PROVINCE OF PUNJAB through District Collector, Multan Versus Messrs KHALID HUSSAIN AND COMPANY GOVERNMENT CONTRACTORS

MIAN HAMID FAROOQ, J.--- Province of Punjab etc., the appellants/defendants, through the present appeal, have called in question judgment and decree, dated 24-9-2001, whereby the learned Trial Court, on the, basis of the report of "Referee" decreed respondent/plaintiff's suit for recovery of Rs.16,12,878.

2. Briefly stated facts of the case are that the respondent No. 1/ plaintiff, on 21-5-1995, filed the suit for recovery of Rs.49,82,700, together with accrued interest, against the appellants/defendants, inter alia, pleading that pursuant to the invitation of tenders by respondent No.4 for work on Flood Fighting "J" Head Spur and Mole Head. Spur Burji Nagni Flooti Bund, Shujabad, District Multan, the plaintiffs Finn filed the tender and it, being lowest, was accepted acid the aforesaid work, against sums of Rs.29,28,200 and Rs.26,54,500, respectively, was allotted to it; during the currency of work, defendant No.7 was allowed to participate in the on going work without the consent of respondent firm; the plaintiff finished the work on "J" Head Spur exclusively; the defendants paid only a sum of Rs.6,00,000 and the suit amount is outstanding. The suit was contested by 'the appellants, through the written statement, stating therein that the respondent firm did complete the work on Mole Head Spur and did not raise any objection when the work was assigned to respondent No.2/defendant No.7, therefore it is not entitled to recover the suit amount. Following issues were framed.

ISSUES

(1) Whether the suit is not maintainable in its present form`? OPD.

(2) Whether the defendants Nos.2 to 6 have filed a petition under section 34 of Arbitration Act, if so, its effect OPD 2 to 6

(3) Whether the plaintiff is estopped by his words and conduct to file this suit'? OPD-7

(4) Whether the phintiff intends to blackmail the defendants'? OPD-7

(5) Whether the plaintiff is claiming relief against the work done by the defendant No.7'? OPD-7

(6) Whether the defendant No. 7 is entitled to special costs under section 35-A of C.P.C. as Rs.25000'? OPD

(7) Whether the plaintiff is entitled to recover suit amount from the defendant'? OPP

(8) Relief.

3. During the proceedings iii the suit, both the parties, on 30-9-2000, made joint statement that the matter may be referred to Mumtaz Ahmed Khan, Superintending Engineer, Mailsi Canal Circle as "Referee" and that the parties would be bound by the decision of the "Referee". Accordingly, the learned trial Court appointed the said Mumtaz Ahmed Khan as "Referee", observing that the verdict of the "Referee" would be binding upon the parties, vide order, dated 30-9-2000. Pursuant to the said order, Mumtaz Ahmed Khan checked the relevant record, recorded statement of the parties and submitted his report, which was marked as Ex.C-1. Thereupon, the learned trial Court, after finding that the respondent firm is entitled only for Rs.16,12,878, passed a decree for recovery of Rs.16,12,878, favouring the respondent Finn and against the appellant, while rest of the claim was rejected, vide impugned judgment and decree, dated 24-9-2001, hence the present appeal.

2. Learned Law Officer has submitted that the impugned judgment is not sustainable in law, as the "Referee" did not decide the matter according to the record and respondent firm was not entitled to recover the decretal amount. Conversely, the learned counsel for the respondent No. 1 has submitted that the appeal is barred by time and. although .the respondent firm filed the suit for recovery of Rs.49,82,700, yet the learned trial Court partially decreed its suit to the extent of Rs.16,12,878. Learned counsel, when questioned, admitted that the respondent firm neither filed any appeal nor cross-objections against the impugned judgment and decree.

3. We have heard the learned counsel and examined the available record. Firstly coming to the objection of the learned counsel for respondent No.1 that the appeal is barred by time. We have examined the record and find that the impugned judgment and decree was passed on 24-9-2001 and the appeal was filed on 21-12-2001, therefore, the same is within time. Objection of the learned counsel is repelled.

4. As noted above, both the parties jointly stated before the learned trial Court that the matter may be referred to Mumtaz Ahmed Khan, Superintendent Engineer, Mailsi District Multan as "Referee", the parties will be bound by his decision and the suit be decided as per the terms of decision of the "Referee". It appears appropriate to reproduce the statement made by the parties oil 30-9-2000, which reads as follows:--

Thereupon the learned trial Court, upon joint request of the parties, referred the matter to Mumtaz Ahmed Khan, observing that the parties would be bound by the verdict of the said Referee.

5. To our mind, most crucial question, involved in the present case, is as to whether the report of the Referee (Exh. C-1) is to be treated as "statement furnishing information" within the meaning of Article 33 of Qanun-e-Shahadat Order, 1984 or an "award" within the meaning of section 14 Arbitration Act. In this case, we find from Exh.C-1 that Mumtaz Ahmed Khan, who was appointed as "Referee", conducted the hearing of the case on 17-10-2000, 26-10-2000, 6-11-2000, 18-11-2000 and 1-1-2001, questionnaires were framed for the parties, their replies were received, the witnesses of the appellants and statement of the witnesses on behalf of the respondent were recorded and voluminous documents were produced before the Referee, including daily work register and measurement book. The said Referee, after examining the statement of the parties and scrutinizing the record made available before him, came to the conclusion that the "petitioner has no grievance concerning his claim accepted by the Department for the work executed by him on "J". Head Spur" while the claim of the contractor for payment against Mole Head Spur was dismissed. Article 33 of Qanun-e-Shahadat Order, 1984 envisages that statements made by persons to whom a party to the suit has specifically referred for information in reference to the matter in dispute are admissions. It flows thereform that if a matter is left to be decided upon the statement of third party, such statement is to be considered as admission by the parties. Now the question arises as to whether the report (Exh.C-1) can be considered statement of Mumtaz Ahmed Khan. As noted above, the Referee, after taking hectic efforts, recording evidence of the parties and examining the record, has decided the matter and he has not made any statement furnishing information.

