1988 PLP 1318 (CLC)

‑‑‑Fraud‑‑Silence when amounted to fraud‑‑Rights of a person was not party to arbitration proceedings adjudicated in award‑‑ Partition to proceedings made consent application for making such award rule of Court‑‑Conduct of parties, not disclosing to Court about adjudication of rights of stranger to arbitration proceedings, held, was nothing but practising fraud upon Court‑‑Not necessary that any party should do overt act to constitute fraud‑‑Even silence could amount to fraud in certain cases‑‑No Court could adjudicate upon rights of a party who was not before it or to whom no notice had been given‑‑Such; conduct of parties resulted in violation of principles of natural justice and vitiated all proceedings. (h) Natural justice, principles of‑‑ ‑‑‑ No Court could adjudicate upon right of a party who was not before it or to whom no notice had been given--Such conduct, held, violates principles of natural justice which vitiates all proceed‑ g . (i) Arbitration Act (X of 1940)‑‑ ‑‑‑S. 26‑A‑‑Order making award rule of Court‑‑Duty of Court to examine award‑‑Arbitrator while making award was required to state reasons in sufficient detail‑‑Where such reasons had not been stated, Court would remit such award‑‑Arbitrator not duty bound alone to give reasons for award but Court was also required to examine such award to see whether sufficient reasons had been given to enable Court to consider any question of law arising out of award‑‑Court made award rule of Court without realizing that by such order it was adjudicating, right of a person, who had never been a party to any proceeding at any stage‑‑Proceedings before Court, therefore, stood vitiated‑‑Order making award rule of Court was void and without jurisdiction having been obtained by practising fraud upon Court‑ Possession of property which had been obtained by applicant as a result of order of Court arising out of arbitration proceedings was delivered back to such applicant. (j) Civil Procedure Code (V of 1908)‑‑ ‑‑‑S. 12(2) &

0. I, R. 10(2)‑‑Auction‑purchaser's application to be made party in proceedings‑‑As all actions taken in pursuance of order making award rule of Court were void and illegal, auction of property was also cancelled and amount deposited by auction‑purchaser was refunded to him. Iqbal Ahmad for Plaintiff. Qamar Muhammad Khan for Defendants. Dewan Bashir Ahmad Khan for the Intervenor. Nizam Ahmad for Applicant. The applicant has filed this application under section 12(2), C.P.C. read with Order XXI, Rule 58, C.P.C. in the following circumstances:‑ One Iqbal Mirza died on 26‑12‑1986 leaving Mst. Afroz Jehan the plaintiff as his widow, Mst. Noor Jehan and Mst. Shahjehan the defendants Nos.l and 2 respectively as his daughters and Mohammad Ahmad the applicant as his son. The applicant is in possession of shop No.12 situated in Syed Kazim Raza Market, M.A. Jinnah Road of which K.M.C. is the landlord and the tenancy was in the name of deceased who was also owner of house No.2/25‑3‑H Nazimabad, Karachi. According to the applicant both these properties have been gifted to him, but this question is not relevant for the purposes of the controversy in this application. The applicant is running a business in the said shop and it has been alleged that on 7‑1‑1988 at about 2‑00 p.m. one Alhaj S.A. Hussain claiming to be a Commissioner appointed by the Court came with police and took forcible possession of the shop, put his lock and sealed the shop. He also informed that the shop will be put to auction on 8‑1‑1988. The applicant made inquiries and found out that under an agreement between the plaintiff and defendants one Aftab Khan was appointed as an arbitrator in respect of the dispute relating to the property of the deceased. The applicant was not a party to this agreement. The arbitrator proceeded with the arbitration proceedings without any notice to the applicant and made an award on 18‑7‑1987. This award was filed in the High Court on 20‑7‑1987. The plaintiff and defendants filed an application under section 17 of the Arbitration Act praying that the award may be made rule of the Court and the same has been accepted and no one has any objection to it. Another application under section 151 C.P.C. was filed the same day in which it was prayed that a letter may be issued to the Commissioner so that he may execute the award. These proceedings were taken in suit No.605/1987. When the matter came up for hearing on 13‑9‑1987 Mr. S.A. Kirmani and Mr. Qamar Mohammad Advocates appeared and by consent both the applications were allowed. The award was made rule of the Court. In the award the arbitrator had dealt with the claim of the plaintiff and defendants and also adjudicated the rights of the applicant. He has specifically mentioned that the applicant has not been joined before him in arbitration proceedings as he is in collusion with the plaintiff. The arbitrator awarded that the properties of the deceased, namely, the house at Nazimabad and K.M.C. shop be sold away and disposed of by one Alhaj S.A. Hussain who was appointed Commissioner and authorised to take possession and control of the properties, collect the amounts from the banks and distribute the sale proceeds and the amount recovered among the heirs. It seems that in pursuance of this award the Commissioner took over possession of the shop and the house. The applicant has challenged the proceedings on the ground that he was neither a party to the arbitration agreement and proceedings, nor in the proceedings when the award was made rule of the Court which order has been obtained by practising