Arbitration

Arbitration alleviates burden on national Courts, enhances business productivity and provides faster resolution process, thereby minimizing disruptions to businesses

Ability to enforce international arbitration awards strengthens trade and commerce, while arbitration's stable and predictable dispute resolution mechanism promotes investor confidence, making the country an attractive destination for foreign investment

Such factors collectively foster a favourable business environment, drive economic growth and enhance country's competitiveness on the global stage.

Dispute pertaining to transfer of shares was initiated before High Court where proceedings were neither stayed under Arbitration Act, 1940 nor the matter was referred to Arbitrator

Validity

In addition to Supreme Court adopting a pro-arbitration approach, stance of referring for arbitration was also bolstered by the framework of Companies Act, 2017, which, through its Preamble, affirmatively advocated for alternative mechanisms to ensure expeditious resolution of corporate disputes

Companies were explicitly encouraged under section 278 of Companies Act, 2017 to refer any existing or future disputes, whether between companies or involving any other persons, to arbitration

Supreme Court with pro-arbitration approach and with the consensus of parties referred the matter to Arbitrator

Supreme Court set aside order passed by High Court and accepted application under section 34 of Arbitration Act, 1940

Supreme Court stayed proceedings under sections 126 and 127 of Companies Act, 2017 concerning alleged fraudulent transfer of shares and rectification of register of members (shareholders)

Supreme Court directed that award made by Arbitrator would be filed in High Court in accordance with the proceedings under Arbitration Act, 1940, as the matter fell exclusively within the jurisdiction of Court established under the Companies Act, 2017

Appeal was allowed.

Dispute between the parties arose and was related to a contract executed on 01.11.2017 and was referred to arbitration by a two-member arbitral tribunal, which rendered the award on 02.07.2021

On 07.07.2021, the arbitrators filed the award before the Civil Court

On 01.09.2021, the petitioner filed objections for setting aside the said award

On 23.11.2022, Civil Court framed the issues and required the parties to submit the list of witnesses for the production of evidence

Said orders were assailed before the High Court by filing a revision petition, which was allowed by setting aside the orders dated 23.11.2022 passed by the Civil Court and case was remanded to the Civil Court for decision afresh on the basis of available record

Validity

Arbitrators were entitled to regulate their own procedure and were not governed by the strict procedure prescribed by the C.P.C. and the rules regarding evidence contained in the Qanun-e-Shahadat, 1984

Arbitrators decided the disputes based on evidence presented during arbitration proceedings

Arbitrators were under no obligation to frame issues as provided in the C.P.C.

Court recorded fresh evidence, disregarding the procedural safeguards in arbitration, such as the arbitrator's exclusive jurisdiction to assess evidence and apply the law

Said fact might lead to inconsistent outcomes and procedural unfairness

If the Court frames issues and records evidence after objections to an award were filed, parties might use this as an opportunity to re-litigate the entire dispute, leading to multiple proceedings on the same issues besides undermining both the legislative intent and the integrity of the arbitral process

Said multiplicity undermined the arbitrator's role in providing a one-time binding decision

Possibility of a trial after the award has been filed in Court creates uncertainty about the finality and enforceability of awards, that discourages the parties from opting for arbitration, defeating the legislative intent to promote arbitration as a preferred mode of dispute resolution

Framing of issues, recording of evidence and hearing arguments post the filing of the award in the Court is bound to increase litigation costs for parties and add to the already heavy workload of Courts

Said fact again defeats the purpose of arbitration as an economical and efficient alternative dispute resolution mechanism

Recording of evidence and conducting a trial effectively converts the Court into an appellate or fact-finding forum, which would be contrary to the statutory scheme envisaged by the Act, 1940

In the case in hand, the sole reason given by the Civil Court for framing the issues was that the contentions raised through the objections formed a factual controversy, which could not be determined without the recording of evidence

Perusal of the issues framed by the Civil Court showed that they were generalized in nature, they lacked specificity and the necessity for framing such issues could not be discovered in the impugned order

Therefore, the High Court did not commit any illegality by setting aside the order dated 23.11.2022 and remanding the matter to the Civil Court with the direction to decide the petitioner's objections to the award dated 02.07.2021 on the basis of the available record

Leave to appeal was declined and the petition was consequently dismissed.

Dispute between the parties arose and was related to a contract executed on 01.11.2017 and was referred to arbitration by a two-member arbitral tribunal, which rendered the award on 02.07.2021

On 07.07.2021, the arbitrators filed the award before the Civil Court

On 01.09.2021, the petitioner filed objections for setting aside the said award

On 23.11.2022, Civil Court framed the issues and required the parties to submit the list of witnesses for the production of evidence

Said orders were assailed before the High Court by filing a revision petition, which was allowed by setting aside the orders dated 23.11.2022 passed by the Civil Court and case was remanded to the Civil Court for decision afresh on the basis of available record

Validity

Arbitrators were entitled to regulate their own procedure and were not governed by the strict procedure prescribed by the C.P.C. and the rules regarding evidence contained in the Qanun-e-Shahadat, 1984

Arbitrators decided the disputes based on evidence presented during arbitration proceedings

Arbitrators were under no obligation to frame issues as provided in the C.P.C.

