Arbitration Agreement

In case where a contract includes an arbitration clause, the general approach should be to minimize the court interference, especially when the parties have voluntarily selected their preferred forum for resolving disputes

The courts can interfere to the extent as provided in the Arbitration Act, 1940

It is emphasized that expeditious and inexpensive Dispute Resolution should be considered vital for a vibrant economy and inevitable for economic growth and progress

The Courts have a crucial role to play in ensuring that the commitments made between parties are honored and implemented

It is the duty of courts to promote certainty by enforcing the binding commitments made by the parties

Therefore keeping in view the findings of superior Courts and after going through the award in detail, the High Court was of the considered view that the sole arbitrator rightly gave his findings on each and every issue discussed in the award

Even otherwise the objection filed by the appellant was time-barred under Art. 158 of the Limitation Act, 1908 which provides that the time limit for filing of objections to an award is thirty days from the date of notice of filing of an award in court

The appellant failed to point out any illegality or irregularity in the impugned order and decree and as such there was no force in the appeal, hence the same was dismissed

Appeal dismissed.

Where parties to a contract have agreed to resolve their disputes through arbitration, ordinarily Court must hold the parties to their bargain

This is not an absolute rule

Power conferred upon Court to grant a stay under S. 34 of Arbitration Act, 1940 is entirely a matter of discretion of Court

Expression "such authority may make an order staying the proceedings" indicates that Court has discretion to stay suit or not.

Court underlines sanctity of an arbitration agreement and reinforces basic principle that where parties to an agreement have undertaken to resolve their inter se disputes through arbitration, the intention of parties ought to be respected and given effect

Provision of S.20 of Arbitration Act, 1940, fundamentally is limited to determination of existence of a real and alive dispute between the parties in a summary procedure

Court is only required to prima facie satisfy itself regarding existence of dispute measured with the yardstick of "sufficient cause".

Plea of non est factum, that is, denial of existence of agreement altogether, is rebuttable by attendant circumstances, including performance by party denying agreement where such performance is not inconsistent with tenor and substance of alleged agreement.

Article 7(2) of the United Nations Commission on International Trade Law on International Commercial Arbitration ("UNCITRAL Model Law"), in furtherance of its pro arbitration aims, explicitly allowed for incorporation of arbitration clauses by reference

Supreme Court observed that in a commercially fast paced world, where the world was essentially a global village, it was regrettable that Pakistan, although a signatory to 'UNCITRAL Model Law', had till date not incorporated its provisions into its domestic law and the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 made no mention of incorporation of arbitration clauses by reference.

No one was named in arbitration agreement, therefore, respondents/plaintiffs were left with no option but to submit application under S.20 of Arbitration Act, 1940

Period of contract had already expired and there was a dispute which required resolution and that resolution could be made as per provisions of arbitration agreement, within which respondents/plaintiffs submitted their claim/dispute to Project Manager/Engineer but not fruitful result came out or no decision was made by Project Manager/Engineer

Petitioners / defendants through application under S.33 of Arbitration Act, 1940, intended to decide matter as the same could not be agitated before any forum

Administration of justice required that decision between parties pertaining to dispute should be decided on merits and after proper application of mind, in accordance with law, rather than to be decided on technical grounds

Petitioners/defendants had taken hyper-technical grounds in their application, which application was to be decided along with application under S.20 of Arbitration Act, 1940

Revision was dismissed, in circumstances.

Arbitration clause existed in the contract with regard to referring matter for arbitration in case of any dispute between the parties

Plaintiff had attempted to seek resolution of controversy through negotiation and upon failure sought enforcement of arbitration clause of contract

Arbitration clause should be considered independently as the sole determination to be made to the forum for the resolution of dispute upon terms contained therein

Arbitration agreement between the parties having arbitration clause therein

Present application had been preferred within time and defendant had no sufficient cause to preclude a reference to arbitration

Matter was referred for arbitration and arbitrator was appointed to determine the dispute in accordance with law

Application for referring matter to the arbitration was allowed, in circumstances.

