P L D 1954 Lahore 620 (PLP)

S. A. RAHMAN, J.‑ This order will dispose of F. A. O. No. 13 of 1953 and Civil Revision No. 45 of 1953, which have arisen out of the same matter. The material facts are as follows: There was a dispute concerning accounts between the firm of Muhammad Aslam & Brothers, Lahore (herein after referred to as the first firm) and the firm of Messrs. Ahmad Bakhsh‑Abdur Rashid, Sargodha (hereinafter designated as the second firm). At the instance of the second firm, a case under section 406/420 P. P. C. was registered at Sargodha by the Police against Muhammad Aslam, partner of the first firm. The Police arrived at Lahore to investigate that matter on the 14th of January 1950. On the 17th of January 1950, an agree ment to refer the dispute between the two firms to the arbitra tion of one, Haji Allah Ditta, was executed at Lahore by Muhammad Aslam on behalf of the first firm and Ahmad Bakhsh on behalf of the second firm. Haji Allah Ditta started the pro ceedings as the sole arbitrator in the case and gave a register ed notice to the parties to appear before him on the 25th of Jan uary, 1950, vide Exh. D. 6. This was followed up by a telegram on the 26th of January, 1950, sent to members of both firms, for appearance on the 27th of January, 1950, before the arbitration, vide Exh. D. I. It was specified that proceedings would be taken ex paste against the first firm if no appearance was made on its behalf. In reply, Muhammad Aslam sent a telegraphic notice to the arbitrator on the 26th of January, 1950, informing him that he had been restrained from appearing before the arbitrator by a Court injunction. The arbitrator proceeded to give his award ex paste against Muhammad Aslam & Brothers. The reference to the Court injunction in Muhammad Aslam's notice to the arbitrator was in respect of suit brought by his two brothers, Muhammad Afzal and Muhammad Anwar, for a decla ration that they were not bound by the reference. The suit had been lodged in Court on the 24th of January, 1950 and an ad interim injunction had been issued on the 26th of January, 1950, at their instance to Muhammad Aslam as well as the other party to the reference restraining them from proceeding with the arbi tration. It appears that Ahmad Baksh and his partners had not yet been served with that injunction order but Muhammad Aslam had been duly served before the 27th of January, 1950. The award dated 3rd of February 1950, was filed in the Court of the Senior Civil Judge at Sargodha by the arbitrator, on the 7th of February 1950. This was returned for presentation to the competent Court as it was held that the Sargodha Court had no jurisdiction. Besides the suit brought by Muhammad Aslam's Brothers, he himself put in a petition under section 5 of the Arbitration Act, in the Court of the Civil judge 1st Class, Lahore, on the 20th of January 1950 praying that the authority of the arbitrator be revoked. The civil suit of Muhammad Aslam's brothers was dismissed as incompetent on the ground that award had already been given by the arbitrator. They went up in appeal against that order, but the appeal was withdrawn on the 4th of August 1950. The award which was. returned by the Senior Civil Judge, Sargodha was put in Court at Lahore on the 17th of May 19 50. The petition for revoking the authority of the arbitrator presented by Muhammad Aslam and the application for making the award rule of the Court were disposed of by one judgment by the trial Court. It was held that the award could not be made rule of the Court and the reference to arbitration was superseded. The authority of the arbitrator was directed to be revoked, as in the learned Judge' s view injustice was likely to result at the hands of the arbitrator. The appeal is directed against the order refusing to file the award while the revision petition challenges the order concern ing revocation of the arbitrator's authority. The second firm is the appellant and petitioner, in this Court. In the proceedings under section 5 of the Arbitration Act, the case for the first firm was that the reference to the arbitra tor was not valid; that the agreement to refer had been execut ed under undue influence and that the arbitrator was connected with the second firm. These pleas were traversed by the latter firm, who further asserted that as the award had already been given, the authority of the arbitrator could not be revoked. Two issues were framed by the Court. The learned trial judge held on the first issue that Muhammad Aslam was not subjected to undue influence and that the agreement to refer was not illegal. It was found on the