NAWAB DIN Versus GHULAM HAIDER

1. SHAFIUR RAHMAN, J.‑‑ This appeal as of right has been filed under Article 185(2)(d)(e) of the Constitution of the Islamic Republic of Pakistan, 1973. It is directed against the judgment of the Lahore High Court dated 15‑11‑1981 whereby in First Appeal against the order of the Civil Judge, 1st Class, refusing an application under section 14 of the Arbitration Act for making the award rule of the Court was reversed and the award was made the rule of the Court with costs.

2. The facts of the case are that on 23rd of January, 1968, the appellant Haji Nawab Din and the respondent Sh.Ghulam Raider entered into an Arbitration Agreement. The title of the agreement deed shows that it was an Arbitration Agreement with regard to disputes relating to property. Haji Nawab Din appointed two arbitrators Muhammad Hussain and Sh.Abdul Jabbar, while the respondent appointed Sh.Abdul Haq and Sahibzada Nazir Hussain as arbitrators. The arbitrators were authorised to appoint an. Umpire. Dr.Nasim Ahmed was in fact appointed the Umpire. The dispute before the arbitrators was specified by applications of which the copies were supplied to the other party. The Arbitrators finally ore 19‑2‑1'968 finalized the award in the absence of one of the appellants' arbitrators namely Sh.Abdul Haq, and in spite of a written application filed by the appellant expressing lack of faith in the arbitrators.

3. The respondent filed an application before the Administrative Civil Judge, Sahiwal under section 14 of the Arbitration Act for the production of the award and making it rule of the Court. The appellant was served and raised objections to it. The following issues were framed by the trial Court:‑

4. "(1) Whether the award was illegal, without jurisdiction and liable to be set aside?

(2) What is the effect of non‑‑registration of the award?

(3) Whether the civil Court has no jurisdiction to try the petition?

(4) Relief."

5. The parties led evidence and the learned trial Court after considering the evidence and hearing the arguments held the award to be illegal on the following grounds:‑

6. "(i) The agreement of arbitration is EX.P.1. It is most important. Its perusal reveals that it is quite vague and does not specify the dispute or the property to be referred to the arbitrators. A perusal of the file relating to the award reveals that the arbitrators asked the parties to file their claims. Respondent No.2 put in an application giving details of the dispute sought to be settled through arbitration about shop No. BII‑2R/42. The petitioner also submitted a separate application enumerating various items of dispute sought to be settled through arbitration. Shop No.BII‑2R/42 was also included in the items listed in the petition moved by the petitioner. Subsequently, the petitioner filed an application praying for the deletion of the above shop from the disputed items. This application was, however, dismissed by the Umpire. To sum up respondent No.2 only wanted the dispute about shop No.BII‑2R/42 to be settled through the arbitrators, whereas petitioner did not want this dispute to be referred to the arbitrators. The petitioner was interested in other matters listed in his petition filed before the arbitrators which matters, the respondent No.2, did not want to be referred to the arbitrators. It will thus be seen that this is a case of novel nature in the sense that the parties have differed with each other about the very dispute to be referred to the arbitrators.

(ii) A perusal of the proceedings conducted on 19‑2‑1968 which culminated in the passing of the award in dispute reveals that Abdul Haq, one of the arbitrators appointed by the respondent No.2 was not associated in the same. No reason whatsoever has been given for his absence. There is nothing on the file to suggest that he had knowledge of this date and that he intentionally failed to appear to discharge his duty. In these circumstances, this Court has got no other opinion except to agree with respondent No. 2 that the award was delivered without inviting him to participate in the proceedings.

(iii) I am of the opinion that respondent No.2 had no notice of the award when he moved the application before the arbitrators showing lack of confidence in them. All subsequent proceedings relating to the delivery and preparation of the award were held after the parties were sent to bring the stamp papers.

(iv) In view of my above discussion, I am of the clear opinion that the award is mala fide. That in spite of the best efforts, this Court has not been able to find out as to what exact dispute was jointly referred by the parties to the arbitrators. It is most material to note that Abdul Haq, one of the arbitrators appointed by respondent No.2 was not associated in the proceedings which culminated .in the passing of the award. There are no explanations on the file about his absence. This Court has no alternative except to opine that he was intentionally excluded from the proceedings by the other arbitrators.

7. In view of the decision in Kh. Muhammad Yousuf v. Kh.Abdur Rashid and others P L D 1967 Karachi 508, the trial Court held that the non‑registration of the award was not fatal. The question with regard to the jurisdiction was not pressed. On these findings the trial Court dismissed with costs the application under section 14 of the Arbitration Act.

