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Petitioner: Sh. MEHTABUDDIN AND ANOTHER VS Respondent: ABDUL SATTAR AND 2 OTHERS
Court Name: Sindh High Court Judge(s): Saeeduzzaman Siddiqui Title: Sh. MEHTABUDDIN AND ANOTHER vs ABDUL SATTAR AND 2 OTHERS Case No.: Suit No, 211 of 1975 Date of Judgment:1980-10-06 Reported As: 1981 CLC 828 Result: Award made rule of Court.
Judgment ' The plaintiff in this suit had originally filed an application under section 14(2) of the Arbitration Act, which was registered in this Court as J. M. No, 17/1975. On 15-4-1975, pursuance to an order made by the Court in these proceedings the arbitrators filed the original award along with the record of arbitrations proceedings, in Court, whereupon the award was registered as Suit No, 211/1975 and notices were issued to the parties to file objections against the award, if any. Only plaintiff has filed objections to the award and is resisting it from being made rule of the Court. I have heard Mr. Akhtar Mahmood, the learned counsel for the plaintiff and Mr. Noor Ahmed Noori, the learned counsel for the defendants. Mr. Akhtar Mahmood has raised the following contention :- (i) That there being even number of arbitrators appointed by the parties it was incumbent upon the arbitrators in terms of section 3 read with clause (2) of the Schedule to the Arbitration Act to appoint an umpire within one month of their appointment as an arbitrator and failure to do so has vitiated the award. (ii) That the award was given by the arbitrators after the expiry of the period of for months mentioned in the reference to arbitrators and as no extension of time was obtained either by the party or by the arbitrators from the Court under section 28 of the Arbitration Act, the award is a nullity in the eye of law. (iii) That the reference to the arbitrators was vague and indefinite and as such no award could be given by the arbitrators in terms of the reference. (iv) That the award given by the arbitrators is also vague and unenfotceable and is an unintelligible decision; (v) That the effect of war and creation of Bangla Desh on the partnership existing between the parties was a question of law which was not specifically referred to the arbitrators by the parties
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and the arbitrators have misdirected themselves by giving erroneous conclusion on these questions of law which are open to scrutiny and interference by this Court under section 30 of the Arbitration Act. (vi) That the decision of the arbitrators in so far as it relates on the question of establishment of a business by the plaintiff at Karachi, under the name and style of Paradise Impex, is clearly outside the scope of the reference made to the arbitrators and as such the arbitrators are guilty of misconduct and the award is liable to be set aside on this ground. Before dealing with the above contentions raised by the learned counsel for the plaintiff I would state here some of the admitted facts which formed the background of the reference by the parties to the arbitrators. 2. The plaintiff and the defendants entered into a partnership agreement in the year 1965 and pursuant thereto carried on business under the name and style of "Paradise Corporation" and "Paradise Import and Export Corporation", at Dacca. The firms constituted as above were registered firms and had their registered office at Dacca. The terms of the partnership made it permissible for the partners to open its office at other places. It is an admitted position that the business under the above name and style run at Dacca was under the exclusive control and management of plaintiff who in addition to the partnership business was also carrying on business as sole proprietor under different name at Dacca. The defendants 1 and 2 were also carrying on their business in addition to the above pertnership firms at Karachi under different name. It is also an admitted position that as a result of the creation of the State of Bangladesh the business run under the above name and style at Dacca by the parties was ultimately closed down, and the plaintiff came over to Karachi on repatriation towards the end of 1973. It is not disputed that after coming over to Karachi, the plaintiff established a firm at Karachi under the name and style of Paradise Impex which is still continuing. The dispute appears to have arisen between the parties as a result of some foreign agencies having been acquired by the plaintiff under the name of Paradise Impex, the newly established firm at Karachi, which agency in East Pakistan, stood in the name of the aforesaid partnership firms. This dispute pre-eminently figured in the record of the proceedings before the arbitrators and in the contentions of the parties raised before them. While it is asserted on behalf of the plaintiff that the business started by him at Karachi under the name and style of Paradise Impex has nothing to do and has no concern