P L D 1988 Lahore 250 (PLP)

FAZAL KARIM, J. The only question requiring (determination and fully argued on this appeal by Muhammad Hanif Khan and Muhammad Iqbal Khan, defendants, is whether the reference of the parties' dispute to Nawab Nasrullah Khan Khakwani was as an arbitrator or as a referee.

2. The facts necessary‑for the decision of this question can be shortly stated as follows. Nawab Muhammad Sharif Khan, who died on 15‑1‑1987, was owner of extensive property, urban and agricultural, in Districts Multan and Vehari. He was survived by four sons, Ghulam Farid Khan, Muhammad Hanif Khan, Muhammad lqbal Khan, and Nazir Khan, three daughters, Mst. Rashida Bibi, Mst. Imtiaz Bibi, Mst. Farhat Perveen and a widow Mst. Ghulam Maryyam Bibi. On 28‑2‑1987, Ghulam Farid Khan, plaintiff, now respondent, instituted a suit to have it declared that he was owner in possession of the land in suit, namely, land measuring 23 Kanals 15 Marius situate within the limits of Municipal Corporation, Multan, and land measuring 404 Kanals 13 Marlas situate in Mauza Wahi Rikki, Tehsil Shujabad, District Multan. According to the averments in 'the plaint, his claim to the ownership of the land in suit was founded upon an oral gift. The defendants in the suit were Muhammad Hanif Khan, Muhammad lqbal Khan, Muhammad Nazir Khan, Mst. Rashida Bibi, Mat. 'Initiaz, Mat. Farhat Perveen and Mst. Ghulam Maryam Bibi. Of them, Muhammad Hanif Khan and Muhammad Iqbal Khan, defendants, filed separate written statements contesting the suit. They denied that Nawab Muhammad Sharif Khan had made a gift of the land in suit in favour of Ghulam Farid Khan, plaintiff Muhammad Nazir Khan, Mst. Rashida Bibi and Mst. Imtiaz Bibi admitted the plaintiff's claim but said that the plaintiff had agreed to forego his right to inherit 90 acres of land situate in District Vehari, and that they had no objection to the suit being decreed in his favour if he abided by that agreement. Mst. Farhat Perveen and Mst. Ghulam Maryam Bibi, defendants, were proceeded ex parte. Issues giving effect to the parties' pleadings were formulated on 12‑4‑1987 and the suit was adjourned for plaintiff's evidence to 7‑6‑1987. On 20‑5‑1987, an application signed by Ghulam Farid Khan, plaintiff, Muhammad Hanif Khan, Muhammad lqbal Khan, defendants, and by the counsel for Muhammad Nazir Khan, Mst. Rashida, Mst. Farhat Perveen, Mst. Imtiaz Bibi and Mst. Ghulam Maryyam Bibi was presented before the learned trial Judge. Simultaneously an application was made by Mst. Farhat Perveen and Mst. Ghulam Maryam Bibi defendants, praying for the setting aside of the ex parte proceedings against them. This application was allowed.

3. By the application dated 20‑5‑1987, what the parties agreed to do was: (i) to appoint Nawab Nasrullah Khan Khakwani as a "referee" for the resolution of the dipsute concenerning the suit land and all other properties, urban as well as agricultural, left by Nawab Muhammad Shairf Khan, wherever situated; (ii) to authorize him to orally hear the parties; (iii) to authorise him to give his written decision (Faisla); and (iv) to bind themselves by the decision (Faisla) of the "referee". After having set aside the ex parte proceedings against Mst. Farhat Perveen and Ms. Ghulam Maryyam, defendants, the learned trial Judge proceeded to record the statements of the parties' counsel; by that statement, they agreed to appoint Nawab Nasrullah Khan Khakwani as the referee and to be bound by his decision (Faisla). On the same day. the learned trial Judge made an order appointing Nawab Nasrullah Khan Khakwani as referee saying that he would hear the parties and file his Faista before 4‑6‑1987. The learned trial Judge also directed that copies of the plaint, the written statement and the application dated 20‑5‑1987 whereby the parties had agreed to appoint Nawab Nasrullah Khat, Khakwani as "referee" should be sent to him.

