Arbitration clause

Dispute arose between the parties, inter alia regarding claim of liquidated damages; invoice was issued but not honoured, which dispute allegedly, for the purposes of present proceedings, qualified as category of dispute(s) referable to the arbitrator(s)

Petitioner claimed that dispute could not be referred to the arbitrator(s) directly but only after exhausting the Alternate Dispute Resolution Mechanism, provided for in the Agreement by way of provisioning of Dispute Adjudication Boards

Respondent invoked Arbitration Clause, by issuing notice dated 06.08.2021, whereby same had indicated commencement of the Arbitration and nominated their Arbitrator and sought nomination by other party

Upon alleged non-compliance, respondent invoked jurisdiction of the Civil Court, seeking appointment of Arbitrator(s) through filing of application under S. 8 of the Act of 1940

Application was replied by the petitioner, wherein objection was raised regarding arbitrability of the dispute without resorting to the Dispute Adjudication Boards

Petitioner claimed that resort to Dispute Adjudication Boards was a condition precedent and unless exhausted, no resort to the Arbitration Clause could be made

Court allowed the application and proceeded to direct parties to submit nomination

Validity

Court proceeded to direct parties to nominate Arbitrator(s) without appreciating that dispute was not regarding the mechanism of appointment of arbitrator(s) or numbers thereof, but whether arbitration clause could be resorted to or triggered without fulfilling pre-arbitration condition claimed by the petitioner

Court had failed to assess, ascertain and conceptualize the scope and extent of applicability of S. 8 of Act of 1940 in the context of the controversy whether requirement of approaching Dispute Adjudication Board was mandatory or discretionary

Order was found deficient, which failed to address and appreciate that mere appointment of Arbitrator(s) would not resolve the controversy unless effectiveness of pre-arbitration clause was determined

Interpretation of S. 8 of the Act of 1940 could be undertaken by the High Court but such determination, in the circumstances, when jurisdictional question was not conceived, let alone discussed by the Court, would be prejudicial

Let the Court decided the scope of its jurisdiction under S. 8 of the Act of 1940

Judgments referred needed no discussion in the context of customized drafting of Arbitration Clause

Thus, civil revision was allowed by setting aside the impugned order and matter was remanded, where application of the respondent shall be deemed pending

Court, while deciding the matter afresh, would determine the question that whether S. 8 provided jurisdiction to decide the controversy under reference.

Facts: Lahore Development Authority (LDA) and respondent executed a contract for Package-2 of the Orange Line Metro Train Project containing an arbitration clause; upon disputes, arbitration proceedings commenced before an arbitral tribunal where the respondent filed multiple sub-claims, and LDA applied to the tribunal for separation/bifurcation and separate adjudication of each sub-claim; the tribunal dismissed that application, LDA challenged the said order before the civil court, which dismissed the challenge and affirmed the tribunal's decision, leading the LDA to file present civil revision petition before the High Court

Issues:

(i) "Whether an interlocutory/procedural order of an arbitral tribunal (refusing bifurcation of sub-claims) was independently amenable to challenge before the civil court?";(ii) "Whether the tribunal's order, made after expiry of the initial arbitral period but before formal enlargement of time by court, was legally sustainable?"; and (iii) Whether petitioner's application for separation and individual adjudication of sub-claims was rightly dismissed?"

Held: As regards issue (i); there was no independent substantive right to challenge each interlocutory or procedural order passed by the arbitral tribunal

The legislature's deliberate omission of such a right in the Act of 1940 underscored the principle that the arbitral tribunal was considered to be the master of its own procedure, particularly where it was composed of technical experts best suited to manage complex factual and procedural issues

Thus, the petitioner's application for separation of sub-claims constituted a challenge to the tribunal's case management discretion, which was not permissible under the Act

As per the principle of judicial non-intervention, arbitration had to proceed without interruption or judicial oversight of interlocutory matters

The application filed by the petitioner before the civil court challenging the arbitral tribunal's order dated was thus not maintainable and was rightly dismissed

Consequently, the present civil revision, being an extension of the same challenge, was also not maintainable

As regards issue (ii); where the extension in time was granted by court after the expiry of the original period but before the making of the award, the order operated retrospectively, thereby validating the proceedings conducted beyond the original time limit

Similarly, where the extension was granted after the making of the award, it encompassed the situation where the award was rendered after the expiry of time and the subsequent enlargement by the Court related back, rendering the award valid as if made within the extended period

In such circumstances, there could be no doubt that the extension of time operated retrospectively

As regards issue (iii); while subscribing to the principle of minimal judicial intervention in arbitral proceedings, High Court observed that the expert arbitral tribunal was the master of its own procedure

In the absence of any allegation of bias, violation of the principles of natural justice, or a demonstrable and grave prejudice that could not otherwise be compensated, a court should be loath to interfere with such procedural determinations

Therefore, on the merits of the application itself, High Court found no compelling reason to substitute its own view for that of the expert arbitrators

Impugned order was passed in accordance with law

Present civil revision petition was dismissed, in circumstances.