whatsoever with the business carried on by him at Dacca in partnership with the defendants the contention of the defendants is that the new firm established by the plaintiff is a continuation of the old business and even the name used and employed by the plaintiff is in fact and substance the name of the old firm which greatly worked to the advantage of the plaintiff in obtaining agencies of the foreign suppliers who were well introduced with the partnership firm at Dacca. The use of the word "Paradise" in the name of firm established by the plaintiff at Karachi and the manner in which this word was given pre-eminence in the letter-head used by the plaintiff for the new firm Paradise Impex, was much emphasised and highlighted before the arbitrators by the defendants. The arbitrators who dealt with the dispute considered the contentions raised before them by the parties in their award which is spread over 44 pages in great detail and finally reached the conclusion that Paradise Impex Corporation established by the plaintiff at Karachi is nothing but a continuation of the old firms namely Paradise Import and Export Coporation and Paradise Corporation which was run in the partnership of the parties at Dacca. The arbitrators also reached the conclusion that in spite of the fact that as a result of creation of the State of Bangla Desh the business run by the parties in partnership there, was closed down, but the partnership constituted originally between the parties did not come to an end and was continued even thereafter. The arbitrators also reached the conclusion that the plaintiff, after the creation of Bangla Desh, carried on the business of partnership for sometime there and also utilized the good will and name of the Company and accordingly they held that the plaintiff may either pay the two defendants a sum of Rs, 75,000 in equal proportion to acquire to
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sole and exclusive right to use the name of the old firm or, in the alternative, admit them as partners in the newly constituted firm Paradise Impex, Karachi. 3. Having stated the dispute between the parties in short and the conclusions of the arbitrators I now proceed to consider the contentions of Mr. Akhtar Mahmood in the order in which they were raised before me. 4. On the first contention, that there being even number of arbitrators appointed by the parties, it was incumbent on the arbitrators before entering upon the reference to have appointed an umpire within one month of their appointment. The learned counsel relied upon section 3 and clause (2) in the First Schedule to the Arbitration Act, 1940. (I will hereafter refer in this judgment the Arbitration Act of 1940 as the "Act" and the Scheth. To the Act as the "Schedule"). To appreciate the contention of the learnec. Counsel it will be advantageous to reproduce here both section 3 of the Act and clause (2) of the Schedule which are as follows :- ' Section 3.-An arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference. ' Clause (2) of the First Schedule :- ' If the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments. Section 3 of the Arbitration Act reproduced above provides that unless a contrary intention is expressed in the arbitration agreement or in the reference the provisions contained in the First Schedule to the Act shall be deemed to form part of the agreement in so far as they may be applicable to the reference. Therefore by force of section 3 if no contrary provision is made in the arbitration agreement or in the reference the provisions contained in the Schedule to the Arbitration Act automatically become part of the arbitration agreement/reference. But, as a natural corollary to the above it follows that if arbitration agreement itself makes any contrary provision then to the extent of inconsistency, the provisions contained in the Schedule to the Act shall give way to the provisions in the agreement/reference made by the parties. Clause (2) in the Schedule reproduced above makes it incumbent upon the arbitrators if they are even in number to appoint an umpire not later than one month from the date of their respective appointments. However as earlier stated by me, this Article shall come into play only if no contrary provision is made for appointment of an umpire in the arbitration agreement itself. I will, therefore, now examine, whether at the time of making the reference to the arbitrators the parties made any provision in the arbitration agreement which was contrary to the provisions of clause (2) of the Schedule. Clause (3) of the arbitration agreement entered into between the plaintiff and the defendants makes following provision for appointment of umpire :- "That in case of difference of opinion as to the decision or award the arbitrators named above shall be entitled to appoint an umpire, whose decision shall also be binding on the parties hereto." This clause in the agreement postulates appointment