BOARD OF TRUSTEES OF THE PORT OF KARACHI Versus NATIONAL CONSTRUCTION CO. (PAKISTAN) LTD.

1. This is an application under sections 5, 9, 11 and 33 of the Arbitration Act, 1940. The facts giving rise to this application briefly stated, are as follows :‑

2. On 30th June, 1975, the Board of Trustees of the Port of Karachi (hereinafter called the applicants) entered into a building contract with Messrs National Construction Co. Limited in joint venture with Messrs Christiani and Nielsen A/s, Copenhagen (hereinafter referred to as the contractors) for construction of four new Shipping Berths and two Transit Sheds at Juna Bunder, Karachi (hereinafter referred to as Works) on the terms and conditions mentioned in the contract documents. The contract also contains an arbitration clause which provides settlement of disputes through arbitration and I shall refer to this clause in detail later on.

3. According to the applicants the works under the contract were to be completed by 18‑1‑1978, under the supervision of Messrs Professor Dr. Lackner and partners, Consulting Engineers of West Germany in technical association with Messrs Zafar & Associates of Pakistan (hereinafter referred to as the Consultants).

4. According to the applicants, the Works were and are still in progress and in support of this allegation, the Applicants rely on two letters dated 24‑12‑1979 and 19‑1‑1980 (Anneaures 2 and 3 respectively to the application) from the Contractors.

5. The Contractors submitted various claims from time to time to the Consulting Engineers for their decision in accordance with the terms of the contract but the decisions of the Consulting Engineers in respect of their claims JJV‑1 to JJV‑12 were not acceptable to the Contractors and therefore, they (contractors) by their letter dated 5‑12‑1979 required Applicants and the Consulting Engineers to refer the said claims to arbitration in accordance with the arbitration agreement and further informed that they had nominated Mr. Justice Mohammad Yakub Ali (retired Chief Justice of Pakistan) as their arbitrator and called upon the applicants to nominate their arbitrator within 15 days from the date of receipt of the letter. The receipt of this letter was acknowledged by the Chief Residence Engineer of the Consultants and he informed the Contractors that the Consultants were examining the contents of the letter and would revert to the same within 15 days time from the date of receipt of the letter. Thereafter, the Consultants by their letter dated 23‑12‑1979, addressed to the Contractors at two addresses mentioned in the letter inter alia informed them that the matters in dispute could be referred to arbitration only after the works were completed and after quoting the arbitration clause in detail, further informed them that the Chief Engineer's decisions were final and binding on the Contractors until the completion of works and accordingly required the Contractors to comply with the contract conditions and complete the works at their earliest. After the receipt of the above‑mentioned letter K. W. Hansen, the Project Manager, on behalf of the contractors by his letter dated 13‑1‑1980, informed the Applicants, the Consultants and the Chief (Resident) Engineer of the Consultants that on their neglect and failure to appoint their arbitrator within the period prescribed by law, their arbitrator should be deemed to have become the sole arbitrator for the adjudication of the dispute. On receipt of this letter the Consultants by their letter dated 15‑1‑1980, expressed their surprise and invited the attention of the Con tractors to their letters (consultants' letters) dated 5‑12‑1979 and 23‑12‑1979,. and relying on them stated that the letter under reply had no relevance under any clause of the contract.

6. Thereafter, the applicants received a notice dated 21‑1‑1980, from the sole arbitrator informing the applicants that he had entered upon the arbitration in the dispute between the parties to this application and requiring the applicants to depute their authorised representative to appear before him on 26‑1‑1980, at 10.30 a.m. at the premises of the Sind Club, Karachi and further informing that the procedure for the conduct of the arbitration proceedings would be fixed for filing respective claims by the parties.

7. This notice has caused the Applicants to move the application under consideration containing the following prayers :‑

8. "(a) to set aside the appointment of respondent 2, Mr. Justice (retd.) Mohammad Yakub Ali as sole‑arbitrator;

(b) to restrain the respondents from proceeding with the arbitration;

(c) to hold that the arbitration is premature;

(d) to pass such other order as the Court may deem fit and expedient including the grant of permission to the applicants to appoint their own arbitrator if deemed necessary within reasonable time; and

(dd) to determine the effect of the Agreement for Arbitration;

(e) award costs."