second issue that the application did not lie after the award had been passed. The authority of the arbitra tor was nevertheless revoked at the instance of the first firm to avoid an unjust decision by the arbitrator. In the other case it was pleaded that as only one of the partners of the first firm had joined in the reference, without authority from the other partners, the reference could not bind the firm; that the agreement had been executed under coercion and undue influence, and that the arbitrator was guilty of misconduct. It was contended from the other side that Muhammad Aslam had obtained the consent of his partners for executing the arbitration agreement and that coercion or undue influence was exercised. It was denied that the arbitrator had been guilty of any misconduct. These pleas led to the follow issues :‑ (1) Is the application for filing the award in conformity with the provisions of section 14 of the Arbitration Act ? If not, what is its effect ? (2) Was the agreement for arbitration valid ? (3) Has the arbitrator been guilty of misconduct ? (4) Relief ? On the first issue, the finding was recorded that section 14 of Arbitration Act was no bar to the filing of the award. On the second issue, the finding was in the negative on the ground that the agreement had been entered into on behalf of the two firms by one partner of each firm, who did not have authority to do so from the other partners. Issue No. 3 was found against the second firm and it was held that the arbitrator was not justified in proceeding ex parte against Muhammad Aslam and Brothers and was, therefore, guilty of judicial misconduct. As a result of these findings, the award was set aside and the reference to arbitration superseded. It was held further that even the agreeing partners could not be bound by the ag reement as the dispute between the firm could not be decided piecemeal. The application for making the award rule of the Court was, therefore, dismissed with costs. In the other case, Muhammad Aslam was granted leave to revoke authority of Haji Allah Ditta as arbitrator. The second firm was made to bear the costs of the first firm. The first contention raised by Mr. Ghulam Abbas Jafri on behalf of the appellants is that the two brothers of Muhammad Aslam had in fact agreed to the submission of the dispute to arbitration. For this purpose, the learned counsel has taken me through the evidence on record. He points out that in the application dated the 19th of January 1950, put in by Muhammad Aslam on the 20th January 1950, in Court, for revoking the authority of the arbitrator, the point was not raised at all that the submission was bad because of want of authority from the other partners of Muhammad Aslam. This omission should not, however, affect Muhammad Aslam's partners prejudicially owing to the oral evidence, Muhammad Amin, Deed Writer (P. W. 2.) and Fazal Karim father‑in‑law of Muhammad Aslam, (P. W. 6), say nothing on this point. Mian Ata Muhammad, Advocate (D. W.1) deposed that Muhammad Aslam went away from the Elphinstone Hotel to get the permission of his brother for the reference. He returned in the evening with a deed writer and paper for writing the arbitration agreement. He gave them to understand that his brothers were agreeable to the arbitration. Mimi Ata Muhammad's son‑in‑law Muhammad Afzal was a partner with Ahmad Bakhsh of the second firm in an allotted factory for one year, To similar effect is the statement of Haji Alain Din (D.W. 3) and Ahmad Bakhsh (D. W. 5) None of these witnesses stated that they were present when Muhammad Aslam obtained the consent of his brothers to the arbitration. It is only Allah Bakhsh (D. W. 4) who would have us believe that he went with Muhammad Aslam to Bhati Gate, where the latter consulted Muhammad Afzal and Muhammad Anwar, his brothers, and that they agreed to the arbitration. This witness's claim to have known Muhammad Aslam was not supported by documentary evidence although according to him he had trade dealings with him. As P. W. 7 Muhammad Aslam denied on oath that he had consulted his brothers. He was supported in this respect by Muhammad Anwar as P. W.3, who added that none of his brothers was a managing partner of their firm. It is significant that Muhammad Anwar was not even asked in the witness box whether Muhammad Aslam had gone to consult him and his other brother in the company of Allah Bakhsh D. W. Considering that the agreement was drawn up at Lahore where the brothers of Muhammad Aslam lived, it is not understandable why the precaution was not taken of asking the brothers of Muhammad Aslam to personally