By this appeal, the appellant has challenged the order dated 5

IN THE HIGH COURT OF SINDH AT KARACHI

High Court Appeal No. 108 of 2009

Present:

Mr. Justice Gulzar Ahmed &

Mr. Justice Irfan Saadat Khan.

J U D G M E N T

Date of hearing : 02^nd December 2009.

Appellant through : Mr.Syed Amanullah Agha, Advocate.

Respondent through : Mr.Mushtaque A. Memon, Advocate.

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GULZAR AHMED, J.:- By this appeal, the appellant has challenged the order dated 05.3.2009, passed by learned Single Judge in Suit No. 542 of 2008, by which the award of the Umpire was made rule of the Court.

It seems that contract for construction of residential houses was made between the appellant and members of Association of Builders and Developers (Abad companies). Dispute arose between the parties with regard to escalation in the cost of construction. An agreement dated 26.6.1996 was made between the appellant and the Abad companies including the present respondent whereby the dispute was settled and the appellant agreed to compensate the Abad companies by making payment in the shape of supply of iron/steel products. It seems that despite such agreement, the Abad companies did not complete the project and ultimately the appellant filed Suit No. 252 of 1999 against the Abad companies including the respondent as defendant No. 22. As there was arbitration clause in the agreement dated 26.6.1996, the respondent filed application under Section 34 of the Arbitration Act, 1940 (the Act) in this suit. Respondent also filed an application under Section 20 of the Act being Suit No. 1184 of 1999 against appellant for filing of agreement and reference of dispute to arbitration. Through consolidated judgment application under Section 34 of the Act was allowed and Suit No. 252 of 1999 was stayed against respondent while application under Section 20 of the Act being Suit No. 1184 of 1999 was also allowed and the agreement was ordered to be filed and matter referred to Arbitrators to be appointed by the parties.

M/s. Mazhar-ul-Haq and Samiuddin Sami, Advocates were appointed Arbitrators by the parties, who appointed Mr. Justice (Retired) Haidar Ali Pirzada as Umpire. There was disagreement between the Arbitrators and ultimately the matter came before the Umpire, who seems to have passed the award in favour of the respondent. The award was filed by the Umpire in the Court which was registered as Suit No. 542 of 2008, on which the appellant filed objections under Sections 15 and 30 of the Arbitration Act. The learned Single Judge, after hearing the counsel for the parties, did not find the objections, raised by the appellant, to be tenable and through the impugned order made the award of the Umpire as rule of the Court.

Mr. Syed Amanullah Agha, learned counsel for the appellant has contended that not all the parties to Suit No. 252 of 1999 have agreed for reference of dispute to the arbitration and thus reference of dispute between appellant and respondent alone to arbitration was contrary to the provision of Section 21 of the Act and that all proceedings upto the impugned order are based upon illegality and void and in support of his submissions has relied upon the case of ABDUL MATEEN AND 3 OTHERS V/S YUSUF BILAL AND 4 ORHERS (PLD 1985 Karachi 422), KH.GULZAR AHMED & 6 OTHERS V/S HAJI ATA MUHAMMAD & 15 OTHERS (PLD 1971 Karachi 570) and an unreported judgment dated 16.2.2004 passed in Suit No. 757 of 2003 by Single Judge of this Court.

On the other hand, Mr. Mushtaque A. Memon, learned counsel for respondent has contended that appellant’s main objection is against the judgment by which respondent’s application under Sections 20 and 34 of the Act was allowed and that the appellant did not challenge the said judgment rather accepted the same and fully participated in the arbitration and even in the objections, filed to the award, nothing was said by the appellant with regard to Section 21 of the Act. He thus contended that not only the appellant could not raise objection to the judgment by which the reference was made to the Arbitrators but it is estopped from questioning the arbitration proceedings and relied upon the cases of CHIEF ENGINEER, BUILDING DEPARTMENT, PROVINCIAL P. W. D. GOVERNMENT OF SIND V/S MESSRS PAK NATIONAL CONSTUCTION COMPANY (PLD 1981 Karachi 553) and F.J. RAMBARTS (PAKISTAN) LTD. V/S PAKISTAN STEEL MILLS CORPORATION (1987 CLC 2198). He also contended that Section 21 of the Arbitration Act does not apply where there is an arbitration agreement between the parties.

