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Petitioner: EJAZ ALI SIDDIQUE and another VS Respondent: Rana IRSHAD AHMED and another
Court Name: Balochistan High Court Judge(s): Iftikhar Muhammad Chaudhry, Raja Fayyaz Ahmed Title: EJAZ ALI SIDDIQUE and another vs Rana IRSHAD AHMED and another Case No.: Civil Miscellaneous Application No,25 and Civil Revision No,251 of 1997 Date of Judgment:1998-04-29 Reported As: 1998 CLC 1684 Result: Order accordingly
JUDGMENT
JUDGMENT ' IFTIKHAR MUHAMMAD CHAUDHRY, J.---Brasstacks of this case are, that on 9th October, 1969, a Partnership Deed was executed between appellant Ejaz Ali Siddiqui, his father and two brothers Shaukat Ali and Irshad Ahmad, as well as Agha Ahmad Shah, Mr. Abdul Wahid and Mir Karam Khan, in pursuance whereof, latter surrendered their rights and shares in old concern of Messrs National Mining Corporation, Quetta, in favour of appellant Ejaz Ali Siddiqui, his father and two brothers, named above. As far as Agha Ahmad Shah is concerned, he was partner in the old concern, therefore, he was allowed to continue to hold his previous share. The name and style of partnership was designated to be National Mining Corporation. In 1977-78, Rana Irshad Ahmad Khan and Chaudhry Muhammad Iqbal (respondents) obtained mine from National Mining Corporation for raising coal on royalty basis at the rate of Rs,35 per ton. It is the case of respondents that they developed the mine and installed machinery for the purpose of extracting coal. It so happened that in the year, 1991, appellant Ejaz Ali Siddiqui alongwith other sharers sold the rights of Mine to Mir Changez Ahmad Kurd and Mir Kamran Ahmad Kurd sons of Mir Abdul Wahid Kurd. On attaining the partnership rights, differences arose between the respondents and the new owners, as they were not permitting them to raise the coal. As such, to settle the dispute, the parties entered into an Arbitration, in pursuance whereof, as per Arbitration Agreement, dated 29th June, 1991, the new owners of the Corporation namely Mir Changez Ahmad Kurd appointed Haji Khan Bahadur and Muhammad Murad Kurd as Arbitrators to determine the price of machinery, cost of labour and other expenditures. Whereas respondents appointed on their behalf, Haji Abdul Raziq and Haji Khuda Bakhsh as Arbitrators for decision with the owners, in respect of the mining machinery, underground and surface. These Arbitrators vide Award, dated 14th July, 1991, held the respondents
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entitled to receive rupees twenty-eight lacs and directed the new owners of the Corporation to make payment of this amount, immediately to them. It is an admitted fact that this Arbitration Award was not made as 'Rule of the Court', as in this behalf, no such request was made. Subsequent thereto, on 12th November, 1991, another Arbitration Agreement was executed between respondents and appellant Ejaz Ali Siddiqui, wherein he was designated to be Party No,2, being the Managing Director of National Mining Corporation, Narwar. Later on, statedly behind the back of appellant, sole Arbitrator pronounced the Award on 24th December, 1991. In the concluding para., it was mentioned that the respondents are in total entitled to the sum of Rs,28,00,000 plus Rs,21,60,000 equal to Rs,49,60,000, to which appellant is bound to pay them, after eight months, from the date of finally compiling the Award. As such, immediately after the pronouncement of Award, no application was submitted before the competent Court of civil jurisdiction, for making the Award as 'Rule of the Court'. However, on 24th November, 1992, an application under the Arbitration Act, 1940 for making the Award, dated 24-12-1991, as 'Rule of the Court' was submitted by respondents. It is noteworthy that in the application, nothing was stated in respect of earlier Arbitration Award, which took place between the respondents and the new owners of National Mining Corporation. Appellant-petitioner contested the application and pointed out therein, inter alia, that on 11th July, 1991. Mir Kamran Ahmad Kurd and Mir Changez Ahmad Kurd, purchased share of 75 per cent. Of the remaining partners in the sum of rupees fifty-four lacs and this amount was to be paid by them to the partners, within eighty days and on account of change of ownership, the respondents opted, not to work with the new owners and demanded that they should be paid, for the machinery installed by them and for the works done in the mine. Accordingly to solve the dispute, matter was referred to four Arbitrators, details whereof, have already been given above, who gave Award, declaring that respondents are entitled for rupees twenty-eight lacs in lieu of machinery and other expenditures, incurred by them in the Mine. As at