4. Nawab Nasrullah Khan Khakwani filed his "Faisla!l in Court (it is marked as C 1) on 30‑7‑1987. It shows that Nawab Nasrullah Khan Khakwani had separatedly heard the parties and had examined all the relevant documents, which were produced before him and in the light of the oral statements and the documents produced before him gave his decision, so far as the property in suit was concerned, as follows: Out of the urban property in suit, 4 Kanals were given to the plaintiff; as to the remaining land, viz 404 Kanals 13 Marlas situate in Mauza Wahi Rikki, Tehsil Shujabad, the whole of it was also given to the plaintiff. As regards the remaining property left by Nawab Muhammad Sharif Khan, he divided it among the different heirs in the manner stated in his decision. In finding in favour of the plaintiff, so far as the land in suit measuring 404 Kanals 13 Marlas situate in Mauza Wahi Rikki was concerned, Nawab Nasrullah Khan Khakwani referred to mutation No.88 attested on 27‑11‑1954 and was ot the opinion that the justice of the matter warranted that that land should go to the plaintiff.

5. It appears that on 30‑7‑1987, when the Faisla was filed, plaintiff's counsel, counsel for Muhammad Hanif Khan, Muhammad lqbal Khan, defendants, and Nawab Nasrullah Khan Khakwani were present before the trial Judge. Statement of Nawab Nasrullah Khan Khakwani was recorded; it was to the effect that he had filed his Faisla which was accompanied by two plans. Having recorded his statement, the learned trial Judge proceeded to decree the suit in terms of the "Faisla" of the "Referee", adding that Faisla of the Referee would be treated as part of the decree.

6. As observed above, the, question requiring determination is, whether the status of Nawab Nasrullah Khan Khakwani was that of an arbitrator or a referee. Learned counsel for the plaintiff, now respondent, maintained that the decree in question was a consent decree within the meaning of section 96, subsection (3) of the Code of Civil Procedure, and, therefore, this appeal is not competent; that as the parties had agreed to appoint Nawab Nasrullah Khan Khakwani as referee and the decree in question was made in terms of his Faisla, the Faisla of Nawab Nasrullah Khan Khakwani was an adjustment of the claim under Order XXIII, Rule 3 of the C.P.C. and merely because in the application dated 20‑5‑1987, Nawab Nasrullah Khan Khakwani was said to have been authorized to decide the matter and what Nawab Nasrullah Khan Khakwani did was to give his Faisla would not make any difference to his real position as a referee. On the other hand, learned counsel for the appellant argued that what the parties intended Nawab Nasrullah Khan Khakwani to do was to decide the dispute between them and, therefore, in every sense of the word, his position was that of an arbitrator. In his view, therefore, the decree in question is not 'sustainable in law, for the document dated 30‑7‑1987 was an award and it could not be made the rule of the Court without complying with the provisions of the Arbitration Act, 1940. According to him, the decree is not sustainable in law because no opportunity to file objections to the award was provided to the parties.

7. When the parties refer their dispute to a person, the question often arises whether that person was intended to act as an arbitrator or as a referee. Or, may be, that the person to whom the dispute was referred was intended merely to act as a mediator; that is to say, the reference was for the purpose of aiding a settlement by negotiation rather than for the purpose of discharging a judicial function in the form of an arbitration. As will be presently seen, the line that, distinguishes an arbitrator from a referee is well‑defined. And, from the guidance to be gleaned from authorities, we should think it to be sufficiently clear that it is not the name by which the parties choose to call the person to whom they refer their dispute, nor is the terminology they employ in describing the function that he is intended to perform, that is decisive in determining the question. What is decisive is the parties' intention. For that purpose, it is not the form but the substance that matters; it is not the use of this word or that, that decides the question. Therefore, it may well be that the parties intended their dispute to be resolved by arbitration, but they called the person whom they appointed for the purpose as a referee or his true position was that of a referee, but he was described as an arbitrator. But, if it be clear that the person appointed was intended to be an arbitrator and the function that he performed was the function of arbitration, then, he is not the less an arbitrator because he is described by another name.

