2007 PLP 1499 (CLC)

GULZAR AHMED, J.

This is an application .under sections 30 and 33 of Arbitration Act 1940 (the Act) with prayer to set aside the award dated 27-1-1987. The respondent No.1 has filed its objections to which rejoinder is filed by the applicant. Brief facts of the matter arc that the applicant is a sole proprietor firm engaged as Civil Engineer and contractor. An agreement dated 25-1-1985 was made between the applicant and the respondent No. 1 whereby respondent No. 1 awarded to the applicant a contract for construction of Telecommunication Building and Staff Quarters at Turbat and Panjgur. Clause 2 of the agreement provides that general conditions of the contract and special conditions of the contract besides other documents mentioned therein shall be deemed to form and be read as part of this agreement. As per clause 1(b) of the general conditions of the contract Messrs Kalimuddin Consultant, the respondent No.2 was appointed as the consultant. For certain reasons, the contracted work could not be completed and it is alleged that the respondent No.2 unilaterally withdrew himself from supervision of the site vide telegram dated 6-10-1986 which resulted into suspension of the contracted work. The reason for withdrawing from supervision of the contract work by respondent No.2 was that the applicant has committed breach of clause 16 of the special conditions of contract. Inasmuch as the applicant did not pay to the consultant his supervision expenses. The applicant gave notice dated 15-10-1986 to respondent No.1 in terms of clause 66 of the general conditions of contract for referring the dispute relating to the payment of supervision expenses of the consultant for decision by the Director-General Telephone and Telegraph or his nominee. In this letter, the applicant took the stand that though before the arbitration the matter was to be referred to the consultant but the consultant through telegram dated 6-10-198.6 has already given his decision to stop supervision of the contracted work. The respondent No.1 through its letter dated 23-11-1986 referred the matter to the respondent No.2 the consultant for his decision. It appears that the consultant gave notice to the applicant of making appearance before him but the applicant chose not to appear before him and ultimately the consultant gave his ex parte decision dated 27-1-1987, the operative part of which is as follows;-- "Decisions After the detailed discussions and evaluation of the provisions of the contract agreement, following decisions are pronounced: Dispute-I Payments of the details supervision- expenses -under the provisions of the clause 16 of the Special Conditions of the Contract Agreement, must be made by the Contractors directly to the Consultants under intimation to the employer with effect from 23-1-1986. Dispute-II Under the provisions of clauses 61 and 65 of the General Conditions of the Contract Agreement and clause 23 of the conditions of particular application, the employer has every right to deduct the due monies to be paid by the Contractors under the provisions of clause 16 of the Special Conditions of Contract. Dispute-III The Consultants can act as First Arbitrator under the provisions of the clause 66 of the General Conditions of the contract. The Contractors action to approach the Director-General, Telegraph and Telephone, directly, is in contradiction with the provisions of the Contract Agreement. The above decisions are made and .recorded on January 27, 1987. The Contractors, if disagree may file appeal with the Director-General Telegraph and Telephone Islamabad, within 30 days from the date of receipt of this pronouncement." The applicant has alleged that this decision of the consultant was received by it on 29-1-1987 pursuant to which this application was: Piled on 24-2-1987 with the prayer as noted above. Mr. H.A. Rehmani, learned counsel for the applicant in the first place has argued that the reference of dispute by the respondent No.1 to the consultant was altogether wrong and illegal, as the dispute was with regard to the payment of remuneration of the consultant and he could not be a Judge in his own cause. In support of this submission, he has relied upon the case of New Jubilee Insurance Company Ltd. v. National Bank of Pakistan PLD 1999 SC 1126, the case of Government of N.-W.F.P. v. Hussain Ahmed Haroon 2003 SCMR 104, the case of Rasheeda Begum v. Ch. Muhammad Anwar PLD 2003 Lah. 522 and the case of Fazal Din v. Commissioner Peshawar Division PLD 1968 Pesh.

