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Petitioner: PROVINCE OF WEST PAKISTAN VS Respondent: MUSTAFA R. C. C. PIPE WORKS, KARACHI
Court Name: Sindh High Court Judge(s): Fakhruddin G. Ibrahim, Z. A. Channa Title: PROVINCE OF WEST PAKISTAN vs MUSTAFA R. C. C. PIPE WORKS, KARACHI Case No.: Appeal No, 5$ of 1965 Date of Judgment:1976-03-09 Reported As: PLD 1977 Karachi 397 Result: Appeal dismissed
JUDGMENT
JUDGMENT ' Z. A. CHANNA , J.-This appeal by the Provincial Government is directed' againstthe judgment and decree passed by a learned Additional District and Sessions Judge, Hyderabad, on 24-4-1965, in First Class Civil Suit No, 34, of 1962, decreeing the suit of the respondents for Rs, 4,38,762.81 with proportional costs. The suit was originally filed against the Government of West Pakistan and the appeal was also filed by it, but on account of the dissolution of the Province of West Pakistan and by reason of the provisions of P. 0. No, Il of 1971, the Government of Sind has been substituted m the proceedings before us in place of the Government of West Pakistan. 2. The litigation between the parties has arisen out of two agreements, Nos. B-2/3 and B-2/4, which were executed by them on 31-10.1955, where-under the work of laying two pipe lines in the city of Hyderabad, one of 54" and the other of 48% was entrusted to the plaintiffs/respondents, who are a partnership firm carrying on the business of contractors and manufacture of R. C. C. Pipes. This work involved, inter alia, excavation of trenches, providing and fixing of timbering and supplying and laying of R. C. C. Pipes. The main agreements, which were in the usual printed Form 8-2 for item rate tender and contract for works, were accompanied by typed schedules of rates and cyclostyled specifications, which formed an integral part of the agreements. The schedule of rates contained separate items for providing and fixing close and open timbering as also for excavation. 3. It is alleged that on a dispute arising between the parties whether timbering, which did not involve the leaving of planks or wood in the trenches, was to be paid for separately from the work of excavation, and if so, whether the rate of timbering was to be calculated on the basis of cubic feet or square foot of timber used in the operation, the matter was referred to the Superintending
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Engineer, who decided, vide his letter dated 27-4-1957, that the contractor can use the same timber as many times as required, that the rate of Rs, 12-8-0 per cubic foot for timbering had been agreed upon by both the sides and that from the calculations (submitted by the Executive Engineer) it has been found that if calculated on cubic feet basis the rate is the same as calculated on the basis of square feet. 4. On the basis of the above decision of the Superintending Engineer, the respondents were paid sums of money amounting to Rs, 3,27,568-5-0, in their running bills for the months of May 1957 to August 1957, on account of the item of timbering. Thereafter, however, fresh disputes arose between the parties in respect of this item and there was some correspondence between the officers of the appellants and the respondents in regard to it. The matter was referred to the Additional Chief Engineer, and on the basis of his decision, the two agreements, 8-2/3 and B-2/4, were amended and additional items were added thereto. One of the additional items related to close timbering, for which it was provided that payment would be made at the rate of Rs, 68 per square foot. A note was recorded under this item to the effect that the timber used was to remain the property of the contractor. No provision was made for open timbering, and Mr. Fateh Ali Vellani, who appeared for the respondents, stated at the bar that thereafter no claim for open timbering was made by the respondents. In pursuance of this arrangement, the Additional Chief Engineer sanctioned a sum of Rs, 1,70,000 for providing close timbering by the respondents, vide his letter dated 28-8-1958. 5. The audit, however, raised objections regarding payments for either close or open timbering, which objections were based on clause 7 of the specifications that timbering was to be done at the cost of the contractor, and accordingly not only the amount of Rs, 1,70,000 for close timbering sanctioned by the Additional Chief Engineer was not paid to'the respondents, but even the amount of Rs, 3,27,568-5-0, which bad already been paid to the respondents, was recovered from their future bills. 6. The respondents, thereupon, brought the present wait in 1962, claiming a sum of Rs, 5,47,688-5- 0---Rs, 3,27,568-5-0, being the amount first paid to and then recovered from them, Rs, 1,62,500, for 13,000 cubic feet of measured timbering done and an additional amount of Rs, 57,620 for the quantity of timbering work done but not entered in the measurement books. 