GHULAM ISHAQ KHAN INSTITUTE OF ENGINEERING, SCIENCE AND TECHNOLOGY Versus HASSAN CONSTRUCTION CO. (PVT.) LTD. ENGINEER AND CONSULTANTS

Through this First Appeal against the Order, the appellants have challenged the order, dated 21‑7‑1996 passed by Mr. Mushtaq Hussain, Civil Judge 1st Class, Islamabad whereby he accepted the application of the respondent under section 20 of the Arbitration Act and appointed Mr. Ghulam Mujaddad Mirza, a retired Judge of the Supreme Court of Pakistan as Sole Arbitrator to decide the dispute which is subject‑matter of the afore‑referred application.

2. The facts in brief are that the respondent‑plaintiff is a private limited construction company which was granted contract for the construction of "Electronics and Computer Sciences Department Building" at appellants' Institution in Topi, District Swabi estimated cost of which was Rs.4,12,14,575 and the stipulated period for the completion of work was fifteen months. For variety of reasons the work could not be completed in time stipulated and according to the respondent‑plaintiff dispute arose with regard to the payment. The respondent‑plaintiff preferred a claim to the appellant which was of no avail. Eventually a request was made for appointment of an arbitrator in terms of the contract vide Letter No.786/HCC/95‑80, dated 29‑12‑1995. Yet another reminder was sent vide Letter No.786/HCC/9681, dated 22‑1‑1996 and the appellants refused to appoint the arbitrator vide Letter No.GIKI/CSED/HCC/22, dated 18‑2‑1996 whereafter the respondent‑plaintiff was obliged to file an application before the learned trial Court under section 20 of the Arbitration Act.

3. In the written reply submitted by the appellants‑defendants it was contended that there was no dispute referable for arbitration; that the respondent plaintiff s claim was time‑barred; that the appellants‑defendants reserved their right to lodge a counter‑claim; that the claim of the respondent‑plaintiff was not supported by material on record and that the allegation that rupees two crores have been withheld by the appellants‑defendants was factually incorrect. It was lastly contended that the respondent‑plaintiff's claim was not tenable as it was being preferred after a period of four years.

4. Learned trial Court vide the impugned order observed that in view of the conflicting pleas emanating from the application and the written reply a dispute did exist within the meaning of section 20 of the Arbitration Act; that the respondent‑plaintiff did move employer for the appointment of the arbitrator; that the respondent had asked for appointment of arbitrator which was not agreed to by the appellants and, therefore, it was necessary to appoint the persons named in para. 1 as sole arbitrator.

5. Learned counsel for the respondent has raised a preliminary objection that the appellants had to file appeal before this Court within a period of ninety days and that after deducting the time spent in obtaining certified copy of the impugned order this appeal was filed after a delay of 160 days. The appellants filed the incompetent appeal on 2‑9‑1996 before the learned District Judge. On 18‑1‑1997 the said appeal was argued and the case was adjourned to 18‑2‑1997 on which date the same was adjourned to 3‑3‑1997 on the request of the learned counsel for the appellants and on '18‑3‑1997 the learned District Judge returned the appeal for presentation before the High Court whereafter on 25‑4‑1997 the instant appeal was filed. Learned counsel submitted that if the period is calculated from 16‑11‑1996 to 25‑4‑1997 there is a delay of 160 days in filing this appeal and no tenable explanation is coming forth to justify condonation of delay and the appeal merits dismissal on sole ground of limitation.

Learned counsel for the appellants, on the other hand, submitted that it was a bona fide mistake and it was a fit case in which this Court should condone the delay and admit the appeal to regular hearing and as only a short question of law is involved it may be fixed some short actual date. In this view of the matter his appeal was admitted to regular hearing subject to the question of limitation.

6. Learned counsel for the appellants contended that no application under section 20 of the Arbitration Act was maintainable as no dispute in terms of the afore‑referred section existed; that the claim of the respondent‑plaintiff was being examined by the appellants and the said application was, therefore, pre mature; that the, appellant has a right to be given a show‑cause notice in terms of section 29(3) of the Arbitration Act as to why the agreement should not be filed; that in absence of the agreement having been filed in Court reference to arbitration clause was not tenable and that the learned trial Court should have asked the parties for appointing the arbitrator and should not have proceeded to appoint the Sole Arbitrator at the asking and choice of the respondent‑plaintiff.

