NATIONAL FIBERS LTD. and another vs PAKISTAN through Secretary

Messrs National Fibers Limited, a private limited company and Messrs Schon Group, a group of company, had made an application under section 20 of the Arbitration Act, 1940, for filing of the Arbitration Agreement dated 2-2-1992 before the learned Senior Civil Judge, Islamabad, in February, 1994. Later the matter because of operation of law was transferred to this Court.

2. The award, formulated by the Secretary, Finance Division, Government of Pakistan, dated 27th January, 1997, is placed on the file and has been examined.

3. A part of the history of this case is that when this matter came up before my learned brother Maulvi Anwaarul Hag, J. No one was representing the petitioners, this was made the rule of the Court after all objections were rejected, vide orders dated 30-10-2003.

4. This order was impugned by the petitioners' side and the same was set aside and the main C.O.S. Was fixed for hearing.

5. When the proceedings were going on before this Court, the learned counsel for the petitioners Mr. Mumtaz Hussain Malik, Advocate, on 30-4-2004 made a statement saying that he had instructions from his client to withdraw this suit. He has not given any reason good or bad for doing so. This has been opposed to by the learned counsel for the respondent's side vehemently.

6. The statement of the withdrawal of the suit has been made after about 10 years of its institution.

The question would be whether such a suit can be withdrawn?

7. A reference in an agreement to arbitration of a dispute is primarily a bilateral act and the award itself is also an agreement enforceable in law.

8. A Court, before whom an award is submitted, does not sit as a Court of appeal for examining the validity of the award and enjoys a limited scope for exercising its powers for setting it aside on the brief grounds given by the Arbitration Act, 1940 itself i,e, misconduct on the part of the Arbitrator or any illegality committed by him. The Court cannot also re-appraise the evidence, rather the error or infirmity, if any, should appear floating on the face of the award and should be discoverable by going through it. Where reasons recorded by the Arbitrator are impugned as perverse, the perversity in the reasoning has to be substantiated with reference to the material considered by the Arbitrator in the award. In this connection reference may be made to the well-known case of Champsey Bhara & Company v. Jivrajh Ballo Spinning and Weaving Company Ltd. AIR 1923 PC 66, where in it was laid down:-- "Where a cause of matters in difference is referred to an arbitrator, whether a lawyer or a layman, he is constituted the sole and final Judge of all questions both of law and of fact. The only exceptions to that rule are cases where the award is the result of corruption or fraud, and one other, which though it is to be regretted is now, firmly, established, viz. Where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. An error in law on the face of the award means that you can find in the award or a document actually incorporated thereto as for instance, a note appended by the arbitrator stating the reasons for his judgment some legal proposition which is the basis of the award and which you can then say is erroneous."

9. For understanding the role of the Courts in arbitration proceedings, reference can be made to many authorities including the following: (i) Joint Venture KG/Rist v. Federation of Pakistan PLD 1996 SC 108 (P-119/B); (ii) Khan Brothers and Associates v. Director-General Foods, Government of Pakistan 1998 CLC 1671(para.10); (iii) Zak aullah Khan v. Federation of Pakistan PLD 1998 Lah. 132 (p.135/A);(iv) World Circle Limited v. State Cement Corporation of Pakistan (1997 CLC 212 (p.214, para.4); (v) Quality Builders Ltd. v. Karachi Metropolitan Corporation 1999 CLC 1777(p.1786 C&D); (vi)

Ghee Corporation of Pakistan (Pvt.) Ltd. v. Broken Hill Proprietary Co. Ltd. PLD 1999 Kar. 113(p.120 para.13); (vii) Abdullah Traders v. Trading Corporation of Pakistan 1999 CLC 2047; (viii) Income Services v. Sui Gas Transmission PLD 1993 Kar. 429; (ix) Durga Parsad Chamina's case PLD 1949 PC 187; (x) S. Zahir Hussain v. Province of Sindh 1981 CLC 379; (xi) Premier Insurance Co. v. Aijaz Ahmad 1981 CLC 311; (xii) Ghulam Abbas v. Karachi Port Trust PLD 1987 SC 393 and PLD 1987 SC 461 rel.

10. By making a statement for withdrawing from the suit, the petitioners' side has also withdrawn its objections. But can it withdraw from its obligation and commitment to the arbitration agreement and the award which has come about as a product of the agreement and moreso after having pursued it for a decade and also without showing any good cause persuasive enough to justify a retraction? And as no good cause has been given, should the act of making such a statement be regarded as based on mala fides after what the learned counsel for other side has stated that for a decade the petitioners had enjoyed the pecuniary benefits and now are trying to throw away the legal burdens with impunity?

11. The question whether a party can revoke a reference to arbitration with impunity and without a good cause, is well-answered in the negative in the following authorities: (i) Chatur Bugh v.

Raghubeer Dayal AIR 1914 All. 314 (ii) 12 M.I.A. 112=1 ind.Jur.N.S.69 = 2 Suth P.0 .J 390.

12. In the case of Sheo Narain v. Bala Rao AIR 1932 All. 348 the Allahabad High Court laid down the following law:-- "Where parties have once agreed to a submission to arbitration, the agreement is binding and enforceable and cannot be annulled except for some such reasons as that the agreement had been obtained by fraud, coercion or undue influence."

Which is based on an earlier decision of the High Court in a case reported as AIR 1914 Allahabad 314 (Chatur Bugh v. Raghubee Dayal), where the following principle was laid down:-- "Agreement to refer to arbitration cannot be revoked except for good and sufficient cause."

13. So while asking for the withdrawal of the suit, the petitioners' side is indirectly trying to bring to a naught the effects of the award and is aiming at wriggling out of its legal obligation without even bothering to advance a good cause. This is not permitted in law.

14. The contents of the award do not show any infirmity. It's neither sketchy nor presumptive nor have the petitioners substantiated any misconduct on the part of the arbitrator. In fact the act of retraction simplicitor on the part of the petitioners reflects a conduct showing their inability to substantiate the objections on merits. The unsuccessful attempt of withdrawal of the suit has been, therefore, made to make the award controversial. This concession cannot be allowed. This Court, therefore, holds that this award remains enforceable and the suit cannot be withdrawn at this stage. The award, therefore, is made the Rule of the Court, on the basis of which a decree be prepared for further action in accordance with law and which will burden the petitioners with consequences, pecuniary or other.

Award made Rule of the Court.