9. The contractors have filed their written statement inter alia, pleading that the application is misconceived, not maintainable in law and in any event frivolous and vexatious in nature and relying on clauses 3.48 and 3.67 of the Contract have further pleaded that the construction of four berths has already been completed and/or substantially completed; and/or is alleged to have been completed and therefore, the reference to arbitration is proper, legal, valid and binding.

10. I have heard Mr. Ali Ahmed Fazil, Advocate on behalf of the applicants, and Mr. Liaquat Merchant Advocate on behalf of the contractors.

11. The learned arbitrator, respondent 2 is underrepresented.

12. Mr. Ali Ahmed Fazeel has urged the following grounds in support of the application :‑

(a) that arbitration has been invoked by Mr. K. W. Hanson, who is not authorised to invoke the same;

(b) that works on the date of reference were and still incomplete and therefore, the arbitrator could not enter upon the reference;

(c) that in any case on the facts and circumstances of this case the appointment of Mr. Justice (Retd.) Mohammad Yakub Ali as sole arbitrator is liable to be set a side and the applicants are entitled to appoint their own arbitrator.

13. In order to appreciate the various submissions made by the learned counsel for the parties on the grounds urged, it would be convenient if the definition of the word 'Works' as defined in the Contract, and other relevant clauses of the contract or material parts thereof are set out hereinbelow:‑

14. The definition of the word 'works' provided in the clause 3.1 (f ) of the contract is as follows :‑

15. (f ) Works means all supplies and performances, which are to be executed by the Contractor in concurrence with the Contract. In so far as to be understood from the wording of the text, works also means the entirety of all or individual structures, which are to be constructed and maintained within the scope of the Contract.

16. Clause 3.67, sub‑clause (2) provides settlement of dispute by arbitration in the following manner:‑

(2) If any dispute or difference of any kind whatsoever shall arise between the K. P. T. or the Engineer and the Contractor in connection with or arising out of the Contract, or the carrying out of the Works (whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the Contract), it shall in the first place referred to and settled by the Engineer, who within a period of 90 days after being requested to do so, shall give written notice of his decision to the Contractor.

17. Save as hereinafter provided, such decision in respect of every matter so referred shall be final and binding upon the Contractor until the completion of the works and shall forth with be given effect to by the Contractor, who shall proceed with the works with all due diligence, whether he requires arbitration as hereinafter provided or not.

18. If the Engineer has given written notice of his decision to the Contractor and no claim to arbitration has been communicated to him by the Contractor within a period of 90 days from receipt of such notice, the said decision shall remain final and binding upon the Contractor.

19. If the Engineer shall fail to give notice of his decision as aforesaid within a period of 90 days after being requested as aforesaid, or if, the Contractor should be dissatisfied wit any such decision, then the Contractor may within 90 days after receiving notice of such decision, or within 90 days after the expiration of the first named period of 90 days (as the case may be) require that the matter in dispute be referred to arbitration as hereinafter provided.

20. ..

21. All disputes and differences for which the eventual decision of the Engineer is not, as aforesaid, final and binding, shall be finally settled by the arbitrators/umpires named under this provision.

22. The said arbitrator/umpires shall have full power to open up, review and revise any decision, opinion, direction, certificate or valuation of the Engineer. Neither party shall be limited in the proceedings before such Courts of arbitration, to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision. No decision given by the Engineer in accordance with the foregoing provisions, shall disqualify him from being called as a witness and giving evidence before the Court of Arbitration on any matter whatsoever relevant to the dispute or difference referred to the Court of arbitration as aforesaid.

23. The arbitrators/umpires shall not enter on the reference until after the completion or alleged completion of the works, unless with the written consent of the K. P. T. and the Contractor, provided always‑

(a) that such reference may be opened before such completion or alleged completion in respect of the withholding by the Engineer of any certificate, or the withholding of any portion of the Retention Money to which the Contractor clams in accordance with the Conditions set out in this Contract to be entitled, or in respect of the exercise of the Engineer's power to give a certificate under clause 3.63(1) of these conditions;

(b) that the giving of a Certificate of completion under clause 3.48 thereof shall not be a condition. precedent to the opening of any such reference.