Court recorded fresh evidence, disregarding the procedural safeguards in arbitration, such as the arbitrator's exclusive jurisdiction to assess evidence and apply the law

Said fact might lead to inconsistent outcomes and procedural unfairness

If the Court frames issues and records evidence after objections to an award were filed, parties might use this as an opportunity to re-litigate the entire dispute, leading to multiple proceedings on the same issues besides undermining both the legislative intent and the integrity of the arbitral process

Said multiplicity undermined the arbitrator's role in providing a one-time binding decision

Possibility of a trial after the award has been filed in Court creates uncertainty about the finality and enforceability of awards, that discourages the parties from opting for arbitration, defeating the legislative intent to promote arbitration as a preferred mode of dispute resolution

Framing of issues, recording of evidence and hearing arguments post the filing of the award in the Court is bound to increase litigation costs for parties and add to the already heavy workload of Courts

Said fact again defeats the purpose of arbitration as an economical and efficient alternative dispute resolution mechanism

Recording of evidence and conducting a trial effectively converts the Court into an appellate or fact-finding forum, which would be contrary to the statutory scheme envisaged by the Act, 1940

In the case in hand, the sole reason given by the Civil Court for framing the issues was that the contentions raised through the objections formed a factual controversy, which could not be determined without the recording of evidence

Perusal of the issues framed by the Civil Court showed that they were generalized in nature, they lacked specificity and the necessity for framing such issues could not be discovered in the impugned order

Therefore, the High Court did not commit any illegality by setting aside the order dated 23.11.2022 and remanding the matter to the Civil Court with the direction to decide the petitioner's objections to the award dated 02.07.2021 on the basis of the available record

Leave to appeal was declined and the petition was consequently dismissed.

Dispute pertaining to transfer of shares was initiated before High Court where proceedings were neither stayed under Arbitration Act, 1940 nor the matter was referred to Arbitrator

Validity

In addition to Supreme Court adopting a pro-arbitration approach, stance of referring for arbitration was also bolstered by the framework of Companies Act, 2017, which, through its Preamble, affirmatively advocated for alternative mechanisms to ensure expeditious resolution of corporate disputes

Companies were explicitly encouraged under section 278 of Companies Act, 2017 to refer any existing or future disputes, whether between companies or involving any other persons, to arbitration

Supreme Court with pro-arbitration approach and with the consensus of parties referred the matter to Arbitrator

Supreme Court set aside order passed by High Court and accepted application under section 34 of Arbitration Act, 1940

Supreme Court stayed proceedings under sections 126 and 127 of Companies Act, 2017 concerning alleged fraudulent transfer of shares and rectification of register of members (shareholders)

Supreme Court directed that award made by Arbitrator would be filed in High Court in accordance with the proceedings under Arbitration Act, 1940, as the matter fell exclusively within the jurisdiction of Court established under the Companies Act, 2017

Appeal was allowed.

Arbitration alleviates burden on national Courts, enhances business productivity and provides faster resolution process, thereby minimizing disruptions to businesses

Ability to enforce international arbitration awards strengthens trade and commerce, while arbitration's stable and predictable dispute resolution mechanism promotes investor confidence, making the country an attractive destination for foreign investment

Such factors collectively foster a favourable business environment, drive economic growth and enhance country's competitiveness on the global stage.

Referee Court had rightly concluded that escalation was part of contract and provisions of Pakistan Engineering Council guidelines had been wrongly applied to the contract, therefore Arbitrators' interpretation in such regard was validly set aside

Regardless of correct interpretation of relevant clause of contract and legal position in that regard orders passed by Referee Court had never been challenged and was duly implemented

Such orders attained finality and were binding on Arbitrators who were bound to follow the same

Arbitrators went way beyond the terms of reference as well as their powers and jurisdiction by sitting as a Court of Appeal on Referee Court's orders and any such remarks given by them were extraneous to the Terms of Reference and should have been discarded by Referee Court

Calculations finally made by Arbitrators had to have been made Rule of the Court

Order of Referee Court as well as Lower Appellate Court to the extent of issue pertaining to escalation cost were not sustainable in the eye of law and the same were set aside to that extent

High Court discarded remarks made by Arbitrators regarding non-admissibility of escalation

High Court made calculations with respect to escalation cost as Rule of the Court

Constitutional petition was allowed accordingly.

Petitioners / companies were awarded contract by respondent / Pakistan Tobacco Board (PTB) for collection of Federal Tobacco Cess (FTC) on surplus tobacco stock etc.

Dispute between the parties arose with regard to charging for transportation of tobacco over and above the allotted quota

On direction of Court arbitration proceedings were initiated and award given by arbitrator was made rule of the Court

Validity

Trial Court directed impleading petitioners as necessary party to arbitration application

When petitioners were necessary parties to such application, they were also necessary party to arbitration proceedings and without impleading them no effective award, to the extent of liability of petitioners, could be announced

Such award could not be made rule of Court for the purpose of execution against the interest of petitioners

Necessary questions pertaining to quota of tobacco and its transportation were not answered

High Court set aside the award to the extent of findings of such issues and judgements and decrees were set aside to such extent as petitioners were necessary party to arbitration proceeding

High Court remanded the matter to Trial Court for settlement of additional issues where petitionerswere to be made party to the application submitted by respondent / Pakistan Tobacco Board whereafter petitioners / companies would file their reply

Revision was disposed of accordingly.

