1989 PLP 2194 (CLC)

13. It was further contended that the objections filed by Bashir Ahmad were filed after 30 days and so in view of Imam Din v. Allah Rakha and others (AIR 1942 Lahore 190), the objections were time‑barred.

14. On the other hand the learned counsel for the respondents supported the impugned decision. While arguing his case, it was contended that the learned Civil Court passed a composite order whereby the objections against the award were rejected and the award was made "rule of Court" under Section 17 of the Act. It was contended with emphasis that Bashir Ahmad, therefore, had right to impeach the validity of the award under Section 39 of the Act. The objection of the learned counsel for the appellants is, therefore, simply technical in nature and has no force.

15. On the question of limitation it was contended that irrespective of filing of objection, it was the duty of the Court to decide whether or not the award was valid on the face of it.

16. It was contended with vehemence that the ownership of premises in dispute was not subject‑matter of the reference. It was represented that the arbitration agreement contained reference to the effect that civil and criminal disputes were being referred. In the civil suit there was no assertion by Wali Muhammad and others that they were the owners of the shop, therefore, it was proposed that the award was beyond the scope of the reference and was therefore, a total nullity. It was finally contended that Bashir Ahmad had filed a suit for dissolution of partnership on the ground of embezzlement and misappropriation of the funds, while Wali Muhammad filed a complaint against Bashir Ahmad for forgery and manufacturing fictitious partnership accounts with an object to defraud him. It was, therefore, contended that both the disputes related to accounts of the partnership. It was, therefore, contended that the argument of the learned counsel for the appellants was completely devoid of force. 17. 1 have heard the arguments of the learned counsel for the parties and have undertaken a critical examination of the record.

18. I herein proceed to determine the respective contentions of the parties. First of all I will deal with the argument of the learned counsel for the appellants that the civil dispute in arbitration proceedings was distinct and separate from the criminal dispute. I am afraid, the argument is totally untenable. It is quite clear from the record that Bashir Ahmad filed the suit on 1‑11‑1961, whereas Wali Muhammad filed criminal complaint on 25‑1‑1962 wherein Bashir Ahmad and others accused were charged of having committed offences which were non compoundable in nature. It is very clear that the averments made in civil suit A related to acts of misappropriation and embezzlement of partnership funds while the allegations levelled in the complaint also related to the preparation of fictitious partnership record with an object to cheat the partners. It was on 9‑2‑1962 when both the civil and criminal disputes were simultaneously referred to arbitration by a written submission. The argument of the learned counsel that the two disputes were different and did not constitute consideration for each other has no ground.

19. It is a well‑settled principle of law that whenever a non‑compoundable offence is committed, it becomes a matter of public interest, that such an offence shall be duly punished according to law. No private agreement can be allowed to frustrate the process of law by stifling the prosecution. Such an agreement is opposed to public policy and offends section 23 of the Contract Act. This proposition came under consideration before Superior Courts. Now I will proceed to notice the precedents cited before me.

20. In Kamini Kumar Basu and others v. Birendra Nath Basu and another (AIR 1930 Privy Council 100), a suit was filed to. enforce Ekrarnama executed by one Ananta, his sons Kamim and others. Lbarned Subordinate Judge held that the Ekrarnama offended the provision of section 23 of the Contract Act. The High Court in appeal varied the decision of the learned trial Court that the award and Ekrarnama were found valid, gave relief to plaintiff against the persons, who had taken part in the arbitration proceedings or who had signed the Ekrarnama. Privy Council in this case set aside the judgment of High‑ Court and came to the conclusion that the arbitration agreement and award offended the provision of Section 23 of the Contract Act. It was held by Privy Council "it is an implied term of the reference, the arbitration of a civil dispute or an Ekrarnama that the criminal complaint already filed would never furter proceed, then the consideration of the reference or Ekrarnama as the case may be is unlawful and the award or Ekrarnama is invalid, quite irrespective of the fact whether any prosecution in law had been started or not."

