P L D 1959 (W (PLP)

Briefly, the facts out of which these objections have arisen are that defendants 2 to 5, who are carrying on business under the name of Messrs. Haji Muhammad Ibrahim & Sons are alleged to have entered into a partnership, in connection with a contract obtained for the construction of quarters of the Karachi Joint Water Board under an agreement dated 8!4‑1954 with the plaintiffs. According to the terms of this partnership the plaintiffs agreed to finance the said construction work upto Rs. 40,000 by contributing the said amount themselves or by arranging it from some bank. Clause 9 of this agreement reads as under :‑ "That in case of any dispute among any one or all the three partners, the same for decision will be referred to arbitration in accordance with the law of arbitration." It appears that defendant No. 1 on 22nd November 1956 by a notice denied the existence of any partnership with the plaintiffs and called upon them to pay certain amount received by Gujrat Co‑operative Bank from their dues with the Karachi Joint Water Board in attachment. Plaintiff No. 1 Mumtaz Begum by a reply dated 29th of November 1956 informed them that since they are disputing the existence of the partnership between the parties, she has referred the matter to arbitration under the terms of the partnership deed, appointed Khawaja Abdur Rahman as her Arbitrator and called upon the defendant 1 to appoint his Arbitrator. Similarly on the 1st of December 1957 Begum Jamila Khatoon, plaintiff No. 2 also. informed defendant 1 that the dispute has been referred to arbitration and she has appointed Mr. Ghufran Ahmad as her Arbitrator. Defendant No. 1, however, on the 11th of December 1956 informed the plaintiffs that as there exists no partnership between the parties, the question of the appointment of an Arbitrator on behalf of the defendant does not arise. On the 14th of December 1956 the two Arbitrators informed defendant 1 that as he had failed to appoint an Arbitrator they will proceed to hear the matter on the 27th of December 1956. Defendant No. 1 thereupon filed an application in this Court on the 18th of December 1956 under sections 5, 8 and 33 of the Arbitration Act challenging the validity and the existence of the alleged partnership. In these proceedings the two arbitrators were also impleaded as parties. On the 26th of December 1956 they were informed that they have no jurisdiction to proceed with the arbitration proceedings and the defendants will not participate in it. This petition was treated as having been filed under section 33 of the Arbitration Act but was dismissed on the 26th of March 1957 as it was not pressed. It, however, appears that on the 11th of December 1956 defendants filed a suit No. 14/1957 against the plaintiffs in this Court on the ground that there exists no partnership between the parties and prayed (1) that it may be declared that there existed no partnership between them and plaintiffs and the alleged agreement dated 8‑4‑1954 is a sham, fictitious, illusory and ineffective and (2) in the alternative they also claimed dissolution of the partnership if the Court comes to the conclusion that there existed partnership between the parties, They also claimed a decree for a sum of Rs. 24,520‑13‑0, Rs. 14,392 and Rs. 7,910 against the plaintiffs as these were illegally recovered from them in attachment proceedings against Mr. Rizwanullah, the husband of Mst. Jamila Khatoon. This suit remained under objection but was admitted by an order of Inamullah, J. on the 7th of February 1957. The Arbitrators gave their award on 12‑4‑1957. The same was filed in Court on the 9th of May 1957. Notices were issued to the defendants. It is under these circumstances that this matter has come before this Court for hearing. Defendants have challenged the validity of the award, amongst other, firstly, on the ground that even if it is assumed for the purposes of this matter that the alleged partnership existed between the parties, under its terms the matter could only be referred to the arbitration of a sole arbitrator, and as it was done, the award is without jurisdiction and is inoperative, and secondly, on the ground that the award was given at a time when legal proceedings were pending in respect of the matter in dispute before a competent Civil Court and is in contravention of section 35 of the Arbitration Act. I propose to discuss only these two objections as in my opinion the award must be set‑aside on these grounds. The first objection relates to the appointment of arbitrators by the parties for the determination of their dispute. Clause (9) of the alleged partnership agreement has already been reproduced. Ordinarily parties have a right to fix the number of Arbitrators and to agree on the manner in which they will be appointed but a perusal of the impugned agreement shows that it is silent on this point. This case will therefore be governed by section 3 of the Arbitration Act and the reference shall be presumed to have been intended to be made according to the provisions of Schedule I of the Arbitration Act. According to section 1 of 't this Schedule unless otherwise provided, the reference shall be to a~ sole Arbitrator. Plaintiffs 1 and 2 in this case, however, appointed separate Arbitrators on their behalf and defendant No. 1 was also called upon to appoint an Arbitrator on their behalf. This means that they have clearly violated the provisions of Schedule I and the reference to Arbitrators on their behalf cannot be considered to be in accordance with the arbitration law. Mr. Sohail, the learned counsel for the plaintiffs has urge3 that there was an oral agreement subsequent to the execution of the partnership deed between the parties and all the parties have agreed that in case of dispute between them the