8. Thus, In Ch. Muhammad Saleem v. Muhammad Akram and others P L D 1971 S C 516, where, as here, the main dispute related to the capacity in which Maulvi Akhtar Ali, a retired Deputy Commissioner, to whom the parties had referred their dispute, had acted. In describing the proceedings that had resulted, in the document Exh. D. 1, that was drawn up by Maulvi Akhtar Ali, the latter and the witnesses had made frequent use of the words such as Salis, Faisla, Tasfia, which more properly belong to the field of arbitration. The document Exh.D.1 concluded with these significant words: "Heard the parties, who are present, they have accepted this award, a copy of which has been given to each party." It was held that the use of this terminology did not, by itself, ebtablish that the proceedings were arbitration proceedings; that what the parties intended Maulvi Akhtar Ali to do was to act as a mediator and what he actually did was to induce the parties to arrive at a settlement. The proceedings, therefore, lacked the essential characteristic of an arbitration: "The most 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 that person decides that dispute by holding an 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 must 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."

9. Learned counsel for both the parties relied upon the oft‑quoted case, namely, Akbari Begum v. Rehmat Hussain and others A I R 1933 Allahabad 861 and each tried to derive support for his contention from the judgment of Suleman C.J. The facts of that case were as follows. The property in dispute belonged to one Ahmad Hussain, who died leaving behind two daughters, Mst. Akbari Begum and Mst. Sughran and three sons Rehmat Hussain, Shafqat Hussain and Azmat Hussain. The daughters instituted the suit for the recovery of their shares against their brothers. The defendants set up two registered deeds of gift and two oral gifts. The eldest brother Rehmat Hussain did not claim any benefit under the oral gifts. On the 16th May, 1929, which was the date fixed for the production of evidence, a joint application was filed signed by the husband of one of the plaintiffs and by two of the defendants. The application was not signed by Rehmat Hussain, defendant. The application stated as follows: ‑ "We, the petitioners, leave to decision of all the points in dispute in the case, including costs, on The statement of Munshi Rahmat Hussain, defendant

1. Whatever statement the aforesaid gentleman makes with regard to the decision of the case, shall be accepted by the appellants, and the case be decided in accordance therewith. The parties do not want to produce any other evidence. Rahmat Hussain was present in the Court room, was put into the witness‑box and the oath was also administered to him. He made a statement against the respondents and in favour of the defendants on all the important points and expressed his opinion that the parties should bear their own costs. None objected to his statement and the Court pronounced the judgment on the same day in accordance with the statement of Rahmat Hussain and dismissed the suit.

10. The case was first heard by Niamatullah and Bennet, JJ. They differed on the question whether the parties could agree to abide by the statement of a witness or a party to the suit, Niamatullah, J. holding that it was open to the parties to agree to abide by the statement of a third person to be made on oath administered in the manner in which witnesses are sworn in Court and Bennet, J. being of the contrary opinion, namely, that "this would set up another form of procedure contrary to the provisions of the Code of Civil Procedure and, in asmuch as such an agreement would defeat the provisions of that law and it must, therefore, be deemed forbidden by law, it is void under section 23 of the Indian Contract Act." On this difference of opinion, the case was referred to Suleman C.J. The learned Chief Justice observed: "Now there is an overwhelming authority in favour of the view that a decree passed on the basis of such an agreement when carried out by the statement of the referee is binding upon the parties. The only difference of opinion that seems to have arisen is as to whether the binding character of the decree should be based on the supposition that such a reference amounts to a reference to arbitration or an adjustment of the claim, or is an admission of the parties of an offer amounting to an estoppel. The trend of the authorities in this Court appear to be more in favour of the view that such an agreement is in substance a compromise or adjustment of the suit, and neither a mere admission capable of being rebutted nor strictly speaking a reference to arbitration." After considering a large number of cases cited before him, the learned Chief Justice concluded, and this, in our opinion, is the ratio of his decision: "In concurrence with the opinions of the learned Judges who have made this reference, I hold that an agreement to abide by the statement of a particular witness is in substance not a reference to arbitration. The essence of arbitration is that the arbitrator decides the case and his award is in the nature of a judgment which is later on incorporated into a decree of the Court. The arbitrator can either proceed on the basis of his own knowledge or make enquiries and take evidence and then give his decision on such evidence. But where parties agree to abide by the statement of a third person or a referee, the referee merely makes a statement according to his knowledge or belief and the Court the decides the case and pronounces its judgment on the basis of such a statement and passes a decree thereon. The referee is not authorised to make enquiries and take evidence and then announce his decision on the basis of such evidence. He is called upon to make a statement according to his knowledge or belief. In the case of an arbitration, as the arbitrator's award is an expression of an opinion and his procedure resembles that of Court, a party is entitled to file objections and challenge the validity of the award. The making of a statement by a referee or a third person has no resemblance to a proceeding conducted by him as if he were a Court of law, and accordingly there can be no procedure for filing objections as to its validity. It is for the Court, in pronouncing judgment, to consider its effect. But under section 20 of the Indian Evidence Act statements made by persons to whom a party to the suit has expressly referred for information in reference to a matter in dispute are deemed to be admissions of the party himself. If the parties have agreed to abide by the statement of a third person to be made in Court, he may well be a person to whom the parties have expressly referred for information in reference to the matter in dispute."

