1997 PLP 1177 (CLC)

"Arbitration.‑‑In case of arbitration each party will appoint his own arbiter and a third arbiter will be appointed with the agreement of both parties." The present appellant filed an application dated 19‑3‑1996 under section 34 of the Arbitration Act, 1940, supported by an affidavit for stay of the proceedings in the civil suit and for ,reference of the subject‑matter of the dispute in the civil suit for arbitration. The learned Civil Judge 1st Class, Islamabad, vide his order dated 17‑4‑1996 dismissed the application of the present appellant. Hence this first appeal.

3. Ch. Fazal‑e‑Hussain, Advocate, the learned counsel for the appellant has contended that the impugned order dated 17‑4‑1996 was contrary to the provisions of section 34 of the Arbitration Act, 1940, which conferred a substantive right on the appellant to demand the subject‑matter of dispute to be referred to the arbitration. He relied on the judgment of the Hon'ble Supreme Court in the case of Pakistan International Airlines Corporation v. Messrs Pak Saaf Dry Cleaners (PLD 1981 SC 553). It was further contended that the finding of the learned Civil Judge was incorrect in that the dispute was not covered by the arbitration clause of the agreement. He relied on the cases of the Printers (Mysore) (Private) Ltd. v. Pothan Joseph (AIR 1960 SC 1156) and Anjuman Faizul Islam (Regd.). Rewalpandi through Secretary v. Messrs Building Artisans Ltd, and another (PLD 1994 Lahore 122) in which it was held that the dispute for arbitration covered the dispute regarding interpretation and the effect of the terms of the contract. The learned counsel emphasised that the jurisdiction of the Civil Court was not ousted even where the matter in dispute was referable to arbitration. He supported his contention by referring the case of The Universal Life & General Insurance Co. Ltd., Lahore v. Ejaz Mahmood (PLD 1978 Lahore 475). The learned counsel took pains to refer to the judgment in the case of Abdul Qayyutti Khan V. Government of Punjab through Secretary, Local Government and 1Zural Development Department and another (PLD 1995 Lahore 205) to point out that the Arbitration Act, 1940 provided three modes of arbitration viz.(a) Arbitration with the intervention of. the Court where there is no suit pending; (b) Arbitration in a suit pending before a Court; and (c) Arbitration withoyt the intervention of the Court. The learned counsel stated that the grant or refusal of stay of proceedings under section 34 of the Arbitration Act was dependent upon peculiar facts and circumstances of each case and that the learned Civil 4udge was required to make objective assessment and come to conclusion for the grant or refusal of stay of proceedings and while doing so the learned Civil Judge fell into error by ignoring the interpretation of law laid down in the case of Messrs Eckhardt & Co.. Marine GmbH v. Muhammad Hanif (PLD 1993 $C 42) and the case of Messrs Rupali Polyester Ltd. v. Dr. Nael G. Bunni and others (PLD 1994 Lahore 525). It was stressed that the learned trial Court was required to follow the dictum laid down by a Division Bench of the Sindh High Court in a judgment reported in Amanullah Piracha and an other v. Mrs. Tasneem Baig and another (1988 MLD 1552) whereby the impugned order of a learned Single Judge was reversed and the suit was stayed under section 34 of the Act. He categorically stated that the appellant was ready and willing to do all things necessary to the proper conduct of the arbitration proceedings in accordance with the provisions of the Arbitration Act. He submitted that the learned trial Court was not correct in taking the view that the agreement dated 9_8‑1988 did not provide as to when the arbitration clause was to be invoked and that the same was vague. According to the learned counsel, the impugned order is a colourable exercise of powers vesting in a Court of law and that the application of the appellant under section 34 filed at the earliest stage of the proceedings ought to have been granted.

4. Mr. Samad Mahmood, Advocate, the learned counsel for the respondents has defended the impugned order dated 17‑4‑1996. He stated that the arbitration clause could not be invoked in the present case inasmuch as defendant No.2/respondent No.2 was not a party thereto. He further stated that the arbitration clause was uncertain, vague and could not be treated to be an arbitration clause within the meaning and scope of the Arbitration Act. He further argued that clause (13) of the agreement dated 9‑8‑1988 was not available to the appellant for making an application under section 34 of the Arbitration Act. 5. 1 have heard the learned counsel for the parties at quite some length and have also perused the available record. The question to be determined is as to whether there. was any arbitration agreement as spelt out from clause (13) of the agreement dated 9‑8‑1988 executed between the appellant and respondent No. l which could be made the basis for reference of arbitration under section 34 of the Act. The term "arbitration agreement" has been defined in clause (a) of section 2 of the Arbitration Act, 1940, which reads as under:‑‑ "2(a) 'arbitration agreement' means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not. " Section 34 of the Arbitration Act provides that "where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and was still ready on proper conduct of the arbitration, such authority may make an order staying the proceedings". The. provisions of section 2(a) and section 34 of the Act, 1940, are quite clear in their meaning and scope. There has to be a written agreement to submit present or future difference to arbitration. Further, the matter of dispute is referable only qua the parties to the arbitration agreement or any party claiming under any of such parties. An application under section 34 of the Act has to be made before filing a written statement or taking any further steps in the proceedings where an applicant is found to be ready and willing to do all things necessary to the proper A conduct of the arbitration at the time of commencement of the proceedings as well as at the time of making of an application under section

