P L D 1959 (W (PLP)

WAHIDUDDIN AHMED, J.‑This is an appeal from the judgment of our brother Inamullah, J. dated the 16th February 1954 in Suit No. 381 of 1953 (P L D 1954 Sind 241) on the Original Side of the Chief Court of Sind. The present appeal has arisen from the order of the learned Judge in dismissing the objections filed by the appellants to an ex parte award dated 2‑1‑1953 and from the order that it may be made the rule of the Court. On the 28th of December 1951 the parties entered into a contract for the purchase and supply of 100 bales of cotton. The contracted goods were supplied to the appellants on the 12th of January 1952 of the value of Rs. 59,892‑1‑

9. They paid only Rs. 52,000 and a balance of Rs. 7,892‑1‑9 remained unpaid. The appellants admitted their liability to pay the said amount but contended that with the consent of the respondents the amount in dispute was kept back as security for the supply of some more bales of cotton to them: The respondents, however, demanded the payment of the said amount but the appellants refused to pay the same. Correspondence was exchanged between the parties. The respondents by a letter dated the 24th of July 1952, reproduced below, informed the appellants that they had decided to go in for arbitration through the Karachi Cotton Association Limited, Karachi, and that Mr. Baboolal Kotak will act as their Arbitrator in the above matter :‑ Messrs S. M. Fazail & Co., 24th July, 1952 Karachi. Dear Sirs, Re : 100 bls. 289FR Multan Inv. No.

171. In continuation of our letter of the 28th ultimo as we have failed to receive any satisfactory reply from you in the above matter, we hereby inform you that we have decided to go in for Arbitration through the Karachi Cotton Association, Ltd., Karachi. Mr. Baboolal Kotak to act as our Arbitrator in the above matter. Yours faithfully, Sd. Not legible." The appellants remained inactive. Therefore the respondents by letter dated the 6th of September, 1952, reproduced below, called upon the appellants to appoint their arbitrator within 48 hours of the receipt of the said notice, failing which they threatened to proceed against them as per bye‑laws of the Karachi Cotton Association Limited :‑ 6th September, 1952. M/s S. M. Fazail & Co. Bunder Road, Karachi. Dear Sirs, Re : Arbitration Appointing Mr. Baboolal Kotak as our arbitrator we have requested you through our letter of 24th July 1952 to appoint your arbitrator ; but we have no reply so far from you as to your appointing arbitrator. We therefore give you this notice that if you fail to give the name of your arbitrator within 48 hours on receipt of this letter, we shall proceed against you as per bye‑laws of the Karachi Cotton Association Ltd. Yours faithfully, Sd. Not legible. On the 18th of September 1952 the respondents informed the appellants that as they committed default in the appointment of arbitrator in terms of the arbitration agreement, Mr. R. K. Doctor has been appointed as arbitrator on their behalf. The appellants did not reply to these letters. It was in these circum stances that the two arbitrators, namely, Mr. R. K. Doctor and Mr. Babulal Kotak gave their award in favour of the respondents. The arbitrators filed their award dated the 2nd of January 1953 in Court on the 31st of March 1953. The appellants raised objections for making the award a rule of the Court, and, amongst others, contended that the appointment of the arbitrator on their behalf by the respondents was not in accordance with law and also not in accordance with the terms of the agreement agreed upon between the parties. It will be observed that the contract entered into between parties is governed by the Karachi Cotton Association Ltd., bye‑laws. Bye‑law No. 39 (1) (a), reproduced below. is one of the terms which governs the case of the parties :‑‑ "Any dispute arising out of a ready transaction or out of a forward contract other than on the question of class and/or staple of the cotton tendered but including the construction of the official forward contract forms shall be referred to the arbitration of any two disinterested members from the Panel of Arbitrators referred to in By‑Law 39‑1 (b) one to be appointed by each party, If one of the parties to the contract fails to appoint an arbitrator, after having received 15 clear days' notice from the other party to do so, the party who has appointed an arbitrator shall have power to appoint the second arbitrator both of whom shall then proceed to deal with the question at issue. In case the two arbitrators are unable to agree the matter shall then be referred to an umpire, who shall be nominated by the two arbitrators from among the Panel of Arbitrators. In the event of two arbitrators being unable to agree as to the name of the umpire. the Board of Directors shall appoint an umpire from among the Panel of Arbitrators. The decision of the arbitrators or umpire shall be final and binding on the parties to the contract." One of the objections raised on behalf of the appellants was that no valid notice had been given for the appointment of an arbitrator on their behalf as provided under bye‑law 39‑1 (a) Inamullah, J., after considering the contention raised before him, observed :‑ The notice of 24th July 1952, no doubt, is not happily worded. The only difficulty that