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Petitioner: Malik MUHAMMAD URFAN VS Respondent: NORTHWEST FRONTIER. PROVINCE HTROUGH
Court Name: Supreme Court of Pakistan Judge(s): Nasim Hasan Shah, Aslam Riaz Hussain, M. S. H. Qureshi Title:Malik MUHAMMAD URFAN vs NORTHWEST FRONTIER. PROVINCE HTROUGH
JUDGMENT
Reported As: PLD 1984 Supreme Court 253 Result: Appeal dismissed Judgment JUDGMENT ' NASIM HASAN SHAH, J.-This appeal, by leave of this Court, is directed against the judgment dated 22-12-1977 passed by a Division Bench of the Peshawar High Court, Peshawar in Writ Petition No, 407 of 1977. ' The facts briefly stated are as follows :- ' The appellant, Malik Muhammad Urfan, bad, on 2-12-1955, applied to the Department of Mineral 'Concession, Government of Pakistan, for the grant of a mining lease of soapstone over an area of 122 acres in the revenue estate of Khanda Khuh, Tehsil and District Abottabad. No action appears to have been taken on this application for a fairly long time and, during this period, on the 15th August, 1967, the appellant entered into a partnership with Messrs Abdur Rehman son of Ghulam Qadir Khan, Abdur Rehman Khan son of Mir Hussain Khan and Taj Muhammad Khan son of Sher Ahmad Khan, respondents Nos, 3 to 5 respectively, whereby it was, inter alia, agreed between them that in the event of the mining lease being granted (for which the appellant had already applied) the names of the said three respondents shall be included therein and the lease would be in the name of the firm. It, however, appears that before the mining lease was actually granted, Taj Muhammad Khan, respondent No, 5 herein, appeared before the Department and made a statement that the partners bad no objection to the grant of the lease in the name of the appellant alone. Consequently, on the 14th November, 1967, the Directorate of Industries, Commerce and Mineral Development, Government of N.-W. F. P. (respondent No, 2 herein) granted a lease in the name of the appellant alone covering the said area of 122 acres for a period of five years, expiring on 13th November, 1972. In the meanwhile, the partnership entered into between the appellant and
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respondents Nos, 3 to 5 on 15-8-1967 was registered with the Registrar of Firms under the name and style of "Malik Muhammad Urfan and Partners" on 16-3-1969. It further appears that after the allotment of the lease, the respondents Nos, 3 to 5 in their capacity as second party of the partnership undertook the development of the Mines and spent a substantial amount on the mining operations, installations of machinery etc. ' In the meanwhile, on 25-3-1968, an additional area of 4.19 acres was also leased in the name of Malik Muhammad Urfan, appellant in exclusion of the original area, for period of five years which was to expire on 24-3-1973. A prospecting licence of a further area of 34.19 acres was granted on 27-9-1972 for a period of one year, but this time in the name of the firm "Malik Muhammad Urfan and Partners". The parties, in this manner, obtained in all an area of about 161 acres on lease. ' Some disputes having arisen between the two sets of partners i, e. Malik Muhammad Urfan (appellant) on the one side and respondents Nos, 3 to 5 on the other, the appellant instituted a civil suit in the Court of the Senior Civil Judge, Abbottabad on 27-9-1972 seeking declaration to the effect that he was the sole lessee of the leased area of Khanda Khuh etc. With a further prayer for the grant of a perpetual injunction against respondents Nos, 3 to 5 to restrain them from extracting soapstone from the said area. In the same suit, dissolution of partnerhip and rendition of accounts was also sought. This suit appears to be still pending. Herein, the Director of Industries etc. (respondent No, 2) was also impleaded as a defendant. ' The parties having fallen out and the lease period being about to expire Malik Muhammad Urfan (appellant) submitted, on 26-10-1972, in his own name, an application for the renewal of the said leases of 122 acres and 4.19 acres respectively. However, raj Muhammad Khan, respondent No, 5, one of the partners of the Firm (Malik Muhammad Urfan and Partners) had, in the meanwhile, submitted an application on 14-4-1972 for the transfer of the two leases from the name of the appellant to the name of the partnership firm (Muhammad Urfan and Partners) and these were, accordingly, assigned in the name of the firm on 3-5-1972. The appellant, on coming to know of this fact, objected to this assignment, whereupon the issue was referred for its advice to the Law Department of the N.-W. F. P. Government. On the advice of the Law Department, the respondent No, 2 (Director of Industries, Commerce and Mineral Development, N.-W. F. P., Peshawar) withdrew the order of assigning of the two leases in the name of the Firm on 9-11-1974. Both the leases having, in the meanwhile, expired, the respondent No, 2 issued two letters on 10-11-1974 asking the Deputy Commissioner, Abbottabad, to take over possession of the areas of 122 acres and 4.19 acres, on the ground that the mining leases granted to the parties for 5 years were no longer valid. On 8-3-1975, the Mines Committee of the N.