Province of Khyber Pakhtunkhwa through the Secretary to Government of Khyber Pakhtunkhwa, Irregation Department Vs M/S Technicon Engineers & EPC Contractor Group

JUDGMENT SHEET

PESHAWAR HIGH COURT, PESHAWAR

JUDICIAL DEPARTMENT

C.R No.222-P/2021.

Province of Khyber Pakhtunkhwa through the Secretary to Government of Khyber Pakhtunkhwa, Irrigation Department, Peshawar & 02 others Vs. M/S Technicon Engineers & EPC Contractor Group & 03 others.

Date of hearing 04.05.2026.

Mr. Jehanzeb Khan Muhammadzai, Advocate, and Mr. Taimur Haider, AAG, for the petitioners.

Mr. Shumail Ahmad Butt, Advocate, alongwith Muhammad Azam Zafar, for the respondents.

JUDGMENT

MUHAMMAD NAEEM ANWAR, J: - Through this consolidated order, I propose to decide the instant Civil Revision along with connected Civil Revision No.186-P/2023 titled “Province of Khyber Pakhtunkhwa through Secretary to Government of Khyber Pakhtunkhwa, Irrigation Department, Peshawar and others versus M/S Technicon Engineers & EPC Contractor Group and others”, as both the petitions arise out of the same controversy, involve common questions of law and facts, and emanate from the arbitration clause incorporated in the agreement executed between the parties with respect to the restoration work of “Munda Head Works for feeding of Lower Swat Canal, Doaba Canal and Tangi Lift Irrigation Scheme, District Charsadda”, executed on 28.12.2010.

2.Through instant petition, the order dated 12.02.2021 passed by learned Civil Judge-II, Peshawar, has been questioned, whereby Mr. Zahid Idrees Mufti, Advocate, a retired officer of the Communication & Works Department, Abbottabad, was appointed as sole Arbitrator for adjudication and settlement of disputes inter se the parties. Whereas vide through the connected petition, the petitioners have assailed the subsequent order whereby the learned trial Court, while exercising powers under Section 28 of the Arbitration Act, 1940, allowed the application of the respondents for extension of time to enable the Arbitrator to continue the proceedings and submit the

award, whereas the application of the petitioners seeking stay of the arbitration proceedings was declined. The said order dated 14.10.2022 was assailed before the learned District Judge, Peshawar, which revision was entrusted to learned Additional District Judge-XVII, Peshawar, and ultimately dismissed vide order dated 04.02.2023 on the ground of non-maintainability. Both the aforesaid orders have, therefore, been brought under challenge through these connected civil revisions.

3.The primary contention advanced by the petitioners against the appointment of the learned Arbitrator was that the impugned order had been passed in a cursory, hasty and slipshod manner without affording adequate opportunity of hearing to the petitioners and without adherence to the mandatory procedural requirements contemplated under the Arbitration Act, 1940. It was contended that the order suffered from jurisdictional defect, was devoid of lawful justification, unsupported by cogent reasons and thus liable to be declared arbitrary and unsustainable in the eye of law. It was further argued that respondents Nos.1 to 4/plaintiffs had already received the final payment certificate upon completion of the contract and, therefore, the contractual obligations stood fully discharged and extinguished. According to the petitioners, once the contract had attained finality and stood executed to its logical conclusion, the arbitration clause embedded therein also ceased to have operative effect. The learned counsel further maintained that after completion of the work and submission/finalization of the bills, no surviving dispute remained capable of being referred to arbitration and, consequently, the question of appointment of an Arbitrator did not legally arise.

4.The respondents contested the petitions on legal as well as factual premises by asserting that the arbitration proceedings had already commenced pursuant to the order of appointment and the petitioners had actively participated therein without protest; therefore, by their own conduct and acquiescence, they were estopped from questioning the competence or appointment of the Arbitrator at a belated stage. It was further contended that the petitions lacked substantive grounds warranting interference in revisional jurisdiction. However, during the pendency of these petitions, on 09.02.2026,

learned counsel for the petitioners, namely Mr. Jehanzeb Khan Muhammadzai, Advocate, assisted by learned Assistant Advocate General, made a statement at the bar that the petitioners would not press the petition provided that an independent and mutually acceptable Arbitrator was appointed in substitution of the previously appointed Arbitrator. Learned counsel for the respondents expressed no objection to such course. Consequently, both sides were directed to furnish proposed names for appointment of a sole Arbitrator. Although various names were subsequently suggested by the respective parties, no consensus or concurrence could ultimately be achieved regarding the appointment of any particular individual as sole Arbitrator.

