar view. The learned Judge relied on the following passage in P. L. Paruck on Arbitration Act, 2nd Edition, page 372 :- "A defect in the nomination of the arbitrator can be cured by waiver by the party going before the arbitrator and taking his chance of a favourable decision, but not if the party appears under protest, Sheonath v. Ramnath (10 M A A 414 at p. 426). If. there is irregularity in the appointment of the arbitrators, and if any party knowing such irregularity takes part in the proceedings and does not raise the point at the first opportunity and an award to be made without raising any protest, he will be deemed to have acquiesced and waived his objection; but the waiver to be effective must be an intended act and with knowledge of the necessary facts, Chaturbhuj v. Deokaran (26 Bom. L R 84 at p. 96) . . . . . " Our learned brother further relied in this connection on the commentary at page 383 of Russell on Arbitration 15th Edition, which runs as under :- "If the parties to the reference either agree beforehand to the method of appointment, or afterwards acquiesced in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of relevant facts will amount to such acquiescence." and eventually came to the conclusion that in such circum stances the irregularity, if any, was cured and the appointment of the arbitrator cannot be challenged on that ground before the Court. There is vast difference between want of jurisdiction and irregular exercise or assumption of jurisdiction. Irregularly exercise or assumption of jurisdiction may be waived ; their Lordships of the Privy Council in Ledgard v. Bull (13 I A 134), while considering a case where the District judge transferred a case under section 24 Civil P. C. to his file from the Court of the Subordinate judge, who had no jurisdiction to hear it, although the matter if presented in his Court directly, could be heard by him, made the following observation: "The District Judge was perfectly competent to entertain and try the suit if it were competently brought, and their Lordships do not doubt that, in such a case, a defendant may be barred by his own conduct, from objecting to irregulari ties in the institution of the suit. (But) when the Judge has no inherent jurisdiction over the subject-matter of a suit the parties cannot, by their mutual consent, convert it into a proper judicial process, although they may constitute the judge their arbiter, and be bound by his decision on the merits when these are submitted to him. But there are numerous authorities which, establish that. when in a cause which the judge is competent to try, the parties without objection join issue, and go to trial upon the merits, the defendant cannot subsequently dispute his jurisdiction upon the grounds that there were irregularities in the initial procedure, which, if objected to at the time, would have led to the dismissal of the suit." In this case also, if there would have been no agreement between the parties to get their dispute decided by arbitration and then the appellants would have appointed an arbitrator on their behalf and on the failure of the respondents appointed an arbitrator on their behalf the position would have been different. In such event if the respondents would have appeared in the arbitration proceedings without protest and objection then such proceedings will be void. It will be an instance of inherent want of jurisdiction which cannot be waived. But the case here is entirely different. Here it is a case where the parties entered into an agreement of arbitration; they contemplated appointment of arbitrators according to special provisions in the by-laws of the Karachi Cotton Association; the arbitrators were not appointed according to those by-laws, they were appointed under a different by-law; the respondents appeared before the arbitrators, participated in the proceedings, raised no objec tions, and thereby waived all their rights and cured the irregularity in the appointment of the arbitrators. The learned counsel for the respondents has relied on two authorities one reported in Munawar ck Co. v. S. A. Rauf & Co. (P L D 1954 Sind 30), and the other is el. G. Smith and others v. Ludha Ghella Domodar (17 I L R (Bom.) 129). In the first decision our learned brother, Bachal J. held that if any party without knowledge of any defect in the appointment of the arbitrators appeared before them, then the party concerned was entitled to raise objections before the Court and he cannot be said to have waived his right to do so by merely appearing before the arbitrators. In 17 I L R Bom. 129 the two arbitrators on difference asked the Chamber of Commerce to appoint an umpire. They appointed an umpire who surveyed the goods in dispute and took a final decision in the matter. Then party disputing the validity of the appointment of the umpire never appeared before him. In fact they had no knowledge of the defect till the matter was raised in Court. The ratio decidandi, therefore, in the last two cases was entirely on different considerations. It was based on the ground that the parties concerned had no knowledge of the irregularity, and we are in respectful agreement with the observations made in those authorities. The cases of waiver proceeds on the principle that if the party) concerned knows of a defect in the appointment of an arbitrator in the proceedings and nevertheless goes on with the reference before the arbitrator, he cannot be all owed to raise an objection at the trial as he must be taken to have waived the irregularity. Another point raised by the learned Counsel for the respondents is that there was no agreement in writing between the parties to refer the matter to arbitration. According to him the agreement between the parties was oral and, there fore, even if such oral agreement was merged in writing subsequently, it cannot be said that there was a written agreement between the parties to refer the matter to arbitra tion. He invited our attention to a decision in A I R (1951) All.

860. In this authority the only point involved was that if the matter in dispute is referred to arbitration on the basis of an oral agreement, then under the provisions of the Arbitration Act such reference is invalid. Nobody can dispute the proposition of law enunciated in this authority. In the present case, however, although in the beginning the agreement between the parties was oral, it was subsequently confirmed in writing on four occasions. We do not find any, substance in this contention and have no hesitation in holding that there was a written agreement between the parties for the submission of the matter to arbitration. The last point argued by the learned counsel for the respondents was that the respondents were not members of the Karachi Cotton Association, that in the arbitration contemplated in the four writings, whereby the time for the fulfilment of the contract was extended, it was not mentioned in what way the arbitration of the dispute between the parties should take place and, therefore, any reference to arbitration under the by-laws of the Karachi Cotton Association was illegal and void. This argument is not well-founded. At no stage the respondents took this objection. The matter was argued before the learned trial judge on the assumption that the parties were governed by the Karachi Cotton Association by-laws. Even otherwise the letter written by the appellants to the respondents about the appointment of his arbitrator distinctly mentioned that the appointment was being made under by-law 39 of the Karachi Cotton Association. The respondents never repudiated that the parties are not governed by the by-laws of this Association. In spite of this, as observed above, the respondents appeared before the arbitrators and, as held above, their appearance cured all the irregularities in the appointment of the arbitrator for the determination of their dispute. In our view the learned Judge below did not consider the case law on the subject and, therefore, erred in arriving at the conclusion that the award in question was liable to he set aside on account of the irregular appointment of the arbitrators. The result is that the appeal is accepted. The respon dents to pay the costs of this appeal. The learned Counsel for the respondents gives up all the other objections in respect of the award. In these circum stances the award will be made the Rule of the Court and a decree in pursuance of the award will follow. A. H. Appeal accepted.