7. The plea taken by the appellants in their written statement was that according to clause 7 of the agreement, the contractor had to leave the timbering wood in the trenches on both sides of the pipe line and since this was not done he was not entitled to any payment for this item of work. ' This was also the plea taken by the appellants In their memo. Of appeal filed in this Court. 8 The learned trial Court upheld the claim of the respondents for the amount of Rs, 3,27,560-5.0, which had been originally paid to them but was finally deducted from their future bills, as also a further amount of Rs, 1,11,194-5.0 on account of further work of close timbering undertaken by the respondents, but disallowed the respondents' claim in respect of the timbering work alleged to have been done by them but not entered in the measurement books. 9. Mr. Addul Satter Sheikh, the learned counsel for the appellants, did not canvass before the merits of the case but confined his arguments to the following legal contentions I- (1) that clause 30 of the main agreement was an arbitration clause requiring submission of all disputes between the parties to the arbitration of the Superintending Engineer (2) that the decision of the Superintending Engineer, vide his letter dated 27-4-1957, was an Award ; and (3) by reason of the aforesaid Award, the respondents were precluded, in view of the provisions contained in sections 31 and 32 of the Arbitration Act, 1942, from instituting the suit, which was for the enforcement of the Award and involved its validity.
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10. The learned counsel conceded that the stand now taken by him before us was materially different and could even be considered to be inconsistent with the stand taken by the appellants in the trial Court and particularly in the memo. Of appeal filed before this Court, where it is specifically contended that the decision of the Superintending Engineer was not in the nature of an Award or was binding, but since his contentions involved the construction of a document, these were questions of law and therefore he was entitled to raise the same before us. In support of this Argument he relied upon three decisions from the Indian jurisdiction, reported in AIR 1931 Oudh 133, AIR 1955 SC 62 and AIR 1959 Raj. 162. In the Oudh case the question which arose for consideration of the Court was whether a Deed created Waqf Al-al-Aulad or in the alternative create a gift. It was held, following an earlier Oudh case, that 'the question of the proper construction to be placed on a deed was a question of law and there could be no estoppel by pleading of law inasmuch as the other side must be -presumed to know what the law is " 11. In the case before the Supreme Court of India, the appellant therein had applied for registration under the Bombay Shops and Establishment .Act, 1948, and in the statement made under section 7 of the said Act he had described the nature of his business as a factory. The learned Judges of the High Court considered that this imported admission that his factory was a 'shop' because of the use of the word 'shop' in 'workshop'. The Supreme Court of India held : "This might have raised an inference of fact against the appellant had nothing else been known but when the facts are fully set out as above and admitted, the appellant's opinion about the legal effect of this fact is of no consequence in construing this section. Arises." 12. In the Rajhistan case, it was held that the ground that the suit in question is not maintainable inasmuch as it virtually amounts to a suit to enforce an Award is, "in the first place, a matter of pure law, and secondly, that it goes to the very root of the case". 13. Although no authority of a Pakistani Court was cited before us in support of the above contentions, we have, on the basis of the aforesaid authorities from the Indian jurisdiction, permitted the learned counsel for the appellants to canvass before us the position that the suit was not maintainable and was barred by the provisions of sections 31 and 32 of the Arbitration Act, 1940. 14. Coming back to the first plea raised by the learned counsel for the appellants, he urged before us that clause 30 in the printed form of the two agreements clearly amounted to an agreement in writing to refer disputes to Arbitration. The said clause 30 reads as follows :- "Clause 30.- Except where otherwise specified in the contract and subject to the powers delegated to him by Government under the Code Rules then in force, the decision of the Superintending Engineer of the Circle for the time being shall be final. Conclusive, and binding on all parties to the contract upon all questions relating to the meaning of the specifications, designs, drawings, and instructions hereinbefore mentioned and as to the quality of workmanship or materials as used on the work, or as to any other question, claim right, matter or thing whatsoever, in any way arising out of, or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the works, or the execution on failure to execute the same, whether arising, during the progress of the work, or after the completion or abandonment thereof." ' In support of his argument the learned counsel referred us to a decision of the Lahore High Court reported in AIR 1947 Lab. 216. This case involved the interpretation of a P. W. D. Agreement which also contained a clause. Almost identical to clause 30 in the two agreements before us, providing that the decision of the Superintending Engineer would be final. It was held in that case that "though the words 'arbitration', 'arbitrator' or 'arbitration agreement' do not appear in the clause, but that is, in my view, immaterial