that time, respondents also owe an amount of rupees twenty-four lacs to appellant-petitioner, therefore, on payment of four lacs in cash, the amount of rupees twenty-eight lacs was adjusted. But despite final settlement between the respondents and the Firm and for the fact that appellant had no concern with the firm, the respondents kept on pressing their demands for more money and subsequently under the conspiracy and with the collusion of Arbitrator, it was arranged that he would intervene and call upon the appellant to enter into an Agreement of Arbitration with the respondents, with clear understanding that the question of arbitration already decided shall be upheld, ratified and legalized. Consequently the appellant was compelled, coerced and persuaded through mis- representation and deception to enter into Arbitration Agreement. Accordingly the appellant on 23rd December, 1991, appeared before the Arbitrator and found out the mala fides of the respondents and the Arbitrator. Except certain discussion between the parties and the Arbitrator, no further proceedings were taken by the Arbitrator. Inasmuch as no witness was examined, because the appellant explained to Arbitrator that he no longer represents the Firm and is not in a position to re-open the issue, already settled between the parties through Arbitration. With the result, the proceedings were adjourned sine die. After this hearing, the Arbitrator never took up the matter nor recorded statement of any witness in his presence nor he was afforded opportunity to place his case and to produce evidence before the Arbitrator. However, on 23rd December, 1991, appellant on having smelled the mala fide intentions of the respondents and the Arbitrator, informed the other partners, who on the next day i,e,, 24th December, 1991, notified to the Arbitrator that he should not take any proceedings in the matter, without their consent. As such, when the Arbitrator came to know about the stand of appellant, he did not take any proceedings in the matter. In the meanwhile in order to cause unnecessary harassment to appellant and his brother, one of the respondent namely Rana Irshad Ahmad disappeared, while the other filed a wrong and malicious report with the police about his abduction and tried to involve the appellant and his
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brother as culprits. The respondent Rana Irshad Ahmad remained underground for four months. With the result, appellant and his brother were summoned by the police on many occasions and kept them sitting in the police station for many hours, merely to cause harassment and compelled them to accept unreasonable demands of respondents. This exercise continued for about four long months and during this period, behind the back of appellant, on 24th December, 1991, purportedly Arbitrator pronounced his Award, without informing the appellant and it appears that with the connivance of respondents, the Arbitration Award was written somewhere in September, 1992, but by anti-dating the same, it was shown to have been written on 24th December, 1991. After explaining the above background of the case, the appellant filed following objections under sections 30 and 33 of the Arbitration Act:--- "(A) That as per paras. 1, 2 and 3 of the application, applicants' case is that differences forming subject-matter of Arbitration Agreement related to applicants' claim arising out of development made and machinery installed in coal mines of the Firm (National Mining Corporation). As such, the Arbitration Agreement and Award are not enforceable and are invalid for following reasons:--- (i) On their own showing respondent had ceased to be partner in Firm (National Mining Corporation) following sale by him of his shares thereto; (ii) Admittedly, independently of the Firm, there were not differences between applicants and objector-respondent so as to be subject-matter of an Arbitration Agreement or of Arbitration proceedings; (iii) As ex-partner, respondent had no express authority to refer any dispute relating to business of the Firm to arbitration; (iv) Even under law, implied authority of a partner does not empower him to submit a dispute relating to the business of the Firm to arbitration. In this behalf attention is invited to section 19 of the Partnership Act, 1932:--- 19. Implied authority of partner as agent of the firm.