5.The controversy in hand arises out of an application instituted by the respondents under Section 20 of the Arbitration Act, 1940. The said provision empowers the Court to enforce an arbitration agreement by directing filing of the agreement and making an order of reference where the agreed mechanism for constitution of the arbitral forum fails or becomes unworkable. For invoking jurisdiction under Section 20 of the Arbitration Act, the following essential conditions are required to be satisfied: -

 That there exists a valid and subsisting arbitration agreement between the parties;

 That prior to institution of the application under Section 20, no proceedings contemplated under Sections 3 to 19 of the Arbitration Act, 1940 have been initiated;

 That disputes or differences have actually arisen between the parties in relation to matters covered by the arbitration agreement;

 That the application under Section 20 is within limitation; and  That the Court approached possesses territorial and pecuniary jurisdiction in respect of the subject matter of the agreement and the disputes arising therefrom.

6.Under the scheme of the Arbitration Act, 1940, where parties have entered into an arbitration agreement but subsequently fail to arrive at a consensus regarding the appointment of an arbitrator, the Court is vested with ample jurisdiction to intervene and appoint an arbitrator so as to preserve the efficacy of the arbitration agreement and prevent frustration of the agreed dispute resolution mechanism.

Section 20 of the Arbitration Act, 1940, confers jurisdiction upon the Court to direct filing of the arbitration agreement and, thereafter, to make an order of reference to arbitration. The provision is attracted where one party seeks enforcement of the arbitration clause and the opposite party either refuses to cooperate or the agreed procedure for appointment becomes unworkable. In such circumstances, the Court does not create a new contract between the parties; rather, it effectuates and enforces the existing arbitration agreement. The settled principle of law is that arbitration clauses must receive a liberal and purposeful interpretation. Once the existence of a valid arbitration agreement is admitted or proved, the Courts ordinarily lean in favour of giving effect to the intention of the parties to settle disputes through arbitration instead of allowing the mechanism to fail on account of disagreement over the person of arbitrator.

7.It is equally well settled that where parties fail to nominate an arbitrator by mutual consent, or where one party deliberately obstructs the constitution of the arbitral forum, the Court may itself appoint an independent and impartial arbitrator in exercise of powers under Section 20 read with the relevant provisions of the Arbitration Act. Such power is exercised to avoid multiplicity of proceedings and to ensure that a recalcitrant party does not defeat the arbitration agreement by inaction or non-cooperation. It has consistently been held that refusal or inability of parties to mutually appoint an arbitrator furnishes sufficient ground for judicial intervention. The Court, while appointing an arbitrator, is principally guided by:

 the existence of a valid arbitration agreement;  the emergence of a dispute covered by the arbitration clause;

 failure of the agreed procedure for appointment; and  the necessity to preserve the contractual intention of the parties.

In this regard, it has been observed that once consensus between the parties becomes impossible, the Court assumes supervisory jurisdiction to facilitate constitution of the arbitral tribunal. The appointment by the Court is not an encroachment

upon party autonomy; rather, it is a mechanism to rescue the arbitration agreement from collapse. Reference may be made to the case of Allied Engineering Consultants (Pvt.) Ltd., Lahore vs. Messrs Sui Gas Transmission Company Ltd. (1989 CLC 1143), wherein it was recognized that the Court possesses authority under Section 20 of the Arbitration Act to appoint an arbitrator where parties fail to agree upon one. Likewise, in the case of Hassan Bakhsh through Legal Heirs vs. Sultan and 2 others (2016 MLD 1157), the Court reiterated that where the arbitration agreement survives but the parties are unable to constitute the arbitral forum, judicial appointment of an arbitrator becomes legally justified and necessary for advancement of justice. Similar principles were reaffirmed in the case of Messrs TAIGA APPAREL (PVT.) LTD. Vs. Messrs International Fabrication Company (2025 CLD 954), emphasizing that the object of arbitration law is to facilitate adjudication through agreed alternate dispute resolution rather than permit technical deadlock to defeat substantive rights. Therefore, the legal position emerging from the statutory framework and judicial pronouncements is that failure of the parties to form consensus regarding appointment of an arbitrator does not invalidate the arbitration agreement; instead, such failure activates the Court’s jurisdiction to appoint a neutral arbitrator and refer the disputes for adjudication in accordance with law.