-W. F. P. Government decided to divide the lease area, earlier given to the parties, into two equal units of 80.55 acres each and to give the same on lease afresh. Consequently, on 12-3-1975, the respondent No, 2 informed the appellant on the one band and respondents Nos, 3 to 5 on the other that it had been decided to grant them separate mining leases for five years each covering an area of 80.55 acres, as per sketch attached and both of them were advised to make formal applications for the purpose. Respondents Nos, Ito 5 had, by then, formed a new firm by the name of Messrs Tanawal Mining Corporation (respondent No, 6 herein). Therefore, in response to the letter of the department dated 12-3-1975, the said firm applied on the 15th of March, 1975, for the grant of the lease in the name of the Firm and, accordingly, a lease covering an area of 80.55 acres was granted in the name of the Firm on the 29th March, 1975, followed by an allotment letter dated 12-4-1975. The appellant had also submitted an application on the 27th March, 1975, to the Department and he was also granted lease covering the area of 80.55 acres. However, in the same application, the appellant reserved his right to challenge the decision in regard to the grant of the lease of the remaining area on the ground that he alone was entitled to the renewal of the two leases, covering 122 acres and 4.19 acres of the land. It appears that the area of 80.55 acres which was granted on lease to Messrs Tanawal Mining Corporation
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(respondent No, 6) also included the last-mentioned area of 4.19 acres, which is the developed and most valuable area and, in fact, constitutes the real bone of contention between the parties. ' True to his threat, the appellant filed a writ petition on 1-4-1975 before the Peshawar High. Court (W. P. No, 235 of 1975) for a declaration to the effect that he should be granted the mining lease of the entire area of 161 acres and no part of this area could be given to any body else on the ground that he was entitled to a renewal of the leases granted on 14th November, 1967, 25th March, 1968 and the prospecting licence granted on 27th September, 1972. He further prayed that respondent No, 2 be restrained from dividing that area and granting a lease of a part of it to respondents Nos, 3 to 5. ' The High Court called for the comments of the Department on the said writ petition. Herein, the Department, inter alla, took up the position that the appellant could only be renewed the leases if he had applied for their renewal within one year before the expiry of the lease period (as laid down in clause 58 of the Second Schedule, Part VIII of the Pakistan Mining Concession Rules, 1960), which he had failed to do ; the leases having expired it was in the discretion of the licensing authority, after the expiry of the lease period to grant the same area or part of it to any other party. However, in the same comments it was also, towards the end, stated that in case of a dispute between the lessor (Department) and the lessee (appellant) the same could be resolved by invoking rule 77 of the Pakistan Mining Concession Rules, 1960 read with paragraph 79 of the Second Schedule, Part II (Standard Form of Mining Lease) under which a dispute could be resolved through arbitration. ' The High Court, after pesusing the comments, dismissed the writ petition by its judgment dated 28-5-1975. With regard to the question of renewal of the leases, it was observed that- "the case of respondent is that in violation of rule 58 (ibid), petitioner did not apply for the renewal of his lease within a year before the expiry of the lease period and this position has be-a accepted by the learned counsel. In this view, therefore, respondent/Government seems to have been justified not to renew in favour of the petitioner the lease for the entire area." ' As regards the submission made in the end by the Department in its comments, the Court observed - "Even other wile rule 77 would come in the way of the petitioner. The language of this rule is all pervading and it would, therefore, include the referring of any dispute regarding a lease or licence to two arbitrators whose decision shall be final. The grievance of petitioner is obviously in regard to the lease of a part of the area and thus the dispute raised by him would be covered by this rule." ' Taking a cue from the above observations of the Court, Malik Muhammad Urfan (appellant) approached the Minister for Industries, through a letter dated 2-8-1975 for appointing his arbitrator and on being allowed to do so nominated S. Usman Ali Shah, Advocate, as his arbitrator on 25-11- 1975. ' On 13-2-1976, respondent No, 2 addressed a letter to respondent No, 6 on the subject of the application of Malik Muhammad Urfan (appellant herein) for arbitration stating that- "it has