Arbitration agreement or an arbitration clause in agreement can define disputes or types of disputes which are agreed to be referred to arbitration by parties thereto

It is for parties to make their own contract and not for court to make one for them as a court can only interpret contract

Question of what disputes fall within terms or scope of a particular arbitration agreement is a matter of interpretation of such an agreement

Parties are free to make their own contracts and are also free to agree as to what matters would be referred to arbitration

Words of arbitration clause which take within its sweep any claim, right or matter in any way arising out of or relating to contract have been upheld by courts to take in all claims which arise out of or pertain to contract

Parties have contractual freedom to select matters or disputes which are to be resolved through arbitration, leaving others to be decided by courts

If arbitration clause excludes certain matters in express terms and leaves them to be decided by courts, no arbitration can arise in respect of such matters

If it is found that arbitration clause does not encompass a dispute raised in a suit, party filing suit cannot be held to have abandoned its right to seek arbitration on matters encompassed by arbitration clause.

Arbitration agreement or an arbitration clause in agreement can define disputes or types of disputes which are agreed to be referred to arbitration by parties thereto

It is for parties to make their own contract and not for court to make one for them as a court can only interpret contract

Question of what disputes fall within terms or scope of a particular arbitration agreement is a matter of interpretation of such an agreement

Parties are free to make their own contracts and are also free to agree as to what matters would be referred to arbitration

Words of arbitration clause which take within its sweep any claim, right or matter in any way arising out of or relating to contract have been upheld by courts to take in all claims which arise out of or pertain to contract

Parties have contractual freedom to select matters or disputes which are to be resolved through arbitration, leaving others to be decided by courts

If arbitration clause excludes certain matters in express terms and leaves them to be decided by courts, no arbitration can arise in respect of such matters

If it is found that arbitration clause does not encompass a dispute raised in a suit, party filing suit cannot be held to have abandoned its right to seek arbitration on matters encompassed by arbitration clause.

Arbitration agreement or an arbitration clause in agreement can define disputes or types of disputes which are agreed to be referred to arbitration by parties thereto

It is for parties to make their own contract and not for court to make one for them as a court can only interpret contract

Question of what disputes fall within terms or scope of a particular arbitration agreement is a matter of interpretation of such an agreement

Parties are free to make their own contracts and are also free to agree as to what matters would be referred to arbitration

Words of arbitration clause which take within its sweep any claim, right or matter in any way arising out of or relating to contract have been upheld by courts to take in all claims which arise out of or pertain to contract

Parties have contractual freedom to select matters or disputes which are to be resolved through arbitration, leaving others to be decided by courts

If arbitration clause excludes certain matters in express terms and leaves them to be decided by courts, no arbitration can arise in respect of such matters

If it is found that arbitration clause does not encompass a dispute raised in a suit, party filing suit cannot be held to have abandoned its right to seek arbitration on matters encompassed by arbitration clause.

Arbitrator was appointed who submitted his award in the Court wherein principal amount with markup on the same was granted till payment

Objections raised against the award were rejected and it was made Rule of the Court

Validity

Court while examining the validity of award could not act as a Court of Appeal and make reappraisal of evidence recorded by the arbitrator in order to discover the error or infirmity in the award unless such error or infirmity was on the record

Award, in the present case, was based on documentary evidence which did not require reappraisal of evidence

No infirmity had been pointed out in the impugned award

Nothing was on record with regard to misconduct of arbitrator

Arbitrator had no authority to grant any markup on the principal amount from the date of award till payment

Markup with effect from the date of award till realization of principal amount awarded by the arbitrator was without competence

Appeal was dismissed, accordingly.

Adjudication to determine as to whether arbitration agreement existed between the parties in a proceeding where foreign arbitration award was sought to be enforced

Scope

Refusal of a court to recognize a foreign arbitral award under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 usually involved investigation into disputed questions but it was not in every case that the court would be under obligation to frame issues, record evidence of the parties and follow the procedure prescribed for decision in a suit

Such matters had been left to the satisfaction of the Court under Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, which had to regulate its proceedings keeping in view nature of the allegations in pleadings, and court may adopt such mode for disposal as was in consonance with principles of justice and what the circumstances of the case required; and therefore it was within competence of the court to frame formal issues and record evidence in a particular case

Questions as to whether exchange of e-mails and letters available on record constituted arbitration contract/agreement and whether arbitration was conducted according to applicable rules could be questions which cannot be decided without framing issues and adducing evidence.