-- (1) Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. ' The Authority of a partner to bind the firm conferred by this section is called his ' implied authority'. (2) In absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to--- (a) submit a dispute relating to the business of the firm to arbitration, (b) to (h) ........................................................................................................... (B) That in the circumstances, the agreement in question is not covered by definition of Arbitration Agreement as contemplated by section 2(a) of Arbitration Act, 1940. It is not with respect to present or future differences. (C) That neither the Award was made nor announced in presence of respondent nor for that matter any notice thereof was given to respondent. Therefore, filing of award is barred by time as contemplated by Article 178 of the Limitation Act, 1908. (D) That the dispute in question was between the applicants on the one side and National Mining Corporation (a partnership firm) on the other therefore, the application against the answering respondent is not maintainable. (E) That the National Mining Corporation is a Firm having 5 partners, therefore, the application is bad for misjoinder and non-joinder of parties. (F) That award is also illegal, unjust and arbitrary and no reasons have been given in the award as required under section 26-A of the Arbitration Act, 1940. (G) That in fact at the time of the execution of Arbitration Agreement, dated 12-11-1991, the Mine belonged solely to Kamran Ahmad son of Ahmad Shah and. Mir Changez Ahmad son of Abdul Wahid Kurd and before that the dispute between the applicants on the one side and the Firm on
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the other had already been decided by 4 Arbitrators on 14-7-1991, holding that applicants are entitled to payment of Rs,28 lacs in lieu of their interest in the Mine (Machinery and development work done in the Mine), therefore, there was no dispute between the applicants and the respondents to be decided by the arbitrator on 12-11-1991 in connection with the Mine, hence the Arbitration Agreement is void and is of no legal consequence. (H) That Arbitration Agreement is a result of coercion, undue influence and fraud. (J) That even otherwise the Arbitrator has not conducted himself and the proceedings in accordance with law which amounts to misconduct and misconducting the proceedings. (K) That the arbitrator has awarded Rs,28 lacs as the price of machinery plus Rs,21,60,000 as 2/5th of the price of mine and has failed to take into consideration that the applicants have already received Rs,28 lacs as price of the machinery. On this ground alone the award is liable to be set aside. (L) That after the decision by the Arbitrators on 14-7-1991, there was no dispute left between the parties to be referred for arbitration. (M) That the award is not based on any evidence. (N) That the award is patently bad, because as already explained above, amount of Rs,28 lacs has been paid to the applicants. Suppression of this payment by the applicants and inclusion of the same in the award by the Arbitrator renders the award as void, illegal and arbitrary. (P) That without prejudice to above objections, application is premature." Both the respondents filed reply to objection application under sections 30 and 33 of the Arbitration Act, wherein it was pleaded, that the Objection Application filed by appellant is time-barred, therefore, liable to be dismissed. The appellant participated and admitted the decision of Arbitrator and also joined in 'Dowai Khair' in this behalf and never raised objection at the relevant time and now by the principle of Waiver-estoppel, he is estopped from challenging the Award. The appellant submitted himself to the jurisdiction of Arbitrator, therefore, now he cannot challenge the Award or the jurisdiction of Arbitrator. The application is not maintainable under the law, in view of the provisions contained in Arbitration Act. On merits, it was admitted by them, to the extent that Mir Kamran Ahmad Kurd and Mir Changez Ahmad Kurd, purchased the shares of remaining partners i,e,, 75% for a sum of rupees fifty-four lacs. It was also admitted that four Arbitrators were appointed, but they were only appointed in order to estimate the price of mine and not expenses of development of mine and second arbitration agreement was executed between the appellant and respondent about the compensation of development of mine, which includes the development of tunnels, construction of power house, labour colony, Roads etc. For the purpose of arbitration agreement, dated 14-7-1991, a list of machinery was also prepared further all these proceedings of arbitration, dated 14-7-1991, were conducted in their absence and behind their back. Respondents also explained that after the Arbitration Award, dated 14th July, 1991, neither Mir Changez Kurd nor appellant Ejaz Ali Siddiqui, paid any amount to them and it has been wrongly stated by appellants that rupees twenty-four lacs were outstanding against respondents and after payment of rupees four lacs in cash, the amount of rupees twenty-eight lacs