8. 'A First Appeal was filed against the order in the High Court. The learned Judge in the High Court reversed the finding of the trial Court by holding as under:‑---

9. "(i) The arbitration agreement in the present case cannot be considered as uncertain and vague.

(ii) The appellants, the arbitrators and the umpire who were present on.19‑2‑1968 and had taken part in the arbitration proceedings, cannot be blamed if Abdul Haq had failed to appear on 19‑2‑1968. Neither the proceedings nor the award made by the remaining arbitrators and the umpire are affected by the absence of Abdul Haq.

(iii) The number of arbitrators appointed by the parties was more than three and as such, the award of the majority was to prevail in view of the provisions of subsection (3) of section 10 of the Arbitration Act. The omission of Abdul Haq to sign the award is therefore, of no legal consequence as it was signed by a majority of the arbitrators as also by the umpire."

10. It was held that the award Exh.P.9 filed by the Umpire, Dr.Nasim Ahmad, was valid and did not suffer from any lacuna. It was made rule of the Court and a decree was passed.

11. Ch. Khalilur Rahman, Advocate, the learned counsel for the appellant has contended that the agreement with regard to arbitration was vague and indefinite as neither the dispute nor the disputed property was identified and described and no extrinsic evidence could be allowed to make up that defect. In support of his contention he has relied on section 29 of the Contract Act, Section 93 of the Evidence Act and the decisions given in Maung Kyin and another v. Ma Shwe Law and others A I R 1917 Privy Council 207, Chetandas Daga and others v. Radhakisson Ramchandra and others A I R 1927 Bombay 553, Rambaksh Lachmandas v. Bombay Cotton Company AIR 1931 Bombay 81, Mst.Dhanpatti v. Badri Singh A I R 1935 Allahabad 729, Jai Gobind Singh and another v. Bagal Lai Singh A I 'R (37) 1950 Patna 445, Deep Narain Singh and others v. Mst.Dhaneshwari and others A I R 1960 Patna 201.

12. The second ground taken up by the learned counsel for challenging the award is, non‑participation or absence of one of the arbitrators namely Sh.Abdul Haq, when the award was finalized i.e. on 19‑2‑1968. According to the learned counsel this act of the Arbitrator amounted to misconduct and vitiated the award finalized by the others. For this proposition the learned counsel has relied on Abu Hamid Zahir Ala v. Golam Sarwar A I R 1918 Calcutta 865, Mamidi Appayya v. Yedan Venkataswami and others A I R 1919 ;Madras 877, R.B.Pandit Sankata Prasad v. Jagannath and others A I R 1922 Oudh 276, Faealally Jivaji Raja v. Khimji Poonji & Co. A I R 1934 Bombay 476, Nand Ram and another v. Fakir Chand I L R 7 Allahabad 523, and Chhaganlal Asaram v. Jeevanlal Gangabisan and others AIR 1954 Nagpur 263.

13. The third ground taken up by the learned counsel for the appellant is that ‑ award was compulsorily register able under the Registration Act and not being so registered, it was inadmissible in evidence and could not be made the rule of the Court. In support of this proposition the learned counsel has relied on James R.R. Shinner v. Robert Hercules Skinner and others A I R 1929 Privy Council 269, Jitendra Nath De and another v. Nagendra Nath De A I R 1934 Calcutta 815, Badri Chaudhuri v. Mst.Chamoa Chaudhrain and others AIR 1937 Patna 183, Mohammad Azizullah Khan Mohammad Salamullah Khan v. Mohammad Noorullah Khan and others A I R 1939 Nagpur 233, U.Kelatha v. U.Pannuwa A I R 1940 Rangoon 228, Nani Bala Saha v. Ram Gopal Saha and another, minors, represented by pleader guardian Babu Kumar Gurukrama Mozumdar and another A I R 1945 Calcutta 19.

14. On merits the learned counsel for the appellant has contended that the site of one of the shops belonged admittedly to the Government and only the superstructure could be claimed by the parties being a subject‑matter of the dispute. In resolving the dispute and in giving the award the arbitrators have shown no awareness of this fact and on that count the award is rendered intrinsically defective and not capable of being made rule of the Court or acted upon.

