Appointment of arbitrator

2025 CLD 138 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S.20(4)Cantonments Act (II of 1924), S.84Appointment of arbitrator

Dispute arose between the parties with regard to initial work order and subsequent changes/enhancement in the costs for the project

Appointment of arbitrator was to be made in such manner as may be agreed upon between the parties in terms of the contract

Contention of the appellant was that an independent arbitrator ought to have been appointed instead of appointment of the arbitrator in terms of the contract owing to his biasness and partiality being part of the respondent-department as its appellate authority

Validity

Whole object underlying the Arbitration Act, 1940 (Act) is to enforce the arbitration agreement whereby the parties bind themselves down to have their disputes, arising out of transaction to which such an agreement is applicable, adjudicated upon and decided by the domestic tribunal

Under clause (4) of S.20 of the Act, power of the Court to order reference to an arbitrator appointed by itself did not confer the authority on the Court to substitute the original agreement of the parties by an entirely new agreement of its own choice

If the parties out of their free-will and consent appointed a third person knowing fully well his relation with any one of the parties to dispute, such arbitration agreement shall not be invalided on the principle of bias and the arbitrator cannot be removed on this ground

Known interest of an arbitrator did not in any way invalidate his appointment, and it was only in a case where such an interest was concealed or came into existence after the appointment, that the appointment was rendered invalid or was liable to be revoked

Appellant was well aware of the authority and department of the arbitrator from the very first date and the Arbitrator was not the official of the respondent-department rather he was an Appellate Authority under S.84 of the Cantonments Act, 1924, who was appointed by the Government as defined under Pakistan Cantonment Service Rules, 1952

Arbitrator was not a participant in the meetings of Cantonment Board, therefore, any kind of allegation of biasness or partiality on his part was purely hypothetical and presumptuous, without any kind of evidence at all

Parties had already appointed the arbitrator for adjudication of the disputes arising out of the agreement and the appellant could not wriggle out from his commitment, and was precluded from approaching the court for appointing an arbitrator other than the arbitrator named in the agreement

Appellant could approach the already appointed arbitrator for redressal of his grievance and thereafter if there appeared any instance of biasness he could approach the Court for redressal of his grievance under relevant provisions of law

Appeal was dismissed, in circumstances.

2025 CLC 95 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S.20(4)Cantonments Act (II of 1924), S.84Appointment of arbitrator

Dispute arose between the parties with regard to initial work order and subsequent changes/enhancement in the costs for the project

Appointment of arbitrator was to be made in such manner as may be agreed upon between the parties in terms of the contract

Contention of the appellant was that an independent arbitrator ought to have been appointed instead of appointment of the arbitrator in terms of the contract owing to his biasness and partiality being part of the respondent-department as its appellate authority

Validity

Whole object underlying the Arbitration Act, 1940 (Act) is to enforce the arbitration agreement whereby the parties bind themselves down to have their disputes, arising out of transaction to which such an agreement is applicable, adjudicated upon and decided by the domestic tribunal

Under clause 4 of S.20 of the Act, power of the Court to order reference to an arbitrator appointed by itself did not confer the authority on the Court to substitute the original agreement of the parties by an entirely new agreement of its own choice

If the parties out of their free-will and consent appointed a third person knowing fully well his relation with any one of the parties to dispute, such arbitration agreement shall not be invalided on the principle of bias and the arbitrator cannot be removed on this ground

Known interest of an arbitrator did not in any way invalidate his appointment, and it was only in a case where such an interest was concealed or came into existence after the appointment, that the appointment was rendered invalid or was liable to be revoked

Appellant was well aware of the authority and department of the arbitrator from the very first date and the Arbitrator was not the official of the respondent-department rather he was an Appellate Authority under S.84 of the Cantonments Act, 1924, who was appointed by the Government as defined under Pakistan Cantonment Service Rules, 1952

Arbitrator was not a participant in the meetings of Cantonment Board, therefore, any kind of allegation of biasness or partiality on his part was purely hypothetical and presumptuous, without any kind of evidence at all

Parties had already appointed the arbitrator for adjudication of the disputes arising out of the agreement and the appellant could not wriggle out from his commitment, and was precluded from approaching the court for appointing an arbitrator other than the arbitrator named in the agreement

Appellant could approach the already appointed arbitrator for redressal of his grievance and thereafter if there appeared any instance of biasness he could approach the Court for redressal of his grievance under relevant provisions of law

Appeal was dismissed, in circumstances.

