P L D 1954 Sind 241 (PLP)

On 28th December 1951 the parties entered into a contract for purchase and supply of 100 bales of cotton. On 12th January 1952 the contracted goods were delivered to the defendant and the value of the same came to Rs. 59,892‑1‑

9. The defendant however paid Rs.52,

000. There thus remains a balance of Rs. 7,892‑1‑

9. The defendant admitted his liability to pay the amount of Rs. 7,892‑1‑9 but contended that he had kept back the same in deposit as security for some bales to be supplied by the defendant to the plaintiff. It would appear therefore that the defendant has not repudi ated the claim of the plaintiff. It is also note‑worthy that the award is also for the same amount which has been admitted by the defendant to be due to the plain tiff. Mr. Ibadat Yar Khan, the learned counsel for the defendant has taken four objections in regard to the validity of the award. He has clearly dealt with the objections which I would dispose of separately. The first contention of Mr. Ibadat Yar Khan is that there is no dispute between the parties. His argument is that the defendant having admitted his liability to pay the amount it cannot be said that there is any dispute between the parties. He has urged that the very essence of submission to arbitration is a dispute between the parties and as there was no dispute between the parties in the present case the arbitrators had no jurisdiction to proceed with the matter. He has relied on a passage from Russel "On Arbitration" 1952 Edition page

62. It runs as under :‑‑‑ "Mere refusal to pay upon a claim which is not really disputed does not necessarily give rise to a dispute calling an arbitration clause into operation." Mr. Munawar Abbas, the learned counsel for the plaintiff on the basis of certain authorities has contended that the refusal to pay on demand does amount to a dispute within the meaning of the Arbitration Act. In support of his contention he has relied on 5 S L R 1924 Sind 105 (116) and (2) A I R 1925 Sind 242 It has been held in these cases that refusal to pay on demand does amount to a dispute. The question of refusal to pay was also considered by the Bombay High Court and it has been held in 1931 Bom 164 that where there is a controversy regarding the time, manner or basis of payment it can amount to a dispute within the meaning of the Arbitration Act. In the present case on the assertion of the defendant that he had kept back the money as deposit for certain future claim that may accrue against the plaintiff it was clearly a controversy regarding the time of payment. In I L R 46 Cal. 534, Rankin, J. held that though the existence of a dispute was an essential condition for the arbitrator's jurisdiction the dispute might be either in the acknowledgment of the debt or as regards the mode and time of satisfying it. In the present case I am of the view as I have already observed that there was clearly a dispute in view of the fact that the defendant had no ostensible right to withhold payment of the amount which he admitted to be due to the plaintiff. I therefore hold that, in view of what I have stated above, there was a dispute between the parties. The next contention raised by Mr. Ibadat Yar Khan was that an umpire was appointed within the time allowed by para 2 of Schedule I section 2 of the Arbitration Act of 1940. Section 2 of Schedule I reads as under: "If a 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 appoint ments." In order to appreciate this contention certain dates are necessary. The plaintiff appointed his arbitrator on 24th July 1952 and thereafter on the failure of the defendant to appoint his own arbitrator the plaintiff appointed another arbitrator on his behalf on 18th September 1952. The umpire was appointed on 11th November 1952. The contention of Mr. Ibadat Yar Khan, the learned counsel for the defendant is that taking one month's time from 11th September 1952 in view of section 2 of the 1st Schedule of the Arbitration Act the umpire having been appointed on 11th November 1952 was appointed much beyond the statutory period It is not contended by Mr. Munawar Abbas that the umpire was not appointed beyond one month. Mr. Munawar Abbas the learned counsel for the plaintiff has however contended that section 2 of Schedule I of the Arbitration Act 1940 stands modified by the agreement between the parties, namely, the Bye‑laws of the Karachi Cotton Association Limited which were admittedly applicable to the present case. Section 3 of the Arbitration Act 1940 reads as under: An arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the first schedule so far as they are applicable to the reference." In view of the above section what has to be seen is whether the bye‑law of the Karachi Cotton Association Limited is in any way modified by section 2 of the 1st Schedule. The relevant portion of bye‑law 39 (f) reads as under:- "The two arbitrators, when appointed, shall before proce eding with the dispute nominate and appoint an umpire from the panel of arbitrators to deal with the dispute, in case the two arbitrators are unable to agree." In the above bye‑law the relevant words to be considered for the purposes of the question before me are "before proceeding with the dispute nominate and appoint an umpire. "The question is whether the words "before proceeding with the dispute" do modify the period provided under section 2 of Schedule I of the Act. The rule of interpretation is that the words should be construed in their grammatical and literal sense. Keeping this rule in view I am of the opinion that the words "before proceeding with the dispute" give an indefinite time to the arbitrators to appoint an umpire with only one condition that they appoint before proceeding with the dispute. The framers of the bye‑law for reasons best known them thought it proper not to limit the discretion of the arbitrators as regards the time‑limit of appointing an umpire to one month. Mr. Ibadat Yar Khan the learned advocate for the defendant has relied on A I R 1951 All.