15. Mr. Karam Elahi Bhatti, Advocate, the learned counsel for the respondent on the other hand has contended that the agreement to refer the dispute to the arbitration satisfies all the requirements of a valid agreement and as the dispute and the disputed property both were in fact before the arbitrators appointed by the parties and they had notice of it from the very beginning, there could be no question of arbitration agreement being vague or indefinite or the dispute being not specified. As regards the want of registration, it has been contended that there was no right or title in the property which was created by this document and for that reason it did not require registration at all. Finally it is contended that the arbitrator had full notice of the date i.e. 19‑2‑1968 when the award was to be finalized and so had the appellant, and if the arbitrator did not attend the proceedings in spite of having such notice, the award could not get vitiated. As regards the merits and contents of the award it has been contended by the learned counsel for the respondent that the arbitrators were fully aware of the extent of legal interest and title possessed by the parties in the property and there was no question of any misconception or exceeding the jurisdiction possessed by them.

16. An examination of the agreement to refer the dispute t Arbitration reveals that it is a short document, bears a title which is (Salis nama mutnaza babet jaidad) . It is clear from this agreement that the dispute relating to property alone was referred to Arbitration.' According to the respondent dispute extended to two shops and business therein. According to the appellant, the dispute was confined to only one shop and the business therein. The dispute and the property mentioned in EXh.P.1 not being qualified by any further description have to be taken in the general and extensive form an if any one of the parties sought to raise a dispute with regard to the property, the other could not foreclose it as not under the agreement. The appellant could restrict this agreement to the so he has in mind only if it had been so limited by the agreement itself. The agreement by itself is not unworkable. The parties ha indicated their dispute and the property to which it related. They were at the very first hearing informed of it. The Agreement was plainly not hit by any of the provisions referred to by the learned counsel and was valid in all respects.

17. The 'question of registration of the award was a controversial matter in the sub‑continent and there were conflicting views on the subject. For example, the Full Bench case Seonarain Lal, v. Prabhu Chand A I R 1958 Patna 252 holding that an award did not create any title or interest in immovable property hence it did not require registration. This view was accepted in Abdul Karim v. Mirza Bashir Ahmad P L D 1967 Lahore 365 but then this view was reversed in Satish Kumar and others v. Surinder Kumar and others A I R 1970 Supreme Court 833, and now is no longer a good law in India. In our country an amendment was made in the Registration Act by Ordinance No.45 of 1962 which has been fully taken note of and considered in the Pakistan Employees Cooperative Housing . Society Ltd. Karachi v. Mst.Anwar Sultana and others P L D 1969 Karachi 474 and what has been held is as follows:‑

18. "As in the amended section 49 this clause does not find any place, it is clear that the prohibition contained therein is no, longer operative, with the necessary consequence that the: document Exh.41 would become admissible in evidence although it is not registered as required by section 107 of the Transfer) of Property Act. In view of the law as obtaining at present I, this document would not operate to create any right, but it would certainly be available to prove the nature of the plaintiff's) possession. " .

19. The result of the amendment is that the award is receivable in evidence but by itself it will not "operate to create, declare assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent to or in the) immovable property.

20. The objection with regard to the non‑participation or absence of one of the arbitrators on 19‑2‑1968 when the award was finalized appears to be formidable. The view taken in the sub‑continent has consistent been that such an award is vitiated and the vitiation cant be ignored or not given effect to in proceedings only where a party's conduct amounts to waiver or estoppel. So far as the absence of Sh.Abdul Haq is concerned, there is nothing in the conduct of the appellant which could saddle him with waiver or estoppel. According to the respondent's own case Sh.Abdul Haq was present on 16‑2‑1968 when to his knowledge the proceedings were adjourned for finalizing the award on 19‑2‑1968. At the stage when the award was being finalized, Sh.Abdul Haq was not present and ha not signed the award nor participated in the deliberations.

21. The earliest case in point of time on the subject is that of Nand Ram and another v. Fakir Chand of the year 1885 1 L R 7 Allahabad 523. Justice Mahmood in that case held that "the presence of all the arbitrators at all meetings, and above all at the last meeting, when the final act of arbitration is done, is essential to the validity of the award." The same argument as is advanced before us and as prevailed with the High Court was advanced and rejected in the following words:‑

22. "What the parties to a reference to arbitration intended is that the persons to whom the reference is made should meet and discuss together all the matters referred, and that the award should be the result of their united deliberations. This conference and deliberation in the presence of all the arbitrators `is the very essence of the arbitration, and the sole reason why the award is made binding. In a case recently decided by this Court ‑‑ Rohilkhand and Kumaon Bank v. Row I L R 6 All. 468, I took occasion to express my views upon a cognate subject, holding that no judgment can be given in a Court consisting of several Judges, unless those Judges have conferred together, heard evidence and arguments together, and formed their opinions upon the entire arguments and evidence so heard. I held that the only proper decree was that of the majority after such conference. Here the same principle should be 'applied. Whatever may have been the arbitrator's motive for withdrawing, his non‑participation in the deliberations of the others makes their award ultra vires and of no effect." '

