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Petitioner: Pak Telecom Mobile Limited VS Respondent: M/s Saftey & Security Services (Private) JUDGMENT
Court Name: Islamabad High Court Judge(s): Arbab Muhammad Tahir Title:Pak Telecom Mobile Limited vs M/s Saftey & Security Services (Private)
JUDGMENT
Reported As: 2023 IHC 408 Result: Appeal Dismissed Judgment
JUDGMENT ARBAB MUHAMMAD TAHIR,J.:- This Regular First Appeal under Section 39 of the Arbitration Act, 1940 (hereinafter referred to as "the Act") is directed against order and decree dated 14.03.2015 passed by the learned Civil Judge-West, Islamabad through which, the learned Civil Court made Award dated 15.10.2014 (hereinafter referred to as "the Award") as a Rule of Court and passed an order and decree in terms thereof in the following terms:- "... therefore, the award is made rule of the Court and suit is decreed that the plaintiff is entitled for Rs.43,38,161/- along with interest at the prevailing bank rate from the date of decree of this court with no order as to costs. Decree sheet be prepared accordingly...." 02. The essential facts forming background of the present appeal are that on 01.05.2007 a Contract for Provision of Security Guards (hereinafter referred to as "the Contract") was entered into between Pakistan Telecom Mobile Limited (hereinafter referred to as "the appellant") and M/s Safety & Security Services (Pvt.) Limited (hereinafter referred to as "the respondent") for provision of security guards completely from ex-servicemen as per the demand of appellant. Since respondent No.2 (Pakistan Telecommunication Company Limited) has been impleaded as a proforma respondent and no specific relief has been sought against it, hence, the said respondent need not be referred to. The Contract was entered into between the parties in consideration of the payments that were to be made by appellant to respondent according to the provisions set-forth in the terms and conditions described in Annexure-A attached with the said Contract. The Contract was valid with effect from 01.05.2007 to 30.04.2008 and thereafter was to be
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renewed/extended from time to time subject to mutual understanding between the parties. That performance of respondent was poor and the Security Guards deployed by it were also not performing their duties diligently, thus, on 09.10.2009, appellant informed the respondent that it is not willing to renew the Contract and on 19.03.2010 a notice for termination of the same was given to respondent. That aggrieved by said termination, respondent filed a suit for recovery of Rs.11,838,161/- against appellant. That appellant filed an application under Section 34 of the Act praying inter alia for stay of proceedings and for dispute to be referred to arbitration since the Contract contained an arbitration clause. That appellant's said application was by learned civil court and proceedings in the suit were stayed and matter was referred to arbitration. That the entire amount that was claimed by respondent was Rs.11,838,161/-. That learned Arbitrator entered upon the reference and announced the Award on 15.10.2014 thereby allowing respondent's claim to the tune of Rs.43,38,161/- along with interest at the prevailing bank rate from the date of award till realization of the amount. However, rest of respondent's claim was declined. The said Award was filed in the Court. Appellant filed objections to the said Award, which were turned down. Consequently, the Award was made a Rule of Court in the above-mentioned terms. Hence, this appeal. 03. Learned counsel appearing on behalf of appellant has argued that the details qua a sum of Rs.43,38,161/- was neither mentioned by respondent in its plaint nor in the written claim submitted by it before learned Arbitrator. That Contract executed between the parties was initially for a period of one year ending on 18.04.2008, but appellant, as a gesture of goodwill, continued to extend the same till 18.04.2010 and finally it terminated the same on 19.04.2010. That under the terms & conditions of said Contract, it was respondent No.1's responsibility to give protection to the properties belonging to appellant. That performance of respondent was not up to the mark. That appellant time and again informed respondent regarding its poor performance as well as increasing number of incidents regarding theft of fuel / diesel, electricity and other valuable equipments, which caused huge financial loss to appellant. That Security Guards deployed by respondent often remained absent from their duty places. That respondent's claim amounting to Rs.19,49,387/- was not just undue but also uncertain. That on 09.10.2009, appellant conveyed its unwillingness to respondent as to the renewal of Contract. That since an advance notice dated 19.03.2010 had already been given to respondent, hence, the award of 15-day payment amounting to Rs.10,53,871/- in lieu of 30 days advance notice, was not justified. That respondent did not pay salaries to its employees/guards. That learned Arbitrator did not take into account the documents produced by appellant viz-a-viz notice for termination, payment of balance amount to respondent, illegal electricity connections and absence of the guards from the site etc. That the impugned order and decree passed by learned civil court is against facts as well as law. That Award rendered by learned Arbitrator is devoid of reasons in terms of Section 26-A of the Act. That there are various violations regarding principle of natural justice. That learned Arbitrator as well as learned civil court have fallen into an error of law by allowing respondent's claim. That order and decree of learned civil court is bad in the eye of law, thus, needs to be interfered with by this Court, concluded learned counsel for appellant. 4. Conversely, learned counsel appearing for respondent has vehemently controverted the arguments advanced at the Bar by learned counsel for appellant by arguing that appellant terminated the Contract without giving any notice to respondent. That no joint inquiry was conducted as envisaged under Clause 4.3 of Contract. That learned Arbitrator did give credence to the evidence led by both the parties. That the issues framed by learned Arbitrator were fully discussed. That Award rendered by learned Arbitrator does not suffer from any irregularity. That Award is not open to an interference by this Court. That this Court cannot substitute its findings for those of learned Arbitrator. That the Award cannot be disturbed by this Court unless there are