8.Upon careful examination of the entire record, coupled with thoughtful consideration of the submissions advanced by the learned counsel for the parties, I am satisfied that the arbitration agreement admittedly exists between the parties; disputes relatable to the said agreement have undeniably arisen; and despite opportunity afforded by this Court, the parties have failed to evolve any consensus regarding appointment of a mutually agreed Arbitrator. In these circumstances, judicial intervention becomes necessary to facilitate constitution of the arbitral forum and to advance the object of expeditious settlement of disputes through arbitration.

9.Consequently, in exercise of powers conferred upon this Court under Sections 20 and 21 of the Arbitration Act, 1940, Mr.

Mohammad Ayub, retired Chief Engineer, Communication & Works Department, presently residing at Hayatabad, Peshawar, is hereby appointed as sole Arbitrator to adjudicate upon, determine and decide all disputes and differences arising between the parties out of the contract/agreement in question pertaining to the restoration work of “Munda Head Works for feeding of Lower Swat Canal, Doaba Canal and Tangi Lift Irrigation Scheme, District Charsadda”.

 The office of this Court is directed, in consonance with the mandate of Section 21 of the Arbitration Act, 1940, to forthwith transmit to the learned Arbitrator:

 a certified copy of this order of reference;

 copy of the application instituted under Section 20 of the Arbitration Act, 1940 consisting of 29 leaves, annexed with the instant petition and available at page No.12 of the paper-book; and  such other relevant documents forming part of the judicial record as may be necessary for effective commencement of the arbitral proceedings.

 The parties shall appear before the learned Arbitrator on a date and time to be fixed by him upon issuance of notice and shall furnish before the learned Arbitrator complete copies of the contract/agreement containing the arbitration clause, along with all relevant correspondence, documents and material necessary for proper adjudication of the disputes. The claimant side shall submit statement of claim along with supporting documents, whereas the opposite side shall file written defence/reply together with all documents intended to be relied upon during the arbitration proceedings.

 The learned Arbitrator shall, upon receipt of the order of reference and record, formally enter upon the reference and thereafter proceed with the matter strictly in accordance with the provisions of the Arbitration Act, 1940, while adhering to the recognized principles of fair trial, impartiality, transparency and due process. The learned Arbitrator shall afford adequate opportunity of hearing to all concerned parties and shall regulate

the proceedings in a manner conducive to fair, expeditious and effective adjudication of the controversy.

 The remuneration/fee of the learned Arbitrator is tentatively fixed at Rs. 400,000/- (Rupees Four Hundred Thousand only), which shall be borne and paid by the parties in equal proportion, unless otherwise determined in the final award. The parties shall deposit their respective shares before the learned Arbitrator within the period prescribed by him. The learned Arbitrator shall also be entitled to reasonable incidental and administrative expenses incurred in connection with conduct of the proceedings, subject to proper account and final adjustment in accordance with law.

 The parties are directed to extend full cooperation to the learned Arbitrator and shall not seek unnecessary adjournments or adopt any dilatory tactics which may hamper expeditious conclusion of the arbitral proceedings. In case any party fails to cooperate or defaults in appearance despite notice, the learned Arbitrator shall be at liberty to proceed further in accordance with law and the provisions of the Arbitration Act, 1940.  The learned Arbitrator shall endeavor to conclude the proceedings and announce/publish the award within a period of four months from the date of entering upon the reference, subject, however, to extension of time by the competent Court under Section 28 of the Arbitration Act, 1940, if circumstances so warrant. Upon conclusion of the proceedings, the award along with record of arbitration proceedings shall be submitted before the competent Court in accordance with law.

10.So far as the connected Civil Revision is concerned, the grievance of the petitioners therein pertains to the order whereby time was extended for submission of the award and the request for stay of arbitration proceedings was declined. Since this Court, through the instant judgment, has itself appointed a new sole Arbitrator for adjudication of the disputes between the parties, the controversy raised in the connected petition no longer survives independently and has substantially become infructuous. Hence,

both the petitions are disposed on in the above terms. No order as to costs.

Announced.

J UD G E

Haider Shah, SSS (SB) Hon’ble Mr. Justice Muhammad Naeem Anwar.