Petitioners / defendants were aggrieved of dismissal of their application seeking rejection of plaint on the basis of arbitration clause available in the agreement to sell

Plea raised by petitioners / defendants was that the precedent judgment relied upon by Trial Court was not applicable

Validity

Order in question was based solely by placing reliance on a judgment which did not discuss or lay down the principle(s) of law subject matter of the case in hand and was distinguishable on facts mentioned therein

Trial Court had given no other reason for reaching the conclusion that how that case law was relevant, thus, making reference to such a case-law based on previous judgment to reach the conclusion was not sustainable

Oder in question was devoid of plausible reasoning and patently ambiguous and there was no explanation in the same as to how the conclusion was reached in the matter and was also based on misreading or non-reading of judgment relied upon in the same, hence such reliance on the judgment was misplaced

Jurisdiction vested in Trial Court had not been exercised properly

High Court set aside order in question and the matter was remitted to Trial Courtfor decision afresh on the application filed by petitioners / defendants

Revision was allowed accordingly.

Where foreign investment was involved, delays may jeopardize investor confidence and hamper inflow of modern technology, management practices and advanced marketing techniques into the country

High Court with the consensus of parties appointed a Mediator to resolve all outstanding disputes between the parties in line with the jurisprudential approach laid down by Courts

High Court directed the mediator to convene a meeting between parties and conclude the medication proceedings within a period of four weeks

Constitutional petition was disposed of accordingly.

It was necessary that appellant / defendant should not have disentitled itself from doing so either by filing written statement or by taking any other step in the proceedings

Application of appellant / defendant to Trial Court under S. 34 of Arbitration Act, 1940, was filed "before filing a written statement or taking any other step in the proceedings"

Words "taking any other steps in the proceedings" did not include each and every step, it must be such a step which clearly and unambiguously manifested intention to waive benefit of arbitration agreement and to proceed with the suit

Taking other steps in suit proceedings connoted the idea of doing something in aid of the progress of suit or submitting to jurisdiction of Trial Court for the purpose of adjudication of merits of the controversy in suit

Once a party exercised option to invoke arbitration clause in terms of S. 34 of Arbitration Act, 1940, that was a manifestation of its readiness and willingness to do all things necessary for the proper conduct of arbitration

If Trial Court was satisfied that dispute pending before it in a suit (legal proceedings) should be decided by arbitration in accordance with arbitration agreement and parties were ready and willing to do all things necessary for proper conduct of arbitration, it could make an order staying the proceedings before it

Effect of an order under S. 34 of Arbitration Act, 1940, was of a stay of the suit

High Court set aside order passed by Trial Court whereby appellant's / defendant's application under S. 34 of Arbitration Act, 1940, was dismissed and proceedings in the suit instituted by respondent/plaintiff were stayed

Appeal was allowed, in circumstances.

Appellant/plaintiff company was awarded contract for construction of carriageway but certain differences led to filing of suit

Ad-interim injunction issued by Trial Court in favour of appellant/plaintiff was set aside under S. 34 of Arbitration Act, 1940

Validity

Appellant/ plaintiff did not apply to respondent/defendant (National Highway Authority) for extension of time for completion of the project

If NHA and/or Engineer, as the case was, had declined to accede to genuine request of appellant/plaintiff for the grant of extension in time, then appellant/plaintiff could have been in a good possible position to have blamed NHA for causing undue delay and creating hurdles in the way of appellant/plaintiff towards completion of project

In absence of such resort regarding seeking extension in completion period, appellant/plaintiff exposed itself to unsavory consequences, for which NHA could not be held responsible

It was neither a statutory nor a mandatory requirement of law that application under S. 34 of Arbitration Act, 1940, must specify disputes arising between the parties

Mere non-mentioning of disputes in application under Arbitration Act, 1940 would not render the application bad ipso facto

Court, by itself perusing arbitration clause in the contract and claim raised in the suit, would determine whether claim brought in suit, sought to be stayed or otherwise, was within the submission to arbitration

Trial Court did not just stay proceedings in the civil suit, but had also put aggrieved party at liberty to approach concerned forum by referring the matter to arbitration if so needed

High Court declined to interfere in order passed by Trial Court as the same was not suffering from any legal infirmity

Appeal was dismissed, in circumstances.