Coming to the question of limitation and dilating on what he called the "bona fides" of the appellants in filing the earlier appeal before the learned District Judge, learned counsel submitted that under section 18 of the Civil Courts Ordinance, 1962 if the value of the suit exceeds rupees three lacs the appeal has to be filed in the High Court whereas in other cases it has to be filed before the District Judge and since the application under section 20 of the Arbitration Act was not a civil suit the appellant thought that the appeal before the District Judge was maintainable. He further added that the application under section 20 could not have been treated as a suit and the respondent‑plaintiff had wrongly mentioned the value of the suit for the purpose of pecuniary jurisdiction and that incorrect entry would not create a jurisdiction in derogation to law. In support of the submissions learned counsel relied on the following judgments:‑‑‑

(i ) Evacuee Trust Company v. Muhammad Ismail (PLD 1978 Karachi 252).

(ii) Muhammad Azeem v. Muhammad Nawaz (PLD 1961 Lahore 137).

(iii) ILR 45 Calcutta 44.

(iv) Taj Muhammad Khan v. N.‑W.F.P. Forest (PLD 1984 Peshawar 64).

(v) 1969 CLC 49.

(vi) Government of N.‑W.F.P. v. Azizur Rehman (1991 MLD 422)

(vii) M.A. Jalil v. Salahuddin Khan (1983 CLC 1685).

(viii) Brothers Steel Mills v. Ilyas Meraj (PLD 1996 Supreme Court 543).

When asked as to what prejudice has been caused by the appointment of the Arbitrator, learned counsel submitted that as no dispute existed, the appellant is likely to be involved in litigation and that since the Sole Arbitrator has been appointed on the suggestion of the respondent‑plaintiff, the same was not acceptable to the appellant and that he had no objection to the appointment of a mutually agreed Sole Arbitrator by this Court.

7. Learned counsel for the respondent‑plaintiff on the other hand submitted that the proceedings initiated under section 20 of the Arbitration Act are registered as suit; that a reference under the arbitration is considered as a suit and the application under the Arbitration Act has to contain details including the pecuniary jurisdiction. He referred to section 2(c) of the Arbitration Act and M.A. Jalil v. Salahuddin Khan (1983 CLC 1685) and Province of Punjab v. District Judge, Lahore (PLD 1984 Lahore 515) in support of this contention and contended that pecuniary jurisdiction having been mentioned in the application filed, the appeal against the impugned order lay before this Court and this appeal filed after 160 days delay and merits dismissal on this short ground alone. In support of the plea, learned counsel relied on the following judgments:‑‑‑

(i) Government of Pakistan v. Rafi Associates Ltd. (1985 CLC 2234).

(ii) Abdul Ghani v. Mst. Mussarat Rehana (1985 CLC 2529).

(iii) Malik Muhammad Ishaque v. M/s. Erose Theatre (PLD 1977 Supreme Court 109).

(iv) Said Muhammad v. Goma etc. (PLD 1952 Baghdad‑ul‑Jadid 8).

(v) Muhammad Ghazanfar v. Mst. Nur Basar (PLD 1952 Lahore 156).

(vi) Hakim Muhammad Boota v. Habib Ahmed (PLD 1985 SC 153).

8. Coming to the merits of the appeal, learned counsel for the respondent plaintiff submitted that a bare reading of the written reply submitted by the appellant would show that the dispute within the meaning of section 20 of the Arbitration Act did exist and that the agreement stipulated an arbitration clause and appointment of Arbitrator, therefore, was necessary. He submitted that on 21‑7‑1996 both the parties were asked to propose name of the Arbitrators. The respondent‑plaintiff proposed three names which find mention in the application which is on record of the learned trial Court but the appellant‑defendant refused to suggest any name whereafter the learned trial Court was within its right to appoint the Sole Arbitrator. He lastly contended that the issue has been prolonged for the last four/five years and arbitration was the only way out which cannot be objected to in view of the settled precedent case‑law.