join in executing the agreement. After considering this evidence, I am not satisfied that the consent of Muhammad Aslam's brothers was in fact obtained to the reference I agree with the trial Court's findings in this respect. The question then arises as to whether the agreement to refer would be bidding on the first firm. Section 19 of the Partnership Act 1932 clearly lays down that a partner has no, implied authority to refer a dispute to arbitration in the absence of any usage or custom of trade to the contrary. No usage or custom of trade has been established in this case. It is, therefore, conceded very fairly by Mr. Ghulam Abbas Jafri that the agreement would not bind the partners of Muhammad Aslam. He however, contends that at least Muhammad Aslam would be personally bound by the reference. In this connection, learned counsel has taken his stand on the following authorities. (1) Strangford against Green (86 E R 1041.). (2) Bhagvan Manaji Marwadi v. Hiraji Premji Marwadi (A I R 1932 Bom. 516 (D. B.)). (3). Madangopal Radhey Lal v. Sanwaldas Madhavdas (A I R 1948 Sind 79.). (4). Jagan Nath v. Dina Nath (134 I. C. 99 (S.B.).). On the contrary, M. Muhammad Shafi for the respondents invited my attention to Abdul Ghani Siraj‑ud‑Din (A I R 1939 Lah. 154 (S. B.).) and pointed out that the Sind case relied on by the appellants really goes against them. In the English case cited, it was held that the defendant may undertake for his partner, and having engaged for him, and promised that he would perform the award on his part not withstanding the partner is not bound to do so, if the latter refuse, it is a breach of the defendant's promise and the plain tiff would have judgment on the award. It is obvious that in that case the defendant had given a personal understanding to perform the award, on which the suit was based. The case is consequently distinguishable, as in the present case Muhammad Aslam had given no such personal undertaking. He purported to act only on behalf of the firm. In Bhagavan v. Hiraji reliance was placed on a quotation from Lindley on Partnership for the proposition that the partner actually referring the dispute is bound by the award and that the other partner may become bound by ratification. As was pointed out in Madangoval Radhevla, v. Sanwaldas Madhavdas in the Bombay case, there was no application to set aside the award. The question for determination was that of liability of the partners not served in the suit, in the course of which the dispute was referred to arbitration by one partner. The quotation from Lindley on partnership is also based on the English ruling noticed above and with all respect, therefore, it seems to me, no principle of universal application could be derived therefrom. The Sind case definitely goes against the appellants' contention, It was held therein that there was no warrant for the proposition that if an award is passed against a firm which was not a party to the reference, the ratifying partner can be held liable perso nally although the award is set aside against the firm. With respect, I am inclined to agree with this view. Learned single judge of this Court in Abdul Ghani v. Siraj‑ud‑Din took the view that a dispute concerning accounts of partnership cannot be settled unless all the interested persons are joined and if in a dispute between partners, there is a reference to arbitration out of Court but it subsequently trans pires that there was no valid reference on behalf of one of the partners then the award given in pursuance of such a reference is not binding on the submitting partners a s well. Here also the case is one of disputed accounts between two firm and the principle seems to be applicable that unless all the interested partners of each firm had joined the reference, the firms would not be bound and even the submitting partners could not be held to the agreement. Of course, if the other partners had ratified the agreement it may become binding on the firm The remark of the trial Court that the reference was bad at both ends, however seems to be open to exception. There is no evidence that the other partners of Ahmad Bakhsh had objected to the reference. Presumably, they had ratified the ag reement. Nevertheless, it is clear that neither Muhammad As lam's partners nor he himself can be held bound by the award in the circumstances of this case. I would, therefore, affirm the decision of the Court below on this point. On the question of the misconduct of the arbitrator, the trial Court has remarked that the arbitrator ran up to Sargodha on the very date on which he gave his award to file it in Court there. The position in this respect appears to have been mis conceived by the learned Civil Judge. There is a mistake in the copy of the order of the Senior Civil Judge, Sargodha, by which the award was returned to the arbitrator. It mentions that the petition was presented before him on the 3rd of February, 1950. This seems to be a typing error for the 7th of February. 