Respondent invoked arbitration clause before Trial Court and sought appointment of arbitrator; the application was dismissed for parties to first proceed as per agreement

Lower Appellate Court set aside order of Trial Court and directed appointment of arbitrator

Validity

Both the agreements between parties required two arbitrators, followed by an umpire if needed

Correct legal provision to invoke was S. 9 and not S. 8 of Arbitration Act, 1940

Lower Appellate Court directed Trial Court to appoint arbitrator without first determining whether two steps procedures envisaged under arbitration clauses agreed between parties had been exhausted and it also failed to address issue of whether application under Ss. 8 and 20 of Arbitration Act 1940 was maintainable for two separate agreements, which was erroneous, making its decision legally unsustainable

Application of respondent under Ss. 8 and 20 of Arbitration Act, 1940 was not maintainable as it covered two separate agreements, and arbitration mechanism in both the agreements was not exhausted by respondent, rendering the application premature

High Court set aside judgment passed by Lower Appellate Court as disputes between the parties fell under S. 9, rather than S. 8 of Arbitration Act, 1940 and the parties were at liberty to invoke arbitration clauses in letter and spirit

Revision was allowed accordingly.

Procedure for appointment of arbitrator, as provided in arbitration agreement, must be given effect.

Arbitration is a dispute resolution process where the parties agree to submit their disputes to a neutral third-party called the arbitrator, who, after listening to the stance of the parties, makes a binding decision

There are two types of arbitration; the first is "voluntary arbitration" in which the parties agree to arbitration voluntarily, through a contract or agreement and second type is known as "mandatory arbitration" which is required by law or contract, and the parties must participate in the process

The first and the basic benefit of arbitration is the faster resolution of a dispute because it contains a process which is faster than traditional litigation, reducing the time and cost associated with resolving disputes

Arbitration can be more cost-effective than approaching the court as it eradicates many of the formalities and procedures associated with the litigation

It is commonly used to resolve commercial disputes, labour disputes, such as grievances and collective bargaining agreements but the arbitrator can also play pivotal role in resolving international disputes, such as disputes between countries or multinational corporations.

Petitioner / plaintiff was a subcontractor, whereas main contract was between respondent / foreign company and respondent / National Highway Authority (NHA)

Petitioner / plaintiff filed civil suit under S. 14 of Arbitration Act, 1940 against respondent / foreign company

Trial Court on application filed by respondent / foreign company stayed proceedings of suit under S. 4 of Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, as Foreign Arbitral Award had already been issued in its favour

Validity

Mere exchange of few letters or act of registering some complaints, in absence of privity of contract between petitioner / plaintiff and respondent / NHA, did not give any cause of action to petitioner / plaintiff to sue respondent / NHA

Subcontract was independent and any representation made therein, or scope of obligations undertaken in the context thereof did not bind respondent / NHA- the employer, which could not be held liable for any vicarious liability in the guise of subcontract

Arbitration agreement, under reference, was not null and void, inoperative or incapable of being performed

High Court declined to interfere in the order passed by Trial Court and directed that legal proceedings would remain stayed till the circumstances so warranted and could be resurrected if conditions so arise

Revision was dismissed, in circumstances.

Arbitration agreement may have a different law from that of the proper law.

Doctrine of forum non conveniens, has no place where contract between parties specifically provides for disputes to be settled through arbitration seated in a foreign country.

Parties to such an agreement can vary, amend or waive either expressly or impliedly/by conduct the procedure established by the agreement.

Appellant / National Highway Authority (NHA) assailed order passed by Executing Court directing respondent / decree holder to provide accurate calculation of outstanding decretal amount in line with terms of decree under execution

Validity

Mere furnishing of bank guarantee did not result in payment of amount in question to respondent / decree holder

It was only when principal amount was actually paid to respondent / decree holder that accrual of financing charges on amount in question would continue until such date

Appellant / NHA could have avoided paying substantial portion of financing charges if it had promptly complied with direction given by Arbitrator in the award or even when judgment and decree was passed

Appellant / NHA was well aware of terms of contract, including relevant clause thereof and adverse consequences which were to flow from non-compliance therewith, when it had decided to avoid its obligation under award and / or judgment and decree

Claim of respondent / decree holder was consistent with reports of two banks concerned as well as the judgment and decree read with award as a whole

Trial Court did not commit any illegality and had rightly directed respondent / decree holder to provide accurate calculation of outstanding decretal amount in line with terms of decree under execution

Appeal was dismissed, in circumstances.

Parties to such an agreement can vary, amend or waive either expressly or impliedly/by conduct the procedure established by the agreement.

Doctrine of forum non conveniens, has no place where contract between parties specifically provides for disputes to be settled through arbitration seated in a foreign country.

According to agreement, petitioner/contractor was required to make payment of balance amount in ten equal installments on monthly basis on first day of each month but not later than 10 of same month and the last final installment was due on 30-11-2002

Petitioner/contractor deposited an amount of Rs. 890,000/- with Pakistan Tobacco Board and an amount of Rs. 7,200,000/- along with penalty was to be paid

When petitioner/contractor was directed by the Board to deposit outstanding installment, he invoked arbitration clause of the agreement by way of filing an application under S. 20 of Arbitration Act, 1940

Question of loss suffered by petitioner/contractor on account of exemption letter issued by Pakistan Tobacco Board was properly determined in the agreement

Where two views were possible with regard to powers of an arbitrator and the ground upon which arbitration award could be set aside, the Court could not interfere with the award adopting its own interpretations

High Court declined to interfere in the matter

Constitutional petition was dismissed, in circumstances.