was adjusted. In fact the appellant has not paid a single penny to respondents. It was further stated that factual position is that respondents have no concern with the Firm or other partners and they have entered into Arbitration Agreement, with appellant. They had spent all they had and whatever they earned from this business, therefore, appellant is responsible for the amount of machinery and development and he sold his share to his partners. It was further emphasised that rupees twenty-eight lacs were never paid to them. Allegations of appellant that he was coerced, compelled or persuaded through misrepresentation or deception to enter into Arbitration, were repudiated, as according to them, appellant entered into Arbitration Agreement, dated 12th November, 1991, to settle the dispute through Arbitrator. It was further stated that Arbitrator called some other Mine owners on 23rd
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December, 1991 and after taking their verbal statement in presence of appellant, asked the appellant, who admitted his liability to pay Rs,49,60,000 to respondents. On his admission, the Arbitrator and other persons present there, made Dowai Khair'. The appellant had full opportunity to place his case before the Arbitrator. He has again wrongly stated that Arbitrator wrongly included rupees twenty-eight lacs which he has already paid to respondents. He had never paid them rupees twenty-eight lacs. The reply to objections raised by appellant under sections 30 and 33 of the Arbitration Act, were answered as under:--- "LEGAL OBJECTIONS:--- (A) That the objection application filed by the respondent is time-barred, therefore, liable to be set aside. (B) Respondent participated and admitted the decision of arbitrator as well as participated in Dowai Chair in this behalf and never raised any objection at the relevant time, now by the principle of waiver, estoppel he is estopped from challenging the award. (C) The respondent submitted himself to the jurisdiction of Arbitrator, now he cannot challenge the award or the jurisdiction of Arbitrator. (D) The application is not maintainable under law in view of the provisions contained in the Arbitration Act. 14. The applicant submitted his reply to objection raised under sections 30 and 33 of the Arbitration Act as under:--- (A) That the respondent was partner as well as Managing Director of National Mining Corporation and all transactions were made between applicants and respondent. And for all purposes respondent deal in all matters, further, respondent received the amount for machinery installed by applicant and development of mines made by applicants from his other partners, therefore, solely he is responsible for the amount due in his personal capacity. (i) Contents are not admitted. That the respondent had sold his share to other partners which include the price of machinery installed by applicants and price of development of mines made by applicant, therefore, he is responsible for payment. Further, he admitted his liability before the arbitrator, now he cannot change his position to avoid his liability. According to award he is personally liable to pay Rs,49,60,000. (ii) Contents are not admitted. There was a dispute between the parties and to settle the same an agreement for arbitration was executed. The award is very clear in this behalf. (iii) That the respondent is liable to pay in his personal capacity as stated in reply to clauses (i), (ii). (iv) Contents are not admitted detailed reply has been given in the reply to application, however, it is not out of place that respondent was Managing Director of the firm and not an Agent, and he was liable for the amount in his personal capacity as he received the amount in respect of development as well as machinery. (B) That the contents are not admitted. Factually there was a dispute between applicants and respondents which was resolved by the Arbitrator. (C) That the contents are not admitted. The award was announced in presence of respondent who admitted the same and promised to pay the same within stipulated time. According to the terms of the award the respondent has to pay Rs,49,60,000 to the applicants within eight months and if respondent failed to pay the said amount within time then the applicant will at liberty to file the award in Court and get it/make it rule of Court in accordance with law and get recover the amount. The award was made on .24-12-1991 and eight months expired on 24-8-1992. Thereafter, applicants approached the arbitrator who after his satisfaction permitted the applicants to file the application for making the award rule of Court. The applicants submitted application on 22-10-1992 for making the award rule of Court. Therefore, the application is within time.