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as long as the parties can be found to have agreed to allow the matter to be decided by a person of their own selection whose decision was to be final, conclusive and binding on them". 15. The final contention of Mr. Abdul Sattar Shaikh was that if it was held that the decision of the Superintending Engineer in the instant case was an Award, as was submitted by him, then the suit was really for the enforcement of the Award and involved its validity, and accordingly was barred by section 32 of the Arbitration Act. The argument, in other words was that the respondents by their suit were seeking decision upon the effect of an Award and in fact the main basis of the claim is the decision of the Superintending Engineer, which was an Award. In support of this contention the learned counsel referred us to a number of decisions from the Indian Jurisdiction as well as Pakistani authorities, reported in A 1 R 1946 Mad. 346, AIR 1952 Nag. 65, AIR 1958 AU. 506, AIR. 1964 Orissa 21, PLD 1955 Sind 282, PLD 1967 Lah. 365 and PLD 1970 Kar. 379. 16. In the Madras case, the question which arose for consideration by a Division Bench of that Court was whether in view of the provisions of the Arbitration Act, 1940, a party to an Arbitration Award, which had not been filed in Court, was entitled to enforce it by way of a suit? It was observed in that judgment as follows :- "The Act of 1940 was intended to consolidate and amend the law of India relating to arbitration matters. The scheme of the Act is to prevent the parties to an arbitration agitating question relating to arbitration in any manner other than act provided by the Act. ' The suit which the appellant filed clearly raises the question with regard to the existence and validity of the Award, and such a suit is expressly barred by section 32." 17. In the Nagpur case, the question for consideration was whether an Award, an application for fling whereof in Court had been rejected on the ground that the application was made beyond the prescribed period of 90 days, could act as a bar to bring a suit on the original cause of action ? The view expressed by the learned Judges was as follows : - ""In our judgment a plaintiff who has been a party to an arbitration agreement till an Award is won by him Is barred by sections 31, 32 and 33 of the Arbitration Act, 1940, from bringing a suit on the same cause of action, and be cannot ignore the Award or impeach its validity." 18. In the Allahabad case, it was held that tae question whether the arbitration agreement was operative or effective or not, whether it should be enforced or not, or whether it was frustrated or not, or whether it failed alongwith other clauses of the contract or not, are all questions regarding the effect of an arbitration agreement and sections 32 and 33 of the Arbitration Act bar suits for decisions of such questions and such matters must be determined only by means of an application under section 33 of the said Act. 20. In the Orissa case, it was held that the "effect of the Award is wide enough to cover a suit to enforce an award, and in that view of the matter a suit to enforce a claim under an Award is hit by section 32 of the Arbitration Act and is not maintainable". 21. In the Sind case, a learned Judge of the Sind Chief Court, relying on the decisions reported in AIR i946 Sind 117 and 1 L R 18 Cal. 414, observed that Once an Award has been made, the disputes between the parties relating to the subject-matter of the reference merged in the Award and no suit can lie which can have effect avoiding the Award except the provisions of section 31 of the Arbitration Act, 1940." 21. In the Lahore case, a Division Bench of the defunct West Pakistan High Court took the view that the phrase 'decision upon the existence or effect of an Award' is wide enough to cover suits which are aimed at implementing the terms of an Award and that "in cases where parties want to have Award enforced, the proper procedure is to first get that Award made a rule of the Court and then enforce and execute the decree which might be passed in the Award and they cannot resort to a procedure of filing a separate suit by by-passing the procedure laid down in the Arbitration ACt