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apparent errors on the face of it. That appellant's witnesses categorically admitted the tenure of Contract to be until 19.05.2010. That had there been any complaint regarding respondent's performance, the appellant could have conducted a joint inquiry. That no grounds exist which could lead to the setting aside of Award and/or the impugned order and decree, concluded learned counsel for respondent. While concluding the arguments, learned counsel for respondent relied upon the cases reported as PLD 1987 SC 393, 2001 SCMR 1700, PLD 2011 SC 506, 2012 SCMR 954, 2012 MLD 23, 2014 SCMR 1268, 2015 CLC 1387, 2015 SCMR 21 and 2018 SCMR 662. 5. Heard the contentions advanced at the Bar and perused the record with able assistance of the learned counsel for the parties. 6. The challenge that has been thrown by the appellant to the order and decree passed by the learned Civil Court is primarily on the ground that the learned Civil Court fell into an error and committed an illegality by making the Award as Rule of Court on account of it being based on whimsical grounds and bereft of any reasons in terms of Section 26-A of the Act. In the lis in hand, the reference of dispute to arbitration by learned civil court through order dated 31.05.2015 has not been called into question by the appellant at all. The questions that need to be determined in the present lis are two folds. First being as to whether or not the Court, in the absence of an application under Section 20 of the Act, could stay the proceedings in the suit on account of the existence of an arbitration agreement between the parties to the suit and refer the matter to arbitration in terms of Section 34 of the Act. Secondly, whether or not the leaned Arbitrator travelled beyond the scope of the reference and/or the arbitration proceedings. 7. This Court, at the first instance, would deal with the first question regarding stay of proceedings and reference of dispute to arbitration in the absence of an application under Section 20 of the Act. 8. Perusal of record transpires that on 28.07.2011, a civil suit bearing No.200 of 2011 was filed by respondent for recovery of Rs.11,838,161/- on account of financial loss, mental agony as well as injury to its unblemished reputation inter alia on the ground that appellant illegally terminated the Contract on 19.04.2010 without serving any prior notice on respondent as well as non-payment of a "half-month's" contract price based on last monthly verified bill of the security company, thereby breached the terms and conditions of Contract. The record is silent as to whether or not the appellant filed its written statement to the suit. Be that as it may, the Contract itself contained an arbitration clause providing for disputes and differences between parties to be settled at first instance through amicable negotiations, but in case of failure, the same were to be referred to sole Arbitrator, and the Award rendered by Arbitrator was to be deemed as final and to be binding upon both the parties. Clause 7.1 of Contract relates to reference of dispute to arbitration, which reads thus:- "7.1. In the event of any dispute arising between SSSL and the client out of or in relation to this contract, SSSL and the client shall attempt in the first instance to resolve such dispute through friendly consultations. If the dispute cannot be resolved through mutual consultations with in sixty (60) days after one party has served written notice on the other party requesting the commencement of such consultations, then the disputes shall be finally settled by arbitration. The dispute shall be referred for arbitration in Rawalpindi/Islamabad to a sole arbitrator if one can be agreed upon or two arbitrators (one each to be appointed by each party) and an umpire (to be appointed by the arbitrators before their entering upon the reference) in accordance with the Arbitration Act, 1940 or any amendment thereto or re-enactment thereof for the time being in force. The arbitration award shall be final and binding on the parties. The arbitration fee shall be borne by the losing party or as otherwise provided in the arbitration award." (Emphasis supplied) 09. Under the terms & conditions of Contract, it was mutually agreed upon by parties that if the disputes between the parties were not resolved through amicable negotiations, the matter was