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(D) That the contents of ground (C) are not admitted. The respondent was Managing Director of National Mining Corporation thereafter, on 11-7-1991 the respondent received Rs,54 Lacs from other shareholders which include the price of machinery installed by the applicant as well as developments made by the applicants, therefore, when arbitration agreement 12-11-1991 was executed he was not partner of the National Mining Corporation and thereafter, when he participated in the arbitration proceeding he was not partner or Managing Director of National Mining Corporation and he is responsible for all the liabilities in his personal capacity. Further, according to award he has to pay Rs,49,60,000 in his personal capacity. Therefore, in view of above facts National Mining Corporation have no concern with the present award. (E) That the contents of ground (E) are not admitted as explained in answer to ground D the respondent is liable to pay the said amount in his personal capacity. Therefore, there is no need to join any other person in the present proceedings nor award set any liability on any other person except on respondent. (F) That the contents of ground (F) are not admitted by reason of admission of respondent he is estopped from raising such objections. (G) Contents of ground (G) are not admitted as stated and respondent wrongly stated that there is no dispute between the applicants and respondents. A detailed reply has been given above. (H) The contents of ground (H) are not admitted if the Arbitration Agreement was result of coercion, undue influence and fraud why he did not take legal action against the same and on the contrary participated in the arbitration proceedings. (J) That the contents of ground (J) are not admitted a detailed reply has already been given above. (K) That the contents of ground (K) are not admitted. The respondents have not paid to the applicants 28 Lacs as price of machinery as alleged. (L) Contents of ground (L) are not admitted. That there was a dispute between the parties, therefore, they entered into agreement for arbitration. (M) That the award is in accordance with the law. The arbitrator took oral evidence and also inspected documents and discussed all the matters and after admitting the liability by respondent he gave the award. (N) That respondent has not mentioned in ground (P) on what grounds objection, application is premature, therefore, the same cannot be replied." ' Learned Trial Court, out of the pleadings of parties, framed following issues for determination:--- "ISSUES: (1) Whether the objection application filed by the respondent is time-barred? (2) Whether the respondent is estopped from challenging the award? (3) Whether the respondent cannot challenge the award or the jurisdiction of Arbitration? (4) Whether the objections filed by the respondent are not maintainable under the provision of the Arbitration Act? (5) Whether the dispute in question was between the applicants and the respondent Ijaz Ali Siddiqui or the same was between the applicant and the Firm National Mining Corporation? (6) Whether there was any arbitration proceedings and award between the applicants and the respondent National Mining Corporation decided by the 4 Arbitrators namely Haji Khan Bahadur, Muhammad Murad, Haji Khuda Bux and Haji Abdul Razik decided on 14-7-1991? (7) Whether the applicants have received the amount of Rs,28 lacs awarded by the 4 Arbitrators on 14-7-1991? (8) That after the decision of the Arbitrators on 14-7-1991, whether there was any dispute existing between the applicants and the respondent?
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(9) That after selling his share whether the respondent had any authority to refer any dispute between the applicants and the Firm to the Arbitration in his capacity as ex-partner? (10) Whether the Arbitration agreement and the award filed by the applicants in Court is enforceable? (11) Whether any notice of the award was given by the Arbitrator to the respondent, if not, to what effect? (12) Whether the application is bad for misjoinder and non-joinder of parties? (13) Whether the Arbitrator has misconducted himself and the proceedings? (14) Whether the award is legal and valid when the same is not supported by any reasons or evidence? (15) Whether the award can be converted into decree to be passed against the respondent what should the order be? (16) Whether any award on 24-12-1991, was given or the award was antidated given in September, 1992?" ' Respondents led evidence of P.Ws. Muhammad Hussain, Haji Malik Muhammad Mirwani, Muhammad Ikhlaq, and Khalid Javed, Petition-Writer, who produced Arbitration Agreement (Exh.A/1), dated 12-11-1991 and extract from the Register (Exh.A/2). On the other hand, appellant got examined R.Ws. Mir Changez Ahmad Kurd, Khadim Hussain, Haji Abdul Raziq, who produced earlier Arbitration Agreements, dated 29-6-1991 as R/2 and R/3 and the Arbitration Award as Exh.R/1, Muhammad Murad, Sardar Saadat, Abdul Rehman, Haji Khuda Bakhsh, Masood Ahmad, Atta Muhammad, Head Constable, Police Station, Gawalmandi, who produce F.I.R. As Exh.R/2-A, and Shaukat Ali, brother of appellant. The appellant Ejaz Ali Siddiqui, also got recorded his own statement. Thereafter, respondent Rana Irshad Ahmad also got recorded statement in rebuttal. He produced Exh.A/5, letter of Authorization executed by Mir Shah Nawaz Kurd, Sole Arbitrator in favour of respondent Rana Irshad Ahmad as well as Arbitration Agreement alongwith affidavit of one Muhammad Khalil son of Jaffar Khan. Respondent Chaudhry Muhammad Iqbal did not make statement before the Court, however, he filed an affidavit, stating therein that the claim of Rana Irshad Ahmad is baseless and they have already received rupees twenty lacs from appellant Ejaz Ali Siddiqui, in pursuance of earlier Arbitration Award, dated 14th July, 1991 and presently nothing is outstanding…
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