of an umpire by the arbitrators only upon a difference having arisen between them. The provision thus contained in the arbitration agreement between the parties is different from the provisions of clause (2) in the 4 Schedule and as such in my opinion, to that extent, the contrary provision in the agreement, shall prevail over the provisions contained in clause (2) of the Schedule. Mr. Akhtar Mahmood, the learned counsel for the plaintiff in support of his above contention relied upon the cases of Jawala Parasad v. Amar Nath (1), Ebrahim Ahmed v. Said Hosiery and Textile Mills (2), Firm Shri Ram Harachandas v. President, Cotton Seed Forward Delivery Managing Association (3), and Vinayak Vishnu Sahanara Padhe v. B. G. Gadri and others (4). It is not necessary to examine these cases referred by the learned counsel in any detail as in none of these cases it was contended before the Court that the arbitration agreement
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between the parties contained a term for appointment of an umpire contrary to the provision of clause (2) of the Schedule. I may also state {{FOOT NOTE}} (1) AIR 1951 All. 474 (2) PLD 1952 Sind 52 (3) AIR 1954 Nag. 236 (4) AIR 1959 Bom. 39 {{FOOT NOTE}} here that Mr. Akhtar Mahmood very fairly pointed out that the view expressed in AIR 1951 All. 474 was dissented to by another Bench of the same High Court in a later case, Shambhu Rath v. Hari Spanker Lal (1). Similarly the view expressed in PLD 1952 Sind 52 was dissented in the case of the Labab Gut v. Badshah Gul (2) and Balawal Khan v. Capt. Mahmood Alam Khan (3). As the conflicting views expressed in PLD 1952 Sind 52, PLD 1952 Pesh. 23 and PLD 1956 Lah. 494 were all by the learned Single Judges of the respective High Courts, I may here refer a latter decision by a Division Bench of the erstwhile High Court of West Pakistan, Karachi Bench, in the case of Haji Sattar Heft Muhammad v. Abdul Karim Haji Issa and 3 others. The learned Judges of the Division Bench, in this case dealt with the effect of omission to appoint the umpire by the arbitrators in following words at page 383 of the report: "Our conclusion is that a breach of the provisions of paragraph 2 of Schedule I committed by an omission to appoint an umpire in terms of the paragraph was merely the non-observance of an implied condition of the arbitration agreement and that this non-observance could be remedied by the aggreived party by invoking section 8 of the Act. The failure to invoke the aid of section 8 of the Act amounts to a waiver of the defect of the non-appointment of an umpire. It is not open to the aggrieved party now to raise an objection on the basis of a breach which was curable by its own action and there is no justification for treating the breach as the breach of a provision of law, and thus forgetting the conduct of the aggrieved party itself." ' In view of the above discussed legal position I am of the view that in the circumstances of the present case the award given by the arbitrators cannot be held to be void or illegal on account of their omission to appoint an umpire within one month of their appointment as arbitrators. The point canvassed by Mr. Akhtar Mahmood before me, further loses its significance in view of the fact that the award given by the arbitrators was unanimous and no difference of opinion in fact arose between them. 5. The next contention of the learned counsel is that the award was given after the time mentioned in the arbitration agreement had expired. Clause (7) of the arbitration agreement which is relevant to the contention of the learned counsel is in the following terms :- "That the arbitrators may enter into arbitration proceedings within a month and shall give their award within a period of for months from entering into the proceedings in arbitration." ' The above paragraph in the arbitration agreement provides that the arbitrators appointed by the parties may enter upon the reference within one month of their appointment and within a further period of for months from entering upon the reference they shall give the award. Mr. Akhtar Mahmood, the learned counsel for the plaintiff urged before me that this clause in the agreement does not contain any provision for extension of time if the award is not made within that time. The learned counsel, however, further contended that in spite of absence of such a provision in the agreemeni it was open to the parties or the arbitrators to have applied to the Court for extension of time under section 28 of the Act and the Court thereupon was competent to enlarge or refuse to enlarge the time. He accordingly urged that the award having been given beyond the time {{FOOT NOTE}} (1) AIR 1954 All. 673 (2) PLD 1952 Pesh. 23 (3) PLD 1956 Lab. 494 (4) PLD 1958 Kar. 378 {{FOOT NOTE}}