2024 CLD 1346 ISLAMABAD Judicial Precedent

Ss.8(2) & 20Appointment of ArbitratorJurisdiction of Civil CourtScopeContract price variation on account of legislative changes and market-based currency fluctuationDistinction

Issues regarding contract interpretation including whether a party is entitled to compensation for escalation based on legislative changes or currency fluctuation

Issue reserved for arbitrator

Civil Court in an application under Ss.8 & 20 of the Arbitration Act, 1940 (Act), only has to see whether a dispute exists and whether it is covered by the arbitration agreement, and it is not meant to delve into the merits of the dispute itself, and threshold of the examination has to be extremely low to see only whether the dispute raised is one which, under the terms of the dispute resolution clause, could be considered a dispute under or in relation to that contract and can by no means extend to interpretation of the contract clauses to examine whether that interpretation justifies or precludes the claim in dispute, which is the arbitrator's job

Assertion of a claim by one party and the repudiation thereof by the other party constitutes a dispute warranting the arbitration clause to become operative

While proceeding the matter to arbitration, one has to be careful with any observations on the merits of the case, but it needs to be said that there can be a distinction between a variation to the contract price occurring due to a change in legislation and variation on market-based currency fluctuation in the ordinary course

Consequences of changes in legislation on the foreign cost component and the consequences of exchange rate fluctuations due to ordinary market movements are not necessarily the same thing

Question as to whether this distinction held in the case in hand and whether the petitioner was entitled to any escalation on that basis on the proper construction of the Contract was a job reserved for the arbitrator and not for the Civil Court

Civil revision was allowed, in circumstances.

2023 PLD 105 ISLAMABAD Judicial Precedent

Ss. 8, 9, 20 & 30Award, setting aside ofAppointment of arbitratorProcedure

Dispute was with regard to award given by sole arbitrator which award was set aside by Trial Court on the ground that sole arbitrator could not have been appointed

Validity

Application under S.8(2) of Arbitration Act, 1940 for appointment of arbitrator(s) could be made only if arbitrator(s) who neglected or refused to act or had become incapable of acting or had died, had been appointed with the consent of the parties or by the Court under S.8 or 20 of Arbitration Act, 1940 but not where such arbitrator had been appointed by any party without the other part's consent

Provision of S. 8 of Arbitration Act 1940, referred to power of Court to appoint an arbitrator or an umpire in case of neglect, refusal to act, incapability of acting, death of the appointed arbitrator, when parties did not concur in appointment of an arbitrator or umpire

Provision of S. 9 of Arbitration Act 1940, empowered a party to appoint his arbitrator as the sole arbitrator and was applicable only when arbitration agreement provided that reference would be to two arbitrators, one to be appointed by each party

Arbitration clause in agreements between parties provided for two arbitrators to be appointed by each of the parties, element of consent of parties was lacking, therefore, provision of S. 8 of Arbitration Act, 1940 was of no relevance

High Court maintained order setting aside of the award rendered by sole arbitrator

Appeal was dismissed, in circumstances.

2023 PLD 1 ISLAMABAD Judicial Precedent

Ss. 5, 11, 20, 30 & 39 (iv)Appointment of arbitratorDesignated arbitrator, change ofInfluence on arbitrator

Dispute was with regard to appointment of arbitrator other than the one nominated in arbitration agreement between the parties and influence of National Accountability Bureau over the arbitrator so appointed

Validity

Basic idea of arbitration was settlement of disputes by tribunals chosen by parties themselves whose decision was to be accepted as final between themselves

Due weight had to be given to arrangement made by parties themselves relating to personnel and machinery for settlement of their disputes

In the case of a named arbitrator, reference had to be made to him and a party was precluded from approaching the Court for appointing an arbitrator other than the named arbitrator

Once a party entered into an agreement with eyes wide open, it could not wriggle out of the situation on the claim that designated person would not be impartial or objective

If at the conclusion of arbitration proceedings respondent felt that arbitrator had not acted independently or impartially or had suffered bias while rendering the award, it was always open to it to take such as a ground in its application under S. 30 of Arbitration Act, 1940 for setting aside the award

During the course of arbitration proceedings, if arbitrator had proceeded with the reference in a manner as to give reason to respondent to believe that he was misconducting the proceedings, he could file application under S.5 of Arbitration Act, 1940 to revoke authority of arbitrator

Application under S. 11 of Arbitration Act, 1940 could also be filed for removal of arbitrator

If NAB were to interfere with arbitrator, it would not just amount to perversion of the course of justice but would also be an actionable wrong

Where the arbitrator let himself be influenced by such a rank outsider to the contract while rendering an award, it would amount to "misconduct" not just as is understood in the arbitration parlance but also in the true sense of the word, i.e. wrongdoing

Very essence of impartial adjudication was defeated where an adjudicator would allow his mind to be influenced by a third party who did not have any statutory power or contractual authority to administer the contract

Adjudicator must not let himself be coerced into deciding a claim one way or the other

High Court maintained order of Trial Court referring the disputes between the parties to arbitration but set aside appointment of arbitrator other than the one designated by parties

Appeal was allowed accordingly.

2018 PLD 1 ISLAMABAD Judicial Precedent

S. 20Appointment of arbitratorNon-compliance of a pre-conditionEffect

Where dispute resolution mechanism enshrined in contract provides for disputes between parties to contract to be referred to engineer/consultant before they can be referred to arbitration and one of the parties to contract without exhausting pre-condition of reference to engineer/consultant files application under S.20 of Arbitration Act, 1940 seeking for appointment of arbitrator and a reference of dispute to arbitration, court generally turns down such application as premature.