Petitioners were aggrieved of orders passed by Courts below rejecting application made by them under Ss. 21 & 34 of Arbitration Act, 1940

Validity

Respondents extended consent for arbitration through sole arbitrator before Revisional Court during pendency of suit before Trial Court

Such consent did not operate as estoppel against respondents when petitioners made an application before Trial Court under Ss. 21 & 34 of Arbitration Act, 1940

Legality of order made by Trial Court under O.XIII, R.2, C.P.C. was under adjudication before Lower Appellate Court, in exercise of revisional jurisdiction

Trial Court rightly rejected application of petitioners made under Ss. 21 & 34 of Arbitration Act, 1940

Provision of S. 34 of Arbitration Act, 1940 was wrongly mentioned in caption of the application

Court could only refer matter/differences without consent of all interested parties under S. 21 of Arbitration Act, 1940

Respondents did not extend consent for arbitration, therefore, Trial Court rightly exercised its jurisdiction and Lower Appellate Court rightly upheld the same

High Court declined to interfere with the orders passed by two Courts below

Revision was dismissed, in circumstances.

Contention of the appellants was that the matters arising out of the award passed by the arbitrator were judicial in nature and not ministerial and mere absence or delay of objections did not absolve the Court from its responsibility to scrutinize it on merits

Validity

Such contention of the appellants was misplaced because although it was held that the objections of one of the appellants were barred by time, yet, while deciding the matter, the Trial Court had fully discussed the material available on record and decided the case on merits

Findings of Trial Court were based on proper appreciation of the material available before it, which did not require any interference

Appellate Court has a very limited jurisdiction while adjudicating an appeal arising out of the Arbitration Act, 1940, as neither it can reappraise the evidence nor can set aside an award merely on the basis of alleged irregularity committed by the Trial Court

For interference with an award and findings of the lower court there must be a patent illegality, which should be apparent on the face of award or the arbitrators have committed misconduct while passing the award which indeed was not the case of the appellants

Appeal was dismissed accordingly.

Appellant authorities were aggrieved of rejection of objections filed against award which had been made rule of the Court by Trial Court

Validity

While making award rule of Court, in a case where parties does not file objections, the Court is not supposed to act in a mechanical manner like the proverbial post office and place its seal on it

Court is obligated to look into the award and if it finds patent illegality on the face of award, the Court is empowered to set aside, modify or remit the award for reconsideration

Trial Court neither considered the reasons for setting aside the award nor considered as to whether award was liable to be remitted

By simply observing that award had been delivered by two Arbitrators who were Officers of the Department of appellant, irrespective of the fact whether the award was invalid, it was violative of the contract or otherwise violative of the rule of due process and it had no basis

High Court set aside rule of the Court and remanded the matter to Trial Court for decision afresh on the objection to the award by framing proper issues and allowing the parties to produce evidence

Appeal was allowed in circumstances.

Appellant / defendant was aggrieved of dismissal of his application to stay legal proceedings so as to refer the matter to arbitration

Validity

If in a contract, there is provision of resolution of dispute between the parties by way of arbitration and parties have agreed to such forum, then such forum is to be resorted to and given preference over filing of suit

If one of the parties to the contract by-passing forum of arbitration files a suit, then the other party can file application for stay as contemplated under S.34 of Arbitration Act, 1940 and if Trial Court is satisfied then order for stay of proceedings in the suit can be passed to enable resolution of dispute between the parties by way of arbitration only

Conditions precedent for application under S.34 of Arbitration Act, 1940 are that the party applying for stay has not filed written statement or taken "any other steps in the proceedings" indicating that right to invoke arbitration clause is intentionally abandoned in favour of Court proceedings

Nothing was available over surface of record to construe that conduct of appellant / defendant, in order to be termed as "a step in the proceedings", was such as would manifestly had displayed an unequivocal intention to proceed with the suit and giving up right to have the matter disposed of by arbitration

High Court set aside order in question as the same was passed by Trial Court in disregard of parameters and criteria for test laid down by the Supreme Court for ascertainment and determination of act of appellant / defendant in order to be termed as "a step in the proceedings"

High Court remanded the matter to Trial Court for decision afresh on application under S.34 of Arbitration Act, 1940

Appeal was allowed, in circumstances.

Such is a premature step to stifle arbitration clause.