fraud and is without jurisdiction. The plaintiff and the defendants filed their counter‑affidavits separately. They maintained that the application under section 12(2) is not maintainable and that the Commissioner has already sold the property and that it was in the knowledge of the applicant that the property was being sold. None of the parties, however, denied that the applicant has share in the property. The claim of the applicant to have and hold the entire property was denied. The learned counsel for the plaintiff and defendants have raised objection that the application under section 12(2) is not maintainable. Mr. Qamar Mohammad Khan the learned counsel for the defendant pointed out, that in the application under the prayer clause the applicant has sought for stay of the orders that were passed and the award which was made rule of the Court. When this objection was raised the applicant filed an application CMA 933/1988 for amendment of the prayer clause for substituting the word set aside for the word 'stay'. From the facts stated in the application the question of staying the proceedings does not arise. It is a typographical error and the application is accordingly granted. Now coming to the merits of the application Mr. Iqbal Ahmad Khan and Mr. Qamar Mohammad Khan the learned counsel for the plaintiff and defendants have contented that the applicant is not a party to the proceedings in suit No.605/1987 in which award has been made rule of the Court, therefore, the application under section 12(2) is not maintainable. In this regard reliance has been placed on PLD 1965 Kar.

705. However, in this regard reference can be made to Ch. Jalal Din v. Asghari Begum 1984 SCMR 5136 where it was held that a stranger who is affected by order passed b5 the Court is entitled to file an application under section 12(2), C.p.C In view of the dictum laid down by the Supreme Court this objection had no force. The second contention of the learned counsel for the defendant is that the award is being challenged by a stranger and this procedure cannot be adopted in view of sections 30, 31 and 32 of the Arbitration Act. According to the learned counsel if the award is to be challenged procedure provided under the Arbitration Act should be followed and section 12(2) is not applicable The )earn(,d counsel contended that section 41 of the Arbitration Act is applicable on1v when application under section 20 is filed. This contention is completely misconceived. The applicant seeks setting aside the order making award rule of the Court and not the award. Section 41 of the Arbitration Act provides that subject to the provisions of Arbitration Act and rules made thereunder the provisions of C . P. C . shall apply to all proceedings before the Court and to all appeals under this Act. The learned counsel has referred to Indian Mineral Company v. Northern India Line Marketing Association AIR 1958 All. 692 but the observations in this judgment do not support the contention raised by the defendants' Advocates. It has been held that clause (a) of section 41 of the Arbitration Act makes the provisions of C.P.C. applicable to all proceedings before the Court and to all appeals except where such applicability is expressly excluded by the Act or any rule framed by the High Court under section

44. It was further held that the C.P.C. is applicable only subject to the provisions of sections 32 and

33. Order VI, Rule 17, C.P.C. was held applicable to proceedings under the Act. Section 41 makes provisions of C.P.C. applicable to all proceedings before the Court subject to the provisions of Arbitration Act and rules made thereunder. The applicability of C . P. C . will be limited only to the extent it is not in conflict with the provisions o Arbitration Act and Rules framed under it. Therefore, the provisions of section 12 subsection (2), Civil Procedure Code will apply in the proceedings before the Court filed under the Arbitration Act. The next contention of the learned counsel for the plaintiff and defendants is that as the proceeding before the Court is not a suit the provisions of section 12(2).. will not apply. It is true that the proceedings under the arbitration 'Act and for confirmation of, the award are filed under the .Arbitration .act, rout for all procedure and practical purposes it is treated under the Chief Court Rules (Original Side) as a suit. It is filed on the original side of the High Court and is registered as a suit. Section 41 of the arbitration Act does not restrict the applicability of the provision of C.P.C. only to suits. It makes them applicable to all proceeding before the Court: under the Arbitration Act. According to the learned counsel for the defendant as the award and the order passed by the Court is being challenged on the ground of fraud a civil suit is competent and the applicant should file a civil suit instead of filling a application under section 12(2), C.P.C. In this regard reference ha, been made to M. Yousuf v. Wall Mohammad and others 1984 C I 1690. In this case on an application for ejectment filed under the Sind Rented Premises Ordinance ex parte order of ejectment was passed by the Controller against the tenant. Application under section 12(2) C.P.C. challenging the order was filed but the Controller dismissed it on the ground that C .P. C . has not been made applicable to rent proceedings under the Ordinance therefore, the application was not competent. The tenant filed an appeal against the order of the Controller and it was observed that "as the order was challenged on the ground that it was obtained