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mentioned in clause (7) of the Arbitration agreement without having obtained the extension of time from the Court as provided in section 28 of the Act, it was a nullity in the eye of law. The learned counsel referred to clause (3) in the Schedule to contend that extension of time could be granted only by a Court Clause (;) of the Schedule and section 28 of the Act respectively are in the following terms :- "Clause 3.-The arbitrators shall make their award within for months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow. ' Section 28.-(1) The Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, en large from time to time the time for making the award. (2) Any provision in an arbitration agreement whereby the arbitrators or umpire may, except with the consent of all the parties to the agreement, enlarge the time for making the award, shall be void and of no effect." ' No doubt clause (3) of the Schedule to the Arbitration Act reproduced above contemplates that arbitrators shall make their award within for months upon entering upon the reference or having been called upon by the parties to act or within such extended time as the Court may allow. (The underlining is mine). But this provision in the Schedule is to be read with section 28 of the Act. Subsection (1) of section 28 gives power to the Court to enlarge time for making award, whether the time initially reserved for it has expired or not or whether the award has been made or not; and this power could be exercised by the Court from time to time as the circumstances of the case may require. Subsection (2) of section 28 provides that any provision in an arbitration whereby the arbitrators or umpire are empowered to enlarge the time for making the award except with the consent of all the parties to the agreement, is void and of no effect. It will thus be seen that when all parties to the agreement, agree, the time for making of award could be extended or enlarged by the arbitrators or the umpire and no exception can be taken to it. In the case before me, it is not disputed by Mr. Akhtar Mahmood, the learned counsel for the plaintiff that before the expiry of 4 months period mentioned in the agreement the parties made an endorsement on the back of the original arbitration agreement agreeing to extension of the time by one month, for giving award by the arbitrators and they continued to appear and participate in the proceedings before the arbitrators after expiry of 4 months period until award was given without raising any objection. The endorsement made by the parties on the back of the arbitration agreement is in the following terms :- "Time one month is extended by consent of all the parties for award by the arbitrators." ' Mr. Akhtar Mahmood the learned counsel for the plaintiff relied upon the cases of Messrs Badri Narayan Agar walla v. Pak Jute Bala Ltd. (1) and Tayab Sharif v. Kassam Adamji (2), to support his above contention. The facts of these cases, however, are of no help and assistance to Mr. Akhtar Mahmood. The effect of giving extension of time by the parties to the arbitrators for giving award and their continued appearance before the {{FOOT NOTE}} (1) P 1 D 1966 Dacca 262 (2) PLD 1956 Sind 195 *lHere in italics] {{FOOT NOTE}} arbitrators in spite of expiry of the period of 4 months originally reserved for giving the award, never came up for consideration in these cases. This point directly arose was decided in the case of Haji Ghulam Mohiuddin v. Federation of Pakistan (1), by a Division Bench of the then High Court of West Pakistan, Lahore Bench, the relevant portion is at pages 209 and 210 of report as under :- "In view of the above weight of authorities we hold that the award cannot become invalid in the instant case due to the mere fact that it was not given within for months, the reason being that the
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appellant did not raise this objection at the proper time and rather acqiesced in the continuance of the arbitration proceedings, lead evidence and took the chance of a favourable decision and when the decision has gone against him he cannot be allowed to say that the arbitration proceedings extended beyond the time limit implied in the arbitration agreement. If the terms of the agreement can be changed by the parties by their mutual consent (as for example by writing) then it is obvious that the terms about time matter could also be changed with their consent implied from their conduct. In the instant case the consent of the appellant in continuation of these proceedings is obvious because he raised no objection with regard to it at any stage of the case before the arbitrator and it is the finding of the learned appellate Court as well." ' The present case is on a much stronger footing than the case decided in PLD 1967 Lah. 204, as here not only all the parties to the agreement continued to perticipate in the arbitration proceedings before the arbitrator after expiry of the period of 4 months originally fixed in the arbitration agreement for giving the award by the arbitrators but that by an endorsement duly made and signed by them they agreed to extension of the time by one month for giving award by the arbitrators. In these circumstances I am of the view that the contention of the learned counsel for the plaintiff has no merit and the award given by arbitrators on 1st January, 1975, is legal and valid. 