Petitioner /Civil Aviation Authority was aggrieved of order passed by Trial Court for appointment of an umpire for arbitration proceedings between the parties

Held, that requirement for appointment of umpire is intended to meet contingency of arbitrators with divided opinion

Where arbitrators are not at variance there is no occasion to refer matter to umpire, who can only be appointed if there are even number of arbitrators

Contract between parties required the arbitrators and not the parties to appoint the umpire

Respondents / contractors did not address notice in question for appointment of substitute umpire to the arbitrators but to petitioner / Authority

Such notice did not conform to requirements of S. 8(1)(b) of Arbitration Act, 1940

Respondents / contractors could not solicit concurrence in appointment of umpire from petitioner / Authority but from arbitrators as that was what the relevant clause of the Contract had provided for

Without a notice by respondents / contractors to the arbitrators to appoint the umpire in place of umpire nominated in contract, the application under S. 8 of Arbitration Act, 1940 could not be entertained by Trial Court, which ought to have pointed out respondents / contractors to the arbitrators who were to concur in the appointment of substitute umpire

As arbitrators had not been required by respondents / contractors to supply vacancy created by recusal of umpire nominated in contract to sit as the umpire, the requirements of S. 8(1)(b) of Arbitration Act, 1940, were not fulfilled, therefore Trial Court did not have jurisdiction to appoint an umpire under S.8(2) of Arbitration Act, 1940

High Court set aside the order passed by Trial Court and respondents / contractors were at liberty to request arbitrators to supply vacancy created due to recusal of umpire nominated in contract

Respondents / contractors could send a notice in writing under S. 8(1) Arbitration Act, 1940, to arbitrators requiring them to supply the vacancy within fifteen days of such notice, in case they did not appoint an umpire

In case arbitrators did not appoint umpire even after notice, then respondents / contractors could apply under S.8(2) of Arbitration Act, 1940, to Trial Court to supply the vacancy

Revision was allowed accordingly.

Appellant/National Highway Authority was aggrieved of dismissal of its objections by Trial Court against award which was made rule of the Court

Validity

Appellant/Authority had legal experts rendering opinions and memoranda on probability of success of a challenge to a claim or to an award

Members of appellant/Authority should have recorded in their minutes of meetings as to why they chose to differ from legal advice if it recommended accepting the award without further contest

Such accountability would become all the more important where award had stipulated ongoing late payment charges that kept on accumulating until those were paid

Appellant/Authority had made matters worse for itself by frivolous contests to the awards for years to come

If appellant/ Authority had paid the award on time, it would not have incurred 3% above the discount rate of State Bank of Pakistan accumulating to a substantial sum

There was no accountability of appellant/Authority on such score, which had caused needless misery for the contractors, apart from being a drain on appellant's/Authority's finances

In any private organization, Board of Directors could have been fired for ignoring legal advice against contest to an award if such advice was given, and not obtaining such advice was itself a negligent act, for the directors were meant to act on expert legal advice and not pretend to be legal experts themselves where their ignorance could translate into tens of millions of rupees of public money being paid out as late payment charges

Such act of appellant/Authority had burdened Courts with disputes that should never have reached the Courts in the first place

High Court declined to interfere in order of Trial Court making award rule of the Court and imposed costs upon appellant/Authority

Appeal was dismissed, in circumstances.

Petitioner / plaintiff filed suit for specific performance of agreement to sell and proceedings in the suit were stayed by Lower Appellate Court in exercise of jurisdiction under S.34 of Arbitration Act, 1940

Validity

Provision of S.34 of Arbitration Act, 1940, has been enacted to make arbitration agreements effective and prevent a party from going to Court contrary to his/its own agreement

Where parties had agreed to refer disputes to arbitration, Court should as far as possible, give an opportunity for resolution of disputes through arbitration rather than by judicial adjudication

Powers vested in Court to grant stay under S.34 of Arbitration Act, 1940, is entirely a matter of discretion of Court

Court must not ignore to see that parties are held to their bargain and promote sanctity of contracts/ agreements

Application under S.34 of Arbitration Act, 1940, merits rejection, when in such application, there are no averments as to the applicant's readiness and willingness to have the disputes resolved through arbitration

Court has jurisdiction to entertain the suit, however, the Court in its discretion may stay the proceedings in the suit and also consider whether the discretion should be exercised in a particular case or not

Provision of S.34 of Arbitration Act, 1940, does not make it obligatory on the Court to necessarily refer the dispute to arbitration and may exercise the discretion to stay the proceedings if it is satisfied that there is no sufficient reason why the matter should not be referred to in accordance with the arbitration agreement

High Court declined to interfere in the matter and maintained the order passed by Lower Appellate Court

Revision was dismissed in circumstances.

Respondent/ Registrar appointed his nominee to decide the issue through arbitration under S.54 of Co-operative Societies Act, 1925

Trial Court dismissed the suit filed by appellants / plaintiffs

Validity

Nominee of Registrardirected respondent/ society to restore suit plots to appellants/ plaintiffs once all outstanding dues had been paid by them and in case same plots were not available then to adjust them with plots having same market value

Appellants/ plaintiffs had already exhausted their remedy under S.54 of Co-operative Societies Act, 1925, pursuant to which an order was delivered that had determined rights of partiesand the same had attained finality

High Court declined to interfere in judgment and decree passed by the Trial Court as appellants/ plaintiffs could not jump ship once again and continue to pursue the subject suit nor continue instant appeal which was a continuation of subject suit simply because theywere not happy with outcome of proceedings earlier instituted

Appeal was dismissed, in circumstances.

