2020 PLP 106 (CLC)

SHAHID BILAL HASSAN, J.

Facts, in concision, are as such that the petitioner entered into a contract agreement dated 17.05.2010 with National Transmission and Dispatch Company Limited (NTDC) to design, supply, test and commission the plant and equipment for Contract No.3076 (Package-1) Design, supply, installation, testing and commissioning of Plant and Equipment for Rahim Yar Khan 500/220/132 kV. Subsequent to the execution of Main Contract between the petitioner and NTDC, the petitioner and the respondent separately entered into a Sub-Contract dated 22.12.2010 to undertake and fulfill the requirements of the Main Contract. The Sub-Contract was amended on 02.04.2011 to the extent of project scope and remuneration. A dispute arose between the petitioner and respondent as to the payment of rental charges and the question of ownership and possession of tools as well as machinery used in relation to the terms and conditions. As a result, the respondent filed an application invoking the provisions of section 20 of the Arbitration Act, 1940 for referral of the dispute to arbitration on 01.03.2013 in the Civil Court, Lahore, but the same was withdrawn on 08.10.2013 for determination of dispute as per the procedure laid down in clause 6 of the Main Contract. However, subsequently the respondent filed another application under section 20 of the Act, 1940 on 27.03.2015, which was dismissed by the learned Civil Judge for being filed prematurely. After dismissal of the second arbitration application, the parties appeared before a mediator of the Lahore Chamber of Commerce and Industry on 14.03.2018, 09.05.2018 and 07.06.2018 but the parties could not reach to any final settlement, which culminated in filing of third application under section 20 of the Act, 1940 before the Civil Court on 23.11.2018.

2. Through the instant revision petition, the petitioner has called into question the order dated 07.05.2019 passed by learned Civil Judge Ist Class, Lahore whereby in response to the above said application under section 20 of the Act, 1940, appointed one Muhammad Mazhar Ul Islam as Arbitrator, without consent of the petitioner, who was nominated by the rival party.

3. Learned counsel for the petitioner avows that the impugned order is against law on the subject matter, because the learned Judge has failed to apply the express provisions of Act, 1940 applicable to the matter; adds that the learned Court below has erred in law i.e. with specific reference to section 20(4) of the Act ibid where it was incumbent upon the Court to appoint an arbitrator with consent of both the parties. Submits that the arbitrator proposed and appointed by the learned trial Court was without consent of the petitioner, therefore, the impugned order cannot hold field in presence of express provisions of law on the subject. Contends that consent is the essence of arbitration and arbitration is the mechanism chosen to resolve disputes quickly and without being delayed by technicalities by an arbitrator and it is illogical that parties should submit to the adjudication of an arbitrator in whom they do not repose any confidence. Maintains that in the entire scheme of the Arbitration Act, 1940 there is no provision provided for the appointment without the consent of the parties; that the provisions of section 8 of the Act have no bearing on the matter in hand as the application has been filed by the respondent itself under section 20 and not under section 8 of the Act and scheme and intent as well as spirit of section 8 is separate and distinct from section 20(4), albeit both pertain to the appointment of arbitrators; that it is established law that an invalid and defect appointment of an arbitrator cannot lead to a valid and binding award; thus, the impugned order is not sustainable as the same has been passed with material illegality and irregularity. Prays for acceptance of civil revision in hand, setting aside of the impugned order and appointment of arbitrator with consent of the parties.

4. On the contrary, learned counsel for the respondent has supported the impugned order and has prayed for dismissal of the civil revision in hand.

5. Heard.

6. Disposal of the present petition needs reproduction of the provisions of relevant law i.e. Arbitration Act, 1940, which are reproduced infra:- 'Section 3: Provisions implied in arbitration agreement. An arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference.' First Schedule is headed as "implied condition of arbitration agreements" and it consists of eight paragraphs and the most relevant are reproduced as under:-

1. Unless otherwise expressly provided, the reference shall be a sole arbitrator.

2. If the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments. 3.

4.

5.

6.

7.

8.

Section 20(4) of the Act, 1940 is also relevant to the present case, which reads:- '20. Application to file in Court arbitration agreement. - (1)

(2)

(3)

(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.' When the above provisions of law are read conjointly it can easily be gathered that consent of the parties is sine qua non and essential and any dissent shown by either of the party on the arbitrator proposed by the rival party, the said arbitrator would not be appointed, because, in the entire scheme of the Act, 1940, the jurisdiction is not conferred upon the Court, to whom application under section 20(4) of the Act ibid is moved, to unilaterally appoint a sole arbitrator proposed by one party that is not acceptable to the other party. It is settled principle of law that when an act is prescribed to be done in a certain manner, it must be done in the prescribed manner and not otherwise. In Karachi Dock Labour Board v. Messrs Quality Builders Ltd. (PLD 2016 Supreme Court 121) the Apex Court of the Country has elaborated the said principle in the following words:- '...... shall be stringently applicable when it comes to the question of appointment of arbitrators; as the conferment of jurisdiction upon the arbitrator should be strictly in line with the letter and spirit of the agreement between the parties and the express provisions of the law. Obviously, any award passed by such an arbitrator who is not appointed in the above manner shall also be invalid, having been passed by an arbitrator without jurisdiction.' Apart from the above, I am in agreement with the arguments and assertions of the learned counsel for the petitioner on the point that provisions of section 8 of the Act, 1940 are not applicable to the matter in hand, because the same is separate and distinct from section 20(4) of the Act ibid. Moreover, there is no embargo, restraint and impediment on appointment of more than one arbitrator as the above provision of law is much clear on the subject and at the cost of repetition the subsection (4) of the Section 20 of the Act supra is referred here, 'If the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments.'

7. For the foregoing reasons, it is held that the learned Court below has exercised that jurisdiction which is not vested in it and while committing illegality and irregularity has passed the impugned order, which cannot be allowed to hold field further. Resultantly, the civil revision in hand is allowed, impugned order is set aside. The learned trial Court is directed to appoint new arbitrator(s), obviously, with consent of the parties and also keeping view his/their expertise in the relevant field. No order as to the costs. KMZ/T-19/L Order accordingly.