arises in construing that notice is whether it requires the defendant to appoint an arbitrator or not. In my opinion the notice does comply with the requirement of bye‑law 39‑1 (a). The notice clearly states that the plaintiff has appointed one Mr. Baboolal Kotak as his arbitrator regarding the dispute between the parties. The only question is if the defendant was also called upon to appoint his arbitrator or not. The words `we have decided to go in for arbitration through the Karachi Cotton Association Limited Karachi' clearly convey that the plaintiff relies on the bye‑law of the Karachi Cotton Association Limited and that he invokes the same. The notice, though it does not clearly call upon the defendant to appoint his arbitrator, has in effect called upon the defendant to appoint his arbitrator." The learned counsel for the appellants has given up all other objections in respect of the award. in dispute and has addressed us only on the question whether the notice of the 24th of July 1952 was in compliance with bye‑law No. 39‑1 (a) or not. The learned counsel strenuously argued that the agreement between the parties takes away the ordinary jurisdiction of the Courts to determine civil disputes between the parties. It contains certain conditions which should be strictly observed. The conditions incorporated in arbitration agreement must be followed in letter and spirit, and if there is the slightest departure, it should be held that they have not been complied with. There is much force in the contention raised by the learned counsel for the appellants. 1t will be pertinent to observe that ordinarily if there is no agreement to the contrary between the parties and the matter is referred to two arbitrators under section 9 of the Arbitration Act, 1940, each party is entitled to appoint his own arbitrator. The party anxious to get the matter referred to arbitration is entitled to call upon the other party to appoint his arbitrator within 15 days of the receipt of such notice. In this case, however, the parties are governed by bye‑law 39‑1 (a) of the Karachi Cotton Association, and, therefore, it shall have to be examined whether the terms agreed upon between them are different from the one laid down in section 9‑1 (b) of the Arbitration Act. A comparison of the terms incor porated in the said bye‑law with the language used in section 9 will show that the underlying idea in both is almost the same with this exception that under section 9‑1 (b) on the failure of any party to appoint an arbitrator the party who has ap pointed an arbitrator is entitled to appoint his arbitrator to act as sole arbitrator in the reference. Under the said bye‑law also, if one of the parties to the arbitration fails to appoint an arbitrator having received 15 clear days notice from the other party to do so, the party who has appointed an arbitrator shall have power, to appoint the second arbitrator. There is thus very little difference between the rule laid down in section 9 of the Arbitration Act and Bye‑law 39‑1 (a) of the K. C. A. They are based on the same principle and contain the same spirit namely to appoint somebody as arbitrator to act on behalf of the defaulting party. Before exercising this right, a notice to the other side is necessary. The question therefore immediately arises where the respondents in this case gave a proper notice as contemplated by the terms of the arbitration to the appellants and called upon them to appoint their arbitrator within the stipulated time. The notice relied upon by the respondents is of 24th July 1952. A perusal of this notice shows two facts : firstly, that the respondents have decided to go for arbitration through the Karachi Cotton Association Ltd., Karachi, and secondly, that Mr. Babulal Kotak will act as arbitrator on their behalf. In this letter the respondents never called upon the appellants to appoint an arbitrator on their behalf. The learned counsel for the respondents, however, urged that this request is conveyed by implication, and, therefore, it is a proper notice as contemplated by the terms of the agreement. We are afraid this argument is fallacious. Under section 42 of the Arbitration Act, a notice required to be given to the other side in respect of Arbitration must be in writing and should be served on them. These notices must contain the nature of the dispute between the parties, the purpose for which the notice has been given and the act which is to be performed by the other side. This is a rule which has found favour both in Indian and English Courts. In Shaw Wallace & Co. v. Gurbuxsing Beshensing (A I R 1929 Sind 58 at p. 60) Rupchand, J. observed: "Now S. 52, Contract Act, provides that when the order in which reciprocal promises are to be performed is not expressly fixed by the Contract, they shall be performed in that order which the nature of the transaction requires and there can be no doubt that where a party intends to enforce the submission clause, he should in the first instance perform his own part of the contract for the proper and expeditious disposal of the arbitration, proceedings. He should, therefore, not only specify the nature of the disputes which are to be referred, but also intimate to the opposite party the name of the arbitrator selected by him so to enable the opponent to