9. I have heard learned counsel for the parties and have also given anxious thoughts to the arguments addressed at the bar.

10. The main issues which have been mooted in the instant case are the following:‑‑‑

(i) Whether the delay in filing the instant appeal can be described as a bona fide mistake and condoned under section 14 of the Limitation Act;

(ii) Whether a difference had arisen between the parties to warrant invoking of the arbitration clause of the agreement/contract; and

(iii) whether the learned trial Court acted in terms of section 20(3)(4) of the Arbitration Act in passing the order for appointing the Sole Arbitrator.

11. The argument of the learned counsel for the appellants that he acted in good faith in filing appeal before the District Judge primarily rests on section 18(1)(a)(b) of Civil Courts Ordinance, 1962 which provided that "appeal from decree or order of a Civil Judge shall lie‑‑‑

"(a) to the High Court if the value of the original suit in which the decree or order was made exceeds and

(b) to the District Judge in any other case. "

The precedent case‑law referred to by the learned counsel is distinguishable. For instance he relied on a Single Bench judgment of this Court reported in M.A. Jalil v. Salahuddin Khan (1983 CLC 1685). In the said case the petitioner initially filed the appeal before the District Judge which was returned whereafter revision was filed before this Court and it was prayed that the appeal was filed bona fide; that the question of pecuniary jurisdiction was not raised before the District Judge; that the petitioner was misled by the impugned award by the Arbitrator in filing appeal before the District Judge and that there was no case decided on the question of forum of appeal. The prayer was allowed and the delay was condoned by the High Court and it was observed as under:‑‑‑

"I am inclined to agree with the submissions of the learned counsel for the petitioner. Firstly the respondent cannot now be allowed to raise objection as to the pecuniary jurisdiction and the learned Additional District Judge for the first time in this Court and secondly the question of jurisdiction and forum of appeal was not free from doubt. Both the learned counsel were not able to cite any Judgment in support of their respective pleas."

Reference was also made to Muhammad Azeem v. Muhammad Nawaz (PLD 1961 Lahore 137) wherein in a rent matter the appeal was filed before the District Judge and the same was returned as incompetent and after the expiry of period of limitation the appeal was filed before the High Court and the High Court considering various provisions of law relating to appeal against the orders of Rent Controllers appointed under the West Pakistan, .Rent Restriction Ordinance, 1959 and some ambiguity about the forum of appeal arrived at the conclusion that the mistake by the learned counsel for the appellant was not so gross as to disentitle him from getting the benefit of section 5 of the Limitation Act.

In Government of N.‑W.F.P. v. Azizur Rehman (1991 MLD 422) the appellant who had incompetent appeal before the District Judge which was returned referred to PLD 1958 Lahore 44 to contend that the appeal before the District Judge was competent and no contrary judgment was cited by the other side and it was in these circumstances that at page 424 this Court held as under:‑‑‑

"The question of competency of the appeal in the Court of District Judge or this Court was difficult and a complicated one, therefore, the appellants cannot be balmed for filing the appeal in that Court nor it can be said that they were negligent in pursuing their remedy in the said Court. In the circumstances, the application under section 5/14 of the Limitation Act is accepted, the period spent in prosecuting the appeal in the Court of the District is condoned and the appeal is held as within time. "

In Taj Muhammad Khan v. N.‑W.F.P. Forest (PLD 1984 Peshawar 64) incompetent appeal filed before the District Judge was held to be a bona fide mistake as the contention was that the order appealed against was passed on a miscellaneous application for temporary injunction and that on the main suit and even otherwise on merit the case was weak as the arbitration clause in the course had itself become infructuous and the learned trial Court had no jurisdiction to pass the order in question.

On merits learned counsel referred to 1985 MLD 115 to contend that in the facts and circumstances of this case there was no dispute which warranted recourse to arbitration clause and the order passed by the learned trial Court is not tenable in law.