Court has to be satisfied that the parties have intended to settle or resolve the dispute through arbitration, i.e. through a person, who, after conducting an inquiry, will give a decision and the same shall be binding on them

Court, in such an eventuality would give effect to said clause as an "arbitration agreement" despite the fact that it may not contain expression as 'arbitration', 'arbitrator' or 'arbitration agreement'.

Arbitration is that category of dispute resolution process where the parties make a voluntary choice to have their disputes resolved by an arbitrator rather than through the courts

Arbitration is the submission of a dispute to be decided by a third person

Mechanism for selection of the arbitrator is invariably mentioned in the arbitration clause

Either the parties agree to nominate and appoint an arbitrator or the arbitrator is named in the agreement

Parties may even agree to name an Authority or person from amongst their own officers/officials, and this would not render such an arbitration agreement illegal or against public policy.

Plaintiff filed suit for declaration, specific performance and permanent injunction which was dismissed for non-prosecution and application for restoration of the said suit was moved

Application for initiation of arbitration proceedings was also moved before Arbitrator by the plaintiff

Defendant moved application before civil Court for stay of arbitration proceedings on the ground that Arbitrator had been impleaded as defendant in the civil suit and he was also witness of arbitration agreement

Trial Court stayed proceedings before the Arbitrator on the basis of allegation of bias

Validity

Order IX, R. 9, C.P.C. barred the institution of a fresh suit on the same cause of action which was subject matter of the earlier suit dismissed for non-prosecution

Invocation of arbitration clause of the agreement by the petitioner could not be termed as institution of a fresh suit

Arbitration with or without the intervention of the Court was not a suit

Application under S.20 of Arbitration Act, 1940 was not a suit stricto sensu

Section 69 of Partnership Act, 1932 did bar a partner in an unregistered partnership from instituting a suit to enforce a right arising from a contract

Application under S.20 of Arbitration Act, 1940 did not fall within the ambit of S.69 of Partnership Act, 1932

Suit instituted by the petitioner did not culminate in a judgment or a decree

Disputes between the parties were not adjudicated by the Civil Court on merits

Principle of res judicata was not applicable with regard to institution of arbitration proceedings by the petitioner

Petitioner had been deprived of seeking adjudication of his claim before any forum

When defendant in a suit had taken a step in the proceedings or filed a written statement then he would be disentitled from seeking a stay of suit on the basis of an arbitration agreement executed with the plaintiff

Defendant in the present case had objected to the maintainability of suit on the basis of arbitration agreement executed between the parties

Institution of suit or its dismissal for non-prosecution would not operate to place a disability on the petitioner from instituting arbitration proceedings in circumstances

Petitioner could not have been denied his right to institute arbitration proceedings against the respondent on the ground that he had earlier instituted a civil suit against the respondent

Arbitrator was named in the impugned arbitration agreement

Had the parties to the arbitration agreement no consensus ad idem with regard to its execution then respondent would not have objected to the maintainability of petitioner's suit on the basis of said agreement

Impugned arbitration agreement was voluntary entered into therefore parties could not be allowed to resile from the same

Vague or unsubstantiated apprehensions could not be made standard for the removal of an arbitrator

Respondent had not pleaded specifically the basis on which he had alleged that the arbitrator was bent upon to decide the matter against him

Arbitrator had been impleaded as a defendant in the suit instituted by the petitioner but no relief had been sought against him

Mere fact that arbitrator had been impleaded as a defendant in the suit would not disqualify him from sitting in an adjudicating capacity over the dispute between the parties

Arbitrators should not attend Court and participate in the proceedings before Civil Court in which their removal or revocation of their authority had been sought whether or not they were impleaded as parties to such proceedings

Application to challenge the existence or validity of an arbitration agreement could be filed but no such application had been moved by the respondent

Authority of an appointed arbitrator or umpire should not be revoked except with the leave of the Court unless a contrary intention was expressed in the arbitration agreement

Impugned orders passed by the Courts below were set aside

Application for stay of arbitration proceedings was dismissed

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.