24. Work under this Contract, which has nothing to do with such a dispute, question or difference, shall be continued without any delay during the Court of arbitration. The same is valid for the disputed portion of the works, in so far as the dispute does not extend to essential questions of the technical solution to be selected.

25. Clause 3.48 provides issuance of Certificate of Completion of Works in the following condition f‑‑

26. "3.48. Certificate of Completion of Works.‑As soon in the opinion of the Engineer, the works shall have been substantially completed (vide also clause 3.49(2)), and shall have satisfactorily passed any final test that may be prescribed by the Contract, the Engineer shall on receiving the written undertaking by the Contractor to finish any outstanding work during the first 28 days of the period of Maintenance, issue a certificate of Completion (also named "Final Acceptance Certificate elsewhere in the Contract) with the concurrence of K. P. T. in respect of the works. The period of Maintenance for the works shall commence from the date of such a certificate.

27. The Engineer may give such a certificate of Completion with respect to each of the four Berths or the two Sheds before the completion of the whole of the works upon written application of the Contractor provided these parts of the structures have. been completed to the satisfaction of the Engineer. A Certificate of completion given in accordance with the foregoing provision, shall not be deemed to certify completion of any ground of surfaces requiring re‑instatement, unless such certificate shall expressly so state."

28. Now, I will take up the first objection that the arbitration has been invoked by K. W. Hansen who is not authorised to invoke the same. In this regard Mr. Ali Ahmed Fazeel referred to that the letter dated 5‑12‑1979, addressed to the Engineer and the applications whereby Mr. Justice (Retd.) Yakub Ali was nominated as arbitrator and whereby they were required to nominate their arbitrator within a period of 15 days from the date of the receipt of letters. He also referred to another letter dated 13‑1‑1980 addressed to the Engineer, the applicants and the Chief Resident Engineer whereby they were informed that on their negligent and failure to appoint their arbitrator within the period prescribed by law Mr. Justice (Retd.) Yaqub Ali "shall be deemed to be the sole arbitrator for adjudication of the disputes". It was submitted that both these letters were issued under the signature of K. W. Hansen, the Project Manager who is not authorised under Clause 9 of the Agreement (Appendix D to the Contract Document to invoke arbitration or appoint the Arbitrator. It was also submitted that these letters have not been issued under the signature/ authority of the Joint Venture and not even under the authority of the Execu tive Committee of the Constituent of Joint Venture, and under paragraph 8 of the agreement between the Constituents of the Joint Venture dated 23‑6‑1975 and incorporated in Appendix 9 in Volume I of the Contract documents, it is the Executive Committee who could submit to arbitration any claim against the applicants.

29. On the other hand, Mr. Liaquat Merchant submitted that both these letters were signed by the Project Manager on behalf of the Joint Venture. He relied on the contents of the Decision/Resolution of the Executive Com mittee of the Joint Venture, a copy whereof is annexed to the written state ment, whereby the Project Manager is authorised and directed to give notice of arbitration to the applicants under Article, 3.67 of the Contract and takes all such other acts, things steps and proceedings for adjudication of claim against the applicants in arbitration.

30. It is, therefore, necessary to examine the relevant clauses of the agreement between the Constituents of the Joint Venture contained in Appendix 9 to the Contract Documents.

31. It would be advantageous if these clauses are reproduced herein below;

32. "7. Manager.‑The Management of the Joint Venture shall be con ferred on

(a) The Executive Committee.

(b) The Project Manager.

8. Executive Committee‑The Executive Committee shall consist of one member appointed by each party and the Project Manager.

33. Each party may also appoint such special alternate Member, or Members as may be necessary. The power to appoint shall include the power to remove and replace.

34. The meetings of the Executive Committee shall be called at the instance of a Member representing either party.

35. The Executive Committee shall control the Execution and carrying out of the works and have power to decide the financial policy, to prepare the programme of the works, to approve of the annual accounts, to prepare and submit to arbitration any claim or claims against the Employer, to grant powers to represent and bind the joint venture, authorise purchase of equipment and in general do all acts, deeds and things that may be necessary for the purpose of successful execu tion of the Works.