11. It must be noted that in Mst. Akbari Begum's case the parties did not agree that Rahmat Hussain should decide the disputed points. They agreed that the decision should be in accordance with his statement.

12. The distinction between an arbitrator and a referee, therefore, is that the arbitrator is authorised to decide after making an enquiry, but a referee is not so authorised. All that a referee is required to do is to make a statement according to his knowledge or belief; if he makes the statement, the statement is an admission of both the parties binding upon them, and as soon as the statement is made, it is perfected into an adjustment by a lawful agreement or compromise within the meaning of Order XXIII, Rule 3 of the Code of Civil Procedure.

13. Mst. Akbari Begum's case was considered in two cases decided by a learned Judge of this Court, namely, Ali Hussain v. Rafiquddin and nine others P L D 1977 Lah. 418 and Sher Zaman Khan v. Noor Zaman Khan and another P L D 1977 Lah.

672. It was noticed in the latter case that in Mst. Akbari Begum's case, there were observation to the effect that a written statement submitted by a referee had been given the status of a statement under section 20 of the Evidence Act, 1872 (now Article 33 of the Qanun‑e‑Shahadat 1984) and that it was not necessary that a referee under section 20 must act on his personal knowledge. It was held, and we respectfuly adopt this view, but that this does not mean that the referee under section 20 can be allowed to make a statement after following the procedure of an arbitrator.