21. In Gopal Chandra Poddar v. Lakshmi Kanta Shah (AIR 1933 Calcutta 817), the arbitration award was set aside on the ground that it was violative of section 23 of the Contract Act being given as a result of arbitration reference in which the consideration was stifling of the prosecution. The rule laid down in this authority was in the following words: "The agreement in the present case was to take the administration of law out of the hands of the Judges and to put it into the hands of private individuals to determine what is to be done iii a particular case and as such it is opposed to public policy. Reliance has been placed by the learned Advocate for the appellant on a decision of my learned brother Guha, J. and my learned brother M. G. Gose, J, who was also a party to that decision. That was the case of Deb Kumar Roy v. Anath Bandhu Seri (3). It is sufficient to say for the purposes of the conclusion to which I have reached that the case is distinguishable from the present one as it has been pointed out at P.28 of the said report that in liability based upon an adjudication of accounts between the parties concerned. That fact is wanting in the present. case. Therefore, this decision cannot be governed by the present case. For this reason I am of opinion that the Subordinate Judge has reached a correct conclusion. This appeal must therefore, be dismissed. As has been pointed out by the Judicial Committee in the decision referred to above, the defence in the case cannot be commended but we are compelled to give effect to it on the ground of public policy. In these circumstances we do no think it right to allow any costs to the present respondent:"

22. This principle was again highlighted in Deb Kumar Roy Choudhury v. Anath Bandhu Sen and others (AIR 1931 Calcutta 421), Sudhdindra Kumar Rai Choudhury, defendant 5 and others v. Ganesh Chandra Ganguli, defendant 1 and others (AIR 1938 Calcutta 840), Banu Mal v. Ratan Duo (AIR 1937 Allahabad 370) and Pakalapati Veerayyar v. Devulapali Sobhanadri (AIR 1936 Madras 656).

23. This proposition was again examined by the Privy Council in Bhowanipur Banking Corporation, Ltd. v. Sreemanti Duregesh Nandini Dassi (AIR 1941 Privy Council 95). In this case it was held :‑ "In the case of an agreement to stifle prosecution it is of the essence of the defence that the defendant should establish a contract whereby the proposed or actual prosecutor agrees as part of the consideration received or to be received by him either not to bring or to discontinue criminal proceedings for some alleged offence. The fact. that the debt forming the consideration was real is irrelevant. It is of course impossible for such a contract to be made unless both parties know of the proposed or actual proceedings. Proof that there has actually been a crime committed is obviously unnecessary. But it is necessary that each party should understand that the one is making his promise in exchange or part exchange for the promise of the other not to prosecute or continue prosecuting. In all criminal cases reparation where possible is the duty of the offender, and is to be encouraged. It would be a public mischief if no reparation being made or promised by the offender or his friends or relatives mercy shown by the injured party should be used as a pretext for avoiding the reparation promised. On the other hand, to insist on reparation as a consideration for a promise to abandon criminal proceedings is a serious abuse of the right of private prosecution. The citizen who proposes to vindicate the criminal law must do so whole heartedly in the interest of justice, and must not seek his own advantage."

24. Authorities cited by the learned counsel for the appellants proceed on distinguishable facts and are not applicable to this case.

25. Learned counsel for the appellants placed reliance upon Gaya Prased v. Jamna Prasad (155 Indian Cases 341). The authority relied by the learned counsel for the appellants is not of much help to the appellants. In this case it was held that "the offence under section 508 was compoundable by the parties, the other two offences under sections 417 and 420 were., also compoundable with the permission of the Court". It was, therefore, held that the violation of section 23 of the Contract Act was not involved.

26. Ramsary Rai v. Lal Bahadur Rai (183 Indian Cases 507) and Muhammad Azim v. Adil Shah (AIR 1934 Peshawar 105) also proceeded on different facts.