36. The decisions of the Executive Committee shall be carried out by the Project Manager and shall be binding upon the Joint Ventures, provided that no such decision shall alter vary or modify the rights of either party under this Agreement.

37. In case the Members of the Executive Committee cannot reach agreement on some question, the matter shall be referred to the Management of the Joint Ventures for decision. .

9. Project Manager.‑The practical execution and carrying . out of the Works shall be delegated to a Project Manager (hereinafter so‑called) who shall be appointed from Christiani & Nielson A/S's Staff with the approval of the Executive Committee, as required under the Contract.

38. The Project Manager shall at all times during the execution of the Works and for so long thereafter as the Executive Committee shall decide, reside on or adjacent to the site of the Works.

39. The Project Manager shall be responsible for the proper execution and carrying out the works in accordance with the Contract and the directions of the Executive Committee, but shall not consent to any alteration, extension or variation to or of the Works outside the scope of the Contract without the previous consent of the Executive Committee."

40. It will be seen from the provisions of clauses 7 and 8 quoted herein above that the management of the Joint Ventures vest in the Executive Committee and the Project Manager. The Executive Committee has powers to decide, to prepare and submit to arbitration any claim or claims against the applicants and clause 8 further provides, that the decision of the Executive Committee shall be carried out by the Project Manager and shall be binding upon the Joint Ventures. It is also clear from the provisions of clauses 7 and 8 and the resolution mentioned above that the letters written or notices issued by the Project Manager were duly authorised. I, therefore, do not find any substance in the first ground urged by Mr. Ali Ahmed Fazeel and do not accept it.

41. I would consider the second ground urged by Mr. Fazeel.

42. It will be seen from the arbitration clause that under it any dispute or difference of any kind whatsoever, between the applicants or the Engineer and the Contractors, in connection with or arising out of the contract or carrying out the works in the first place has to be referred to and settled by the Engineer within the period provided therein and such decision is made final and binding upon the Contractors until the completion of the works even if not acceptable to them in which case, the Contractors are required to give notice within the time provided in the clause that the matters in dispute be referred to arbitration. However, if the matter or matters in dispute are referred to arbitration as provided therein the arbitrators are prohibited from entering upon the reference until after the completion of the Works unless the applicants and the Contractors consent in writing that the arbitrators should enter upon the reference even before the completion or alleged completion of the Works. The only cases where the arbitrators can enter upon the reference before the completion or alleged completion of the Works and without consent or the withholding by the Engineer of any certificate or the withholding of any portion of the retention money to which the Contractors claim in accordance with the conditions set out in the contract to be entitled to, or in respect of exercise of Engineer's powers to give certificate under the clause 3.63(1) of the Conditions.

43. The disputes or differences for the decision of which Mr. Justice (Retd.) Yaqub Ali has been appointed as arbitrator are not those which fall within the aforesaid excepted matters. It was contended by Mr. Fazeel that the Works were not completed when the arbitration was invoked and in support of this contention he relied on two letters of the Contractors dated 24‑12‑1979 and 19‑1‑1980 which clearly show that on the date of `‑12‑1979 when Mr. Justice (P,etd.) Yaqub Ali was appointed as arbitrator, or on 23‑12‑1979, when he was appointed as sole arbitrator the entire Works had not been completed or even not alleged to have been completed and nothing appears on record to show that even on 21‑1‑1980, when Mr. Justice (Retd.) Yaqub Ali entered upon the reference by issuing notice, the entire works had been completed or allegedly completed.

44. I may here reproduce the material portion of the letters dated 24‑12‑1979 and 19‑1‑1980, Letter dated 24‑12‑1979 states as follows :‑‑

45. "Sub.‑JJV Revised time Schedule.

46. Dear Sir,

47. Enclosed please find our revised Time Schedule showing completion of the Sheds at end December, 1980. Also enclosed sequence of roof slab‑construction."

48. Letter dated 19‑1‑1980 states as follows :‑

49. "The General‑Manager Planning and Development, Karachi Port Trust, Karachi. Third Project of Karachi Port Reconstruction of Berth and Sheds Request for Special Advance Payment against Bank Guarantee."