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which deals with the Awards". It was further held in that case that the said. Act is comprehensive enough and no matter which is laid down in the said Act to be dealt with in a particular way can be dealt with in any other way under the ordinary law of the land. 22. In the Karachi case, it was held, firstly, that law does not require drawing up of an agreement in a formal manner, and secondly, that an Arbitrator is after all a Judge appointed by the parties and, therefore, the element of agreement in confirmation of jurisdiction on him should not be lost sight of and such acquiescence or agreement may result in estopping the party which had acquiesced from raising objections to the Award. 23. Mr. Abdul Sattar Shaikh contended, relying on the aforesaid authority that the responsibility of the respondent lay in filing the decision of the Superintending Engineer and getting it made a rule of Court and not by means of a separate suit. He, however, conceded that this argument was applicable only in respect of the amount of Rs, 3,27,568.5-0, which was originally paid to the respondent on the basis of the decision of the Superintending Engineer but subsequently recovered from him, and could not be made applicable to the further amount of Rs, 1,11,194, which the respondent is claiming as a result of work of close timbering or shuttering undertaken by him in consequence of the amendment in the two agreements B-2/3 and B-2/4. 24. Mr. Abdul Sattar Shaikh, however, very fairly referred U3 to a ruling of our own Supreme Court reported in PLD 1971 SC 516. In that case the dispute was regarding the transfer of certain land effected on the basis of a mediation by a retired Deputy Commissioner, who in consequence of the mediation, had written a rukka to the Girdawar requesting him to enter a mutation of sale in favor of the defendants for the price of Rs, 36,000. Their Lordships of the Supreme Court held as follows "Section 32 of the above-mentioned Act does not, in my view, debar a defendant from setting up a plea that an unfiled award which had been fully performed by him is a complete answer to the plaintiff's claim which was the subject-matter of the award. A similar view, we find, was taken by the Supreme Court of India in the case of Kashinathea Yamosa Kabadi, etc. v. Naraingea Bhaskarea Kabadl, etc. AIR 1961 SC 1077, where, in more or less similar circumstances, it was held that such a defence is not blinded on the plea that there is an award which bars the suit, but that the parties had by mutual agreement settled the dispute and that the agreement and the subsequent actions of the parties are binding. The defendant in such a case does not seek to obtain any decision upon the existence, effect or validity of the award but merely seeks to assert that the claim sought to be set up by the plaintiff has already been satisfied by the mutual consent of the parties. This is exactly what the defendants-respondents also sought to do in the present cases. "They merely asserted that the plaintiff-appellant's claim had already been fully satisfied by his acceptance of the unfiled award ; assuming that it was an award ; the subsequent implementation thereof by mutual consent and the entering of the mutation as per his own request in his letter (Exh. D. 8). Thereafter his title to the lands in dispute was extinguished and no further question of declaration of his title to the same lands could arise." 25. In regard to the question whether the mediation and decision by the faired Deputy Commissioner was an award, their Lordships held that it was not an award, as it did not emanate from a judicial determination, and laid down the following essential characteristic of an award : "The most important characteristic of an award, of course, is that it must emanate from a judicial determination. If a dispute is referred to a person and if that person decides that dispute by holding an enquiry and coming to a decision then undoubtedly what that person decides would constitute an award. On the other hand, if a matter is referred to a person and he is not called upon either to hold an enquiry or to give a decision but by the exercise of sagacity, knowlege or experience to bring about merely an understanding between the parties and restoring peace between them than he would only be discharging functions other than those of an arbitrator. But in order to determine this question one must not look merely at the form adopted or the expressions