27. In Firm Harjas Rai Arjan Das v. Tek Chand (AIR 1927 Lahore 465), the criminal proceedings were not pending when the parties referred the dispute to the arbitrator. It was held that the criminal proceedings were not pending between the parties. Hence this case is of no help to the appellants.

28. The ratio emerging from the aforesaid authorities is that the agreements made by the parties for stifling prosecution are not enforced by the Court on the premises that the consideration for such an agreement is opposed to public policy. If a person moves the machinery of criminal law into force on the allegation that the opponent has committed a non‑compoundable offence and compels the opponent to enter into an agreement, that agreement shall be treated as invalid as having been made in defiance of public policy.

29. Applying these principles to the facts of the case, I am of a clear view that order of the learned first Appellate Court does not suffer from any illegality. It is clear from the record that on 1‑11‑1961 Bashir Ahmad filed the suit for dissolution of partnership and rendition of accounts; that one Wali Muhammad filed the complaint on 25‑1‑1962 charging Bashir Ahmad for the commission of non‑compoundable offences mentioned above; that it was on 9‑2‑1962 when both the disputes (criminal as well as civil) were referred to the arbitrator.

30. I have no doubt in my mind that the consideration for the term of reference Inn this case was the compromise of dropping of the criminal proceedings, therefore, the implied term of the reference was the consideration of, suffocating the criminal proceedings in respect of non‑compoundable offences. The finding of the learned Additional District Judge is, therefore, not open to any exception.

31. Coming to the question of limitation and signing of the award, I find no substance in it. The scheme of the Arbitration Act indicates that arbitration is a means of settling many of the disputes that arise out in the course of economic activity of the nation. It is the process by which parties voluntarily refer their disputes to an impartial third person‑‑an arbitrator selected by them for decision based on evidence; that parties agree that the award will be binding on them, therefore, arbitration is a contractual proceeding, whereby parties to dispute select Judge of their own choice in order to obtain an inexpensive and speedy final disposition, therefore, arbitration proceedings can only take place when the parties have specifically agreed to refer their matter for settlement of the dispute. The arbitration proceedings by nature are judicial and alternative to normal litigation, but they co‑exist with the Court. Despite the differences between proceeding before Court and arbitration proceedings, elementary principles of justice are to be maintained in arbitration proceedings. It is in this area that the Court has been given powers of intervention in the process of arbitration. Sections 14, 15, 16, 17 and 30 of the Arbitration Act deal with the powers of the Court in respect of this sphere.

32. Section 14 of the Arbitration Act provides that when the arbitrator makes the award, he shall pronounce his opinion and shall sign it. Section 15 of the Act empowers the Court to modify or correct the award if the award is imperfect or it contains clerical mistakes or errors from an accidental slip or omission. Under section 16 of the Act, the Court has authority to remit the award if it comes to the conclusion that the award has left undetermined any of the matters referred to arbitration and such award cannot be separated without affecting the determination of matter referred or where the award is so imperfect as it is incapable of execution. Section 30 of the Act gives authority to the Court to set aside the award when it comes to the conclusion that the award is invalid on the face of it, that the award has been illegally procured or the award is vitiated by the legal misconduct of the arbitrator.

33. The Court under Sections 14, 15, 16 and 17 of the Act is not a Court of Appeal. The Court is not required to undertake deeper examination of the evidence or material before the arbitrator. It has to examine the award from the face of it and if it comes to the conclusion that the award on the face of it suffers from the circumstances mentioned in Section 14, 15, 16 or Section 30 of the Act, it has the power of interference, otherwise it shall make it a rule of Court within the framework of Section 17 of the Act and pass a decree in accordance with the award. Section 17 of the Act is as follows: "Judgment in terms of award.‑‑Where the Court sees no cause to remit the award or any of the matters referred to arbitration for consideration or to set aside the award, the Court shall after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess or not, otherwise in accordance with the award."