The argument of the learned counsel for the appellant that under a bona fide mistake he treated the application under section 20 of the Arbitration Act as a miscellaneous application, and therefore, he filed the appeal against the order passed therein before the District Judge is not tenable in law for more than one reason. Section 2(c) of the Arbitration Act reads as under:‑‑‑

"'Court' means a Civil Court having jurisdiction to decide the question forming the subject‑matter of the reference if the same had been the subject‑matter of the suit, but does not except for the purpose of arbitration' proceedings under section 21, include a Small Cause Court;"

In Province of Punjab v. District Judge, Lahore (PLD 1984 Lahore 515) a similar argument which has been canvassed before this Court was repelled and it was observed at page 518 as under:‑‑‑

"The appellate jurisdiction is regulated by section 18 of the West Pakistan Civil Courts Ordinance, 1962. It has already been stated, that under this section, if the 'value' of the original suit is not more than Rs.50,000, the appeal from the judgment and decree passed therein, lies to the District Court and in other cases to High Court. As pointed out by the learned counsel for the respondents, the term 'value' has been defined in section 2(h) of the Ordinance, which reads as follows:‑‑‑

'Value' used with reference to suit means the amount or value ‑of the subject‑matter of the suit.

Under section 2(c) of the Arbitration Act, a 'reference' is to be considered as identical to a suit, and the amount of value of the subject matter of the 'reference' furnishes the basis for fixation of the forum, for hearing of the application. Further, there being no other provision for determining the jurisdictional value, for the purposes of the appeal, under section 18, such value, shall enure, for ascertainment of the forum of the appeal as well; on the footing whereof, the forum, competent to hear the revision, can be decided. The view, that the value of the subject‑matter of the application determines the forum of appeal, also finds support from the precedent cited by the learned counsel for the petitioners."

At page 521 of the same judgment it was further reiterated as under:‑‑

"Likewise, the argument that the application in question, being a miscellaneous application does not require jurisdictional value, is also not tenable. As would be evident, from the foregoing discussion, section 2(c) read with rule 4, enjoins that the value of the subject‑matter of the application, for the purposes of pecuniary jurisdiction of the Court, must be mentioned therein. "

The appeal filed by the appellants before the learned District Judge was incompetent and before a party is allowed condonation it has to be seen as to whether a sufficient cause within the meaning of section 5 read with section 14 A of Limitation Act exists to warrant condonation.

For bringing the case within the ambit of section 14, the party has to demonstrate that he prosecuted the appeal before a wrong forum in a good faith.

The term "good faith" appears in section 2 of the Limitation Act and it reads as under:‑‑‑

"2(7). good faith' nothing shall be deemed to be done in good faith which is not done with due care and attention;"

I have gone through the application filed by the respondent‑plaintiff under section 20 of the Arbitration Act which is with the file of the learned trial Court. Para. 12 refers to the value of the suit for the purposes of jurisdiction and court‑fee and it reads as under:‑‑‑

"That for the purpose of valuation and jurisdiction the value of this application is fixed at Rs.2 crore and the court‑fee for the requisite amount as required under the law has been affixed. "

The answer to this para. is rather evasive and it reads as under:‑‑‑

"This para. is not admitted as correct. The petitioner has not affixed proper court‑fee as prescribed under the law. "

The precedent case‑law leaves no room for ambiguity and despite the jurisdictional value having been specifically mentioned in para. 12 of application, the appellants chose a wrong forum for appeal. On 18‑1‑1997 preliminary arguments were heard before the learned Additional District Judge and the respondents‑plaintiffs took the preliminary objection of incompetency of appeal but the appellants persisted in pursuing the said appeal, case was B adjourned to 18‑2‑1997, 3‑3‑1997 and finally on 18‑3‑1997 the Court had to return the appeal. These circumstances do not indicate that the appellants defendants acted with due care and attention to bring their case within the meaning of "good faith" as defined above. This was to say the least a gross negligence on the part of the party and the counsel and it cannot be condoned. In Abdul Ghani v. Ghulam Sarwar (PLD 1977 SC 102), at page 107, it was held as under:‑‑‑