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then to be referred to arbitration in Rawalpindi/Islamabad to a sole Arbitrator if one can be agreed upon or two arbitrators (one each to be appointed by each party). There is nothing on record which would show that after disputes arose between the parties, the appellant has served a written notice on the respondent requesting the commencement of any consultations proceedings. It appears that dispute, which is subject matter of this appeal, could not be resolved through amicable settlement between the parties since apparently neither party resorted to amicable settlement, therefore, during the course of proceedings before learned civil court, appellant, after filing memo of appearance, filed an application under Section 34 of the Act praying for the proceedings before the learned Civil Court to be stayed. For sake of reference, Section 34 of the Act reads as under:- "34. Power to stay legal proceedings where there is an arbitration agreement. Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration such authority, may make an order staying the proceedings." 10. It is an admitted fact that the appellant did not file an application under Section 20 of the Act. The said Section reads as under:- "20. Application to file in Court arbitration agreement. (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in the Court. (2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise, between the applicant as plaintiff and the other parties as defendants. (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed. (4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. (5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable. (Emphasis supplied) 11. Although the appellant did not file any application under Section 20 ibid, but upon filing an application under Section 34, the appellant showed its willingness and readiness to the effect that the proceedings in the suit ought to be stayed so that the issue could be resolved through proper conduct of arbitration proceedings. The application filed by appellant under Section 34 of the Act is also not on the record, however, order dated 02.05.2013 passed in the said application under section 34 is on record. Had the said application been on the record, it could have easily been ascertained as to whether or not appellant had made up its mind qua reference of dispute to
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arbitration. Furthermore, filing of said application under Section 34 of the Act would imply that the appellant was ready and willing for the matter to be referred to arbitration and was also ready to accept the Award rendered by the Arbitrator in terms of Clause 7.1 of the Contract particularly under the circumstances when it did not specifically take objections to the passing of orders dated 02.05.2013 and 31.05.2015. 12. Apparently, a reply was filed by respondent resisting the application under Section 34 of the Act. Perusal of order dated 02.05.2013 passed by learned civil court shows that the application under Section 34 of the Act was allowed and the proceedings before learned civil court were stayed. Simultaneously, the parties were directed to furnish the list of Arbitrators on the next date of hearing before the learned civil court. Order dated 31.05.2015 shows that the parties could not finalize the names of Arbitrator(s), hence, the learned counsel for respondent left the matter of appointment of sole Arbitrator at the discretion of Court. Since appellant did not comply with the directions contained in order dated 02.05.2013 nor did it object to the appointment of Arbitrator by learned civil court, the learned civil court vide order dated 31.05.2015 appointed Sardar Muhammad Aslam, ex-Chief Justice of Islamabad High Court (as he then was) as the sole Arbitrator. For sake of clarity, the relevant excerpt of said order dated 31.05.2015 is reproduced as under:- "...Therefore, parties were asked to file the list of Advocates for their appointment as Arbitrator. However, the learned counsel for the plaintiff put his appearance and submitted that the parties have not reached into compromise, therefore, the matter may be referred to the Arbitrator in view of order dated 02.05.2013. Further he has no objection to appoint any Senior Advocate as Arbitrator. Whereas the defendant did not submit names of Arbitrators and statedly the order dated 02.05.2013. Since only one party has given names of the lawyers for the appointment as sole Arbitrator. Therefore, Mr. Sardar Muhammad Aslam Ex-Chief Justice of Hon'ble Islamabad High Court, Islamabad is hereby appointed as Arbitrator with the mandate to conduct the proceedings regarding dispute and submit the award within stipulated period as per Arbitration Act from the date receive reference. Further fee of the Arbitrator shall be fixed by the respected Arbitrator himself which will be paid by the parties equally." 13. Perusal of Contract would reflect that the arbitration was to be conducted without the intervention of Court, but after passing of orders dated 02.05.2013 and 31.05.2015, it has neither been pleaded in the grounds of appeal that the arbitration was to be conducted without intervention of Court nor any objection in respect thereto has been taken by appellant at any stage. Thus, the reference of the dispute to Arbitration by the learned Civil Court has not been disputed meaning thereby, it was with the intervention of the Court (in terms of Section 20 of the Act) to which, the appellant did not raise any objection. Had there been any objection as to the reference of dispute by learned civil court without there being an application under Section 20 of the Act, the same could have been taken in the pleadings or the order whereby the learned sole Arbitrator was appointed, could have been challenged before an appropriate forum. By not doing so, the appellant submitted itself to the jurisdiction of the Court and made up its mind qua reference of the dispute to arbitration by learned civil Court without thereby being an objection in this regard on its behalf. 14. Since appellant filed the application under Section 34 of the Act, which was allowed by the learned Court below and the proceedings were stayed vide order dated 02.05.2013. It appears that the learned trial Court with an implied intention of appellant referred the matter to arbitration. The arbitration proceedings ensued wherein, appellant actively participated by filing its written reply to the claim of respondent. In the said reply also, no objection regarding the conduct of arbitration proceedings by the learned Arbitrator was taken. In the said reply, appellant simply refuted the allegations of respondent and prayed as under:-
