P L D 1954 Sind 56 (PLP)

The contention of the plaintiff firm is that the defendants had entered into a contract with the plaintiff firm for the purchase of 100 bales of cotton‑4 F Roller at the rate of Rs. 119‑8‑0 per maund under a contract dated 21st January 1952. The delivery was to be taken by the defendants by the 25th February 1952. The defendants failed to take the delivery and thus they caused a loss of Rs. 13,680 to the plaintiffs. The plaintiffs sent a demand note to the defendants but without any response from the defendants. The plaintiff's repeated their demand for payment but the defendants failed to pay. The contract of 21st January contains an agreement to refer the matter to arbitration in case of dispute. The plaintiffs lastly alleged that they had asked the defendants on 2nd January 1953 to proceed in accordance with the terms of agreement to arbitration but they have failed to do so. The defendants are avoiding arbitration hence the present application for reference to arbitration. The defendants have raised two told contentions. It is contended in the first place that they are not members of the Karachi Cotton Association Ltd., Karachi and therefore no, reference can be made to Karachi Cotton Association Ltd., Karachi for arbitration. It is contended, in the second place, that there is no dispute or difference between the parties which can be referred to arbitration. The defendants have disclosed these grounds in their affidavit filed in answer to the affidavit filed by the plaintiffs. In my opinion the first contention has no force. Mr. Aziz, the learned council for the defendants has not shown anything under the rules of the Karachi Cotton Association Ltd., that the Association cannot arbitrate under its rules between the non‑members. In my opinion there is nothing under the Arbitration Act to debar the parties to have an arbitration clause under which all disputes were to be referred to Arbitration under the rules of the Karachi Cotton Association Ltd., Karachi. The agreement is legal and is binding upon the parties. It is a different matter if the Karachi Cotton Association Ltd., declines to arbitrate between the parties. There is nothing before me to show that the Association would do so. The second contention of Mr. Aziz, the learned counsel for the defendants is, as I have already mentioned above, that there is no dispute or difference between the parties. Mr. Aziz, the learned counsel for the defendants, maintains firstly that the defendants have admitted the claim of Rs. 13,680 and recondly that the same has been discharged. The defendants have disclosed the necessary facts in their affidavit of the 15th October 1953. The defendants have alleged that they bad entered into two contracts with the plaintiff, one on the 18th January 1952 and the other on the 21st January 1952. The plaintiff sent three debit notes to the defendants, one of Rs.13,680 which is in question, the second for Rs.12,480 and the third for Rs, 5,760 and the total thus came to Rs.31,

920. The contention of the defendants is that the plaintiff was indebted to one M/s Amir Agencies for an amount of Rs. 8,410 who in turn was indebted to the defendants. The plaintiff wrote to M/S Amir Agencies on 5th March 1953 asking them to collect the 'said amount of Rs. 8,410 from the defendants. The letter in question has been filed by the defendants, The defendants have further con tended that they undertook to adjust Rs. 10,200 to M/s Oriental Commercial Syndicate and a sum of Rs. 5,280 to M/s Fazal Gulzar on behalf of the plaintiffs and gave a cheque for Rs. 8,000 to the plaintiff. The total amount thus comes to Rs. 31,

920. The plaintiff has filed the letters of the defendants as regards these transactions. It is noteworthy that no counter affidavit has been filed to controvert these facts. The allegations of the defendants remain un-rebutted. It was open to the plaintiff to file a rejoinder denying the adjustment claimed by the defendants. In view of the fact that no rejoinder has been filed to the counter affidavit filed by the defendants the un‑controverted facts come to this :‑

