The Government of KP through Chief Secretary, Peshawar and others vs. M/S HMA Pumps (PVT) LTD Office No.10, 3rd Floor the Mall Tower Mall Road, Peshawar Cantt. and another

JUDGMENT SHEET

PESHAWAR HIGH COURT, PESHAWAR

JUDICIAL DEPARTMENT

RFA No.L86/2023 with CM No.29912023 with CM No.541/2023

The Government of Khyber Pakhtunkhwa through Chief Secretary, Peshawar and others Vs 1\[/S HMA Pumps (PVT) LTD Office No.10, 3'd Floor the Mall Tower Mall Road, Peshawar Cantt. and another

JUDGMENT

Date of hearin$, 20.05.2024

Appellants (by): Mr. Yasir Khalid. AAG Respondents Gy): Barrister Muhammad Yaseen Raza Khan. and Barrister Muhammad Ibrahim Khan Afridi. Amicus Curiae

SYED ARSHAD ALI. J.- The instant appeal filed under section 39 of the Arbitration Act, 1940 ("Act") challenges the order of the learned Civil Judge-XXIII, Peshawar, dated 13.01 .2023, whereby the award made by the Umpire on 28.10.2021 and 05.10.2022 was made rule of court.

2.Brief but relevant facts of the case are that the respondents company was awarded a contract for the Water and Sanitation Improvement Project, Town-I, Peshawar by the Project Director, MSP (PD), which was to be completed within twelve months. However, a # dispute arose between the parties relating to the alleged inordinate delay in conclusion of the project which, inter alia, includes the claim for cost of escalation by the respondents company. Since the amicable settlement failed between the parties, therefore, an application was filed by the respondents company for referring the matter

to the arbitrators in terms of section 20 of the Act before the civil court at Peshawar. The learned civil court vide order dated 08.03.2021 had referred the matter to the decision of two arbitrators namely Engr. Mian Muhammad Shakeel and Advocate Junaid Zaman. The award was unanimously passed by the arbitrators and submitted before the court in terms of section 14 of the Act on 28.10.2021.

3.Since it was the opinion of the respondents company that the decision of the arbitrators against the claims listed at Sr. No.l & 3 was vague and ambiguous, therefore, an application was filed by the respondents company for remitting the award to the Umpire namely Mr. Shaiber Khan, a retired District and Sessions Judge, which was accepted by the trial court vide order dated 30.05.2022.The worthy Umpire has framed his award on 04.10.2022, which was submiued before the court. The learned court through the impugned order dated 13.01 .2023 has made the said award rule of the court.

4.When the case came up for hearing before this Court on 12.03.2024, a specific question was framed by this Court to seek assistance of the learned counsel for the parties that "whether in the case when a unanimous award has been passed and any application is filed by any party seeking explanation or opinion of the arbitrator on any matter which has been left undecided, the matter should be re-referred/remitted to the arbitrators who had passed the award or it can be referred to the umpirefor his opinion".

5.Before appreciating the respective contentions of the parties we would like to refer to the relevant provision of the Act.

J

Section 16 of the Act

6.Power to remit award.- (1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit*

(a)where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or

(b)where the award is so indefinite as to be incapable of execution; or

(c)where an objection to the legality of the award is apparent upon the fact of it.

(2)where an award is remitted under sub-section (1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Court:

Provided that any time so fixed may be extended by subsequent order ofthe Court.

(3)An award remitted under sub-section (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed.

Rules 2.4 & 5 of the First Schedule of the Act

2.If the reference is to an even number of arbitrators, the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments.

4.If the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration agreement or to the umpire a notice in witing stating that they cannot agree, the umpire shall forthwith enter on the reference in lieu of the arbitrators.

5.The umpire shall make his award within two z

months of entering on the reference or within such extended time as the Court may allow.

6.The perusal of section 16 of the Act and Rules stated above clearly demonstrates that the umpire can only take cognizance in the matter if there are the circumstances provided under Rule 4 ibid, which, inter alia, includes that both arbitrators could not agree on a

particular issue. Therefore, an umpire cannot be called upon to act under Rule 5 if the circumstances as provided under Rule 4 do not arise. It was observed by the Apex Court in the case of 66Muhammad rooo Shah vs. Shakirullah" (2006 SCMR 165fl that"It may not be out of place to mention here that "the ordinary meaning of the word "Umpire" is a person, who ts to decide upon disagreement. There is a technical meaning attached to the expression, which denotes a person, who is to settle any dffirence that may arise between the Arbitrators. It is in this sense that the expression is used in the Act", (2000 Arbitration Manual by M.A. Zafar, p.760), which means that Umptre is required to settle any dffirence that may arise between the Arbitrators".

7.It was the contention of the learned counsel for the respondents that it is provided under section 16 of the Act that the award can be remitted to the arbitrators or the Umpire for reconsideration, therefore, the learned trial court has rightly remitted the award to the Umpire instead of arbitrators. These contentions of the leamed counsel for the respondents go counter to the scheme of section 16 of the Act, which clearly envisages that where award has Ieft undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the =< matter referred to, the learned court is competent to remit the award or any matter referred to arbitration of the arbitrators or umpire for reconsideration. This clearly implies that if the ambiguity, as stated in section 16 of the Act, arises out of the award passed by the arbitrators, then the matter shall be referred to the arbitrators and in

case the same is arising out of the award passed by the umpire, then obviously the same has to be referred for reconsideration to the Umpire. Indeed, the word "reconsideration" is a determining fact implying the intention of legislation because the award passed by the arbitrator cannot be reconsidered by the umpire as the role of umpire comes into pray only when there is disagreement between the arbitrators. Thus the order of the learned trial court remitting the award to the umpire was patently illegal and the entire edifice built upon the said order has to crumble to the ground being coram non judice and against the letter and spirit of section l6 of the Act read with the First Schedule of the Act, as stated above.

8.In this view of the matter, this appeal is allowed, the impugned order of the learned Civil Judge-XXlI, Peshawar dated 30.05.2022 to the extent of remitting the award to the Umpire, the award passed by the Umpire on 06.10.2022, and the impugned judgment/order of the learned trial court dated 13.01 .2023 making the disputed award passed by the Umpire as rule of the court are set aside and the matter is sent back to the learned trial court to redecide the application of the respondents, which it has filed under section 16 of the Act.

) 'r'

JUDGE

Date of hearing and announcement ofjudgment 20.05.2024

Date of preparation and signing of Judgment .05.0'1.2024

S.B Hon'ble Mr. Justice Syed Arshad Ali Mahmood Shah, SSS