been decided to refer the case regarding dispute over the soapstone Mining area near Khanda Khu, Illaqa Sherwan, Tehsil Abbottabad for arbitration. ' You are advised to communicate the name and address of any person who shall act as arbitrator at your end to this Directorate at an early date." ' In response to the said letter, respondent No, 6 communicated the name and address of his arbitrator, namely, Mr. Muhammad Ayub Khan Tanoli, Advocate, Abbottabad. However, on an objection raised by the appellant to the effect that there was no provision for the appointment of a third arbitrator, respondent No, 2 by his letter dated 29-3-1976 addressed to respondents Nos, 3 to 6 withdrew his earlier letter dated 13-2-1976 observing that "this was being done as there is no provision for third arbirator under the rules". He, however, went on to add that the respondents may represent their case before the arbitrators in the meetings whenever convened for the purpose.
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The respondents strongly protested against this decision. They pointed out that in the first place there was no question of arbitration as both parties "had been allotted 1/2 share of the portion of the disputed area. And if there is something to be referred for arbitration, then our one arbitrator should also be appointed otherwise the proceedings of the arbitrators will be illegal and against the principles of justice". ' The above request of respondent No, 6 was rejected by respondent No, 1, vide letter dated 10-4- 1976, on the ground that "under the rule only two arbitrators can be appointed, therefore, you should properly represent your case through Government arbitrator". ' In these circumstances, the arbitration proceedings were conducted by two arbitrators, one appointed by the appellant and the other by the Government and ultimately, on the 10th January, 1977, the said two arbitrators gave a unanimous award holding that the appellant was entitled to the renewal of the two leases issued on 14-11-1 67 and 25-3-1963 in his name and that the department was not justified to refuse the renewal of the said leases in his favour. Neither party was held entitled to the renewal of the prospecting licence issued on 27th September, 1972. ' It may be mentioned that the arbitrators, while delivering the award had stated that-. "this case relates to a dispute between the Government of North-West Frontier Province on the one hand and Malik Muhammad Urfan son of Sher Zaman Khan on the other, about renewal of Mining lease licences of soapstone located near village Khanda Khu, Tehsil Mansehra, District Hazara. 1 he dispute has been referred to us for arbitration in pursuance of rule 77 of the Pakistan Mining Concession Rules, 1960." (Underlining is ours) ' However, while implementing the Award, the respondent No, 2, in its letter dated 22-6-1977, addressed to both the parties, observed :- "The Peshawar High Court, Peshawar, vide Order No, 235 of 1975, dated 28-5-1975 appointed a council of arbitrators in the case regarding the mining leases and prospecting licence cited in the subject. The council have submitted their award. The following decisions are, therefore, notified in accordance with the arbitration award." ' These included the cancellation of the lease granted to respondent No, 6 and renewal of the leases to the appellant. Aggrieved by the decisions of the arbitrators, as notified by the Government on 22-6-1977, respondent No, 6 challenged the same by filing a Writ Petition (W. P. No, 407 of 1977) before the Peshawar High Court, Peshawar. ' The contentions raised by respondent No, 6 before the High Court were that the impugned order dated 22-6-1977 passed by the respondent/Government was based entirely upon the Award given by the arbitrators, but the said award was illegal and a nullity and could not, therefore, form a valid basis for a decision. In this connection, it was submitted firstly, that the respondent herein was not a party to the dispute referred to the arbitration and referred to the following parts of the award :- "The Department was not justified to refuse to grant the renewal of lease in respect of two areas comprising of 122 acres and 4.19 acres when Malik Muhammad Urfan applied to the department for such renewals. We, therefore, hold that Malik Muhammad Urfan is entitled to the renewal of these leases in his name." Again, he pointed out that in the award it was stated that :- "The case relates to a dispute between the Government of N.-W. F. P., on the one hand and Malik Muhammad Urfan son of Sher Zaman Khan on the other, about renewal of Mining Lease/Licences of soapstone located near village Khanda Khu, Tehsil Mansehra, District Hazara. The dispute has been referred to us for arbitration in pursuance of rule 77 of the Pakistan Mining Concession Rules, 1960." ' These recitals from the award, according to respondent No, 6 (herein), showed that he was neither considered a party nor was a party to the dispute which was referred to arbitration and in relation