Petitioner company assailed execution of work assigned to respondent company on the basis of contract existing between petitioner company and respondent authorities

Validity

When an alternative and equally efficacious remedy is open to a litigant, he should be required to pursue that remedy and not invoke Constitutional jurisdiction of High Court for issuance of a writ

Where there exists an arbitration agreement, parties are required to get their disputes arising out of the contract adjudicated by domestic forum created by them

Existence of arbitration clauses in contract between petitioner company and respondent authorities left no option to High Court but to point the parties in the direction of arbitration

Constitutional petition was dismissed in circumstances.

Petitioner assailed letter issued by respondent whereby it had been declared that its contractual relationship with the petitioner for supply of Liquefied Petroleum Gas (LPG) had come to an end

Validity

High Court, in exercise of its constitutional jurisdiction, could not direct respondent to continue its contractual relationship with the petitioner despite the fact that the period for which the contract was executed had lapsed

If petitioner was of the view that the decision of respondent not to further extend the term of contract was in violation of the provisions of contract, at best, the petitioner's remedy laid in damages and not by seeking a writ of mandamus directing respondent to continue its contractual relationship with the petitioner

Such dispute could be resolved in accordance with the arbitration clause of the contract

Constitutional petition was dismissed, in circumstances.

Petitioner assailed letter issued by respondent whereby it had declared that its contractual relationship with the petitioner for supply of Liquified Petroleum Gas (LPG) had come to an end

Validity

High Court, in exercise of its constitutional jurisdiction, could not direct respondent to continue its contractual relationship with the petitioner despite the fact that the period for which the contract was executed had lapsed

If petitioner was of the view that the decision of respondent not to further extend the term of contract was in violation of the provisions of contract, at best, the petitioner's remedy laid in damages and not be seeking a writ of mandamus directing respondent to continue its contractual relationship with the petitioner

Such dispute could be resolved in accordance with the arbitration clause of the contract

Constitutional petition was dismissed.

Petitioner sought declaration to the effect that non-provision of leftover Liquefied Petroleum Gas (LPG) from the share of respondent was unlawful and that the petitioner had preferential right for the provision of the leftover LPG

Validity

Dispute between the petitioner and respondent had arisen from and was related to an agreement

LPG purchase agreement provided that the contractual dispute between the petitioner and respondent was to be settled amicably failing which the dispute shall be settled through arbitration

Primary dispute agitated by the petitioner in the writ petition was to be resolved in accordance with the agreement between the parties

True, the agreement required the producers of LPG base-stock to sell LPG to licensed LPG marketing companies but that placed no obligation on the respondent to sell LPG to the petitioner to the exclusion of any other licensed LPG marketing company without a tender bidding process

Constitutional petition was dismissed, in circumstances.

Grounds and factors to be considered by a court to determine whether a limitation on dispute resolution imposed by a clause or arbitration clause in an agreement caused undue hardship, and thus was invalid for public policy reasons.

Defendants after availing two opportunities for filing of written statement, moved application under O. VII, R. 11, C.P.C. seeking rejection of plaint on grounds that suit was not maintainable in view of arbitration clause available in contract agreement

Application filed by defendants under O. VII, R. 11, C.P.C. was treated as an application under S. 34 of Arbitration Act, 1940 and proceedings were stayed

Validity

Mere wrong mentioning of provision of law could not deprive a party from relief for which it was otherwise entitled

Such was not a matter hinging upon wrong mentioning of a provision as defendants with conscious mind moved application by invoking provision of O.VII, R. 11 C.P.C.

Defendants had no intention to seek stay of proceedings rather they while canvasing multiple reasons, including arbitration clause of agreement, sought rejection of plaint

Application moved by defendants could not be treated as application under S. 34 of Arbitration Act, 1940 and proceedings could not be stayed

High Court set aside judgment and decree passed by Trial Court resulting into dismissal of application filed by defendants

Revision was allowed in circumstances.

Petition for reference of dispute to the arbitrator was moved by company but same was dismissed having not been accompanied with a resolution of Board

Petitioner filed subsequent petition which was dismissed on the ground of res judicata

Validity

Held, matter on which plea of res judicata was found should have been finally adjudicated and decided in previous proceeding

Principle of res judicata could not be pressed into service unless it was established that matter in issue was earlier adjudicated on merits and conclusively decided

Petitioner's subsequent application could not have been dismissed on the ground of res judicata, in circumstances

Parties to an agreement could enforce the arbitration clause contained therein by filing an application under S.20 of Arbitration Act, 1940

Person who had not entered into an arbitration agreement could not enforce it by instituting arbitration proceedings with the intervention of the Court

Petitioner was not party to the arbitration agreement and it was not competent to file present application

Right to arbitrate was a contractual right and it could not be enforced by anyone who was not a party to the contract containing the arbitration clause

Revision was dismissed in circumstances.