50. Dear Sir,

51. In the High Level Meeting of December 13, 1979, which was presided over by Major General Shafique Ahmed, Federal Secretary, Ministry of Works, and attended by the Chairman, K. P. T. it was unanimously agreed that the progress of Work must be expedited on the Project. The completion date for the Shed was discussed that the Shed must be completed by December 31, 1980. However, to enable the completion by this date, the Federal Secretary, Ministry of Works requested K. P. T. to again help NCC/CN with further extra contractual advance, as a special case, for expediting the progress of the Shed. At K. P. T's request it was agreed by NCC/CN that this extra contractual special advance will be kept in a separate bank account, for the utilization exclusively for the acceleration of the progress of the Shed and will be subject to check by K. P. T. at the time of monthly running bills."

52. Mr. Ali Ahmed Fazeel in support of his contention that the arbitrator could not enter upon the reference until after completion of the Works relied on .Smith v: Martin (1925) 1 K B 745. In this case the words 'until after the completion of the works' used in Condition No. 32 of the contract, came to be considered. It was held that 'the words in Condition No. 32 meant until after completion of the whole of the works contracted for, and not merely until after completion of so much of the works as the builder was under the circumstances bound to perform, 'that consequently the arbitration was premature and the arbitrator had no jurisdiction to make the award. In this case after considering the various conditions of the contract and the arbitration clause, it was observed by Bankes, L. J., as follows :‑‑‑

53. "It is by the light of those earlier conditions that we must read the arbitration clause, Condition 32, on which the present question turns. That condition provides that any dispute or difference arising between the parties is to be referred to arbitration, subject to this, that 'such reference, except on the question of certificate' that is the withholding of a certificate by the architect to which the builder claims to be entitled, and this is not such a question 'shall not be opened until after completion or alleged completion of the works' unless with the written consent of the parties. As it is not in dispute here that the whole of the building contracted for have not been completed, the arbitration was premature. This construction of the contract may operate hardly upon a builder, who may be kept out of money which is justly due to him for an unlimited time, unless he takes other steps to :secure payment ; but he has chosen to agree to this contract, and we cannot do otherwise than act upon its plain meaning, and according to that plain meaning I think it is clear that the arbitrator had no jurisdiction to make the award, and no leave ought to be given to enforce it summarily. The appeal must be allowed."

54. Although thin case clearly supports the stand of Mr. Ali Ahmed Fazeel and no conditions have been brought to my notice by Mr. Liaquat Merchant which show that the arbitrator could enter upon the reference before the completion of the entire works except in cases where the applicants give consent or which relates to matters already mentioned hereinabove and provided in clauses 3, 67 of the contract. No doubt in the above‑cited case the definition of the word 'Works' is not stated and it is not known whether this word was defined in the contract or not. However, Mr. Merchant relying on the definition of the word 'Works' given in the contract, submitted that it also means the entirety of all or individual structures which are to be constructed and maintained within the scope of the contract. However, the submission over looks the controlling words "In so far as to be understood from the wording of the text". Therefore, it is the context in which the 'Works' is used in any particular condition of the contract that has to be looked into to find out whether the word 'works' means the entire contracted work i.e. four berths and two sheds or each of them individually. So far as the arbitrator clause ,is concerned, in my opinion, it clearly shows that the word 'works' in this clause has been used for the Works in its entirety and not for each shed or berth for if arbitration could be had in respect of each shed and each berth then it would not have been provided therein that the decision of the Engineer shall be final and binding upon the Contractors until the completion of the Works. Further, if dispute in relation to each shed or berth on its completion was intended to be referred to arbitration then what was the necessity of providing that any dispute could be referred to arbitration even before the completion of the Works with consent, moreso when the disputes in respect of the withholding by the Engineer of any certificate or the withholding of any portion of the retention money to which the Contractors claim in accordance with the condition set out in the contract to be entitled to or in respect of the exercise of the Engineer's power to give certificate under Article 3.630) could be referred to arbitration without consent, and before completion of the entire Works. Further, the provision that all disputes and differences for which the eventual decision of the Engineer is not final and binding, shall be finally settled by the arbitrators would not have been there, if commencement of arbitration proceeding was intended before the completion of the entire Works. Word `finally' is a keyword and cannot be lost sight of..