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to which the award was to be given. The dispute, which the arbitrators were called upon to decide, was the dispute between the Government on the one hand and Malik Muhammad Urfan (appellant herein) on the other, and not between any other party (like respondent No, 6) who had no dispute with the Government over any matter, nor indeed was made a party to the arbitration. Another contention raised on behalf of respondent No, 6 herein before the learned Judges of the High Court and noticed by them in their judgment was that the dispute regarding the renewal of a lease was not at all referable to arbitration under rule 77 of the Pakistan Mining Con- (Here in italics) ' cession Rules, whereunder disputes concerning (I) the right of the licensee to a prospecting licence or mining lease, or (2) the cancellation of licence or lease or any violation of the understanding given in accordance with sub- . Rule (6) of rule 9, or any breach of the provisions thereof, shall be determined by the two arbitrators. As the matter of renewal of the lease or refusal to renew the lease was not a matter which could be considered as a dispute for reference to arbitration within the meaning of rule 77, the award of the arbitrators to the effect that respondents I and 2 were not justified in refusing to renew the lease of Malik Muhammad Urfan (appellant herein) was not lawful. -The impugned order of the Government dated 22-6-1977 not being an independent decision but simply being based on the award, which itself was not valid, was, therefore, not legally sustainable. ' The appellant herein (and respondent No, 3 before the High Court in the said writ petition) does not appear to have challenged before the High Court the correctness and validity of the above contentions, namely, that the lease of 80.55 acres granted to respondent No, 6 on 29-3-1975 could not be cancelled while considering the dispute between him and the Government in regard to the question whether the leases granted to him in 1967 and 1968 should have been renewed or the contention that a dispute regarding the question of renewal or refusal to renew a lease cannot be referred to the arbitration under rule 7.7 of the Mining Rules, but appears to have justified the cancellation of the lease granted to respondent No, 6 on 29-3-1975 on the ground that the lease granted to respondent No, 6 (herein) could be cancelled because the latter had committed a default in the payment of rent, royalties etc. ' The respondent No, 6 herein met this plea by submitting that the Government had not justified its order of cancellation on this ground, but based it simply on the award. Moreover, the appellant herein (Malik Muhammad Urfan) was competent to refer to arbitration only his own dispute and not a dispute between a third party and the Government and that in any case, the issue of payment or non-payment of royalty etc. Was not referable to the arbitration under rule 77 of the Mining Rules. ' The learned Judges of the High Court upheld the contentions raised on behalf of respondent No, 6 and were pleased to accept the writ petition filed by him (vide their judgment dated 22-12-1977). In the course of their judgment, the learned Judges observed that the application of Malik Muhammad Urfan (appellant herein) for renewal of the leases in question in his name was time- barred under rule 58 of the Mining Rules, as these applications were not submitted less than '12 months previous to the expiry of period of the said leases. They went on to add that :- "Rule 77 of the Pakistan Mining Concessions Rules provides that any question or dispose regarding the licence or lease and . Any matter or thing connected therewith shall be referred to the Central Government in the appropriate Ministry whose decision shall be final. It also provides that any dispute concerning (1) the right of the licensee to a prospecting licence or mining lease, or (2) the cancellation of licence or lease for any violation of the understanding given in accordance with. Sub-rule (6) of rule 9, or any breach of the. Provisions thereof, shall be determined by two arbitrators, one to be nominated by the Central Government and the other by the licensee or lessee and in the case of disagreement between the arbitrators, by. a Judge of the Supreme Court