Provisions of Art.84, Qanun-e-Shahadat, 1984 empowered a court to ascertain veracity of a signature, writing or seal to determine that such signature, writing or seal was that of a person by whom it purported to have been written or made and a comparison may be made by the court with an admitted or proved signature, writing or seal to the satisfaction of the court

Although the provisions of Qanun-e-Shahdat, 1984 did not apply to the proceedings before court under S. 6 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011, however, the court could choose to resort to a comparison of signatures on an agreement and such procedure was in consonance with the spirit and policy of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 which required the Court to dispose of issues by the usual test for summary judgment.

Application for making award as rule of court was moved wherein petition for rejection of the same was filed which was accepted

Validity

Arbitrator had to file the award in the Court either at the request of a party or on the direction of the Court

Court would then give notice to the parties of the filing of award and thereafter it had to see whether same could be made rule of court or not

Party could not file award in the court to make the same rule of the court when award prior to getting the authentication and sanction of the court had been acted upon between the parties

When law required a thing to be done in a certain and particular manner then it should be done in that manner

Findings recorded by the courts below were convincing and elaborate

Revision was dismissed in circumstances.

Arbitration agreement fixing time during which reference may be made to arbitration is impliedly considered valid by S.34(4) of Arbitration Act, 1940

Court is vested with discretion to extend such time only in case if Court is of the opinion that in particular circumstances of the case undue hardship would otherwise be caused to parties due to expiration of time.

Petitioner moved petition for filing arbitration agreement in the Court wherein respondent submitted an application for rejecting the said petition on the ground that petitioner had not exhausted the precondition of referring the dispute to the engineer

Contention of petitioner was that engineer was biased and controversial

Validity

Petitioner was aware of the requirement to refer the dispute in the first instance to the engineer

Dispute was not referred to the engineer for decision under the contract

Dispute between the parties had to be referred in the first instance to the engineer who was supposed to give his decision within stipulated period

If the engineer gave his decision or did not give his decision within stipulated period then aggrieved party could refer the matter in dispute to arbitration

Right of aggrieved party to refer the dispute to arbitration was pre-conditioned with a reference of such dispute to the engineer

Application for filing the arbitration agreement in the Court without fulfillment of such condition was liable to be dismissed as premature

Court could not rewrite the agreement between the parties or exempt a party from complying with its contractual obligation of the contract

Where reference to engineer could not be made because he had resigned or refused to entertain the dispute or had been disengaged by the employer then dispute could be referred to arbitration without a reference to the engineer

Party could not bypass the requirement of a reference of dispute to an engineer on the ground of bias unless court was satisfied that substantial miscarriage of justice would take place if such an application for filing the arbitration agreement was dismissed as premature

Court must not lightly relieve the parties from their bargain

Discretion had to be exercised cautiously and parties should not be relieved from a forum they had chosen because they feared that the engineer's decision might go against them

Bias of an arbitrator was one of the grounds on which an arbitrator could be removed or his authority could be revoked

Mere suspicion of a party must not lead to the conclusion that authority hearing the proceedings was biased

Apprehension must be judged from a healthy, reasoned and average point of view and not on mere apprehension of any whimsical person

Where allegations of fraud, misrepresentation, collusion or mala fide were attributed then necessary particulars and details should be unfolded

Bald or vague statement to such effect would be of no legal consequence

Mere fact that engineer had in past given decision against a party or had expressed a view/opinion adverse to the said party could not be made a ground for avoiding the contractual obligation

Respondent had right to insist that dispute should be resolved in accordance with the procedure provided in the contract

Application for rejection of petition for filing the arbitration agreement in the court was allowed and petitioner's application was dismissed as premature

Petitioner might subject to law refer the dispute to the engineer in terms of contract for decision.

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.

Conditions.

Conditions.