30. On the other hand, Mr. Shabbir A. Shaikh, learned counsel for respondent No.1 has taken a preliminary objection that the decision of the consultant is not an award and that the application under sections '30 and 33 of the Act is not maintainable. In support of his submissions, he relied upon the case of Ch. Muhammad Saleem v. Muhammad Akram PLD 1971 SC 516 and the case of Syed Ziauddin v. Syed Raze-ud-Din 1999 YLR

978. These initial arguments, which the learned counsel for the parties have urged, are legal questions and I propose to deal with them in the first place. Clause 66 of the general conditions of contract provides for arbitration and it reads as under:-- "Settlement of disputes Settlement of disputes Arbitration If any dispute or difference of any kind whatsoever shall arise between the employer and the contractor in connection with or arising out of the contract, or the carrying out of the work (whether during the progress of the works or after their completion and whether before or after termination, abandonment or breach of the contact) it shall in the first place be referred to and settled by the consultant who shall give written notice of his decision to the contractor. If the consultant has given written notice of his decision to the contractor and no claim to arbitration has been communicated to the Consultant by the Contractor within a period of thirty (30) days from receipt of such notice, the said decision shall remain final and binding upon the Contractor. If the Contractor be dissatisfied with any such decision then the Contractor may within thirty (30) days alter receiving no notice of Consultant's decision. The matter or matters shall then be referred to the Director-General, Telephones and Telegraphs or his nominee and the decision of the Director-General or his nominee shall be final upon both the parties." In the face of above clause, the question that arises for determination is whether the decision of the consultant is an award within the meaning of the Act and at the same time whether the respondent No.1 was justified in referring the matter to the consultant. On reading of the arbitration clause, as setup above, it is apparent that the parties had agreed in case of dispute to refer the matter in the first place for settlement by the consultant who shall give written notice of his decision to the contractor and on giving of such notice, if no claim to arbitration is communicated to the consultant by the contractor within a period of 30 days from the receipt of such notice, the decision shall remain final and binding upon the Contractor. If the Contractor be dissatisfied with any such decision then he may within thirty days after receiving notice of Consultant's decision, the matter shall then be referred to Director-General, Telephone and Telegraph or his nominee and decision of Director-General or his nominee shall be final upon both the parties. Thus, arbitration clause provides for .two forums for settlement of dispute. First by the decision of consultant and the second through arbitration by the Director-General, Telephone and Telegraph or his nominee. The first forum appears to be a preliminary forum where the matter is to be settled by the decision of consultant and it' the contractor is not satisfied with the decision of Consultant, he is entitled to invoke the second forum which seems to be that of arbitration before the Director-General, Telephone and Telegraph or his nominee. Perusal of the decision of the consultant which comprises of 14 pages shows that he seems to have entered upon a first arbitration and in material sense has discussed all matters of dispute between the parties by formulating points and then proceeded to consider the documentary evidence that was placed before him and thereafter gave his decision. In the decision itself, consultant has adorned himself as first arbitrator and at many places mentioned that if the contractor is not satisfied with his decision, appeal to Director-General is provided in the arbitration clause. In my view, such assumption by the consultant will not change the character of the arbitration clause itself: as he is not named to be an arbitrator but a forum where he may settle dispute between the parties. Apparently, the consultant was not required to hear evidence or arguments. or to make an enquiry in the form of a judicial determination but was to confine himself to hearing point of view of both the parties and bring them to a settlement failing which, he was to give his decision not based upon enquiry or of nature of judicial determination. Thus, the decision of the consultant could not be termed to be an award which could be made, in terms of the arbitration clause, only by the Director-General, Telephone and Telegraph or his nominee who is named as an arbitrator in the said clause. The other question that now needs to be considered is whether the respondent No.1 was justified in referring the dispute to the consultant in terms of arbitration clause. The applicant has addressed his letter dated 15-10-1996 to the respondent No.1 which is a notice for settlement of dispute by arbitration. In this letter, the applicant has taken stand that the Consultant vide his telegram dated 6-10-1986 has unilaterally decided to stop supervision w.e.f. 14-10-1986 which is his final decision and not acceptable to the applicant and sought submission of dispute to the Director-General, Telephone and Telegraph or his nominee. The telegram of the consultant dated 6-10-1986 which instated to be his final decision needs to be reproduced as under:-- "Messrs Sarwat Ali & Sons Room No.25, Wazir Mansion Nicol Road, Karachi. REPEAT Messrs Project Engineering Co. Pvt. Ltd., 701/A, Sea Breeze Plaza, Karachi. REPEAT Messrs Sauai Associates, Arbab Karam Khan Road, Quetta. REPEAT General Manager, Pakistan T&T, WTR, Quetta. REPEAT Division Engineer (Dev), Pakistan T&T, WTR Quetta. Dated 6-10-1986 No.K/T&T/Genl/86/(.) Non-payment of supervision expenses to the Consultants under clause 16 of the Special Conditions of Contract Agreement is a breach of contract(.) Since March, 1986 you have been reminded in writing and verbally a number of times to meet your contractual obligations in which you have failed to