MESSRS OIL & GAS DEVELOPMENT CORPORATION vs MESSRS KARACHI
This matter concerns a dispute arising from a construction contract between Messrs Oil & Gas Development Corporation and Messrs Karachi Builders, which contained an arbitration clause designating the 'Production Manager' of the Corporation as the arbitrator. Following a contractual dispute, the contractor sought the appointment of an independent arbitrator, but the High Court directed the Production Manager to conduct the proceedings. Subsequently, the Deputy Chief Engineer, who was also acting as the Production Manager, conducted the arbitration and issued an award. The contractor challenged the award, arguing that the Deputy Chief Engineer lacked the authority to act as the designated arbitrator. The High Court set aside the award, holding that the parties intended for the specific office of the Production Manager to arbitrate, not an officer merely performing those duties in addition to their own. The Supreme Court dismissed the Corporation's petition for leave to appeal, affirming the High Court's finding that the arbitration clause required the designated officer to act, and no other official could substitute for that specific role.
- Can an officer performing the duties of a designated arbitrator in an additional capacity validly act as the arbitrator under an arbitration agreement?
- Does an arbitration award become invalid if the person issuing it does not hold the specific designation required by the arbitration clause?
- Is a court justified in setting aside an arbitration award where the arbitrator lacked the requisite authority defined by the contract?
- Section 8, Arbitration Act 1940
- Section 14, Arbitration Act 1940
- Section 30, Arbitration Act 1940
ORDER
QAISAR KHAN, J.-On the 13th of February 1973 Messrs Karachi Builders entered into a contract with Messrs Oil & Gas Development Corporation for carrying out certain work. One of the conditions of the contract was that any dispute between the parties arising out of the contract was to be referred to the arbitration of the Chief Engineer of the Corporation. Though the standard agreement form of the Corporation provided for arbitration by the Chief Engineer yet by special condition entered in the tender form the term "Chief Engineer" was to be read as the term "Production Manager". Difference arose between the patties and the Corporation after cancelling the contract carried out the work itself.
The contractor claimed that he was entitled to over two lacs of rupees from the Corporation and it therefore on the 3rd of April 1974 served a notice on the Corporation under section 8 of the Arbitration Act alleging that a dispute had arisen and that since the post of the Chief Engineer was lying vacant the Corporation should agree to the reference of the dispute to any of the following Officers for arbitration :-
1. Mr. Said Mahmood, retired Superintending Engineer, Pak. P. W. D.
2. Mr. Z. H. Khan, retired Superintending Engineer of Provincial P. W. D.
3. Mr. Abdus Samad, Architecture & Consulting Engineer.
The Corporation by its letter dated the 10th of April 1974 replied that the Superintending Engineer was the Chief of the Engineering Department performing the duties of the Chief Engineer and it was therefore the said Superintending Engineer who could only be appointed as Arbitrator. The contractor thereupon applied to the High Court under section 8 of the Arbitration Act for the appointment of an Arbitrator for settling the dispute. The High Court however by its order dated the 21st of April 1975 came to the conclusion that the Production Manager was the person to arbitrate according to the terms of the contract and not the Chief Engineer. It there--fore dismissed the petition and directed that the Production Manager of the Corporation should proceed with the arbitration.
Both the parties were satisfied with this order because it was the contactor who addressed a letter on the 19th of June 1975 to the Production Manager for starting the arbitration proceeding. The Deputy Chief Engineer Khawaja Masihuddin however who was also working as Production Manager started the arbitration proceeding. He issued notices to the parties on the 28th of August 1975 for their appearance before him on the 15th of September 1975. The contractor thereupon by his letter dated the 12th of September 1975 informed the arbitrator that since he was not the Production Manager he could not therefore arbitrate. The Arbitrator thereafter served a few more notices on the contractor to appear before him but the contractor did not appear and the Arbitrator therefore proceeded ex parse against him. The Arbitrator then gave his Award on the 11th of November 1975 according to which he held the contractor entitled to Rs. 41,192 from the Corporation.
On the 20th of January 1976 the-Award was filed by the Arbitrator in the High Court under section 14 of the Arbitration Act. The Court thereupon issued notices to the parties and both the parties submitted their objections. The contractor's objection was that the Award had been given by the Deputy Chief Engineer and since he could not arbitrate as the Arbitration had to done by the Production Manager, the Award was therefore invalid. The Corporation on the other hand contended that since the Deputy Chief Engineer was incharge of the Engineering Section and was performing the duties of Production Manager he was therefore competent to arbitrate. The learned Single Judge however by his order dated the 14th of March 1977 held that the intention of the parties was to appoint the Production Manager as Arbitrator and not any other officer performing the functions of the Production Manager in addition to his duties. He therefore set aside the Award under section 30 of the Arbitration Act on the ground that Khawaja Masihuddin was not competent to arbitrate.
The Corporation filed an inter-Court appeal in the High Court against the aforesaid judgment of the learned Single Judge but a Division Bench of the High Court upheld the findings of the learned Single Judge and dismissed the appeal on the 13th of December 1977. The Corporation has thus filed this petition for special leave to appeal against the aforesaid order of the Division Bench.
After hearing Mr. G. M. Paryani learned counsel for the petitioner and going through the various orders we have come to the conclusion that there is no merit in this petition. The High Court was perfectly justified in holding that the arbitration had to be done by the Production Manager of the Corporation and hot by any other officer performing the said duties in addition to his own. No infirmity or illegality could be pointed out in the orders of the learned Judges of the High Court and we therefore dismiss, the petition. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.