Arbitration agreement must qualify the test of a valid contract in terms of the law of contract.

Once dispute between parties had been referred to arbitration then only remedy was under Arbitration Act, 1940 and not through a suit.

Section 32 of Arbitration Act, 1940 merely barred a suit to challenge a decision upon existence, effect or validity of an arbitration agreement or award otherwise than as provided in the Act.

Trial Court decided main petition filed under S. 20 of Arbitration Act, 1940 while hearing application moved under S. 41 of Arbitration Act, 1940

Validity

Matter was only fixed on the day for hearing of an application filed under S. 20 of Arbitration Act, 1940 and not for final hearing or disposal of the entire suit or main application

Trial Court while allowing the application had issued direction to the applicant-appellant to file agreement in the court and dispute had been referred for arbitration by the same Arbitrator who had earlier decided the issue between the same parties

When a matter was listed for hearing of an application and not for final disposal or hearing of the main suit, court should not decide the entire suit on merits and could only decide the said application except with the consent of the parties

While hearing miscellaneous application the matter could not have been referred for arbitration as same would amount to finally deciding the main application/suit

Matter was remanded to the Trial Court to decide the main application afresh after providing reasonable opportunity to both the parties within a specified period

Appeal was allowed in circumstances.

Suit was barred under S. 32 of Arbitration Act, 1940 if a party had affirmed the existence of arbitration award or its validity

Aggrieved party might seek remedy of either challenging the validity or existence of arbitration award or raising grounds for setting it aside

Plaintiff instead of availing proper remedy had filed suit which was barred under S. 32 of Arbitration Act, 1940

Impugned judgment and decree passed by the Appellate Court were based on proper appreciation of evidence

No illegality or perversity had been pointed out in the impugned judgment and decree

Revision was dismissed in circumstances.

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.

Agreement in question was governed by English law and it must be accepted as a matter of law that a written contract could be varied by a subsequent oral agreement even if it contained a provision specifically stating that only written amendments and modifications, signed by parties were permissible

Proof of any such subsequent oral agreement was a matter for the law of Pakistan being the lex fori, and law in Pakistan only allowed for a "distinct subsequent oral agreement" to be adduced in evidence

Material placed on record was insufficient to establish that such an agreement was entered into between the parties and amended agreement by, in effect, omitting or altering relevant clause of agreement in question

Plaintiff was unable to establish a prima facie case and even if such case was made out, plaintiff would still not be entitled to any interim injunctive relief

Agreement in question was one of agency and plaintiff's case did not come within the scope of law laid down in such regard for such relief by courts of Pakistan

High Court declined to grant interim relief to plaintiff

Application was dismissed in circumstances.

Right to apply under S. 20 of Arbitration Act, 1940 would accrue when a difference or dispute had arisen between the parties

Question of limitation was to be decided by the Trial Court before granting the application under S. 20 of Arbitration Act, 1940

Leaving the question to be determined by the arbitrator was neither envisaged under S. 20 of Arbitration Act, 1940 nor could the court delegate its power to the arbitrator under S. 20 of Arbitration Act, 1940

If Trial Court had come to the conclusion that application under S. 20 of Arbitration Act, 1940 was barred by time then such application could not be granted nor could the matter be referred to the arbitrator

Trial Court before passing the impugned order was required to decide whether application under S. 20 of Arbitration Act, 1940 had been filed within time stipulated under Art. 181 of Limitation Act, 1908

Question whether the claim made by either party was barred by time or not or whether it was barred by any contractual term would fall within the scope of jurisdiction of arbitrator

Application filed under S. 20 of Arbitration Act, 1940 whether in time or not had to be decided by the court itself before allowing the said application

Jurisdiction of arbitrator was circumscribed by the arbitration agreement

Question whether application under S. 20 of Arbitration Act, 1940 was to be allowed or not was a statutory obligation of court and same could not be delegated to the arbitrator

Trial Court was required to determine the point of time at which the right to apply under S. 20 of Arbitration Act, 1940 had accrued

Trial Court was bound to determine as to when the differences had arisen between the parties i.e. when they did not agree on any particular question covered by the arbitration agreement