2016 MLD 1157 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 17, 20, 21 & 26-AAppointment of arbitratorOrder of referencePower to supersede arbitration when award was void or set asideAward to set out reasons

Trial court, rejecting objection filed by defendant, decreed the suit making award of arbitrator rule of court; appellate court maintained judgment and decree of Trial Court

Validity

Under S. 21 of Arbitration Act, 1940, all parties interested must be in agreement in sending the matter in difference between them to Arbitrator for its resolution

Consent of plaintiff and defendant-Society had not been obtained for sending the matter to arbitration

All parties interested must have been agreed that the matter would be referred to arbitrators, which was lacking in the present case

Appointment of arbitrators and referring the matter in issue to them was in violation of S. 21 of Arbitration Act, 1940

Arbitrators, while proceeding with the arbitration, had also not made any effort to associate plaintiff and respondent in arbitration proceedings, which had badly affected validity of the award

Section 17 of Arbitration Act, 1940 cast duty upon court to examine the award even on its own in order to see as to whether the same suffered from any patent illegality necessitating either setting aside of the award or its remission to Arbitrator, even when no objection had been filed by any of the parties

Under S. 26 of Arbitration Act, 1940, the arbitrators were duty bound to state in the award the reasons for the same in sufficient details to enable court to consider any question of law arising out of the award

Award in question lacked necessary reasons as required under S. 26-A of Arbitration Act, 1940

Trial court had discarded objection of defendant in cursory manner without applying its judicial mind in terms of S. 17 of Arbitration Act, 1940

Courts below, while making the award rule of court, had acted in illegal and unlawful manner

High Court, holding reference of the matter to arbitration and award rendered on basis thereof illegal and unlawful, set aside impugned judgment and decrees of both courts below and restored proceeding of the suit for decision afresh

Revision petition was allowed, in circumstances.

2016 MLD 1157 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 19,20 & 21Parties to suit may apply for order of referenceAppointment of arbitratorOrder of reference

Arbitration is a bilateral arrangement for investigation and determination of a dispute or disputes between parties by one or more persons chosen by them, while avoiding the ordinary procedure for resolution of dispute

Arbitral tribunal derives jurisdiction either from arbitration agreement or reference transmitted to him with consent of litigating parties

Proceedings before arbitral tribunal are although not to be regulated in accordance with general principles provided under C.P.C., but such tribunal cannot be absolved from its liability to decide dispute in a just and fair manner.

2015 CLD 1743 QUETTA-HIGH-COURT-BALOCHISTAN Judicial Precedent

S. 20Agreement between department of Provincial Government and Private Limited CompanyAppointment of arbitratorArbitration clause in the agreementScopeTrial Court appointed arbitrator who filed award which was made rule of courtTrial Court was bound to consider whether arbitration agreement should be filed in the court or notArbitrator could be appointed by the court if parties were agreed for the same

Mode, manner and mechanism for selection of arbitrator had to be adhered from the agreement if arbitration clause did not name an arbitrator

Trial Court, in the present case, without considering the dispute between the parties, and arbitration clause of the agreement, had unilaterally appointed arbitrator thus had conducted the proceedings without adhering to the clause of contract/agreement

Trial Court was required to have first determined its competency/jurisdiction over the dispute prior to appointment of arbitrator which had not been done

Award given by the such arbitrator was void ab initio

Parties must stick to the agreement/contract entered into between them in case of arbitration with intervention of court

If arbitration clause had named an arbitrator and had provided for the manner in which the arbitrator was to be chosen and appointed, parties were bound to act accordingly

Primary duty of arbitrator under the deed of reference was to determine whether he had jurisdiction with regard to dispute arising out of an agreement

Trial Court was bound to consider whether arbitrator had exceeded his jurisdiction or he had jurisdiction to adjudicate upon the matter

Trial Court had decided the question of competency of reference as well as appointment of arbitrator without reference to the agreement

Impugned order passed by the Trial Court was set aside and award was rejected

Case was remanded to the Trial Court with the direction to first decide as to whether under the clause of agreement it had jurisdiction to appoint an arbitrator other than provided in the clause of said agreement and then decide the matter within a specific period

Appeal was accepted accordingly.

2013 CLD 1451 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 20Appointment of arbitratorContract, termination ofEffect

Plaintiff invoked arbitration clause in contract between parties and sought resolving of dispute by appointment of arbitrator

Plea raised by defendant was that by termination of contract, arbitration clause did not survive

Validity

Termination/cancellation could occur due to breach in contractual obligations by any of the parties to contract which in fact could lead towards a dispute and in order to resolve dispute between parties and even for determination of their rights and liabilities and even a wrongful termination could also be made subject matter of arbitration proceedings otherwise the whole purpose and scheme of incorporation arbitration clause in contract would become redundant and superfluous and it was very easy for any party to terminate and or frustrate contact out rightly in order to avoid arbitration proceedings and claims if any

Cancellation of contract or invoking arbitration proceedings both were two distinct situations, termination clause could not be given overriding effect on arbitration proceedings or provision made for arbitration in contract

Despite cancellation/termination of contract provision of arbitration survived and agreement for arbitration contained in contract was a separate part of contract

High Court appointed arbitrator to resolve and arbitrate dispute between parties

Suit was disposed of accordingly.