1950, as the heading of the order itself indicates. Mr. Jafri has shown me a certified copy of an entry in the Civil Court' s Register of the Senior Civil Judge, Sargodha, to the effect that the petition for filing the award there was given on the 17th of February, 1950. Moreover even if the arbitrator had gone precipitately to' Sargodha to file the award in Court there after the giving of the award, this could not amount to misconduct for the purpose of vitiating the award. The subsequent conduct of the arbitrator after the giving of the award is not relevant for this purpose except in so far as it may throw light on the working of his mind earlier. If authority is needed in support of this view, reference may be made to Louis Dreyfus & Co v. Tarachand Ghanshamdas (A I R 1926 Sind 242. (S. B.)) and Russel on Arbitration 14th Edition, page 148. Mr. Jafri then argued that the arbitrator in the present case was perfectly justified in giving an ex pane award when Muhammad Aslam and his brothers failed to appear before him on the 27th of January, 1950, it: spite of a telegram being sent to them intimating that the arbitrator would proceed ex parte if they absented themselves. He points out that earlier, a regis tered notice had also been sent to the firm calling upon them to submit their accounts to the arbitrator on the 25th of January 1950. He maintains that it was no part of the duty of the arbitrator to verify the alle1ltton made in Muhammad Aslam's telegram that he was prevented by an injunction issued by the Civil Court from appearing before him. He suggests that it was the duty of the party concerned to satisfy the arbitrator by producing the Court's order for his inspection that such was indeed the case. The power of the arbitrator to proceed ex parte is no doubt,, discretionary on proof that one party is deliberately avoiding appearance. But Mr. Shafi has invited my attention to the fact that not only Muhammad Aslam but his brothers had also sent telegrams to the arbitrator and the opposite party conveying the information that the Court had issued an injunction restraining the parties from going on with the arbitration. He also points out that the method of service of a notice by the arbitrator to a party, prescribed by section 42 of the Arbitration Act 1942, is either personal service or despatch of a letter by registered post I and a telegraphic notice is not one of the specified methods. The notice was consequently not in accordance with the provisions of section 44' of the Act and could not be described as a valid notice, There seems to be force in this contention. Apart from that, it seems to me that it was the duty of the arbitrator to inves tigate whether Muhammad Aslam and his brothers had a valid excuse for not appearing before him or not. If a reasonable excuse for not attending the appointment could be shown, the Court will set aside an award made by the arbitrator who has proceeded ex parte. Reference in this connection may be made to. Halsbury's Laws of England, Second Edition Volume I, page 651. This rule of English law is not repugnant to any provision of our Arbitration. Act and would therefore provide valuable guidance in the present case. An additional reason for holding that the arbitrator was really not justified in proceedings ex parte against the first firm is that according to Muhammad Aslam, he had appeared on one occasion before the arbitrator and had informed him that his account book was with the police. He is supported in this respect by the document Exh. D. 14 dated 14th January 1950, which purports to be a recovery memo of an accounts register of the first firm, prepared by the police Sub‑Inspector of Sargodha. Mr. Jafri argued that its execution by the Sub‑Inspector was not proved, but it was produced by Muhammad Aslam, who had its custody by way of a receipt for the register. His oral evidence that the Sub‑Inspector wrote it in his presence becomes acceptable in these circumstances. The respondent firm could not, therefore, have made a useful contribution to the proceedings before the arbitration in the absence of their account book. The notice given by the arbitrator though fixing a date for appearance does not mention the place where the