Trial Court while passing the impugned order had not taken into consideration the expression "sufficient cause" used in S.20 of Arbitration Act, 1940

Trial Court was bound to order that the arbitration agreement be filed and then to refer the matter to the arbitrator if sufficient cause could not be shown for not filing the said agreement and making a reference to the arbitrator

Court had to be satisfied that 'sufficient cause' could not be shown before deciding the application and making an order of reference to the arbitrator

Question whether application under S. 20 of Arbitration Act, 1940 was not within time was a 'sufficient cause' and same had to be decided by the court and not the arbitrator

Allowing application under S.20 of Arbitration Act, 1940 and referring the question as to whether it was filed within the prescribed time would tantamount to delegate to the arbitrator the authority to decide whether 'sufficient cause' existed or not

Whether 'sufficient cause' existed or not was within the exclusive domain of the court and a determination with such regard thereto was a pre-condition for making a reference to the arbitrator

Question whether claim was made in time would fall within the domain of arbitrator

Trial Court had failed to advert to the question as to whether 'sufficient cause' had been raised by the petitioner for refusing to make a reference to the arbitrator

Impugned order was set aside

Application filed under S. 20 of Arbitration Act, 1940 would be deemed to be pending before the Trial Court

Question whether application under S. 20 of Arbitration Act, 1940 was filed within time should be determined and decided in view of facts and circumstances of the case

Appeal was accepted.

Suit for recovery of damages and compensation was pending before Trial Court and application filed by defendant for stay of proceedings was dismissed

Validity

Parties had not agreed to make Arbitration Act, 1940, applicable to them, therefore, S.34 of Arbitration Act, 1940, could not be pressed into service

Another condition for pressing S.34 of Arbitration Act, 1940, was that proceedings of arbitration had been commenced but in the present case no such proceedings commenced

No steps having been taken before filing application under S.34 of Arbitration Act, 1940, therefore, Trial Court did not commit any illegality while rejecting application under S.34 of Arbitration Act, 1940

Appeal was dismissed in circumstances.

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

Validity

Proceedings of suit could be stayed under S.34 of Arbitration Act, 1940 if matter was mutually agreed between the parties

No occasion to stay proceedings of the present suit existed as factum of alleged arbitration agreement had been denied by the plaintiff

Impugned judgment passed by the Appellate Court was not sustainable in the eye of law which was passed without application of judicious mind and in excess of jurisdiction vested in it

Impugned judgment passed by the Appellate Court was set aside and order of Trial Court was restored

Constitutional petition was accepted in circumstances.

Power Purchase Agreement ("agreement") between Electric Supply Company ("company") and National Transmission and Despatch Co. Ltd ("NTDC")

In terms of the agreement, the company was entitled to draw up to 650 MW from the national grid

Subsequently in terms of a decision of the Council of Common Interest, 350 MW were withdrawn from the company and NTDC refused to supply power beyond 300 MW under the agreement

Company filed a suit for declaration and injunction to the effect that it was entitled to draw up to 650 MW from the national grid

NTDC filed present application under S.34 of Arbitration Act, 1940 contending that there was clearly a dispute between the parties and as per the agreement a dispute had to be referred for arbitration and the suit stayed

Validity

Prima facie, a dispute existed between the parties

Company had directly challenged the decision of Council of Common Interest in its suit by mentioning in the plaint that decision of the Council was without jurisdiction and ultra vires the Constitution

If such matter went to arbitrators they would have to decide on the constitutional validity of what the Council of Common Interest had done

Such an issue could not be regarded as one that was suitable for arbitrators to decide and was to be regarded as beyond their jurisdiction

Present dispute could not be referred to arbitration as it was quite obvious that the company's claim would be resisted by NTDC on the basis of the decision of the Council of Common Interest, i.e., a constitutional issue-Company would challenge such defence with the result that the arbitrators would be required to rule upon the constitutional validity (or otherwise) of the decision of the Council of Common Interest, which was an issue not suitable for an arbitral tribunal, no matter how eminent might be its composition

Constitutional issues must be regarded as falling peculiarly within the jurisdiction of the courts (and especially a superior court such as the High Court) and hence beyond the ambit of arbitrators

Constitutional issue raised by the company was directly and substantially in issue in the suit, and it constituted the core of the company's grievance, therefore it could not be referred to arbitration

Sufficient reason had been shown by the company for not referring the present dispute to arbitration, therefore the suit filed by it must be allowed to proceed, and be heard and decided on its own merits

Application filed by NTDC to have the suit stayed and matter referred to arbitration was dismissed in circumstances.