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employed but rather at the substance of what the parties to the dispute really intended the person approached in that behalf to do and how that person acted in that particular matter." 26. Mr. Fateh Ali Vellani, the learned counsel for the respondent, on the other hand, strenuously argued- (1) that clause 30 of the agreement did not constitute an arbitration agreement (2) that the decision of the Superintending, Engineer in regard to timbering was not an Award (3) that even if it be considered somehow to be an Award, it had acted upon and consequently did not bar the filing of a suit, and in the alternative, since the Award had not been filed in Court, a suit on the original cause of action was not barred ; and (4) that on merits the case of the respondents was not only extremely strong but stood uncontroverted. 27. As the first two contentions raised by Mr. Fateh Ali Vellani are closely inter-linked, we propose to deal with them together. 28. In the Arbitration Act, 1940, the expression 'arbitration agreement' has been defined to mean- "A written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not." 29. The above definition is identical with the definition of the expression given in the English Law. According to Russel on Arbitration (Eighteenth Edition), the essential requirements of an arbitration agreement are- (1) that the parties should intend to make a submission to arbitration ; (2) as with every other contract, there must be mutuality, and (3) it must be possible to give a sensible meaning to the alleged agreement. ' It was held in Lovelock Ltd. V. .Exportles (1) that where a contract contained a clause referring "any dispute and/or claim" to arbitration in Engtand and this clause was followed by a clause referring "any other dispute" to arbitration in Russia, that the whole arbitration clause was void for ambiguity. 30. According to the learned author Russel, the expression "arbitration agreement" "Covers both an arbitration clause by which the parties agree that if dispute arises they shall be referred to arbitration, and also an actual (1) (1968) 1 Lloyd's Rep. 163 (C A) ' submission of a particular dispute or disputes to the authority of a particular arbitrator. These are two very different things, and it is often convenient to distinguish between them, calling the first an 'agreement to refer' and the second a submission'." 31. In the instant case, a close perusal of clause 30 would seem to indicate that it lacks the essential characteristics of an arbitration agreement. In the first place, reference to the Superintending Engineer and the finality of his decision was not only subject to the other provisions in the agreement but also made further subject to the powers delegated to him by Government under the Code Rules. It is not known whether any such powers were delegated to the Superintending Engineer in the instant case. Furthermore, the decision had to be of the "Superintending Engineer of the circle for the time being," ' This term came up for consideration in the case reported in AIR 1947 Lah. 215, on which the learned counsel for the appellant had placed reliance. In that case it was observed "The words 'for the time being' in the above clause (allegedly arbitration clause) have first to be construed. Do they go with the word 'circle' only or do they go with the words 'Superintending Engineer?' The words are to say the least ambiguous. It is quite possible to conceive that the circle, being merely administrative, may change from time to time and what work is being done in one circle may by administrative arrangement be assigned to another. But, even if the expression 'Superintending Engineers of the circle' is to be taken collectively, it is not, in my opinion, possible to say with certainty as to which of the Superintending Engineers was intended to arbitrate. Was it the
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officer who held the office of the Superintending Engineer at the time when the suit was instituted or did it refer to the person who had held the office at the time when the 'question, claim, right, matter' etc arose for decision or in other words when the cause of action bad accrued to the plaintiff?" 32. In view of the above ambiguity it was held that the words in the agreement were too vague and indefinite to have the matter decided by the person who held the office of the Superintending Engineer at the time of the accrual of the cause of action or even when the suit was instituted and hence it was impossible to give effect to this agreement which was declared to be "unenforceable for want of certainty." 33. One of the essential features of a submission to arbitration is that the question referred must be determined in a quasi-judicial manner. It was contended by Mr. Fateh Ali Vellani, the learned counsel for the respondents, that the Superintending Engineer under clause 30 of the two agreements merely acted as an expert or as a value but not as an arbitrator, though his decision was binding and conclusive. In support of his contention he referred us to passages in Hudson's Buildings and other Contracts (Ninth Edition), p. 310 and Law and Practice of Building Contracts by Keating (Third Edition), p. 86. According to Keating, an architect in granting ordinary certificates in building contracts is not an arbitrator for the purposes of the Arbitration Act, but his decision as stated in his certificate may be as binding and conclusive between the parties as if it were an award. He learned author goes on to say that it has been said that the object of making the architect's decision in a final…
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