matter will be referred to the arbitration of more than two persons to be appointed by each of the parties. The learned counsel has referred me in this connection to the affidavit filed on behalf of plaintiffs dated the 5th of August 1958. In paragraph 5 of this affidavit this oral agreement is alleged. The defendants, on the other hand, have also filed an affidavit in rejoinder on the 29th of September 1958 denying the alleged oral agreement. In my opinion there is not sufficient evidence on the record to accept the plea of plaintiffs that there was any such oral agreement agreed upon by the parties. If there had been any such agreement the plaintiffs would have referred to it at the time of referring the dispute to the Arbitrators. They did not advert to any such oral agreement. In my opinion it is an after thought and cannot in any way affect the decision of this case. The second objection raised on behalf of defendants 3 about the validity of the award is that the award was made at a time when legal proceedings were pending before a competent Civil Court. It is admitted by Mr. Sohail that Suit No. 14/ 1957 was pending in this Court at the time when the award was pronounced by the Arbitrators. Section 35 of the Arbitration Act reads as under "35.‑(1) No reference nor award shall be rendered invalid by reason only of the commencement of legal proceedings upon the subject‑matter of the reference, but when legal proceedings upon the whole of the sub‑matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire, all further proceedings in a pending reference shall, unless a stay of proce edings is granted under section 34, be invalid. (2) In this section the expression `parties to the reference' includes any persons claiming under any of the parties and litigating under the same title." According to the terms of this section, if legal proceedings have commenced between all the parties to the reference upon the whole of the subject‑matter of the reference in a Court of law, the arbitrators or the parties interested in the matter should move the Court under section 34 of the Arbitration Act to stay the proceedings but if they are not stayed. the Arbitrators are not entitled to proceed with the arbitration and to pronounce an award on the matters in dispute section 35 of the Arbitration Act is very clear on this aspect of the question. Mr. Sohail, the learned counsel for defendants 1 and 2, however, urged that under section 35 of the Arbitration Act no notice was received by the Arbitrators about the pendency of Suit No. 14/1957. Mr. Sohail argued that any notice to the Arbitrators given privately by any of the parties will not come within the provisions of section 35 of the Arbitration Act and the notice contemplated therein must be issued by the Court in which the suit in question was pending. This argument is without any force. Section 35 of the Arbitra tion Act states only this much, that if the Arbitrators have notice of the fact that a suit between the parties in respect of the matter pending before them is also pending before a Court of law, then e they must stop their hands unless the proceedings in the Court are stayed under section 34 of the Arbitration Act. This provision of law nowhere states that such a notice should be issued by the Court concerned. The principle recognised in section 35 of the Arbitration Act is based on the well known case of Doleman & Sons v. Osset Corporation ((1812) 2 K B 257), ,which has been acted upon for a long time although there was no specific provision to this effect in the earlier arbitration enactments or provisions. The idea behind it is that if a matter is pending before a private forum and before a Court of law, respect must be shown to the Court of law. Mr. Sohail further argued that the dispute before the Arbitrators was not the subject‑matter of Suit No. 14/1957. This ground also has no basis. I have already mentioned the reliefs claimed in Suit No. 14/1957. The subject‑matter before the Arbitrators was almost the same. Before the Arbitrators also the question was whether there existed a partnership between the parties. They had also to decide about the monies due to the parties from each other in respect of the partnership business. These very questions are also involved in Suit No. 14/1957. The learned counsel for the plaintiffs lastly urged that Suit No. 14/1957 pending in this Court is likely to be thrown out in view of section 32 of the Arbitration Act. He contended that under this provision of law no independent suit can lie. This question is not free from doubt. There is conflict of opinion at least in those cases where an agreement which also contains an arbitration clause, is attacked on the ground of fraud etc. I don't propose to express any opinion on this question, as it is not relevant for the decision of this case. It is, however, clear to me that the question whether the legal proceedings pending in a Court will succeed or not is not at all relevant for deciding the validity, of an award pronounced during the pendency of such proceedings. What is relevant is the fact whether the arbitrators had notice of these proceedings. This fact is admitted in the award itself. Moreover, the defendants have also relied on a notice Exh. 2 served on the arbitrators on 2‑4‑1957. In these circumstances there is no doubt left in my mind that the award is also hit by the provisions of section 35 of the Arbitration Act. After careful consideration of the objections raised on behalf of defendants, I am clearly of the opinion that the award in this case cannot be sustained and be made the rule of the Court. It therefore set aside the award and order the plaintiffs to bear the costs of the suit. All interim orders passed in this case will stand discharged. K. B. A. Award set aside.