1. That the defendants admit the claim of Rs. 13,680 and

2. That the same had been adjusted between the parties, It is well settled law that an existing dispute is an essential condition for reference to an arbitration. This condition is as essential as a cause of action in a civil suit. Arbitration agreement is thus defined under section 2 (a) of the Arbitration Act, 1940. "Arbitration agreement means a written agreement to submit present or future difference to arbitration whether an arbitrator ' is named therein or not." It is clear from this definition that the very essence of arbitration agreement is that there should be some difference between the parties. In this connection a reference may be made to Halsbury Laws of England, 2nd Edition Volume 1 7622. "In order to constitute a submission to arbitration there must be some difference ‑or dispute either existing or prospective between the parties and they must intend that it should be determined in a quasi‑judicial manner." Mr. Justice Wadia held in A I R 1931 Bom page 164 that there must be some difference and dispute between the parties before a reference to arbitrators can be made, He further held that a failure to pay was not necessarily a difference, and the mere fact that a party could not or would not pay does not in itself amount to a dispute unless the party who chooses not to pay raised a point of controversy regarding; for instance, the basis of payment or the time or manner of payment. The arbitrator, he held, is called upon to settle in quasi‑judicial manner the fact in controversy between the parties and there can be no arbitration where no such controversy in fact exists. Rankin, J. in 46 I L R Cal. 534 held that the existence of a dispute was an essential condition to the arbitrators jurisdiction. But the dispute might be either in acknowledgment of the debt or as regards the mode and time of satisfying it. In I L R 38 Bombay 638 their Lordships set aside a decree passed on an award on the ground that there was no dispute or difference between the parties. To the same effect has been held in A I R 1921 434 that it is an essential condition for an arbitrator's jurisdiction that when arbitration is demanded there shall be in existence a dispute between the parties. It is clear from the above authorities that there must be a dispute between the parties, an assertion of claim by one party and a denial of the same by the other relating to the matter about which an arbitration agreement exists between the parties. In the present case as I have already mentioned above there is nothing before me to controvert the allegations of fact supported as it is by documentary evidence, that there is no dispute between the parties regarding the contract. Mr. Ibadat Yar Khan, the learned counsel for the plaintiff has relied on certain authorities in support of his contention that there is a dispute between the parties and as such the matter can be referred to arbitrators. He has relied on a case reported in A I R 1921 Born.

43. In that case the defendant admitted his liability to pay the amount in question but withheld payment and claimed a set off against a larger sum that was due to the defendant from the plaintiff on other accounts. According to the terms of contract the plaintiff referred the dispute to arbitration. The arbitrators gave their award in favour of the plaintiff. It was held under these circumstances that the petitioner was withholding payment under a claim of his own and that this amounted to a dispute between the parties and that the arbitrators had jurisdiction to arbitrate. The facts of the present case are quite different and it has not been contended before me that the defendants had withheld payment under any such claim as was made out in the case before the Bombay High Court. Another case relied on by Mr: Ibadat Yar Khan is A I R 1924 Sind

117. It was held in that case that a failure to pay a claim constitutes a matter in difference between the parties to a submission. In that case the plaintiff had claimed certain damages from the defendant. The defendant declined to pay the same. It was held under those circumstances that the refusal to pay did amount to a dispute between the parties to a submission. The facts of the present case before me are quite different from the one reported. In that case it was not contended that the claim had already been satisfied, and therefore there was no dispute. The last case relied on by the learned Advocate for the plaintiff is that of firm R. B. Brijlal Gagan Nath A I R 1925 Sind

242. This case has no application to the present case. The principle enunciated there is the same as in A I R 1924 Sind

117. It was held in that case that mere failure or refusal to pay on demand any amount admitted to be due may be a dispute. The question of the satisfaction of the claim was not taken or considered in that case. It is not open to a party to an agreement of reference to revoke the submission to arbitration except for sufficient cause, But on the other hand if sufficient cause is shown there is no doubt that such revocation can be allowed. The words "sufficient cause" mentioned in the subsection 4 of section 20 of the Act are not restricted to grounds such as are mentioned in section 30 of the Act or to grounds of fraud, undue influence or coercion; they coverall the grounds of justice, equity and good conscience on which a Court thinks an agreement should not be ordered to be filed. In the present case it is clear from the facts disclosed in the affidavits of the parties that the claim that arose relating to the contract in question was admitted by the defendants and settled between the parties. In view of settlement of the dispute between the parties it cannot be said that the old contract containing the arbitration clause still subsists. Moreover as I have already mentioned above there does not appear to be a dispute or difference between the parties to be referred to arbitrators. The suit for the reasons set forth above is dismissed with costs. A. H. Suit dismissed.