date(.) Because of the non-payments of supervision expenses, consultants are unable to continue with the supervision of the works on your sites(.) You have been already informed of the monthly supervision expenses due against you(.) You are hereby notified that upto date dues must be cleared within seven days from the date of this telegram(.) In case of non-payment the consultants as a result of breach of contract at your end shall withdraw all their supervisory staff from sites under your contract(.) After the expiry of this notice period none of the works carried out in the absence of consultants supervisory staff shall be measured or verified and none of the bills shall be entertained anal scrutinized(.) Kalimuddin Consultants" The reading of this telegram clearly shows that the consultant, on non-payment of his supervision expenses, has labelled it as breach of contract by applicant and notified the applicant to clear the dues within seven days and in case of non-payment shall withdraw supervision from the site of applicant contract and none of the works carried out in the absence of the consultant supervisory staff shall be measured and verified and none of the bills shall be entertained and scrutinized. This communication by the consultant to the applicant though is not strictly in terms of arbitration clause, but it did provide sufficient reasons to the applicant, to believe that this is what his decision is and this is what his decision is going to be and reference of dispute to him will be a futile exercise and it does appear to me reasonable to have believed so. As a prudent person, one could not expect the consultant to say any thing different in his decision from what he has stated in his telegram which is a notice to the applicant to pay his dues based upon written as well as verbal reminders of the monthly supervision expenses due against applicant of which he has already been informed. As regards the submission that the decision of the consultant is illegal, it is based upon the fact that the dispute was of payment of supervisory expenses of the consultant himself and he could not sit as a Judge in his own cause. In the cited judgment of New Jubilee Insurance Co. (supra) the Honourable Supreme Court has laid down the rule, that one cannot be a Judge in his own cause and breach of this principle would, in fact, be violative of the right of access to justice as enshrined in Article 4 of the Constitution which right is equally founded in the doctrine of due process of law. In the case of Government of N.-W.F.P. (supra) the facts were that certain Doctors had protested and observed strike against appointment of non-Doctor Secretary Health upon which the Doctors were issued show-cause notice wherein they were directed to appear before the Secretary Health as an authorized Officer. The Doctors made representation to the Chief Secretary for change of Authorized Officer as their grievance was against his appointment as Secretary Health and therefore, some other independent officer be appointed as an Authorized Officer, Chief Secretary did not respond to the request of Doctors and the Secretary Health proceeded to pass order dismissing the Doctors from service. Honourable Supreme Court, after discussing the principle that no person should be a Judge in his own cause, observed as under:-- "It is to be judged whether a reasonable person in the similar situation would assume the possibility of bias in the mind of the deciding officer. It is always a question of fact to be decided independently in each case. In the present case the doctors community through their Association was agitating from the very beginning against the posting of anon-technical person as Secretary Health. This issue was going on for a considerable period. They were having some demands as according to their assumption their career was at stake. In these circumstances it could not be said that their apprehension for the change of Authorized Officer was not reasonable when they all were voicing for the change. They were certainly having apprehension that they would not get fair treatment which apparently was not without any foundation." The departmental action taken against the Doctors was set aside by the Service Tribunal and it was maintained by the Honourable Supreme Court. In this very judgment, reference was made to the case of Federation of Pakistan v. Muhammad Akram Shaikh PLD 1989 SC 689 in which the Honourable Supreme Court has quoted Marshall on Natural Justice who has summarized the principle that there is no doubt that any direct pecuniary interest, however, small in the subject of enquiry does disqualify a person from acting as a Judge in the matter. Based upon these high and lofty pronouncements, there could not be any two views that a person having a direct pecuniary interest as the consultant in the present case had, could at all be a Judge to give decision of his entitlement to his own supervisory expenses. It is violation of Article 4 of the Constitution. Though the consultant was not a Judge to make a judicial determination but the very fact that the arbitration clause made him a forum for making a decision on dispute between the applicant and respondent No.1 regarding his own supervisory expenses, in my humble view, he was not a person qualified to sit and make decision and his decision will not be legal and cannot remain final or binding on the applicant rather I will hold it to be void. The request of the applicant for referring the matter to arbitration to Director-General, Telephone and Telegraph or his nominee was for valid and justifiable reasons and the respondent No.1 ought to have acceded to. The dispute regarding the payment of supervisory expenses of the consultant has to be referred in terms of the arbitration clause to the arbitrator named therein. I, therefore, convert this application to a suit under section 20 of the Act, and while the agreement between the parties is filed refer the dispute for arbitration by the Director-General, Telephone and Telegraph or his nominee who will give award in accordance with law. Office is directed to register this application as a suit under section 20 of the Act which is disposed of in the above terms. M.B.A./S-47/K Order accordingly.