6. Almost identical questions came up for' decision before the Honourable Supreme Court of Pakistan, in the case reported as Ghulam Farid Khan v. Muhammad Hanif Khan and others (1990 SCMR 763) .and it was, inter alia, held that despite the use of word "Referee" in the statement of the parties, their real intention was to appoint the Arbitrator for resolving the dispute and that his "Faisla" could hardly be treated as statement furnishing information. It appears appropriate to reproduce a portion of the said judgment, which is completely applicable to the facts and circumstances of the present case and reads as under:--

"Even though in the suit the appellant had laid claim to only some of the properties yet the parties by common consent asked Hafiz. Nasrullah Khan to settle all the disputes arising between them with regard to the entire estate left by the old Nawab. They were obviously not seeking any information from Hafiz Nasrullah Khan but a faisla..."

By his faisla, he not only divided the movable and immovable properties left by the Nawab among his heirs, he even awarded cash amounts to some of them by way of compensation on equitable considerations. He also directed the cancellation of certain mutations of inheritance which had already been effected in the Revenue Record. His "faisla" therefore- could hardly be treated as a statement furnishing information. Quiet clearly, he understood his role as that of an arbitrator and proceeded accordingly, even though in keeping with the statements made by the parties, he described himself as a referee. In the circumstances, the contention of the learned counsel for the appellant that the "faisla" filed by Hafiz Nasrullah Khan was an admission within the meaning of Article 33 Qanun-e-Shahadat cannot be accepted. It was quite clearly an award and the High Court was right in holding that it could not be made rule of the Court without giving an opportunity to the parties, if they so desired, to file objections thereto."

It has been held in the case reported Nazir Ahmed and others v. Muhammad Qasim and others (2004 SCMR 1292) that whenever the case is agreed upon to be decided on the statement of Referee, the matter might fall under Article 33 of Qanun-e-Shahadat Order, 1984, but a reference to a third person to decide the matter in dispute is a reference to arbitration. It appears appropriate to reproduce a portion of para. 10 of the said judgment which reads as follows:--

"....Consequently, we hold that in the instant ease, by mere use of word referee, the matter does not fall under Article 33 of Qanun-e-Shahadat. Muhammad Ashraf Cheema, Advocate was never referred to by the parties to make some statement but to render a complete decision regarding the entire matter in dispute so much so that a fee -was also fixed for the purpose and that such appointment squarely amounted to arbitration in status. It is further held that no decree could be passed on such decision, which for all intents and purposes was an award, unless the parties were given an opportunity to furnish their objections within the period and in the manner provided by Arbitration Act of 1940. "

It has further been held in the case of Nazir Ahmed and others that "under no stretch of imagination a person referred to under Article 33 of Qanun-e-Shahadat is a person asked to decide a hatter after hearing the parties and to furnish his complete judgment. Under such section the referee is a mere witness with scone information that which he gives statement whereas the appointment in hand was made for complete decision of the case after hearing the parties. It is a complete arbitration for all intents and purposes".

7. Placing the principles of law laid down in the afore-noted cases of Ghulam Farid and Nazir Ahmed and others (ibid) in juxta-position with the facts and circumstances of the present case, it leads to the irresistible conclusion that in the case in hand the parties did not agree that Mumtaz Ahmed Khan should make simplicitor statement furnishing information, but in tact, the entire matter was referred to Mumtaz Ahmed Khan for decision, though under the name of "Referee". It may be noted that Exh.C-1 itself states that it is an "award" by the Referee and not a "Faisla" or information. The said Referee conducted the proceedings, recorded the statement of the parties, summoned and examined the record and then rendered his exhaustive decision supprted by reasons and documents. The Referee annexed with the award statements of the parties and voluminous documents forming .part of the record. We have no doubt in our mind that the matter was decided as an "Arbitrator" and not a "Referee" and the suit was not decided on the mere statement of Mumtaz Ahmed Khan.

8. In the above perspective, we are clear in our mind that the report of Referee (Exh.C-1) was an award within the meaning and scope of section 14 of the Arbitration Act. It is settled law that no decree could be passed on the basis of award without giving an opportunity to the parties to file objections thereto. The learned trial .Court, while considering Exh.C-1"as a statement furnishing information" and passing the decree on the basis of the said decision, committed grave illegality inasmuch as the law declared by the Honourable Supreme Court of Pakistan in the case of Ghulam Farid Khan, supra, was completely by-passed.. To our mind, the learned trial Court after the receipt of Exh.C-1 should have treated the said report as award (as himself captioned by the referee as award) and not "a statement furnishing information and 'ought to have asked the parties to file objections to the award and then to have proceeded with the matter. The impugned judgment and decree thus suffer from grave illegality and thus we are persuaded to set it aside.

9. For the foregoing reasons, the appeal is allowed and the impugned, judgment and decree of the learned trial Court is set aside. Resultantly, respondents' suit shall be deemed to be pending before the learned trial Court, who shall invite objections from the parties against the award of the Arbitrator and then to decide the matter after hearing the parties and of course in accordance with law, preferably within a period of six months from today.

S.A.K./F-18/L Appeal accepted.