by practising fraud upon the Authority a suit against such an order could have been maintained under section 9, C.P.C. because the provisions of section 12(2) are not made applicable to the rent proceedings under the Ordinance". This judgment is of no avail to the plaintiff and the defendant as C . P. C . has been made applicable to proceedings under the Arbitration Act. The learned counsel for the plaintiff and the defendants then contended that no fraud has been committed by the plaintiff and the defendant and as the award has been made rule of the Court under a compromise application and that the name of the applicant was disclosed in the reference application and in the award as well. It was contended that no facts were concealed from the Court when the award was made rule of the Court. The learned counsel cited authorities in support of the contention that a consent decree cannot be set aside unless a case for misrepresentation or fraud is made out. It is not necessary to refer to those authorities as in the present case decree is not being challenged by a party who had not given his consent. The decree and the proceedings are being challenged by a party who had not been joined a party although he was a necessary party, share‑holder and co‑owner of the property sought to be distributed or sold. Now the question arises whether on the averments made in the application and admitted by the plaintiff and the defendant will the case fall within the ambit of section 12(2) of Civil Procedure Code. It would not be improper to repeat certain salient facts which are prominent in this application as regards fraud, misrepresentation and want of jurisdiction. The arbitration proceedings were initiated by an agreement between the plaintiff and the defendant for referring their dispute to an arbitrator. To that extent there can be no question of any misrepresentation so far those parties are concerned. In the arbitration agreement it was pointedly mentioned that the applicant is son of late lqbal Mirza from his first wife who has died and the real brother of Mst. Noor Jehan who is also a party to that agreement. The agreement had also enumerated the dispute between the parties in respect of the immovable properties and the bank account of the deceased Iqbal Mirza and then the agreement recited that the parties in this agreement refer their dispute relating to the disposal of immovable property of the deceased for distribution among the legal, heirs including Mohammad Ahmad the applicant. The plaintiff and the defendant had no authority to refer the dispute relating to the share of the applicant to the arbitrator, nor any one of them has claimed to have such an authority. They could have referred the dispute t amongst themselves but the dispute relating to the share of the applicant no arbitrator could have been appointed by them without his consent and authority. The arbitrator entered upon the reference and made an award in which he has awarded in respect of the share of the applicant without giving any notice of hearing to him. The arbitrator ordered to sell all the properties and for that purpose appointed a Commissioner who was also authorized to collect the amounts from the Bank and distribute amongst the parties including the applicant. The arbitrator in entering upon the reference and deciding the rights of the applicant has acted without his authority and consent and without any notice to him. He was not afforded any opportunity to defend himself and to meet the claim of the plaintiff and defendant. In these circumstances, the arbitrator made an award by deciding the shares of all the legal heirs including such legal heirs who was not a party to the arbitration proceedings. It may be correct that in the arbitration agreement and the award the claim of Mohammad Ahmad has also been considered, but this fact by itself cannot make the award binding on the applicant. The learned counsel for the defendants and the plaintiff have contended that the applicant had appeared before the Commissioner and had sought time to compromise the matter and has thus accepted the award. In this regard reference is made to a joint application filed before the Commissioner by the plaintiff, defendant and the applicant dated 7‑1‑1988 in which they had stated that the property has been attached by the Commissioner under the orders of the High Court and auction has also been fixed on 8‑1‑1988. Likewise the shop has also been put to auction and possession of the shop was taken with police aid and the applicant surrendered it showing respect to the order of the Court. After enumerating that there are four share‑holders including the applicant it was stated that the parties are trying to negotiate for settlement so that the parent's property may be saved and it was requested that the auction may be stopped. Again on 8‑1‑1988 another joint application was made in which it was stated that the value of goodwill of the shop has been fixed at Rupees five lacs and that of the house at Rupees three lacs and first choice has been given to the applicant. The applicant stated that he wanted to take shop, but no settlement has reached between the parties and also requested that auction may be postponed so that the parties may amicably settle the matter. Thereafter, it seems that auction was postponed and was held on 10‑1‑1988. According to the applicant in the circumstances he was placed, he was in no position but to negotiate for settlement as the Commissioner had come with police force and he had to surrender the shop and the house had been attached by him