Appellant/National Highway Authority was aggrieved of dismissal of its objections by Trial Court against award which was made rule of the Court

Validity

Appellant/Authority had legal experts rendering opinions and memoranda on probability of success of a challenge to a claim or to an award

Members of appellant/Authority should have recorded in their minutes of meetings as to why they chose to differ from legal advice if it recommended accepting the award without further contest

Such accountability would become all the more important where award had stipulated ongoing late payment charges that kept on accumulating until those were paid

Appellant/Authority had made matters worse for itself by frivolous contests to the awards for years to come

If appellant/ Authority had paid the award on time, it would not have incurred 3% above the discount rate of State Bank of Pakistan accumulating to a substantial sum

There was no accountability of appellant/Authority on such score, which had caused needless misery for the contractors, apart from being a drain on appellant's/Authority's finances

In any private organization, Board of Directors could have been fired for ignoring legal advice against contest to an award if such advice was given, and not obtaining such advice was itself a negligent act, for the directors were meant to act on expert legal advice and not pretend to be legal experts themselves where their ignorance could translate into tens of millions of rupees of public money being paid out as late payment charges

Such act of appellant/Authority had burdened Courts with disputes that should never have reached the Courts in the first place

High Court declined to interfere in order of Trial Court making award rule of the Court and imposed costs upon appellant/Authority

Appeal was dismissed, in circumstances.

Arbitration agreement not only imposes a "positive" obligation upon parties to proceed with a dispute but also creates negative undertaking for parties which obligates them not to bring any claims falling within the scope of arbitration agreement, in a forum other than arbitration.

Petitioner Co-operative Society called in question the order passed by Registrar of Co-operative Societies whereby order of the petitioner terminating the services of Incharge Parks and Horticulture Authority was set aside and also challenged the jurisdiction of the Registrar to entertain the application for arbitration under S.54 of the Co-operative Societies Act, 1925

Validity

Expression "touching the business of a society" as contained in S.54 of the Co-operative Societies Act, 1925, did not cover the service matters between the employee and the cooperative society

Petition under S.54 of the Co-operative Societies Act, 1925, filed by employee before the Registrar of Co-operative Societies was not maintainable

Constitutional petition was allowed and all the orders passed in the proceedings initiated pursuant to the said petition were declared to be nullity in the eyes of law and were accordingly set aside.

Arbitration agreement not only imposes a "positive" obligation upon parties to proceed with a dispute but also creates negative undertaking for parties which obligates them not to bring any claims falling within the scope of arbitration agreement, in a forum other than arbitration.

Objections against award announced by arbitrator were dismissed by Trial Court as well as Lower Appellate Court and award was made rule of the Court

Validity

If on reappraisal of evidence, a different view is possible, High Court cannot substitute its own view and upset findings of fact concurrently arrived at by the Courts below

Such findings can only be interfered with if the Courts below had misread the evidence or had committed a jurisdictional error

Dispute between the parties could not be resolved without the assistance of Dispute Review Expert (DRE)

It was for such reason that respondent company referred the dispute to DRE under specific clause of the Conditions of Particular Application

Just like rule 9(c) of Rules of Procedure for the Functions of the Disputes Review Expert, the provision of R. 9(d) of Rules of Procedure for the Functions of the Disputes Review Expert also does not prescribe any time limit within which a party can refer a dispute to DRE

Contractual provisions which placed a time limit on a party's right to initiate a dispute resolution process had to be strictly construed

Reference of dispute to DRE did not offend any provision of Conditions of Particular Application read with Rules and Procedures for the Functions of the Disputes Review Expert

High Court in exercise of revisional jurisdiction declined to interfere in the award made rule of the Court

Revision was dismissed, in circumstances.

Appellant was aggrieved of order passed by Trial Court dismissing objections filed against award and making it Rule of the Court

Validity

Objections to award filed by appellant under S. 30 of Arbitration Act, 1940, before Trial Court were cryptic and perfunctory

Objections were full of generalizations and did not deal with specific aspects of the award

This was equally true of the grounds taken by appellant in memorandum of appeal

Appellant in the grounds of his appeal filed before High Court did not point out any specific infirmity with the award, except making generalized challenges

There was no patent illegality appearing on the face of award and Arbitrator had amply referred to the evidence while deciding each of the claims before him

All claims and counter claims were decided on the basis of the documentary evidence placed and proved before Arbitrator

High Court declined to interfere in order passed by Trial Court whereby appellant's objections to the award were spurned and award was made a Rule of Court

Appeal was dismissed, in circumstances.

Objections against award announced by arbitrator were dismissed by Trial Court as well as Lower Appellate Court and award was made rule of the Court

Validity

If on reappraisal of evidence, a different view is possible, High Court cannot substitute its own view and upset findings of fact concurrently arrived at by the Courts below

Such findings can only be interfered with if the Courts below had misread the evidence or had committed a jurisdictional error

Dispute between the parties could not be resolved without the assistance of Dispute Review Expert (DRE)

It was for such reason that respondent company referred the dispute to DRE under specific clause of the Conditions of Particular Application

Just like rule 9(c) of Rules of Procedure for the Functions of the Disputes Review Expert, the provision of R. 9(d) of Rules of Procedure for the Functions of the Disputes Review Expert also does not prescribe any time limit within which a party can refer a dispute to DRE

Contractual provisions which placed a time limit on a party's right to initiate a dispute resolution process had to be strictly construed

Reference of dispute to DRE did not offend any provision of Conditions of Particular Application read with Rules and Procedures for the Functions of the Disputes Review Expert

High Court in exercise of revisional jurisdiction declined to interfere in the award made rule of the Court

Revision was dismissed, in circumstances.