55. Mr. Merchant further argued that since: in Appendix A to the Form, of Tender, for completion of the Sheds and berths two different periods have been provided and since liquidated damages for late completion of berth and total of the Works, the amount of Bonus for early completion of the Berth and the Total Works and the Bills of Quantities for each of them were separately provided, therefore, the dispute in respect of each of them, on completion of any of them, could be referred to arbitration separately. But in my opinion the answer to the question whether dispute or difference in respect of each item of works could be separately referred to arbitration will have to be answered on the language of the arbitration clause and if the language is clear and unambiguous, and to me it appears to be, then the provisions which have been referred to by Mr. Merchant became irrelevant.

56. Mr. Merchant also contended the question whether the Works were completed or not or the same have been substantially completed or not has to be determined by the Arbitrator and not by this Court. In support of this contention Mr. Merchant referred to the following passage from the judgment of my learned brother Zaffar Hussain Mirza, J. in Muhammad Azam Muhammad Fazil & Co., Karachi v. Messrs N. A. Industries, Karachi P L D 1977 Kar. 21 ;

57. "But if the challenge to the arbitration clause is founded on disputed question of interpretation of other terms of the contract, the decision of such a question would amount to usurping the jurisdiction of the domestic forum which the parties have chosen for adjudication of their disputes. Both on authority and principle it is proper to leave such question to be adjudicated and decided by the arbitrator."

58. But the question under consideration is whether the learned Arbitrator could enter upon the reference or not. It is a jurisdictional question and not the question of determination and interpretation' of other terms or conditions of the contract. In the instant case the exercise of jurisdiction by the Arbitrator under the arbitration agreement depends on completion or alleged completion of the Works. The question whether the Works were substantially completed is irrelevant to the question of exercise of jurisdiction by the Arbitrator.

59. Further, if the exercise of jurisdiction by an arbitrator depends on the existence of certain conditions the existence of those conditions could only be decided by the Court and not by the arbitrator. Here I may refer to some more observations of Bankes, L. J. in Smith v. Martin which appear at page 749 of the report ‑‑

60. "The only doubt that I at one time entertained in this matter was whether, having regard to the form of the contract, it might not be said that the parties, by giving the arbitrator power to deal with disputes arising on the construction of the contract, had empowered him to decide whether the works had been completed or not. But our attention was called to a case of. Pathick Brothers v. Metropolitan Water Board (Reported in Hudson on Building Contracts, 4th Edn. Vol. 11, p. 456), in which it was held by the Court of Appeal that where a right to go to arbitration depends on the happening of an event, the arbitrator has no jurisdiction to decide whether the event has happened. A finding therefore in the present case that the works were completed before the commencement of the arbitration was outside the jurisdiction of the arbitrator."

61. Mr. Fazeel also referred to Christopher Brown L. D. v. Genossenschaft Gesterreichischer Waldbesitzer Holz wire‑Schaftsbetriebe Registrierte Genossen schaft Mit Beschrankter Haftung (1). In this case the arbitrator after making enquiry as to their jurisdiction had given their award. It was observed by Devlin, J. at page 13 of the report as follows :‑

62. "If the plaintiff takes upon himself the burden of proving the award, and fails to prove that the arbitrators bad jurisdiction, his action, fails, and it is irrelevant whether the arbitrators thought or did not think that they had jurisdiction. Their finding is of no value to him. But if he proves that the arbitrators did have jurisdiction then he succeeds, and his success is not destroyed because the arbitrators themselves went into the matter and came to the same conclusion which ex hypothesis, was the right one. In short, any view which is expressed by the arbitrators expressly or impliedly in the award, any finding which can be called a finding that they had jurisdiction does not make the award any better, and likewise does not make it any worse.

63. This approach to the matter and the principles to which I have referred are, I think substantially those which were laid down in the judgments in Rex v. Fulham, Hammersmith and Kensington Rent Tribunal ex parte Zerek, (1951) ?_ K B 1 ; (1951) 1 T L R 423 ; (1951) 1 All E R 482 which was a decision of the Divisional Court. The Court there was considering a similar question in relation to a rent tribunal and the circumstances in which a rent tribunal could properly enquire into matters affecting its own jurisdiction. I think that the same principles apply to an arbitration tribunal."

