M/s Ayan Enterprises VS OGDCL etc

ORDER SHEET

IN THE ISLAMABAD HIGH COURT, ISLAMABAD

JUDICIAL DEPARTMENT

F.A.O.No.158 of 2019 M/s Ayan Enterprises Versus Managing Director, O.G.D.C.L. and another S. No. of order Date of order/ Order with signature of Judge and that of parties or counsel / proceedings Proceedings where necessary. 10.03.2021 Mian Muhammad Omer Riaz and Mr. Tarique Ali Mastoi, Advocates for the petitioner, Barrister Umer Aslam Khan for the respondents.

Through the instant appeal under Section 39 of the Arbitration Act, 1940 (“the 1940 Act”), the appellant, M/s Ayan Enterprises, impugns the order dated 10.07.2019 passed by the Court of the learned Civil Judge, Islamabad, whereby objections to the arbitration award dated 30.11.2018 filed by the Oil and Gas Development Company Limited (“O.G.D.C.L.”), were allowed, and the matter was remitted to arbitrator for re-consideration.

2.Learned counsel for the appellant submitted that the sole ground on which the arbitration award was set-aside was that the arbitration proceedings continued beyond the period of four months; and that the learned Civil Court erred by not appreciating that respondent No.1 had participated in the arbitration proceedings without any demur or reservation beyond a period of four months. Learned counsel for the appellant prayed for the appeal to be allowed and for the impugned order dated 10.07.2019 to be set- aside.

3.On the other hand, learned counsel for the respondents drew the attention of the Court to paragraph 3 in the First Schedule to the 1940 Act, and submitted that it was one of the implied conditions on the arbitration agreement that the arbitrator would make his award within a period of four months after entering on the reference; that in the case at hand, the arbitration award was rendered beyond a period of four months from the date when

the arbitrator entered upon the reference; that at no material stage, did the appellant or the arbitrator file an application under Section 28 of the 1940 Act for the enlargement of time for making the award; and that the learned Civil Court did not commit any illegality by setting aside the award on the ground that it was rendered beyond a period of four months from the date of entering on the reference. Learned counsel for the respondents prayed for the appeal to be dismissed.

4.I have heard the contentions of the learned counsel for the contesting parties and have perused the record with their able assistance.

5.Perusal of the operative part of the impugned order dated 10.07.2019 shows that the primary ground on which the learned Civil Court set-aside the arbitration award and remitted the matter to the arbitrator was that the award had not been rendered within a period of four months after entering on the reference.

6.Section 3 of the 1940 Act provides that an arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule insofar as they are applicable to the reference. Paragraph 3 of the First Schedule to the 1940 Act provides that the arbitrators shall make their award within four months after entering on the reference and after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow. Under Section 26(1) of the 1940 Act, the Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time the time for making the award.

7.Although, in the case at hand, neither the arbitrator nor any party filed an application before the Court for an enlargement of time for making the

award, the admitted position is that the respondents did not object to the arbitrator proceeding beyond a period of four months with the arbitration proceedings. This conduct of the respondents would be treated as acquiescence for the continuation of the arbitration proceedings beyond four months. It would also operate as an estoppel against the respondents from objecting to the award made beyond a period of four months. In holding so, reliance is placed on the law laid down by the Hon'ble Supreme Court in the case of WAPDA Vs. Khanzada Muhammad Abdul Haque Khan Khattak and Company (PLD 1990 SC 359) wherein it was held as follows:- "Reading section 3, implied Condition No.3 in the First Schedule to the Arbitration Act and section 28 thereof together, the position of law appears to be clear that the parties are free to enlarge the time for making the award with their mutual consent as with the consent of all the parties, a term can be incorporated in the arbitration agreement giving powers to the arbitrator to enlarge the time for making the award. By Condition No.3 in the First Schedule, statutorily an implied term is incorporated in the agreement that the award shall be made within four months after entering upon the reference. By this statutory provision, the term is to be taken as an integral part of the arbitration agreement and is subject to alteration with the consent of the parties like any other term of a contract. If that were not the intention of the legislature, section 28(2) would not make valid a provision in the arbitration agreement empowering the arbitrator or arbitrators to enlarge the time for making the award with the consent of the parties. If the parties after the expiry of the four months submit themselves to the jurisdiction of the arbitrator and take part in the proceedings enabling him to make an award, it cannot be said that the arbitrator acted without jurisdiction. In such a contingency, the principles of waiver and estoppel would apply with full force.

It is now well-settled that where the party had all along submitted to the proceedings of the arbitrator without any protest, he cannot turn round and object or insist that the award was made out of statutory period. In Province of Balochistan v. Malik Haji Gul Hasan PLD 1982 Quetta 52, Messrs Sind Cotton Exporter v. Messrs A.B. Sadiq Brothers PLD 1955 Sind 268 and Messrs. Musa Ismail & Co. v. Amin Agencies

Ltd. PLD 1955 Sind 242, it was held by the High Courts of Balochistan and Sind respectively that the party raising no objection before the award is given and voluntarily acquiescing to arbitrator's jurisdiction, such party was debarred from raising objection at later stage. It was also held by a Division Bench of the Lahore High Court in the case of Ghulam Mohiuddin v. Federation of Pakistan PLD 1967 Lahore 204 that if a party takes part in the proceedings even after the expiry of four months without raising any objection, it cannot be allowed to raise such an objection. In this case a large number of cases on the point from Pakistan and other jurisdictions were reviewed and discussed."

8.The impugned order dated 10.07.2019 is not in conformity with the law laid down in the aforementioned judgment. Therefore, the instant appeal is allowed; the impugned order dated 10.07.2019 passed by the Court of the learned Civil Judge, Islamabad is set-aside; and the matter is remanded to the learned Senior Civil Judge, Islamabad to decide the respondents’ objections under Sections 30 and 33 of the 1940 Act against the arbitration award dated 30.11.2018. There shall be no order as to costs.

(MIANGUL HASSAN AURANGZEB)

JUDGE

Sultan*