Question was whether arbitrators, engaged upon a domestic arbitration and acting within the framework of the municipal law, could decide a constitutional issue of that jurisdiction, more so where the constitutional issue was said to be beyond the jurisdiction of even the courts

Such an issue could not be regarded as one that was suitable for arbitrators

Distinction existed between a legal issue and one that was of a constitutional nature

Former may well (subject to ultimate consideration by the court) be regarded as falling within the arbitrators remit, however, the latter was an issue that must be decided by the court itself, especially where that court was a superior court such as the High Court

Constitutional issue raised in the suit must be directly and substantially in issue

If it was only collaterally or incidentally in issue, then there would be no bar to referr the matter to arbitration

However, it does lie within the jurisdiction of the arbitrators to decide whether a party had properly and successfully invoked a force majeure clause in the contract in relation to or out of which the dispute arose, therefore in such limited sense, a constitutional point may go to the arbitrators.

Whenever a dispute that came within the scope of an arbitration agreement was made out, then prima facie the matter must be so referred for arbitration, and the onus laid on the plaintiff, which was a heavy one to discharge, to show that sufficient reason, existed for the suit to continue.

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.

Powers of the court under the Second Schedule of the Arbitration Act, 1940, could be exercised by issuing an interim order for the preservation and safety of the subject matter

Mere filing of an application under S.34 of the Arbitration Act, 1940, or even stay of the proceedings and referring the matter to the Arbitrator should not preclude the Trial Court from dealing with the injunction application.

Stay of legal proceedings could be obtained under S.34 of Arbitration Act, 1940, but in order to invoke such provision, it was necessary that there must be an arbitration agreement in existence; legal proceedings must have been started by a party to the agreement; proceedings must be with respect to matter agreed to be referred to arbitration; application for stay must have been filed before filing written statement or taking any step in proceedings; and party asking for stay must be ready and willing to do all things necessary to proper conduct of arbitration-Application under S.34 of Arbitration Act, 1940, could merit rejection, when in the application there was no averment that applicant was ready and willing to have dispute settled through arbitration

No obligation on court to necessarily refer dispute to arbitration but it gave the court discretion to stay proceedings, if it was satisfied that there was no sufficient reason as to why matter should not be referred to in accordance with arbitration proceedings

Legal proceeding which was sought to be stayed must be in respect of matter which parties had agreed to refer and the same was within the terms of arbitration agreement

Before order for staying of suit could be made under S.34 of Arbitration Act, 1940, it must be established that suit had been instituted in respect of matter agreed to be referred

Where suit had commenced as to the matter which was outside the submission, the court was competent to refuse the stay

Court under S.34 of Arbitration Act, 1940, could stay a suit and could also exercise its jurisdiction to entertain the suit for adjudication of claim of parties containing arbitration clause and could also consider whether exercise of such discretion in particular case would be judicious and reasonable

High Court declined to stay proceedings and directed defendants to file written statements

Application was dismissed in circumstances.