474. It was held in that case that unless there is an express provision in the arbitra tion agreement between the parties Schedule I section 2 of the Arbitration Act would be binding and non‑observance of the same would vitiate the award. This case has no application to the present case. The learned judge in that case answered. "We have read the reference carefully and we are clearly of the opinion that there is no express provision waiving the appointment of an umpire." It is clear from the above observation of the learned judges of the Allahabad High Court that there is no such bye‑law like 39 (1) (f) as I have before me of the Karachi Cotton Association Limited. The other cases relied upon by Ibadat Yar Khan in support of his contention are Ebrahim Ahmad v. Sind Hosiery Textile Mills (P L D 1952 Sind 52) and Masroor Ahmad v. R. M. Mithani (P L D 1953 Sind 20) It was held in P L D 1952 Sind 52 that the appointment of an umpire within the period prescribed in section 2 of the Schedule I of the Arbitration Act is mandatory and the violation of the provision would invalidate the award. I respectfully agree with this view but the question before me, as I have already mentioned above; is the interpretation of the Bye‑law 39 (1) (f) of the Karachi Cotton Association Limited. The inter pretation of this bye‑law, it seems from the perusal of the judgment which I have carefully gone through, did not arise. The case reported in Universal Corporation v. S. A. Rauf & Co. (P L D 1953 Sind 18) also does not consider the Bye‑law 39 (1) (f) as the same was not in consideration in that case. I am therefore for the reasons given above of the opinion that bye‑law 39 (1) (f) of the Karachi Cotton Association Limited modifies the time‑limit provided under section 2 of Schedule I of the Arbitration Act 1940. The third contention of Mr. Ibadat Yar Khan was that no valid notice had been given for the appointment of an arbitrator as provided under Bye‑law 39 (1) (a). The relevant portion of Bye‑law 39 (1) (a) of the Karachi Cotton Association Limited is as under :‑ 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

" The question before me is whether the above provision of the Bye‑law of the Association has been complied with or not. The short question is whether the defendant had given 15 days clear notice to the other party to appoint an arbitrator or not. In the present case the alleged notice was given on 24th July 1952. The notice reads as under :‑ "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 Associa tion Ltd., Karachi. Mr. Babulal Kotak to act as our arbitrator in the above matter." It follows from Bye‑law 39 (1) (a) that the party who whishes to exercise his right to appoint another arbitrator on behalf of the other party must do so after 15 days notice to the other party to appoint his arbitrator. In other words the question is whether the arbitrator appointed by the plaintiff on behalf of the defendant was appointed by him after 15 days clear notice as required by Bye-law 39 (1) (al or not. In the present case the arbitrator was appointed by the plaintiff on behalf of the defendant on 18th September 1952. If the notice of 24th July 1952 is in compliance of Bye law 39 (1) (a) no difficulty arises as the arbitrator on behalf of the defendant was appointed after 15 days The question however is whether the notice of 24th July 1952 is in compliance with Bye‑law No. 39 (1) (a) or not. 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. Babulal Kotak (P L D 1953 Sind 18 and P L D 1953 Sind 20.) 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. In this connection Mr. Ibadat Yar Khan also contended that the letter of 6th September 1952 may be said to be a notice calling upon the defendant to appoint his arbitrator but as the arbitrator has been appointed on 18th September 1952 by the plaintiff it was before the expiry of 15 days. This con tention is not tenable as the letter of 6th September 1952 is only by way of reminder by the plaintiff with a reference to their letter of 24th July 1952. Mr. Ibadat Yar Khan has also relied on A I R 1927 Sind 126 in support of his contention that where a submission clause provided a certain time for the nomination of an arbitrator by a party on behalf of the other party and the arbitrator has been appointed before the expiry of the time the reference was bad. I entirely agree with the conclusion arrived in that case. The question here before me was whether the notice of 24th July 1952 did require the defendant to appoint his arbitrator or not and therefore this case would not apply so far as the main question before me is concerned. The other case relied on by Mr. Ibadat Yar Khan is A I R 1935 Lah.

76. In this case also one party had appointed another arbitrator on behalf of the other party who had refused to appoint an arbitrator before the expiry of the time allowed to the other party to appoint his arbitrator, it was held that the award was without jurisdiction. This case also would have no application as the main point so far as this question was concerned was whether on a proper construction of the notice of 24th July 1932 it can be said that the defendant was required to appoint his arbitrator or not. The last contention of Mr. Ibadat Kar Khan was that in the present case the umpire was appointed in violation of Bye‑law 39 (f). The contention in short was that the plaintiff himself had appointed the umpire while under the 39 (f) the umpire should have been appointed by the two arbitrators. Mr. Ibadat Yar Khan has relied on a letter of 18th September 1952 written by the plaintiff to the defen dant conveying the appointment of an arbitrator on behalf of the defendant and also the fact that he has appointed an umpire. The question however that remains to be considered is whether the arbitrators had appointed any umpire or not. It was open to the arbitrators to appoint Pir Bhai as the umpire who was also nominated by the plaintiff as an umpire. In this connection two letters addressed by the arbitrators to the parties are important. The letter of 25th September 1952 addressed by the arbitrators to the parties clearly F protests against the appointment of Mr. H. H. Pit Bhai as an umpire by the plaintiff. The letter of 11th November 1952 by the arbitrators intimates to the parties that Mr. H. H. Pir Bhai has been appointed as an umpire. A persual of these two letters together makes it abundantly clear that the arbitrators had exercised their own discretion in the matter of appointment of an umpire. It cannot be said that they had delegated their power of the appointment of an umpire to any of the parties concerned. I therefore hold that the umpire had been validly appointed. The objections for the reasons given above are dismissed. The award is made the rule of the Court and decree to follow. A. H. Award made rule of Court.