It is true that this section does not define sufficient cause but the meaning of this expression is too well known to need recapitulation, and we would only refer here to the observations of Kaikaus, J. on this question in Ataullah v. Custodian Evacuee Property PLD 1961 SC 236 'under section 5 .....there has to be a finding of sufficient cause. In pre‑Partition India sufficient cause had been defined as circumstances beyond the control of the party and I do not know of any case wherein this definition of sufficient cause had been rejected'. We re‑affirm these observations and we explain here that the burden is on the appellant to prove that his delay in filing his appeal was on account of circumstances beyond his control, because as observed by Sir George Rankin in Kanwar Rejendra Bahadur Singh v. Rai Rajeshwar Bali and others AIR 1937 PC 276...in applying section 5 (of the Limitation Act)--------the analogy of section 14 (which applies only to suits) is an agreement of considerable weight'. Section 14 permits the exclusion of time only for proceedings 'prosecuted in good faith therefore, in order to make out sufficient cause under section 5 an appellant must prove that he had acted in good faith in presenting his appeal in the wrong Court. Good faith has been defined in clause (7) of section 2 of the Limitation Act as: 'good faith' nothing shall be deemed to be done in good faith which is not done with due care and attention'. Now if an appellant proves that he filed his appeal in the wrong Court despite due care and attention it means that the presentation of the appeal in the wrong Court was on account of circumstances beyond his control. No doubt, what such circumstances are must depend on the facts and circumstances of each case, and in Kanwar Rejendra Bahadur Singh's case, Sir George Rankin set aside the finding of the Chief Court that the appellant's Advocate had been very negligent in filing the appeal in the wrong Court, because the facts relevant to the question of the Court in which the appeal was to be filed were very complicated. Similarly, an appellant can bring his case under section 5 if he can show that there is some ambiguity in the law governing the forum in which the appeal is to be filed. "

In a Division Bench judgment of this Court reported in Abdul Ghani v. Mst. Mussarat Rehana (1985 CLC 2529) wherein at page 2531 it was held as follows:‑‑‑

"We are of the view, that the error in filing the appeal in the District Court is so patent that it could have been avoided by exercising due care. The wrong advice of a counsel does not furnish a foundation for enlargement of time."

This view was reiterated in Government of Pakistan v. Rafi Associates Limited (1985 CLC 2234).

12. For what has been discussed above I am of the view that circumstances do not warrant an inference that the appellants acted in "good faith" and no sufficient reason has been shown to justify condonation of delay in filing appeal before this Court.

13. Coming to the merits of the case I find that a bare reading of the application and the written reply filed by the appellants‑respondents would show that the respondent‑plaintiff had asserted a claim which was repudiated by the appellants‑defendants and this would constitute a dispute to warrant recourse to section 20 of the Arbitration Act. A reference to paras. (ix) and (x) of the written reply would show that the claim of the respondent‑plaintiff was being repudiated. These paragraphs read as under:‑‑‑

"(ix) The petitioner's plea is not correct. He failed to submit that claim with documentary evidence of the rise in prices as required vide clause 70 of the Contract. He had only submitted claim for the rise in cost of the cement during the progress of the work which, after scrutiny, was paid to him. Escalation claim submitted by the petitioner after completion of the work is under consideration. Verification of documentary evidence provided by the petitioner is being got done from the Authorities specified in the contract. Amount of the claim will be calculated on the basis of these verifications and the net payment, if any, due to the petitioner after taking into account the whole contract will be paid to him subject to the issuance of the certificate of maintenance by .the engineer as specified in clause 62(1) of General Conditions of the Contract. Petitioner has also to sign a certificate that he has no further claim.

(x) Petitioner's claim of Rs.5,83,402 includes an amount of Rs.4,21,566 for earth said to have been disposed of outside the boundary of GIK Institute which was neither covered in the contract nor ordered by the engineer. Rs.1,25,000 on account of construction of Pump House was not claimed through a proper bill which the respondents agree to pay, if established by the petitioner, on finalization of petitioner's account Rs.36,836 are being claimed for the work not physically performed, therefore, cannot be admitted."