14. Here, there is no question that Nawab Nasrullah Khan Khakwani did not act as a mediator; it is nobody's case that he did so and there is nothing to show that the document dated 30‑7‑1987 was in the nature of a settlement and the parties were induced to arrive at it by his mediation. The only question, therefore, is whether Nawab Nasrullah Khan Khakwani had acted as,a referee as he was described to be in the application dated 20‑5‑1987 as also in the statements of the parties' counsel and the order of the Court of that date or whether what the parties really intended him to do was to act as an arbitrator and to give an award. For the determination of this question, it is necessary to read the application dated 20‑5‑1987 and the proceedings recorded by the trial Court on that date with the attendant circumstances and to find out what the real intention of the parties was. As noticed above, the dispute sought to be resolved in the suit' related only to two properties, viz land measuring 23 Kanals 15 Marlas situate within the limits of Municipal Corporation, Multan, and land measuring 404 Kanals 13 Marlas situate in Mauza Wahi Rikki, Tehsil Shujabad; yet the parties authorized Nawab Nasrullah Khan Khakwani to decide the dispute in relation to the entire inheritance of Nawab Muhammad Sharif Khan. For that purpose, the parties expressly authorized Nawab Nasrullah Khan Khakwani to orally hear the parties. A reading of the document dated 30‑7‑1987 itself makes it demonstrably clear that the function that he performed was the judicial function of deciding the dispute. In the opening paragraph of this document, he expressly said, among other things, that he had heard the parties, perused the documents produced before him and after a careful consideration thereof had decided the disputes in the manner stated therein. Thus, in considering the dispute about land measuring 723 Kanals situate in Mauza Allahabad, Tehsil Vehari, he referred to mutation Nos. 87 and 88 attested on 27‑11‑1954 and found that the plaintiff and Muhammad Hanif Khan, defendant, were not entitled to any share from it. He, therefore, set the mutation of inheritance (mutation No.713 dated 9‑5‑1987) at naught in so far as it gave shares to them, and gave the whole of it to the remaining heirs. About land in suit measuring 404 Kanals 13 Marlas situate in Mauza Wahi Rikki, Tehsil Shujabad, he took into consideration the contents of mutation No.88 attested on 27‑11‑1954 and the fact that the plaintiff had been receiving the income from the garden situate therein and drew the inference that that land should belong exclusively to the plaintiff because the deceased had so intended. In doing so, he also decided that 29 Kanals of land situate in Mauza Wahi Rikki which belonged exclusively to the plaintiff should go to Muhammad Hanif Khan, defendant. As he was of the opinion that Muhammad Hanif Khan deserved to be compensated he thought it just to direct Muhammad Nazir Khan and Muhammad lqbal Khan, defendants, to pay Rs.75,000 each to Muhammad Hanif Khan, defendant. He then dealt with commercial plot measuring 4 Kanals 5 Marlas situate in Multan City; as this was situate near the residence of Muhammad lqbal Khan, defendant, he gave 3 Kanals to him and the remaining 1 Kanal 5 Marlas to Muhammad Hanif Khan, defendant. Dealing with another land measuring 10 Kanals, 10 Marlas, part of bungalow Known as AI‑Hanif, Nawab Nasrullah Khan Khakwani referred to a plan which he had himself prepared so that no doubt was left as to his decision, and observed that out of it, on 2 Kanals 4 Marlas stood the bungalow of Muhammad Nazir Khan, defendant, which Nawab Muhammad Sharif Khan had given to him in his life time; that similarly, Nawab Muhammad Sharif Khan deceased had given 1 Kanal 7 Marlas to his daughter Mst. Rashida Bibi and decided that 6 Kanals 10 Marlas should go to the deceased's daughters, Mst. Rashida Bibi, Mst. Imtiaz Bibi and Mst. Farhat Perveen in equal shares and the remaining three Kanals should belong to Muhammad Nazir Khan, defendant. Concerning the bungalow known as Sharif Manzal situate at Katchehry Bazar, Multan he again referred to a plan prepared by him and also to a will deed dated 26‑12‑1978 and apportioned that property also among the different heirs of Muhammad Sharif deceased. He also made a decision about the price of the Malba of this building and assigned different shares to different heirs. In short, not only did Nawab Nasrullah Khan Khakwani make enquiries, hear the parties, consult the documents bearing on the dispute, but also took into consideration various other factors, such as the intention of Nawab Muhammad Sharif Khan, situation of the properties, convenience of the parties, value of the properties, which are all judicial functions and also determined the amount which was necessary to be paid by this or that member of the family to another to compensate him for the loss occasioned by his decision. All these facts and circumstances, in our opinion, afford sufficient grounds for thinking that in recording the findings contained in the document dated 30‑7‑1987 that he did, Nawab Nasrullah Khan Khakwani had acted as an arbitrator and that the document dated 30‑7‑1987 was an award and that neither Nawab Nasrullah Khan Khakwani intended to act as a mere referee nor did he perform the function that was entrusted to him in that capacity.

15. For these reasons, we accept this appeal, set aside the order and decree appealed from and remit the case to the learned trial Court for its fresh decision in accordance with law. As Agha Inam‑ur‑Rahim Khan Civil Judge had proceeded with the matter on the basis that the reference to Nawab Nasrullah Khan Khakwani was as a referee, we deem it proper that the suit is entrusted to another Civil Judge. The parties shall appear before the learned District Judge, Multan, on 6‑2‑1988 and the learned District Judge shall entrust the suit to a Civil Judge other than, Agha Inam‑ur‑Rahim. The parties are left to bear their own cost. M.B.A. /M‑566/L case remanded.