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"In light of the foregoing it is humbly requested that the claim of SSS Company may kindly be rejected with full cost of proceedings and fee of arbitration." (Emphasis supplied) 15. This Court in the case titled BNP (Pvt.) Limited Vs. Collier International Pakistan (Pvt.) Limited (2016 CLC 1772 Islamabad) after thorough discussion qua reference of dispute to arbitration has held as follows:- "10. Section 34 of the 1940 Act has been enacted to make arbitration agreements effective and prevent a party from going to the Court contrary to his own agreement. Where parties have agreed to refer disputes to arbitration, the Court should as far as possible, give an opportunity for resolution of disputes through arbitration rather than by judicial adjudication. The power conferred upon the Court to grant stay under Section 34 of the 1940 Act is entirely a matter of discretion of the Court. But the Courts should see that the parties are held to their bargain and promote the sanctity of contracts. Stay of proceedings in a suit is a more expedient and proper course to follow where there is an arbitration clause in a contract. The moment an application under Section 34 of the 1940 Act is filed in a pending suit, further progress thereof is automatically arrested and the trial Court's power to act under the Code of Civil Procedure, 1908, is suspended till decision is rendered on the application." (Emphasis supplied) 16. Furthermore, it was held as follows:- "12. In view of the above, the contention of the learned counsel for the appellant that the pre- condition for a reference to arbitration had not been satisfied is spurned as pre-mature at this stage of the case. Once the Court stays the proceedings in the suit, the parties are left whether to institute arbitration proceedings with the intervention of the Court (under Section 20 of the 1940 Act), or without the intervention of the Court (under Chapter II of the 1940 Act). However, where the parties to the suit, who are also parties to an arbitration agreement executed prior to the institution of the suit, jointly apply for the matters in dispute between such parties to be referred to arbitration, the Court may treat such an application as an application under Section 20 of the 1940 Act, and refer the disputes to arbitration." (Emphasis supplied.) 17. The learned Arbitrator entered upon the reference, who after recording pro and contra evidence, rendered the Award and filed the same in Court under Section 14 of the Act. On 08.12.2014, objections were filed by appellant seeking setting aside of the Award. The objections which were taken in the objection petition were inter alia to the effect that the Award was against the facts as well as evidence available on record. Furthermore, it was pleaded that the Award is based on whimsical grounds, without any valid reason, bereft of reasons and without application of judicial mind. However, the sole objection that was taken by appellant in its objection petition was that it came to know about the contents of Award on 26.11.2014 when the Award was filed in Court. For sake of clarity, the said objection is reproduced as under:- "that the petitioner / defendant No.1 received notice from this Honourable Court and appeared in this Honourable Court and came to know on 26.11.2014 that award has been submitted in this Honourable Court and thereafter the petitioner came to know about the contents of decision of the award." 18. Order dated 24.06.2014 passed by learned Arbitrator shows that counsel for both the parties were present and the respondent was permitted to file its claim with an advance copy to learned counsel for appellant. On 28.06.2014 again the counsel for parties were present and the reference was filed. It was directed that reply be filed by 02.07.2014. On 02.07.2014, again attendance of both the counsel was marked. Since reply was not filed hence, the proceedings were adjourned to 03.07.2014. On the said date, yet another adjournment was sought for filing of reply on behalf of appellant. It was not until 11.08.2014 that a reply was filed on behalf of appellant. Since time was of
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the essence, learned Arbitrator expedited the arbitration proceedings and on 18.08.2014, he framed the issues. In the said order dated 18.08.2014, it was directed that affidavit in evidence be filed by respondent on 20.08.2014 with an advance copy to appellant's counsel and proceedings were adjourned to 25.08.2014. After recording of evidence and discussing each issue, learned Arbitrator announced the Award on 15.10.2014 and a notice in terms of Section 14(2) of the Act was given to learned counsel for parties. All these facts negate appellant's stance that it was not in the knowledge of arbitration proceedings and the Award was announced by learned Arbitrator while keeping it in the dark particularly when the appellant took time on a number of occasions to file written reply against respondent's claim, it had obvious knowledge of filing of Award in Court in particular when order dated 15.10.2014 was passed by learned Arbitrator announcing the Award. In the circumstances, no further notice was required to be issued under Section 14(2) of the Act, but learned Arbitrator as a matter of precaution sent notice under Section 14(2) ibid. 19. The case in hand is a lamentable example of a deliberate evasion on part of appellant, who filed an application under Section 34 and got the proceedings in the civil suit filed by respondent to be stayed, but for the reasons best known to it, did not bother to…
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