STEEL Brother & Co. LTD., KARACHI-S vs A. WAHID Opponent

The applicants and opponent are employers and employee being governed by a service agreement entered into between them on the 29th November 1962. The disputes between the parties had arisen as the applicants finally terminated the services of the opponent on the 25th November 1968.

2. There is a history of dispute between the parties starting, from the 27th June 1968 when the applicants addressed the opponent informing him that owing to trading difficulties existing in this country especially for foreign concerns and as they visualized improvement of it in the near future they were terminating his services after the 30th of September 1968. 1 he opponent started a correspondence as a result of this letter which was maintained up to the 23rd of September 1968 in the course of which he questioned the details of the emoluments that were being offered to him in lieu of the termination of his services. On the 23rd September 1968, the opponent finally called upon the applicants to re-consider their offer failing which the matter may be referred to arbitration in accordance with clause 9 of the agreement between the parties, which reads as under: ---9. This agreement shall be an English Agreement and shall be construed according to the laws of England and if at any time hereafter any dispute or question shall arise between the parties hereto touching the meaning construction or effect of these presents or any clause matter or thing herein contained or the rights or liabilities of the parties hereto under these presents or otherwise howsoever in relation to the premises and in such case every such dispute or question shall be referred to arbi--tration either in London or Karachi at the Company's option to two Arbitrators (one to be appointed by each of the parties) or (if such Arbitrators differ) to their Umpire to be nominated by them before entering on the Reference or (in the event of their failing to agree upon the Umpire to be nomi--nated by them) to be nominated by the President of the Law Society if the Arbitration is to take place in London or by the Chairman of the Karachi Chamber of Commerce for the time being if the Arbitration is to take place in Karachi and such Arbitrators or Umpire as the case may be may receive and act upon such evidence whether oral or written and whether strictly admissible as evidence or not as they or he shall in their or his absolute discretion think fit and save as aforesaid the statutory provisions for the time being in force in England as to Arbitrations shall apply.---

3. On the 24th September 1968, the applicants withdrew and revoked all the letters terminating the services of the opponent stating to him that he will remain in their employment being governed by the terms and conditions of service agreement of 1962. On the 4th of November 1968, the, opponent was advised by the applicants that he had been posted to Chittagong, that he should proceed there towards the end of the month and commence working by about the 2nd of December 1968.

Then started another series of letters by the opponent stating his inability to proceed to Chittagong owing to his "domestic situation and difficulties" and as according to him his presence in Karachi was imperative to attend to his day to day problems. The applicants drew the attention of the opponent to the relevant clause of the agreement by which the opponent was bound to serve in Pakistan or elsewhere from time to time as the applicants thought fit. This position was not denied by the opponent who proceeded to resort to the "rules of natural justice and equity" in his protests not to proceed to Chittagong. This correspondence continued until the 29th of November 1968 when the opponent addressed the applicants stating that he had made all preparations for handing over charge under their instructions to the employees of the company at Karachi and ending, with stating that since a dispute had arisen which should be referred to arbitration he advised the applicants of having appointed Mr. Dingomal N. Ramchandani as his arbitrator under clause 9 of the service agreement calling upon the applicants to appoint their arbitrator within the statutory period. On 2nd December 1968, the opponent again addressed the applicants reminding them of their having to appoint an arbitrator on their behalf and repeated the requests on the 13th December 1968. On the 9th December 1968, the applicants advised the opponent that under clause 9 of their service agreement they would exercise their option to hold the arbitration in London and would advise him of the name of their arbitrator in London in the near future. This they did by their letter dated the 14th of December 1968 nominating Mr. Robert Davis as their arbitrator. A certain amount of confusion seems to have prevailed with regard to the correspondence between the parties at this stage but on the 13th December 1968 the opponent informed the applicants that as they had failed to appoint their arbitrator he had under section 9 of the Arbitration Act appointed Mr. Dingomal Ramchandani as the Sole Arbitrator in the reference. This letter appears to have been received by the apple--cants on the 14th of December 1968. On the 1 February 1969, the applicants again addressed the opponent reiterating their stand in the matter contending that the option to appoint their arbitrator was to be exercised within a reasonable time of the notice of reference by the opponent and that they had done so on the 13th December 1968 and since they were willing to settle the matter "without rancour" they offered the opponent to appoint an alternative arbitrator but that if the opponent insisted that Mr. Dingomal should proceed with the matter he should proceed to London to undertake the arbitration with their nominee and if, however, the opponent persisted that the arbitration should be held at Karachi they would be compelled to refer the matter to Court. Hence this application under sections 3 and 9 of the Arbitration Act, 1940, wherein the applicants have in para. 10 reiterated their willingness to withdraw this application and to hold the arbitration proceedings in Karachi provided they are given an opportunity to appoint an arbitrator in Karachi in place of Mr. Robert Davis of London.

4. The learned counsel for either side have addressed me on the implications, of the English Arbitration Act under which as indicated in clause 9 of the Agreement between the parties thatst agreement had to be construed and of section 9 of the Arbitration Act, 1940, which applies in Pakistan.

5. The contention urged on behalf of the applicants is that there is in fact no dispute between the parties as the question is one of discipline and that in fact there is no claim by the opponent, that alternatively if there is a dispute the option and the venue of the arbitration would be that of the applicants according to the terms of the agreement.

6. On the other hand, it is urged on behalf of the applicants that if the terms of the English agreement, namely, to be governed under the English Arbitration Act are to be insisted upon, the opponents have forfeited that right since they entered into the agreement consciously in terms of section 7 of the English Arbitration Act, 1950, whereby on a reference being made to them the opposite-party should appoint their arbitrator within seven days of the notice given to them.