23. In the case Thammiraju and others v. Bapiraju I L R 12 Madras 113, which came up before the High Court in 1888, Russell on the Power and Duty of Arbitrators, was quoted in the following words and the judgment in Nand Ram and another v. Fakir Chand was followed:‑ "as joint arbitrators must all act, so they must all act together. They must each be present at every meeting, and the witnesses and the parties must be examined in the presence of them all: for the parties are entitled to have recourse to the arguments, experience, and judgment of each arbitrator at every stage of the proceedings brought to bear on the minds of his fellow Judges, so that by conference they shall mutually assist each other in arriving together at a just decision."

24. There are more recent cases from the Indian jurisdiction maintaining the same position and sustaining the certainty of the law on this point up‑to‑date. For example ' in the case of Dharmu Saboto and another v. Krushna Saboto and others A I R 1956 Orissa 24, the following observations appropriate to this case were made:‑

25. "From this evidence of this arbitrator it is clear that the award was not the result of the joint deliberation of all the arbitrators. When a matter is referred to the arbitration of more than one arbitrator, all the arbitrators must act together in every stage in order that the parties to the reference may have the benefit of the considered judgment of every one of the arbitrators in the matter of the reference.

26. Under the terms of the Muchalika Ex.1 the parties to the reference no doubt agreed to be bound by the decision of the majority of the arbitrators. From this it does not follow that the parties agreed that the deliberation of the arbitrators also might be held at their sweet will by only a majority of them consisting of any three persons who found it convenient to meet together on any date.

27. It contemplates a deliberation jointly of all the five arbitrators though after this joint deliberation and joint part taking in all the proceedings by all the arbitrators there might be a difference of opinion when a majority decision would be final, and this is the effect of the clause in the reference and not that any three can take part in the proceedings of the arbitration. "

28. Russell on Arbitration was quoted in support of this proposition.

29. In the judgment of Chhaganlal Asaram v. Jeevanlal Gangabisan and others A I R 1954 Nagpur 263, the following law was quoted to support this conclusion, and summarised the law as follows:‑

30. "In re Beck and Jackson', (1857) 1 CB (NS) 695(G), Cresswell, J. observed

31. 'I find the rule thus stated in Russell on arbitration, p.209 ‑‑ speaking of the duty of joint arbitrators, ‑‑As they must all act, so must they all act together. They must each be resent at every meeting; and the witnesses and the parties must be examined in the presence of them all; for, the parties are entitled to have recourse to the arguments, experience, and judgment of each arbitrator at every stage of the proceedings brought to bear on the minds of his fellow‑Judges, so that by conference they shall mutually assist each other in arriving together at a just decision: ‑‑ 'Plews v. Middleton', (1844) 6 QB 845 (H); ‑‑ 'Little v. Newton', (1841) 2 Man & G 351 (I); ‑‑ 'Stalworth v. Inns', (1844) 13 M&W 466 (J).'

32. This principle is also stated recently in 'British Metal Corporation v. Ludlow', 1938‑1 All ER 135 (K) where the two arbitrators appointed by the parties heard the parties and later on appointed a third arbitrator. By the terms of the arbitration agreement, if a third one was appointed the three constituted the Arbitration Tribunal. There was no hearing after the appointment of the third arbitrator. It was held that the award , by the three arbitrators without hearing parties was bad. This view has been taken in this country in 'Nand Ram v. Fakir Chand', 7 All 523 (L); 'Thammiraju v. Bapiraju', 12 Mad 113 (M); 'Ma Sin v. Ma Pu', A I R 1930 Rang 136 (N) and AIR 1934 Bom. 476 (D). This general rule was accepted even in A I * R 1943 Bom. 221 (F) which was cited by the learned counsel for the appellant. It was added that if some formal decision was taken in the absence of one arbitrator the irregularity may be waived if the circumstances of the case allow it."

33. In view .of this fatal defect in the proceedings we would accept this appeal, set aside the judgment and decree of the High Court, restore that of the trial Court leaving the parties throughout to bear their own costs as the defect has arisen on account of the misconduct of one of the arbitrators for, which the parties are not responsible.

34. M.B.A./N‑84/S Appeal accepted.