64. I may also refer to a decision of the Supreme Court in Mr. Muhammad Jamil Asghar v. The Improvement Trust, Rawalpindi (2). It was observed by Kaikaus, J. at page 704 of the report as follows :‑

65. "A purely administrative officer who is empowered to pass an order if certain circumstances exist has no jurisdiction to determine those circumstances and the objective existence of those circumstances is an essential condition of the validity of his order. In respect of every order passed by him the Court can make an enquiry and if it finds that all the circumstances needed for passing the order were not present it will declare the order to be void. Of course, although the officer has been granted no jurisdiction to determine any facts he will have to ascertain whether the requisite circumstances exist for otherwise he cannot pass the order, but, his conclusion as to the existence of those circumstances binds o body and it is open to any person effected to challenge his act on the ground that those circumstances do not in fact exist. An administrative office or authority may be given jurisdiction to determine some facts on proof of which he can pass an order and in that case he will act in a quasi -judicial manner for the determination of those facts and his determina tion validly reached will support his order in relation to those facts. For instance the Government may be empowered to acquire property if it is 'satisfied' of the existence of a public purpose for such acquisition. If the Government validly reaches a conclusion as to the existence of a public purpose its order will be legal provided of course that the circumstances which it has found to exist do in law constitute a public purpose. The Government still will have no jurisdiction to determine the connotation of "public purpose" and it will not be able to validate an acquisition by a misinterpretation of 'public purpose'. It is the Court which will determine what is meant by 'public purpose'. So far as special judicial tribunals are concerned they are given jurisdiction to determine certain facts but they are not judges of the facts which are the foundation of their jurisdiction nor can they define the limits of their own jurisdiction."

(1) (1954) 1 Q B 8 (2) P L D 1965 S C 698

66. I may also refer to a recent judgment of Lahore High Court in Dalil Khan and another v. Sardar Khan and others (1), wherein a learned Single Judge at page 108 of the report observed as follows :‑.

67. "A tribunal of limited jurisdiction cannot confer jurisdiction on itself by a wrong decision that a certain state of facts exists, upon which the limits of its jurisdiction depends even though its decision is declared final by the Statute, on the subject falling within the exclusive jurisdiction."

68. The principles enunciated in the above‑quoted passages would, in m opinion, equally apply to exercise of jurisdiction by an arbitrator who power to act as such depends on the existence of certain condition. 1t was so ruled in Christopher Brown L. D. (2). Therefore, this contention also has no force. I am therefore, clearly of the opinion that on 21‑1‑1910, the works were not completed or allegedly completed and as such learned Arbitrator could not have entered upon the reference on that date.

69. Now, I would take up the last ground. It was urged by Mr. Fazeel that on the facts and circumstances of the case appointment of Mr. Justice (Retd.). Yaqub Ali as sole arbitrator is liable to be set aside. In support of this ground Mr. Fazeel relied on Steel Brothers & Co. Ltd., Karachi v. A. Wahid (3), Central Insurance Co. Ltd. v. Khyber Textile Mills Ltd. and others (4) and Messrs Kamani Engineering Corporation Ltd. v. Madhya Pradesh Electricity Board, Jabalpur and another (5).

(1) 1979 C L C 104 (2) (1951) All E R 482

(3) P L D 1970 Kar. 173 (4) P L D 1975 Kar. 147

(5) AIR 1964 MP268

70. The expression 'sufficient cause' used in section 9 of the Arbitration 1c Act, 1940 has not been defined in the Act. However, this expression is also used in various provisions of the Code of Civil Procedure, 1908 and the Limitation Act. In relation to the provisions of the Code of Civil Procedurel it was observed by Muhammad Sharif, J. in Malik Mumtaz Ahmed and others v. Mst. Umtul Habib and others (1) that ",expression sufficient cause" is not susceptible of an exact definition and no hard and fast rule can be laid down to cover all possible cases. Each case must be judged upon its merits and its peculiar circumstances. Now, before I examine the circumstances in which Mr. Justice (Retd.) Yaqub Ali was appointed as sole Arbitrator, I may refer to the cases cited by Mr. Fazeel. In Steel Brothers & Co. Ltd., Karachi v. A. Wahid the opponents on the applicants, failure to appoint their arbitrators, had appointed the arbitrator nominated by them as the sole arbitrator. This appointment was set aside by Feroze Nana Ghulamally, J. on the ground that the applicants had failed to nominate within the statutory period their arbitrator due to confusion caused by lengthy correspondence between the parties.