7. This is essentially a case which, in my opinion, should be decided on equitable grounds for whilst there is no doubt that the opponent cannot resile from the applicant's right of insistence and adherence to the terms of the agreement of 1962, namely, to be governed in case of a dispute by the English Arbitration Act and therefore of the venue of the arbitra--petition being in London, the applicants have time and again and indeed in this application reiterated their willingness to participate in arbitration proceedings in Karachi provided they are allowed the facility of nominating their own arbitrator, it is necessary to point out for the benefit of the opponent the observations of Buckland, J. In Sundermull Pereshram v. Tribhuban Hirachand & Co. ((1924) 82 I C 769), a matter in which the parties to a suit had entered into a contract in respect of a quantity of sugar, the contract containing an arbitration clause to the effect that all disputes were to be settled by arbitration under the rules of Bengal Chambers of Commerce or at the option of the seller by the arbitration of two European Sugar Importers of Calcutta, one to be appointed by the sellers and one to be appointed by the buyers. It was held that the plaintiffs sellers having elected to go to the arbitration of two European importers it was not' open to the defendants buyers to have the dispute arbitrated upon by the Tribunal in question, and in the case of failure of the plaintiffs to appoint an Arbitrator within the time fixed, in the absence of a different intention expressed in the submission, the procedure laid down in section 9, subsection (b) of the Arbitration Act should have been followed. It was also urged on behalf of the opponent that this application is not maintainable, that if it is maintainable no sufficient cause has been made out as the applicants had sufficient time to consult their London office and that indeed the time that should normally elapse in the contact between the London office and the Karachi office of the applicants should have been and was envisaged when the agreement was entered into and the time limit of seven days was impliedly agreed upon.

I do not consider it necessary to embark upon the techni--calities of the matter, suffice it to say that I propose to dispose of this application under the proviso to section 9 of the Arbitration Act, 1940, and the proviso to the corresponding section 7 in the English Arbitration Act, 1950 and on equitable grounds. The former proviso reads as follows: "9. Where an arbitration agreement provides that a reference shall be to two arbitrators, one to be appointed by each party, then, unless a different intention is expressed in the agreement,-

(a) if either of the appointed arbitrator neglects or refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new arbitrator in his place ;

(b) if one party fails to appoint an arbitrator, either originally or by way of substitution as aforesaid, for fifteen clear days after the service by the other party of a notice in writing to make the appointment, such other party having appointed his arbitrator before giving the notice, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent ; Provided that the Court may set aside any appointment as sole arbitrator made under clause (b) and either, on sufficient cause being shown, allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit.

Explanation.-The fact that an arbitrator or umpire, after a request by either party to enter on and proceed with the reference, does not within one month comply with the request may constitute a neglect or refusal to act within the meaning of section 8 and this section."

Section 7 of the English Arbitration Act, 1950, reads as under: "7. Where an arbitration agreement provides that the reference shall be to two arbitrators, one to be appointed by each party, then, unless a contrary intention is expressed therein,-

(a) if either of the appointed arbitrators refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new arbitrator in his place ;

(b) if, on such a reference, one party fails to appoint an arbitrator, either originally, or by way of substitution as aforesaid, for seven clear days after the other party, having appointed his arbitrator, has served the party making default with notice to make the appointment, the party who has appointed an 4rbitratormay appoint that arbitrator to act as sole arbitrator in the reference and his award shall be binding on both parties as if he had been appointed by consent: Provided that the High Court or a Judge thereof may set aside any appointment made in pursuance of this section."

It appears to me that the object underlying the provisos of both the Acts is the same, namely, that if sufficient cause is shown further time should be allowed to the defaulting party to appoint an arbitrator or pass such other order as this Court thinks fit.

8. As I have previously stated a certain amount of confusion occurred in or about the 13th and 14th of December 1968 of which advantage is sought to be taken by the opponent. The opponent being bound by the terms of his agreement of service cannot on one hand against these terms insist that the venue of the arbitration should be at his option in Karachi and on the other hand take advantage of them for the period in the English Arbitration Act, 1950. In the affidavit of Mr. Garl Heynen, the Manager of the applicant's company in Pakistan it has been satisfactorily explained that the matter of the opponent's transfer was administrative and as he refused to proceed to Chittagong his services were terminated under clause 5(a) of the agreement by letter sent by their London office and delivered to the opponent on 30th November 1968. I do not agree with the contention that the opponent had not earlier raised the contention that he was going to refer the matter to arbitration there is justification in the contention that the applicant's London office would have to be consulted as to the venue of the arbitration proceedings and although the applicants by their letter dated 9th December 1968 exercised their option to hold the arbitration in London, Mr. Garl Heynen signed the letter and left for Chittagong on 10th December 1968 and in his absence his office were not prompt in posting the letter until the 13th December 1968 when it appears to have crossed the opponent's letter of the same date. I am impressed by the fact that the opponent himself time and again in his correspondence with the applicants has stressed "the rules of natural justice and equity" in regard to his case and it is precisely on this ground that the applicants adhered to their undertaking to hold the arbitration proceedings in Karachi if they are given the option of appointing their arbitrator here. This from all points of view is essentially a case, therefore, in which this Court should exercise its option in equity and on the obvious assumptions arising out of the provisos of both the Arbitration Acts that apply in Pakistan and England. 1, therefore, allow the application to the extent that the applicants will be allowed 15. Days time from the announcement of this order to appoint their arbitrator in Karachi to adjudicate at Karachi together with Mr. Dingomal Ramchandani, the opponent's arbitrator, the dispute between the parties. The parties must before entering upon the arbitration proceedings nominate to this Court an umpire in case of difference between the arbitrators. There will be no order as to costs.