Defendant filed application for stay of proceedings on the ground that parties had arbitration clause in their agreement

Application filed by defendant was dismissed by Trial Court

Plea raised by defendant was that dispute had arisen out of the agreement, therefore, despite termination of agreement between the parties, matter should be referred to arbitrator

Validity

Plaintiff did not dispute execution of agreement and its arbitration clause

Once, the parties agreed to decide their dispute in a particular manner, then unless and until any strong and sufficient reason was shown, parties must surrender themselves to the forum voluntarily chosen by them with their free will and consent

Defendant, being co-signatory with plaintiff to arbitration agreement, had the option to compel plaintiff to abide by arbitration clause before commencement of legal proceedings

Application under section 34 of Arbitration Act, 1940, filed by defendant without taking any step of participating into legal proceedings showed his intention to exercise his option to enforce arbitration agreement

Plaintiff failed to show any sufficient reason as to why the matter should not be referred to arbitrator

Termination of agreement was a result of dissatisfaction of defendant and alleged violation of terms and conditions of the agreement, therefore, dispute was outcome of the agreement, which ought to have been decided by invoking arbitration clause

Intention of parties to include arbitration clause, was to specify the forum to resolve future differences or dispute arising out of the agreement, including its termination

Arbitration clause was an independent agreement between the parties which could be invoked, if a dispute or difference had arisen between the parties, therefore, termination of agreement would not supersede it

Irrespective of non-existence of agreement, the arbitration clause survived and arbitrator had the power to resolve the dispute

High Court in exercise of appellate jurisdiction, set aside the order passed by Trial Court and application under section 34 of Arbitration Act, 1940, filed by defendant was accepted resultantly proceedings before Trial Court were stayed

Appeal was allowed in circumstances.

Relevant paragraph of agreement dealing with arbitration would reveal that it simply stipulated about the arbitration, place thereof and the application of provision of the Arbitration Act, 1940

Said clause despite stipulating that arbitration would be held at place `L', did not stipulate the ousting of jurisdiction of the civil court at place `P'

Even S.2(c) of Arbitration Act, 1940 did not come in the way of the civil court at place `P'

What it required and laid stress on was that the court must be a civil court and it must have jurisdiction to entertain a suit vis-a-vis the dispute referred to arbitration

Civil court at place `P' under no canons of interpretation would be shorn of jurisdiction, where the subject matter of dispute was situated and cause of action had arisen within its territorial jurisdiction

Section 31 of Arbitration Act, 1940, too, would not come in the way of the civil court, when all the questions enumerated therein could be decided by the said 'court

Respondents could well move an application for the stay of proceedings under S.34 of Arbitration Act, 1940 in case they felt that appellant had not done something good by leaping over the arbitration clause and there was hardly any occasion to ask for the return of plaint in the case

Allowing appeal, impugned order was set aside and case was sent back to the Trial Court for decision afresh in accordance with law.

Petitioner claimed that after filing of the suit, the matter was resolved by arbitration between the parties, therefore, award should be made rule of the Court

Respondents denied having referred the matter to arbitration

Trial Court allowed the application and made the award as rule of the Court

Appellate Court allowed the appeal and set aside the judgment and decree passed by Trial Court

Validity

Any alleged arbitration or award in respect of subject-matter of a suit without intervention or consent of Court seized of the matter, was ineffective

High Court declined to take any exception to the finding of Appellate Court that award relied upon by petitioner was of no legal effect hence could not be made rule of the Court

Judgment passed by Appellate Court was in consonance with law

No material irregularity existed in exercise of jurisdiction warranting interference by High Court in exercise of its revisional jurisdiction

Revision was dismissed in circumstances.

Notwithstanding the fact that objections were not filed, Court should, in the exercise of its suo motu jurisdiction have, refused to make the award rule of the Court in circumstances.

Person who was not party to arbitration agreement could not be proceeded against under the arbitration agreement.

Plural use of difference clearly indicates that there can be more than one differences that may arise, if such being the case then each may be subject-matter of separate reference which of course depends on the nature of the contract.

S. 2(a)-Arbitration agreement-Means written agreement to submit present or future differences to arbitration-Naming of arbitrators-No requirement

Nor such written agreement be necessarily signed by parties as long as its terms and conditions readily ascertained and freely agreed to' between parties-Respondents writing to Martial Law Authority nominating Y as their arbitrator and appellant similarly writing and nominating S as her arbitrator-Such letters unilaterally written by respective parties addressed to Martial Law Authority read together, held, constituted as valid "arbitration agreement" within meaning of S. 2(a) for purpose of reference of dispute to arbitration.-[Arbitration].