choose another person as his nominee. That this is the procedure is evident from the provisions of section 9, Arbitra tion Act, which deals, inter alia, with submissions which provide for appointment in the first instance of two arbitrators, one to be nominated by each party but contain no provision empower ing one of them to nominate an arbitrator on behalf of his opponent in the event of default. To the same effect is the observation made m Farrar v. Cooper, ((1890) 44 Ch. Div. 323) and May v. Mills, ((1914) 30 T L R 287). In these cases it was held that it is also to be expected that the law will require not merely informing the other side that an appointment has been made, but also as to the subject‑matter and nature of the dispute consequently when the appointing party refused to give informa tion to the other side what the dispute was, it was held that the other party would be justified in treating the notice given to him as defective and improper. The importance attached to such notices can also be gathered from the fact that in Vol. I at page 659 in the Encyclopaedia of Forms and Precedents, Third Edition, a separate form showing the manner in which a notice of appointment of arbitrator and request to other party will be made, is given: "NOTICE OF APPOINTMENT of Arbitrator and Request to other Party to Appoint one. Sir, I hereby give you notice that I have this day appointed (arbitrator) of etc. to be the arbitrator on my behalf to settle by arbitration in pursuance of the proviso in that behalf contained in a deed dated etc. the disputes and differences that are now depending between us. And I hereby require you within seven days from the service of this notice on you to name an arbitrator to act on your behalf in the matter of the said disputes and differences failing which I shall forthwith appoint the said (arbitrator) to be the sole arbitrator in the said reference. DATED the day of... (Signature of party giving the not). To (other party) of etc." In our opinion the contention raised by the learned counsel for the respondents, that there is no need to make a formal request to the other side, for the appointment of the arbitrator and a simple notice, which conveys to the other side that an arbitrator has been appointed by him, should be taken by implication a request to the other side to appoint his arbitrator within the time agreed upon in terms of the agreement, cannot be considered to be a compliance of the explicit terms of the agreement. There is not the slightest doubt in our mind that both under S. 9 (1) (b) of the Arbitration Act and under Bye‑law No. 39‑1(a) of the Karachi Cotton Association it is necessary for, a party, before exercising a right to appoint his arbitrator as sole arbitrator or to appoint an arbitrator on behalf of the other side for failure to appoint an arbitrator, to give a formal notice calling upon the other side to appoint his arbitrator. Failure to give such a notice will be fatal to the arbitration proceeding. In B the matter under consideration, no formal request was made to the appellants to appoint an arbitrator on their behalf and therefore it suffers from an illegality. This view finds support in a case reported in Donald Campbell & Co. v. Jeshraj Girdhari Lal (A I R 1920 P C 123). Their Lordships of the Pirvy Council at p. 128, column 2, observed:‑ " The respondents had appointed as their arbitrator Mr. Leslie, their solicitor, Mr. Leslie very properly expressed his unwilling ness to act as sole arbitrator on his clients' claim. It appears to their Lordships that Mr. Leslie was never appointed sole arbitrator. Such an appointment could have been made only after a written notice under head (b) of the section. There is no trace of any such notice having been given, and it is obvious that all idea of appointing Mr. Leslie sole arbitrator was abandoned in consequence of his unwillingness so to act. The respondents' letter of the 26th May, 1916, states that they had appointed Mr. Pearson to be their arbitrator in the place of Mr. Leslie, but in order that Mr. Pearson should become sole arbitrator there would be necessary a written notice to the appellants to appoint their arbitrators, in which case on their default for seven days, the respondents might have appointed Mr. Pearson sole arbitrator. No such notice was ever given, but Mr. Pearson, at: the request of the respondents, acted as sole arbitrator. It was not necessary that the ‑appointment as sole arbitrator should be in writing, but the failure to give the notice in writing prescribed by S. 9 (b) would have been fatal to the authority of Mr. Pearson as sole arbitrator but for the fact that any objection on this head was waived by the appellants." It would thus be observed that the arbitration proceedings are of a technical nature, they are entered into between the parties with a view to oust the jurisdiction of the ordinary Courts, the language of the statute according to which the arbitrators are appointed or the language of the conditions in pursuance of which arbitrators are appointed, must be carefully observed and any departure from that which is expressly provided in the relevant arbitration clause will be treated as non‑compliance of its terms and will be fatal to the arbitration proceedings. It, therefore, appears to us that the