proceedings were to be held. This is incidentally another defect in the arbit rator's notice, but perhaps should not be attached much impor tance as presumably, Muhammad Aslam who had appeared before the arbitrator once, knew the contemplated venue of pro ceedings. The arbitrator's act was, however, unduly hasty and indeed improper. As was held in Pratapsingh v. Kishanprashad &a Co. Ltd. (135 I C 174 (S. B)) a party is entitled not only to notice of the time and place of a meeting with the arbitrator, but he should be allowed a reasonable opportunity of proving his case either by evidence or by arguments or both and of being fully heard. It was further laid down in Purusottum Das Narain Das v. Louis Dreyfus & Co. (56 I C 325,) that if a party does not appear before the arbitrator, it is the duty of the latter to make sure that they have no sort of excuse for absence. The mentality of the arbitrator in the present case is revealed by his conduct in going to Sargodha to file the award in Court there although he himself resides at Lahore. Normally, he should have left that function to one of the interested parties. This act may not amount to misconduct in itself but strengthens the inference' that his bona fides in proceeding ex parte against the first firm were open to criticism. I, therefore, agree with the trial Court that the arbitrator had been guilty of misconduct and this vitiated his award. The agreement to refer was itself, in my opinion, vitiated by the exercise of undue influence in this case. There is good evidence on the file to show that a police party had arrived in Lahore with Ahmad Bakhsh of the second firm, on the 14th of January 1950. Fazal Haq, Moharrir Head Constable of the New Anarkali Police Station, Lahore, was examined as P. W. 1. and proved with reference to records of the thana that A. S. I. Ahmad Khan had come on that date from Sargodha and had asked for the services of a constable of the police station for assistance in the investigation of a 406 case. Muhammad Amin, Deed Writer (P. W. 2) stated that he was brought to the Elphinstone Hotel, where undoubtedly, Ahmad Bakhsh and Muhammad Afzal were staying (as is proved by the manager of the Hotel, Muhammad Sharif (P. W. 5)) by Fazal Karim P. W. and a constable and that an A. S. I., was also present at the hotel on the 17th of January 1950, when the agreement was scribed by him. The lower Court has not ruled out the possibi lity that Muhammad Aslam was induced to enter into the reference by the police. He did not, however, consider that the evidence was strong enough for holding that the agreement was vitiated in consequence. The case under section 406 P. P. C., was not compoundable. It appears that later the police directed complainant firm to go to the Civil Court for adjudication of their dispute. When that happened, however, is not clear from the statement of Ahmad Bakhsh (D. W. 2). The reference to arbitration was drawn up, as observed above, on the 17th of January and the police arrived here on the 14th. It becomes probable that the police had stayed on and it was under the threat of the prosecution that Muhammad Aslam was persuaded to submit to the reference. That Muhammad Aslam was not a willing party to the arbitration is brought out by the fact that he got a petition written on the 19th of Jan uary to challenge the authority of the arbitrator and actually put it in Court on the 20th Muhammad Aslam stated on oath that he was apprehended by the police and brought to the hotel, though he was not put in handcuffs. He was then made to enter into the reference after his father‑in‑law, Fazal Karim (P. W. 6) had been summoned by telephone, to the hotel. Although therefore, the evidence may not be cogent to establish that the consideration of the agreement was the stifling of a prosecution and, therefore, unlawful, it seems fairly clear that Muhammad Aslam was coerced into executing it by the, threat of prosecution. In view of the above discussion, I find myself in agreement with the trial Court that the submission to arbitration itself was vitiated and that, in any case the award was liable to be set aside because it could not bind the first firm and because judicial misconduct must be imputed to the arbitrator. I; there fore, find no force in the appeal or the revision petition and hereby dismiss both of them. In the circumstances of the case, I leave the parties to bear their own costs in this Court in the appeal as well as the revision petition. The order as to costs in the lower Court, passed by the trial Judge, will stand. Announced. A. H. Appeal and revision petition dismissed.