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of Pakistan to be appointed by the arbitrators in writing and the decision of such arbitrators or such Judge as umpire as the case may be shall be final." ' The conclusion reached by the learned Judges was that the dispute, which could be referred to the arbitration under rule 77 was the dispute connected with the lease which expired on 14-11-1972. Since rule 58 did not confer any right on a lessee to get renewal of the lease which is discretionary with the Government, the matter of renewal of the lease or refusal to lease was not a matter which could be considered as a dispute for the purpose of a reference to arbitration within the meaning of rule 77, and "the award of the arbitrators that respondents 1 and 2 were not justified to refuse to renew the lease of Malik Muhammad Urfan was thus, reduced to a nullity", according to the learned Judges. ' The learned Judges further fount that respondent NO. 2 was under the impression that the High Court had given directions for reference to arbitration about the mining leases over 122 acres and 4.19 acres for soapstone and prospecting licence over 34.91 acres and that the arbitrators had been appointed by the High Court which was not the case. ' The learned Judges also appear to have held that there was no dispute before the arbitrators about the grant or mining lease for soapstone over 80.55 acres of land, situated in village Khanda Khuh, Tehsil and District Abbottabad to respondent No, 6, which was granted to the firm vide 'After dated 29-3-1975. The lease of the respondent had been cancelled as a result of the award given in favour of Malik Muhammad Urfan (appellant) on the ground that he was entitled to the renewal of the lease of the entire area, although the question of renewal of the old licensee being no longer alive issue was not referable to the arbitration and, therefore, the arbitrators had no jurisdiction to entertain such a dispute, as their, jurisdiction was limited to what could be lawfully referred to them. ' The learned Judges also appear to have accepted the plea of respondent No, 6 that the decision of respondents Nos, 1 and 2 notified on 22-12-1967, was based on the award, which was not valid and that it was not an independent decision' and being founded on an invalid foundation was, therefore, not sustainable. Furthermore, respondent No, 6 was not heard or granted any reasonable opportunity to show cause as to why- the lease granted to him on 29-3-1975 should not be cancelled. ' As a result of these findings, the directions contained in the letter of the Government dated 2.-6- 1977 that the mining lease granted to the respondent No, 6 vide letter dated 29-3-1975 should be cancelled, were set aside and the consequential directions that the same be restored to Malik Muhammad Urfan appellant, was held to be ineffective. As against their rights. It was also directed that the possession of the area, if it had already gone out of their hand should be restored in their favour. Hence this appeal by Malik Muhammad Urfan before this Court. ' Sardar Muhammad Iqbal, learned counsel for the appellant, in the course of a very learned address which he was good enough to supplement by a note in writing submitted that he accepted the position that the order of the Government dated. 22-6-1977 was based on the award of the arbitrators dated 10-1-1977 ; but contended that the constitutional jurisdiction of the High Court could not have been invoked by the respondent No, 6 in order to challenge the validity of the award since this was possible only under the provisions of the Arbitration. Act. Hence the High Court erred in entertaining the challenge to the validity of the award in its constitutional jurisdiction and were not justified in law in proceeding to set it aside. It was further contended that the argument of the respondent that a dispute with regard to the question that the matter regarding the renewal of a lease was not covered by the arbitration clause, and, therefore, no reference could be made to the arbitrators for determining such a dispute, was not correct. Moreover, respondent No: 6 could not even otherwise question the validity of the reference to arbitration since it claimed under the Government and was bound by the award as much as its principal, namely, the Government. It
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was also contended that the argument this the two leases earlier granted in favour of the appellant could not be renewed . Under rule 58, as no application was filed within the prescribed time for renewal and, therefore, there was no question of any reference to arbitration, hence the award was a nullity, was not correct. In fact, the grant of the lease to respondent No, .6 on 29-3- 1975 of 80.55 acres was void ab initio. ' As regards the submission of the respondents that the Government had not heard them before notifying the award the correct position was that irrespective of the fact that the letter dated 22-6- 1977 of the Government was liable to be set aside for any reason whatsoever the award could stand independently per its own force. ' In support of the contention that the jurisdiction of the High Court could not be invoked for setting aside the award, the learned counsel submitted that no party can resort to the constitutional jurisdiction of the High Court in order to question the existence of the validity or effect of an arbitration agreement or an award unless the award is given in a statutory arbitration. In all other cases, the aggrieved party must invoke the jurisdiction of the Court under the Arbitration Act. This is so even if the statute while providing for arbitration itself lays down any condition…
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