Question as to whether dispute or claim raised by respondent was legitimate or not was to be determined through arbitration and dispute between parties fell within prerogative and domain of arbitrator

Mere bald and general denial by appellant by simply stating that no dispute existed did not mean that there was no dispute

Scope of S.20 of Arbitration Act, 1940, restricted Trial Court to give findings on issues emanating from agreement itself regarding which parties have agreed to resolve through arbitration

Court was only required to satisfy itself regarding existence of a real and alive dispute between the parties

Reference to arbitration could not be a futile exercise and Court could not blindly refer a non-existent dispute to arbitration but it was required to satisfy itself that there was a tangible prima facie dispute between parties which required resolution through arbitration as agreed by parties

Court was empowered to determine itself, if application under S.20 of Arbitration Act, 1940, was barred by time or not, such was not an issue before Trial Court

All controversies inter se parties fell within the ambit of arbitration under the contract between parties

High Court declined to interfere in the order passed by Trial Court as there existed no sufficient cause within the contemplation of S.20(4) of Arbitration Act, 1940, to refuse application filed under S.20 of Arbitration Act, 1940 and making order of reference to arbitrator

Appeal was dismissed, in circumstances.

Doctrine of Kompetenz-kompetenz essentially allowed the arbitral tribunal to determine its own jurisdiction.

Gas Supply Agreement ('GSA') between a power generation facility ('power company') and distributor of natural gas ('SNGPL')

Dispute over payment for gas after power company refused to take up gas from SNGPL

Question as to whether the award rendered by the Arbitrator in favour of SNGPL amounted to unjust enrichment

Held, that although SNGPL was receiving payment for the same amount of gas twice, it needed to be clarified that this was upon failure of the power company to take up the gas, and further, the SNGPL, in any case, was not recovering the same amount, due to the fact that it was redirecting transmission to its domestic consumers, which paid a lower tariff than Independent Power Producers (IPP) like the power company

Furthermore, to allow the power company's claim would mean overlooking the fact that SNGPL was still under an obligation to supply the Make-Up Gas to the power company at any time within the duration stipulated under the GSA, therefore, there was a 'juristic reason' for the enrichment

Further, the power company had failed to prove its deprivation as it was entitled to Make-Up Gas at a later date, which it failed to avail within the stipulated time frame

Furthermore the Arbitrator while dismissing the claim of unjust enrichment raised by the power company correctly explained that SNGPL expanded monies to construct the infrastructure to deliver gas to the power company; that SNGPL remained liable to its upstream suppliers even if the power company chose not to take the Take or Pay Quantity but opted to pay instead and to Make Up Gas later; that SNGPL had to bear the responsibility of cutting its losses and find an alternative buyer (even at a lower price) for the Gas not taken by the power company and the likely additional costs of its transmission, distribution and unaccounted for gas

Power company (appellant) had failed to make out a claim for unjust enrichment, and the award rendered by the Arbitrator was not disproportionate to the losses suffered by SNGPL

Appeal was dismissed.

After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount

Plea of power generation facility that had the arbitration clause in the GSA did not cover the Payment Agreement, and thus the Sole Arbitrator exceeded his jurisdiction by deciding the issues arising out of the Payment Agreement

Held, that the arbitration clause in the GSA covered disputes, disagreements or default of the seller and buyer "in connection with or arising out of" the GSA

Dispute under the Payment Agreement was inarguably a dispute connected to the GSA, and also arose out of the obligations under the GSA

Controversy arising out of Payment Agreement was a progeny of the GSA and could not be divorced from the parent GSA

Arbitration clause contained in the GSA would therefore be the "centre of gravity" and would be deemed to be anchored in the Payment Agreement which itself was merely an implementation of the GSA

Disputes "arising out of" the GSA were thus wide enough to cover the Payment Agreement

Neither was it commercially sensible nor realistic to hold that both the agreements were to be decided by separate forums

Had this been the case, the parties, as rational businessmen, would have been prudent in expressly excluding the arbitration clause from the Payment Agreement

Appeal was dismissed.

Survey of case law from the United Kingdom, Singapore, Hong Kong, India and Pakistan.

Doctrine of Kompetenz-kompetenz essentially allowed the arbitral tribunal to determine its own jurisdiction.

Gas Supply Agreement ('GSA') between a power generation facility ('power company') and distributor of natural gas ('SNGPL')

Dispute over payment for gas after power company refused to take up gas from SNGPL

Question as to whether the award rendered by the Arbitrator in favour of SNGPL amounted to unjust enrichment

Held, that although SNGPL was receiving payment for the same amount of gas twice, it needed to be clarified that this was upon failure of the power company to take up the gas, and further, the SNGPL, in any case, was not recovering the same amount, due to the fact that it was redirecting transmission to its domestic consumers, which paid a lower tariff than Independent Power Producers (IPP) like the power company

Furthermore, to allow the power company's claim would mean overlooking the fact that SNGPL was still under an obligation to supply the Make-Up Gas to the power company at any time within the duration stipulated under the GSA, therefore, there was a 'juristic reason' for the enrichment

Further, the power company had failed to prove its deprivation as it was entitled to Make-Up Gas at a later date, which it failed to avail within the stipulated time frame

Furthermore the Arbitrator while dismissing the claim of unjust enrichment raised by the power company correctly explained that SNGPL expanded monies to construct the infrastructure to deliver gas to the power company; that SNGPL remained liable to its upstream suppliers even if the power company chose not to take the Take or Pay Quantity but opted to pay instead and to Make Up Gas later; that SNGPL had to bear the responsibility of cutting its losses and find an alternative buyer (even at a lower price) for the Gas not taken by the power company and the likely additional costs of its transmission, distribution and unaccounted for gas

Power company (appellant) had failed to make out a claim for unjust enrichment, and the award rendered by the Arbitrator was not disproportionate to the losses suffered by SNGPL

Appeal was dismissed.