The provision of arbitration clause in the agreement is not denied by the appellants. On the direction of the Court a copy of the said agreement was placed on record. Clause 67 relates to settlement of disputes which reads as under:‑‑‑

"67(1). In the event of any disagreement arising out of the contract the matter shall first be referred to the employer for decision who shall after making such enquiries as he may deem fit give his decision in writing not later than three months after the reference is made to him. The Contractor shall forthwith give effect to the decision of the employer and shall proceed with due diligence whether Arbitration is intended or not. If the contractor be dissatisfied with the decision of the employer or if his decision is not forthcoming within the stipulated period and desires Arbitration under the Arbitration clause as hereinafter provided he shall give a notice in writing of such intention within a period of 28 days of the receipt of the employer's decision, or in case no decision is given, at the end of period within which the employer was to give his decision. The said notice shall contain the cause of action material facts of the case and relief sought, failing which the decision of the employer shall become final, conclusive and binding and the contractor shall be deemed to have forefeited and departed from the claim in excess of that allowed by the employer. No subsequent inflation increase in the amount of claim once‑ preferred in the said notice shall be allowed nor shall any other claim in respect of the same work be entertained from the contractor at any later stage. A reference for arbitration shall be made by the contractor in writing not later than three months after the completion of the work. Failure to make such a reference within this period shall be deemed that the contractor has waived all claims in respect of any dispute.

(2) Disputes which may be referred for arbitration shall be limited to:‑‑‑

(a) any question, difference or objection whatsoever which shall arise in any way connected with or arising out of the contract or/and;

(b) the meaning of the operation of any part of the contract or/and;

(c) the rights, duties or liabilities of either part or/and;

(d) whether the contract should be terminated or has been rightly terminated and as regards parties as the result of such termination; provided that all those matters for which provision has been made in the contract for final and binding decision by the employer or the engineer shall be excluded from arbitration.

(3) The venue of Arbitration shall be in Islamabad

(4) If any dispute, difference or controversy shall at any time arise between the contractor on the one hand and the employer on the other, touching the contract for the works, or as to the true construction, meaning and intent of any part or condition of the same, or as to the manner of executing the works, or as to the quality or description of or payment for the same, or as to the true intent, meaning, interpretation, construction, or effect of the clauses of the contract, specifications or drawing or any of them or the incidents or consequences of the contract or specifications or drawing of any of them or as to anything to be done, omitted or suffered in pursuance of the contract or specifications, or as to the mode of carrying the contract into effect, or as to the breach or alleged breach, or as to obviating or compensating for the commission of any such breach, or as to any other or thing whatsoever connected with or arising out of the contract, and whether before or during the progress or after the completion of the works, such question, difference or dispute shall be referred for decision to an Arbitrator, who shall be mutually appointed by the employer and the contractor and his decision in writing shall be final, binding and conclusive on both the parties. "

14. Contention of the learned counsel for the respondent that on 21‑7‑1996, the learned trial Court had asked both the parties to give a list of arbitrators and the respondent‑plaintiff gave three names through an application whereas the, appellants‑defendants did not give any list is supported by material on record. There is an application on the file of the learned trial Court on behalf of the respondent‑plaintiff proposing the names of the arbitrator which are as follows : ‑‑‑

(i) Engineer Yousaf Ali, Director, C.D.A., Islamabad;

(ii) Engineer S.M. Pasha, General Manager, National Highway Authority, Islamabad; and

(iii) Mr. A. Majid Khan, Regional Manager, M.M. Pakistan Limited, Islamabad.

The appellants‑defendants in the very first reply to the written reply had contended that the title application is misconceived and not maintainable as there is no dispute preferable in any arbitration by any Arbitrator. In the face of such' a stand taken by the appellants‑defendants, the learned Trial Court was left with no option but to appoint the Arbitrator itself. Both the parties were not agreeable for an Arbitrator even before this Court despite having been asked. The impugned order, therefore, has been passed in terms of section 20 of the Arbitration Act and does not call for interference.

15. For afore‑referred reasons this appeal is not only hopelessly time‑barred but is not tenable even on merit. The same is, hereby, dismissed with no order) as to costs.

A.A./G‑62/L Appeal dismissed