34. The nature of dispute which is to be referred has to be specified or spelt out from the arbitration agreement itself. There has to be some definite area of dispute which the parties have agreed to refer to arbitration. Nothing is to be left to the conjectures and surmises of the parties to the agreement. An arbitration agreement, which is uncertain, vague, indeterminate or indefinite cannot be made basis for referring any differences or disputes to arbitration. In the case of Heyman and another v. Darwins Ltd. (1942) 1 All England Law Reports 337) Viscount Simon, L.C speaking for the House of Lords very well explained the scope of the disputes referable to arbitration in the following words:‑‑ "An arbitration clause is a.written submission, agreed to the parties to the contract, and, like other written submissions to arbitration, must be construed according to its language and in the light of the circumstances in which it is made. If the dispute is as to whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the` contract is thereby denying that he has ever joined in the submission. Similarly, if one party to the alleged contract is contending that it is void ab initio (because, for example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself is also void. If, however, the parties are at one in asserting that they entered into a binding contract, but a difference has arisen between them as to whether there has been a breach by one side or the other, or as to whether circumstances have arisen which have discharged one or both parties from further performance, such differences should be regarded as differences which have arisen ' in respect of, or 'with regard to', or 'under' the contract, and an arbitration clause which uses these, or similar, expressions, should be construed accordingly. By the law of England (though not, as I understand, by the Law of Scotland), such an arbitration clause would also confer authority to assess damages for breach, even though it does not confer upon the arbitral body express power to do so' I do not agree that an arbitration clause expressed in such terms as above ceases to have any possible application merely because the contract has 'come to an end', as, for example, by frustration. In such cases it is the performance of the contract that has come to an end. If, therefore, when parties have entered into a contract, circumstances arise before the performance of the contract is completed which, in the view of one party, bring the contract to an end by frustration and, therefore, discharge both parties from further performance, but the other party does not agree, this is a difference about the applicability of the implied term, and is just as much within the arbitration clause as if it were a difference about an express term of the, contract." In the cases of Middle East Trading Co. v. The New National Mills Ltd. (AIR960 Bombay 292) and Ganesh Chandra Dey and another v. Kamal Kumar Agarwalla (AIR 1971 Calcutta 317), it was held that the Court would refuse to stay a suit where the arbitration clause was vague and uncertain and it was just and equitable that the dispute relating to the partnership should be decided by the Court. In the case of Babu Lal Pardhan v. Badri Lal Par han and another (AIR 1919 Patna 74) and In re. Serikrishna Khanna and Brothers (AIR 1934 Sindh 7 29), it was held that when the meaning of an arbitration agreement was not certain or caPable of being made certain, such an agreement was void. In the in case of Luxmi Chand Baijnath v. Kishanlal Sohonlal (AIR 1955 Calcutta 588) was held that an agreement for reference to arbitration was not enforceable where there was no indication as, to what were the points of dispute refereable to arbitration or where there was no indication how the choice was to be made. The House of Lords in the case of G. Scammel & Nephew v. H.C. & T.G. Ousten (1941 Appeal Cases 251) took the view that "in order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty unless this can be done, it would be impossible to hold that the contracting parties had the same intention; in other words, the consensus adidem would be a matter of mere conjecture". By looking at the arbitration clause (13) of the agreement dated 9‑8‑1988 one cannot find out as to what disputes were referable to arbitration, when the choice was to be made and also the nature of differences referable to arbitration. Clause (13) of the agreement is so much nebulously worded that one cannot ascertain as to the terms of reference which can possibly fall within the arbitration clause. In my view, the arbitration clause (13) of the agreement dated 9‑8‑1988 is uncertain, meaningless and unspecific as to its scope. It is no arbitration agreement at all. An, arbitration agreement between the parties constitutes a contract within the meaning of the Contract Act. Under section 29 of the Contract Act, the B agreements, the meaning of which is not certain or capable of being made certain are void. The same principle would apply to the arbitration clauses in an agreement. Therefore, no ,exception can be taken to the view taken by the learned Civil Judge in that the arbitration agreement containing clause 13 of the agreement dated 9‑8‑1988 is vague. The judgments referred to by the learned counsel for the appellant are not relevant for the purpose of deciding the present controversy. Such an agreement could not form basis for moving an application under section 34 of the Arbitration Act. ‑

6. In this view of the matter, the appeal fails and is hereby dismissed with no order as to costs. A.A./H.23/L Appeal dismissed