After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount

Plea of power generation facility that had the arbitration clause in the GSA did not cover the Payment Agreement, and thus the Sole Arbitrator exceeded his jurisdiction by deciding the issues arising out of the Payment Agreement

Held, that the arbitration clause in the GSA covered disputes, disagreements or default of the seller and buyer "in connection with or arising out of" the GSA

Dispute under the Payment Agreement was inarguably a dispute connected to the GSA, and also arose out of the obligations under the GSA

Controversy arising out of Payment Agreement was a progeny of the GSA and could not be divorced from the parent GSA

Arbitration clause contained in the GSA would therefore be the "centre of gravity" and would be deemed to be anchored in the Payment Agreement which itself was merely an implementation of the GSA

Disputes "arising out of" the GSA were thus wide enough to cover the Payment Agreement

Neither was it commercially sensible nor realistic to hold that both the agreements were to be decided by separate forums

Had this been the case, the parties, as rational businessmen, would have been prudent in expressly excluding the arbitration clause from the Payment Agreement

Appeal was dismissed.

Survey of case law from the United Kingdom, Singapore, Hong Kong, India and Pakistan.

If no move is made by parties for decision of matter through arbitration, Registrar can proceed with the matter and decide the dispute himself.

Plaintiff was aggrieved of non-payment of consideration amount for goods supplied to defendant under the contract between the parties

Plea raised by defendant was that (currency) exchange rate stipulation was unmerited as the appropriate exchange rate was to be that prevailing rate upon the date that the relevant amounts had become due

Validity

If objection of defendant was to be sustained, the same would amount to sanction unjust enrichment

Contract and obligation emanating therefrom was not denied and it was also admitted that such liability was denominated in foreign exchange

Payment of adjudicated liability, to plaintiff in Pakistan currency was not demonstrated to be barred by any sanction, foreign or domestic

Such objection was circumscribed with respect to applicable rate of exchange

Award was well reasoned and was predicated upon due consideration of evidence

Defendant failed to demonstrate any infirmity with respect to the Award, within the ambit of S.30 of Arbitration Act, 1940, or otherwise

High Court dismissed objections against award raised by defendant

Award was made rule of the Court, in circumstances.

Petitioner sought referring the matter to arbitrator but Trial Court and Lower Appellate Court concurrently declined to refer the matter on the ground that petitioner had failed to initiate arbitration within period prescribed in agreement between the parties

Validity

Trial Court was to decide whether an application under S.20 of Arbitration Act, 1940, was filed within limitation period provided by law

Arbitrator and not the Court was to deal with question whether claim of a party to arbitration agreement was barred by law of limitation

Provision of S.37(4) of Arbitration Act, 1940, did not apply to the time within which an application under S.20 of Arbitration Act, 1940, could be moved

Trial Court could not refuse to refer matters to arbitration on the ground that because of a clause in arbitration agreement, placing a time limit within which party to such an agreement could raise claim against the other was time barred

Arbitrator was to decide such questions

Both the Courts below erred by not appreciating that it was for the arbitrator and not the Court to decide whether claim of petitioner against respondent was barred by a provision of arbitration agreement imposing time limits within which claims could be made in arbitration

High Court set aside concurrent orders passed by two Courts below and application under S.20 of Arbitration Act, 1940, filed by petitioner was allowed

High Court referred the matter to Karachi Stock Exchange for arbitration

Revision was allowed, in circumstances.

Demand for payment was made by petitioner from his office at place "I" and it was also received by respondent at place "I"

Effect

Civil Court at place "I" was competent to decide application under S.20 of Arbitration Act, 1940, filed by petitioner.

Stay/restraining of encashing of Bank guarantees provided by contractor to Development Authority against mobilization advance

Scope

Petitioner/contractor sought quashing of orders of Arbitrator as well as restraining operation of letters issued by Development Authority whereby it sought to encash Bank guarantees provided by petitioner

Validity

Although court was vested with the powers to grant interim relief, but such discretion must be exercised sparingly and only in appropriate cases

Such discretion ought to be exercised in the exceptional cases when there was adequate material on record, leading to a definite conclusion that Development Authority was likely to render entire arbitration proceedings infructuous, by frittering away the properties or funds either before or during the pendency of arbitration proceedings or even during the interregnum period from the date of arbitration award to its execution

Demand of encashing of bank guarantee through impugned letter was to be deemed to be a conclusive evidence regarding failure of the petitioner to comply with contractual terms and thus, Bank was bound to honour commitment made in the guarantee

Such encashment of Bank guarantee could not be put off until the culmination of proceedings of S. 20 of the Arbitration Act, 1940 before Trial Court or the announcement of award to be made by the arbitrators merely on the ground that a dispute existed between the parties to the contract and therefore injunction sought by petitioner/contractor could not be allowed

Constitutional petition was dismissed, 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.