and both were put to auction on 8‑1‑1988. G From these two applications it is clear that the applicant had not accepted the award and had also not surrendered his right. The circumstances in which he was placed, he was coerced to file these applications without in any manner submitting to the award. Therefore, from these two applications the consent of the applicant for acceptance of the award cannot be inferred. It may also be noted that after the award was made the arbitrator filed it in Court on 20‑7‑1987 i.e. during vacation. No notice under section 14 seems to have been issued to the parties. However, an application under section 17 of the Arbitration Act was filed by the plaintiff and the defendants for making the award rule of the Court as the parties had no objection. Another application was also made on the same day under section 151, C.P.C. praying that the Court may issue letter to the Commissioner for execution of the award. This matter came up for consideration before a learned Single Judge on 13‑9‑1987 who granted both the applications and by consent the award was made rule of the Court. It seems that as the Advocates for the parties were present and had made a consent application the Court did not look into the award, nor it seems to have examined nor any one of them pointed out that in the award the rights of the applicant who was not a party in the arbitration agreement has also been adjudicated. The silence of the parties and their Advocates in not disclosing this fact created an impression on the Court that no one has any objection and there is no obvious illegality in the award. The Court acting under this impression made award rule of the Court. Such conduct of the parties was nothing but practising fraud upon the Court. It is not necessary that any party should do an overt act to constitute a fraud. In certain circumstances even silence may amount to a fraud. This is what has happened in the present case. From the first proceeding when agreement was executed between the plaintiff and the defendant till the award was made rule of the Court both the parties i.e. the plaintiff and defendant have in a calculated manner taken steps to obtain an award and get it confirmed. Therefore, in the circumstances mere disclosure of the applicant's name in the award or in the arbitration agreement did not amount to disclose the H correct facts. In fact it was intended to hoodwink the correct facts and to give a colour of legality. Such conduct will also amount to a fraud. Had the parties mentioned the existence of the applicant and determination of his rights in their application under section 17 o the Arbitration Act the Court would have never made award rule o the Court. No Court can adjudicate upon the rights of a party who is not before him or to whom no notice has been given. Such conduct violates the principles of natural justice which vitiates all proceedings. Section 26‑A of the Arbitration Act provides that the arbitrator shall! state reasons in sufficient detail. It further provides that where reasons in sufficient detail have not been given the Court shall remit the award. By this provision a duty is not only cast upon the arbitrator to give reasons for the award but makes it incumbent on Court to examine the award to see whether sufficient reasons have been given to enable the Court to consider any question of law arising out of the award. The plaintiff and defendant in a calculated manner avoided the examination of the award by the Court. It was the duty of the Court to have examined the entire award but from the order dated 13‑9‑1987 it seems that mind was not applied and considering that as all the parties have agreed, the award was made I rule of the Court, without realising that by such order it was adjudicating the right of a person, who has never been a party to any proceeding at any stage. The proceedings before the Court therefore stand vitiated. In these circumstances the order making award rule of the Court is. void and without jurisdiction and such order was obtained by practising fraud upon the Court. I, therefore, allow the application, set aside the order passed on 13‑9‑1987. The Commissioner is directed to surrender possession of the properties and moneys obtained by him and render full account to the Official Assignee within one week. The Official Assignee is directed to take full and correct accounts of all the money which has been realized by the Commissioner and also of the expenses made by him. The Official Assignee shall deliver the possession of the shop to the applicant. The applicant will be at liberty to challenge the award in appropriate proceedings. The learned counsel for the applicant has contended that the plaintiff, defendant, arbitrator and Commissioner were in collusion and has cited some instances but for the purposes of this application I do not feel it appropriate to deal with them. The application under Order I, Rule 10, C.P.C. filed by the Commissioner is dismissed, as he is not a necessary party. The learned counsel for the auction purchaser has also filed application to be joined as a party. I have heard his Advocate as well. He had made bid in the auction for purchasing the house and shop and alleges to have deposited Rs.82,000 with the Commissioner. J In the facts and circumstances stated above, all actions taken in pursuance of the order making award rule of the Court are void and illegal. The auction is also cancelled and the amount deposited by the auction purchaser shall be refunded to him by the Official Assignee. , A . A . / A‑302/ K Order accordingly.