We have considered the submissions made by learned counsel and have gone through the record.

It appears from the record of the appeal that it is for the first time in this appeal the appellant has raised objection regarding the applicability of Section 21 of the Act. As the objection is based upon law, we have proceeded to consider the same. Section 21 of the Act is as follows:

21. Parties to suit may apply for order of reference. Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may at any time before judgment is pronounced apply in writing to the Court for an order of reference.

Reading of this section itself shows that reference to arbitration is to be made by the Court when in the suit all parties interested agree in writing that any matter in difference between them in the suit be referred to arbitration. The appellant had filed Suit No. 252 of 1999 against as many as 25 defendants. Defendant No. 22 is respondent while defendant No. 23 is a Director of the respondent. The remaining defendants are other parties with which the respondent has no connection. The plaint of the suit has not been filed by the appellant. However, from the judgment passed in the said suit by which the respondent’s application under Section 34 of the Act and respondent’s suit under Section 20 of the Act was allowed appears to show that the appellant has filed a suit against all the defendants on distinct and separable cause of action and sought relief against each of the defendants separately. The appellant has entered into contract with each of the Abad companies separately with separate nature and quantum of work and payments were to be made to the appellant to each of the Abad companies separately. The agreement dated 26.6.1996 was signed by the appellant on the one hand and each of the Abad companies on the other. On the basis of this agreement the appellant has written letter dated 26.6.1996 to the respondent under which the respondent was assigned the work of construction of 46 houses of different categories, in respect of which respondent was to be paid an amount of Rs. 5,685,000/-. The other Abad companies were given work of construction of houses different from that of respondent and different amount was to be paid to them. These documents show that there was a separate agreement between the appellant and respondent for construction of houses as noted above and right and obligations of the appellant and respondent were based upon such agreement which was distinct and separate from those of other defendants in the suit. The case in hand was such to which Section 21 of the Act apparently will have no application rather Section 24 of the Act which is in the following terms will have application:

24. Reference to arbitration by some of the parties. Where some only of the parties to a suit apply to have the matters in difference between them referred to arbitration in accordance with, and in the manner provided by, section 21, the Court may, if it thinks fit, so refer such matters to arbitration provided that the same can be separated from the rest of the subject-matter of the suit in the manner provided in that section, but the suit shall continue so far as it relates to the parties who have not joined in the said application and to matters not contained in the said reference as if no such application had been made, and an award made in pursuance of such a reference shall be binding only on the parties who have joined in the application.

Section 24 seems to be an exception to Section 21 of the Act. For invoking this section following conditions needs to be satisfied:

i. the matter desired to be referred to arbitration can be separated from rest of subject matter of the suit;

ii. the suit continues so far as it relates to the parties who have not joined in the said application and the matter not contained in the said reference in the same manner as if no such application has been made; and

iii. the award made in pursuance of such a reference shall be binding only on the parties who have joined in the application.

The counsel for the appellant has made no submissions that matter which was desired to be referred to arbitration could not have been separated from the rest of subject matter of the suit or that on account of reference made on the application of respondent the appellant’s suit could not be continued against other parties who have not joined said application and the matter could not be continued in the said reference in the same manner as if no such application has been made. Nor the counsel for appellant has made any submission that the award made in pursuance of such reference binds the parties other than those who have joined the application. The conditions prescribed for reference under Section 24 of the Act apparently seem to be applicable to the facts and circumstances of the case and they also stand satisfied from the narration of facts as noted above which facts were not disputed by the counsel for the appellant. Therefore, we find no merit in the submissions of counsel for the appellant. We, therefore, dismiss this appeal in limine. Listed application is also disposed off.

J U D G E

Aamir/PS