71. In the second case on the applicants failure to appoint their arbitrator, the respondents had appointed the arbitrator nominated by them, as the sole arbitrator. On an application made under section 9 of the Arbitration Act, 1940, Fakhruddin G. Ebrahim, J. after stating the circumstances in which the applicants had failed to appoint arbitrator, observed that in those circumstances it could not be said that the applicants delibarately avoided to nominate their arbitrator and further observed that it was possible that they were under bona fide misapprehension that in the stated circumstances, occasion for them to appoint their arbitrator had not arisen.

72. In the third case it was observed that the moment the defaulting party satisfies the Court that it has not been obstructive or evasive and has acted with due deligence, the appointment of sole arbitrator should be set aside.

73. I may also refer to another case of this Court, namely, Messrs M. Esmailies & Sons v. The Federation of Pakistan (2). In this case the mining lease of the plaintiff was cancelled by the Central Government. The plaintiff appointed an arbitrator under rule 80 of the Pakistan Mining Concession rules, 1949 and called upon the defendant/Government to appoint their arbitrator but they did not do so and contended that the matter was to be decided by the Central Government and was not to be referred to arbitration. Therefore, the arbitrator appointed by the plaintiff acted as sole arbitrator and gave an award. The Central Government applied for setting aside the award and realising that the matter was to be referred to arbitration under rule 80 also prayed for permission to appoint their arbitrator. It was observed by Waheeduddin Ahmed, J.

74. "In my opinion the contention of the learned counsel is not correct. The differences between the parties whether the dispute should have been referred to the Central Government or to the two arbitrators appointed by the parties was bona fides and I am inclined to the view that the matter was not free from doubt and the request of the defendants that they should be allowed to appoint their own arbitrator is not without justification."

75. Therefore, from the cases cited hereinbefore it is clear that the appointment of the sole arbitrator on the failure of other party to nominate its arbitrator,) could be set aside if the party in default satisfies the Court that it has no deliberately avoided to appoint its arbitrator or it was acting under some lacking in bona fide by being misapprehension, or confusion and was not lacking obstructive or evasive or negligent. All these grounds are considered to be sufficient within the meaning of section 9 of the Arbitration Act, 1940.

(1) P L D 1955 F C 178 (2) P L D 1959 Kar. 87

76. Now, I would consider the cause due to which the applicants claim that they did not nominate their arbitrator. It has already been noticed that the Chief Resident Engineer by his letter dated 19‑12‑1979, in reply to the letter dated 5‑12.1979, from the Contractors whereby they required the applicants to appoint their arbitrator within 15 days, informed the Contractors that under clause 3.67(2) of the Contract, the arbitrator could not enter upon the reference until after completion of the Works and therefore, the arbitration proceedings were not warranted.

77. Here I may state that the arbitration clause provides that all disputes or difference referred to the Engineer will be decided by him within 90 days and the Contractors should give notice within 90 days after receiving the notice of such decision or within 90 days after the expiration of the period of 90 days within which the Engineer is required to give decision, requiring that the matter in dispute be referred to arbitrators. However, it appears that the applicants were not clear whether the arbitrators were required to be appointed for each dispute as and when it arose or only on completion or alleged completion of the Works because the arbitration clause provides that the arbitrators/Umpire shall enter upon the reference only after the completion or alleged completion of the Works. Therefore, the. applicants failed to appoint their Arbitrator under misapprehension, but they were not lacking in bona fide for they had promptly replied to the letter and had not refused to go to arbitrator. I am therefore, of the opinion that the applicants have made out sufficient cause.

78. I, therefore, set aside the appointment of respondent No. 2 as the sole arbitrator and allow the applicants two weeks time to nominate their arbitrator.

79. The arbitrators shall enter upon the reference only on completion or alleged completion of the entire Works and not before. s. Q. Order accordingly.