condition precedent for the appointment of an arbitrator on behalf of the defaulting party is a valid notice calling upon the other side to appoint an arbitrator within; the stipulated or statutory period. The conduct of the respondents in this case further strengthens our view that the notice dated the 24th of July 1952 was certainly not a notice calling upon the appellants to appoint their arbitrator in pursuance of the terms of the arbitration. It was only on the 6th of September 1952 when they for the first time formally called upon the other side‑appellants‑to give the name of their arbitrator. In our opinion, this letter is tine notice contemplated under the terms of the arbitration, but obviously it was had notice because it called upon the appellants to name their arbitrator within 48 hours, which is definitely against the terms of the arbitration. According to the conditions of the arbitration the notice should have been of 15 clear days. It was however contended by the learned advocate for the respondents that this was merely a repetition and was not a notice calling upon the other side to appoint their arbitrator The learned counsel's argument runs as under: "Notice dated 24th July was the notice calling upon the other side to appoint their arbitrator. The other side did not appoint their arbitrator. The respondents were entitled to give them further time. They therefore extended the time to 418 hours and the appellants having failed to comply with this notice also, the respondents were entitled to nominate an arbitrator on behalf of the appellants." In our opinion this approach to the question is not warranted on the language of the bye‑law in question. Assuming for the sake of argument that the notice dated the 24th of July 1952 was a proper notice, the respondents by giving another notice on the 6th of September 1952 re‑opened the whole question and waived the rights acquired under the previous notice. The sub sequent notice, in our opinion, re‑opened the whole matter of reference to arbitration and cannot be treated anything else except a fresh request on their part to the appellants to appoint an arbitrator on their behalf. In Kishinchand Santram v. Messrs Rochaldas Gidumal (A I R 1939 Sind 24) at page 27 Lobo, J., considering an identical case, observed: " I therefore hold that the first objection raised by the learned advocate for respondents 2 must prevail and that the appointment of an arbitrator by respondent 1 on behalf of respondents 2 was illegal and that the arbitrators acted without jurisdiction. But respondents 2 are entitled in my opinion to succeed even on the second objection. There can be no doubt that though correspondence passed between the parties relating to arbitration prior to Ex. 11 dated 23rd December 1937 the whole matter of reference of disputes to arbitration was re‑opened and re‑stated by respondent 1 in their letter Ex.

11. In this letter respondent 1 gave respondents 2 three days to appoint an arbitrator and stated as follows : Failing which Mr. Godbert of Messrs Fleming Shaw & Co., Karachi, will act on your behalf as we have already advised you. Now S. 9, Arbitration Act, provides a statutory period of seven days' time for the appointment of an arbitrator and respondents 2 had the statutory right of appointing an arbitrator within seven days after having been served with a notice to do so. Respondent 1 clearly appointed Mr. Godbert as arbitrator on behalf of respondents 2 before the expiry of seven days and the appointment was accordingly illegal and the arbitrators who acted upon the reference acted without jurisdiction. It is argued by the learned advocate for respondent I that as a matter of fact the reference to arbitration was made on 5th January 1938, much later than seven days after the notice, Ex.

11. This makes no difference for Ex. 11 distinctly states that on failure to nominate within three days, Mr. Godbert of Messrs Fleming Shaw & Co., Karachi, will act as your arbitrator. The mere embodying of the appointment in a reference on a later date does not affect the invalidity of the appointment made in contravention of the provisions of S. 9, Arbitration Act. Respondents 2 are entitled to succeed therefore even upon the second objection." After a careful consideration of the arguments of the learned counsel for the parties, it appears to us that the view of the learned Judge on the original side on the matter under considera tion is not in accordance with law. According to law a notice of the nature contemplated by the parties for the appointment of arbitrators should be clear in all respects. There should have been a clear request to the appellants to appoint an arbitrator on their behalf. The mere fact that the respondents conveyed that they have appointed their arbitrator does not mean that they have formally called upon the other side to appoint their arbitrator and complied with the terms agreed upon between the parties. We will therefore hold that the appointment of an arbitrator on behalf of the appellant by the respondent was not valid and the arbitration proceedings for this defect are not binding on the appellant. For the reasons given above, we will allow the appeal and order that the award be set aside. Respondent will bear the costs of this appeal. A. H. Appeal allowed.