34. The bare examination of Section 17 of the Act and the scheme of arbitration contained in the Arbitration Act cast. duty on the Court to give a notice of the filing of the award under Section 17 of the Act and then to examine the award within the ambit of Sections 14, 15, 16 and 30 of the Act. It is not in dispute that in this case no notice was issued under Section 17 of the Act to Bashir Ahmad. The first Appellate Court after the examination of the award concluded that arbitration agreement and the award was hit by Section 23 of the Contract Act. I am, therefore, clear in my mind that the objection of the appellants that Bashir Ahmad has filed objections beyond time is totally untenable. The order of the first Appellate Court is not open to scrutiny on this ground.

35. Now I will turn to the objection of the respondent that the award suffered from both legal misconduct of arbitrator and mishandling of arbitration proceedings by the arbitrator.

36. It is quite clear from the examination of record that on 22‑2‑1962, the arbitrator directed the parties to prepare a list of their claims and file it before him. He sent the copy of the proceedings to Sher Bahadar Khan, Magistrate, Ist Class, Rawalpindi, before whom the criminal dispute was pending. On 29‑3‑1962 again this arbitrator sent the report to the same Magistrate, wherein it was communicated that arbitration proceedings were continuing and request was made for adjournment in the complaint for two weeks. Again on 13‑4‑1962 report was sent by the arbitrator to the Magistrate that arbitration proceedings had not been completed. It was stated that it would be completed within one week. Therefore, it was requested that the proceedings in the complaint be adjourned for one week. This report is dated 13‑4‑1962. On 27‑4‑1962, it was again communicated to the Magistrate that the award was ready, it would be announced and copy of it would be sent to the Magistrate. These orders of the arbitrator are on the file of the arbitrator and are exhibited as Exhs. E‑1 to E‑

5. These proceedings throw much light on the conduct of the arbitrator.

37. It is a very settled principle of law that the arbitrator is a Judge chosen by the parties to decide the referred dispute. The main attributes of arbitrator are, his disinterestedness, his complete independence and his impatiality. If the arbitrator in the proceedings is influenced from extraneous pressures or seeks dictation from extraneous source, he cannot be termed as impartial. He is not performing the duties of the arbitrator and has committed the breach of the duty.

38. The record of the case reveals that the arbitrator in this case had been seeking dictation from the Magistrate, in whose Court the criminal complaint I filed against Bashir Ahmad was pending. Not only that he was continuously communicating the progress of proceedings to the Magistrate but also had been asking him to keep on adjourning the proceedings in the criminal complaint till the making of his award. Therefore, the arbitrator was not exercising the duties of an arbitrator acid violated the principles of fairness, essential to arbitration' proceedings. His award is, therefore, bad on the face of it, i.e. Arbitrium est judicium boni viri, secudum acquum et bonum.

39. The above noted conduct of the arbitrator constitutes legal misconduct within the framework of Section 30 of the Act. The term legal misconduct is of wide sweep, it does include the breach of legal duties, therefore, I am of the view that the above‑noted communications constituted legal misconduct and the award was therefore, invalid under section 30 of the Act. As far as the objection of respondent that the question of ownership of premises in dispute was not referred to the arbitrator, I am not inclined to notice the aforesaid contention on the simple ground that I have already held that the agreement to refer the matter to arbitration as well as arbitration award was illegal, being in defiance of section 23 of the Contract Act as well as Section 30 of the Act.

40. For whatever has been stated above, I have no difficulty in reaching the conclusion that the order of the learned first Court of appeal dated 8‑7‑1969 does not suffer from any illegality and is not open to any exception. The First Appeal No.144 and Regular Second Appeal No.677 of 1969 are dismissed. The order of the learned Additional District Judge, Rawalpindi dated 8‑7‑1969 is hereby affirmed. The office is directed to send the record of the case to the learned trial Court. The trial Court is directed to decide the suit in accordance with law without any further loss of time.

41. In view of the complicated nature of the question involved, the parties are left to bear their own costs. A.A./A‑720/L Appeal dismissed.