6. I will deal with the contentions (iii), (iv) and (vi) of the learned counsel together as they are overlapping and inter-connected in ultimate analysis. It is contended that reference to arbitrators as well as the award are vague and that the dispute decided by the arbitrators was beyond the scope of the reference. The dispute referred to the arbitrators admittedly related to the affairs of the partnership firm, namely, Messrs Paradise Corporation and Messrs Paradise Import and Export Corporation and Messrs Paradise Import and Export Corporation, Dacca. The arbitration agreement entered into between the parties referring the dispute to the arbitrator is in the following terms :- "Whereas the parties hereto had entered into partnership in the names and styles of Messrs Paradise Corporation and Messrs Paradise Import and Export Corporation, the firms being registered and run at Dacca; and whereas there have arisen disputes between the parties herein in respect of the affairs of partnership of the firms named above; and whereas the deed of partnership provided any disputes between the parties hereto be referred to arbitration and the parties hereto {{FOOT NOTE}} (1) PLD 1967 Lab. 204 {{FOOT NOTE}} now wish to refer the matters and disputes relating to the affairs of partnership of the firms named above to arbitration. ' Now Therefore This Agreement Witnesseth As Follows :- (l) That the parties hereto have mutually agreed to refer their disputes with regard to the affairs of partnership of the firms Messrs Paradise Corporation and Messrs Paradise Import and Export Corporation, Dacca to the arbitration of Messrs Mehtabuddin son of late Hafiz Muhammad Rafi, of Messrs Perfume Supply Co., Marriot Road, Karachi and Anisur Rehman Kathuria son of late Jamilur Rehman Kathuria, of Annissons, Marriot Road, Karachi. (2) That the parties shall state their respective cases to the above arbitrators in writing and shall be bound by their decision." ' Mr. Akhtar Mahmood the learned counsel for the plaintiff contended that if by interpreting the above clause it is to be understood that the dispute referred to the arbitrators also included determination of the status of the firm established by the plaintiff at Karachi under the name and style of Paradise Impex, then the reference was vague as it did not say so expressly. To me, however, there appears to be no ambiguity or vagueness in the reference made to the arbitration.
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The clause in the arbftration agreement which set out the dispute referred to the arbitrators is in precise and clear terms. The arbitrators however took the view that by making a reference to them in respect of the affairs of the partnership firms Messrs Paradise Corporation and Messrs Paradise Import and Export Corporation, Dacca, the parties empowered them to enquire into the working of the said firm including the question of its establishment in Pakistan after the fall of Dacca. The arbitrators also took the view that the words "affairs of the partnership firm" are not confined to the settlement of accounts only but also empower them to enquire into the subsequent conduct of the business by the plaintiff and the defendants under the same name or under the name similar to them. The interpretation put forth by the arbitrators en the reference cannot be described as perverse. Such interpretation is possible on the language used in the reference as by reading the reference it cannot be said that the reference to abitrators was confined only to the settlement of the accounts between the parties in respect of the above firms carried on at Dacca. The "dispute" and "affairs" relating to partnership firm could legitimately include an enquiry in the subsequent carrying on of the business by one of the partners of the firm under the name and style of the firm and the advantage derived therefrom. The contention of Mr. Akhtar Mahmood, therefore, that the reference to the arbitration was vague or alternatively did not include the determination of the carrying on of the partnership business by the plaintiff at Karachi, was not within the scope of the reference, has no force. I have myself looked into the record of the proceedings before the arbitrators and noticed that the plaintiff himself made admission before the arbitrators that in spite of fall of Dacca and declaration by the Government of Bangla Desh, the property of the partnership as enemy property, he managed to continue the business in one form or other. He also admitted to have remitted some of the assets of the company…
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