Subsequently plaintiff filed application for restoration of suit and sought appointment of Arbitrator under Ss. 8 & 20 of Arbitration Act, 1940

Validity

Once parties were referred to Arbitrator, the purpose / object of Arbitration Act, 1940, was effectively achieved and parties were prevented to obtain a decree from Court contrary to their own agreement that their disputes were to be adjudicated by a private party as provided in arbitration agreement

Order on application under S. 34 of Arbitration Act, 1940, and / or on application under S. 20 of the Act, was one and the same

Purpose of both the provisions was to seek enforcement of an 'arbitration clause/agreement' against the party guilty of avoiding / refusing arbitration for resolution of their dispute

High Court declined exercise of discretion under S. 25 of Arbitration Act, 1940

Plaintiff had repeatedly approached the High Court by suppressing arbitration agreement and attempted to obtain a decree from a civil Court despite the fact that the suit was barred under S. 32 of Arbitration Act, 1940

Suit was dismissed in circumstances.

If defendant filed written statement or took a 'step in the proceedings' then he would not be entitled thereafter to seek a stay of the suit

Where counsel appearing for the party had sought adjournments for filing a written statement and had obtained time on more than one occasion for such purpose then application for stay of suit would not be maintainable

Defendant ought to have applied for setting aside the order for striking off defence

Filing of such application could not be considered to be a "step in the proceedings"

Had the defendant made such an application and said order had been set aside then he could not have been precluded to file an application under S.34 of Arbitration Act, 1940

Defendant could not have sought stay of the proceedings without having the said order set aside

Parties were presumed to be aware of the contents of the order sheet maintained by the Trial Court

Once defendant had gone through the suit then he must at the earliest make up his mind whether or not to submit to the jurisdiction of the court

If defendant wanted to opt for the dispute resolution mechanism contained in the contract then he should take corrective steps and inform the court without any delay about his intention to seek stay of the suit

No one could be stopped for seeking an adjournment for filing an application under S.34 of Arbitration Act, 1940

If after appearance of defendant suit was adjourned for filing written statement without expressing his intention of filing an application under S.34 of Arbitration Act, 1940 then he could be said to have taken a step in the proceedings

Defendant remained silent before the Trial Court for six occasions and case was adjourned for filing written statement

Trial Court was correct in dismissing the application for stay of proceedings in the suit

Appeal was dismissed in circumstances.

Arbitration clause will be of no importance and significance unless specific application at initial stage of case is moved requesting court to refer case for arbitration.

When parties had agreed to decide their dispute in a particular manner then they must surrender themselves to the forum voluntary chosen by them

Arbitration agreement was on record wherein it had been provided that parties should resolve their dispute through arbitrator

Trial Court was left with no option but to allow the application to resolve the dispute through arbitration clause

No plausible objection had been raised with regard to the legality of impugned order nor regarding integrity, veracity or competency of the arbitrator appointed by the Trial Court

No final award had been submitted in the court and it would be premature to make any observation with such regard

Appeal was dismissed in circumstances.

Expression "at any time before filing a written statement or taking any other steps in the proceedings" contained in S.34 of Arbitration Act, 1940

Scope

Contention of plaintiff was that application under S.34 of Arbitration Act, 1940 was not filed on the first date of hearing

Application filed under S.34 of Arbitration Act, 1940 was accepted by the Trial Court

Validity

If a party intended to enforce an arbitration clause then it must do so at the earliest possible moment prior to filing written statement or taking further steps in the proceedings

Defendant thus moved application under S.34 of Arbitration Act, 1940 on the very first date of hearing fixed by the Trial Court for filing of written statement

Defendant thus invoked the arbitration clause at the earliest possible moment without acquiescing the proceedings of suit

Impugned order passed by the Trial Court did not suffer from factual or legal infirmity, material irregularity or jurisdictional error

Appeal was dismissed in limine.

Defendants did not make application for stay of suit in the first instance but they filed memo of appearance and statement along with para-wise comments copy of which was supplied to the plaintiff

Present application under S. 34 of Arbitration Act, 1940 had been filed at a belated stage

Section 20 of Arbitration Act, 1940 was not applicable as suit had already been filed

Application filed under Ss.20 & 34 of Arbitration Act, 1940 read with S. 151, C.P.C. was dismissed in circumstances.

When dispute between the parties had arisen and there was mandatory clause in the agreement for execution of work to refer the dispute to the arbitration in the manner and mode provided in the said clause, then parties were under obligation to have resorted to the proceedings to be carried out by the arbitrator for resolution of their controversies as per terms and conditions of the clause of the agreement.