National Testing Service Vs Director Elementry & Secondry Education Govt. of KPK

JUDGMENT SHEET

IN THE PESHAWAR HIGH COURT,

PESHAWAR.

(Judicial Department)

Regular First Appeal No.382-P/2024

National Testing Service – Pakistan (NTS) Versus Director, Elementary & Secondary Education Department, Govt. of KPK, Peshawar and others.

JUDGMENT

For Appellant: Mr. Mir Afzal Malik, Advocate.

For respondents: Mr. Fazal-e-Maula, AAG.

Date of hearing 02.06.2025.

MUHAMMAD FAHEEM WALI, J.- Through the instant appeal under section 96 C.P.C, the appellant/petitioner has assailed the validity and legality of judgment and order dated 21.09.2024 of learned District Judge, Peshawar vide which application filed under section 20 of the Arbitration Act, 1940, was dismissed.

2.Perusal of the record reveals that appellant/petitioner (“herein referred to as service provider”) entered into an agreement dated 07.09.2020 with respondent No.1 for offering consultancy services for “provision of testing services” in pursuant to the acceptance of proposal of petitioner dated 20.11.2019, in consequence of advertisement No.INF(4536)/19 dated 31.10.2019. As per the terms of agreement, the appellant/petitioner has undertaken the responsibility to collect and shortlist online applications against the prescribed

eligibility criteria agreed with the department and to further shortlist the applications district wise, conduct test at the respective testing centers and in this regard, to intimate the shortlisted candidates qua the test schedule by keeping the authorized person of the department in the loop and after conduct of examination, the appellant/petitioner was under duty to provide position wise and district wise merit lists. The whole exercise was to be carried out by payment of a nominal fee of Rs.290/- per candidate. With mutual consent of the parties, the service provider was required to open a designated account in a commercial bank for every test to be conducted during the course of this agreement. Payment out of this account shall be made to the service provider based on degree of completion of services under the agreement to the satisfaction of the department. The percentage disbursement of fee against each deliverable achieved and duly verified and accepted by the department, as per clause 12 of the agreement, was agreed to be as follows:

Sr. Deliverable Successfully Achieved and %age fee to No Verified & Accepted by the Department be disbursed 1 Deliverable 1: Advertisement of posts, 40% development of list of candidates as eligible or in-eligible along with justification using criteria agreed with the department 2 Deliverable 2: Successful conduct of tests for 30% all eligible candidates across all cities of the Khyber Pakhtunkhwa as per schedule agreed with the department without any irregularity. 3 Deliverable 3: Categorized merit-lists of 30% candidates based on aggregate scores calculated using education and tests weightages agreed with the department.

Pursuant to this agreement, the service provider was tasked to conduct relevant tests for different jobs of teaching cadre. The tests which were successfully conducted by the appellant/petitioner, to the satisfaction of respondents, for those, the appellant/petitioner was issued periodical payment after successful completion of each deliverable in accordance with the aforesaid table. This included conducting tests for the post of 17155 Primary School Teachers (PST) seats for which around 200,000 candidates appeared in the test held on 07.02.2021. Whilst tests for the other posts were conducted prior to the test held for PST and the news of paper leakage had been circulated in social media which news flash was shared by the respondents with the service provider through letter dated 27.01.2021 but as the schedule for the test of PST, had already been announced, so it was not recalled and the tests were held but, mismanagement and the issue of leakage of paper reappeared and duly reported. Respondents sought explanation from the service provider over satisfactory process of the test and though, the service provider responded but the explanation of the service provider was declared unsatisfactory, thus, leading to inquiry by the Provincial Inspection Team into the transparency of the examination process. Likewise, the government directed the service provider not to announce the results. With the conclusion of inquiry, the service provider was directed to conduct PST test again throughout the province. The service provider declined the government request to review the

order and instead of reviewing the order, the appellant/petitioner filed an application for filing the agreement before the court and referring the matter to arbitrator for resolution of the dispute between the parties.

3.The appellant/petitioner had filed the application for filing the agreement before the court and referring the matter to arbitrator u/s 20 of the Arbitration Act, 1940. The respondent was put on notice who appeared before the court and submitted its written statement. Clause 20 of the agreement contained a mechanism for dispute resolution whereby it was made incumbent upon the parties to settle their dispute through mediation. If dispute(s) remained unresolved by mediation, then this shall be finally settled by arbitration to be held under the Arbitration Act, 1940. There shall be three members of arbitrators unless mutually agreed by the parties. The venue of arbitration shall be Peshawar. From the events preceding filing of the agreement in the court, it transpires that parties have not nominated or agreed upon their joint or respective arbitrators.

Therefore, all the three arbitrators were appointed by the court after getting nod from the parties. From the appellant’s side, Mr.

Shaiber Khan, retired Sessions Judge, was selected as arbitrator, from the respondent’s side Mr. Abdul Akram, Additional Secretary was selected as arbitrator and the third arbitrator was nominated by the court namely Mr. Malik Mujtaba, retired Sessions Judge. The terms of reference of arbitration were;

1.Whether the PST examination, conducted by the applicant, was transparent in each district

and the paper was leaked or not leaked prior to written test.

2.Whether the paper was leaked in each district or in some of Districts. Leakage of paper in one district amount to leakage of the paper in each district or only in that one district.

3.Whether the order of Respondent, of cancelation of the paper is justified and the direction of Respondent to conduct fresh test on the same fee is justified.

The arbitrators were directed to submit their report within 45 days of the communication of order to them. The proceedings were conducted by them under Arbitration Act, 1940 and both the parties appeared and produced evidence before the arbitrators. The arbitrators concluded the proceedings and the report was written by learned arbitrator Mr. Malik Mujtaba retired District & Sessions Judge with additional/dissenting note of the learned arbitrator Mr. Shaiber Khan retired District & Sessions Judge. The application was decided by the court on 18.10.2024. An appeal was preferred before this court, the same was accepted and the case was remanded with direction that there were objections of appellant/petitioner which have not been decided by the Court prior to making the decision final. With further directions to follow the law qua deciding objections of the appellant/petitioner regarding the arbitration award and making it a rule of the court. After receipt of the case file, the court addressed the main objection of the appellant/petitioner by ordering removal of the arbitrator appointed by the government

namely Mr. Abdul Akram who was the additional secretary of respondent’s department, therefore, raising a question mark over his impartiality. He was replaced with Mr. Justice (R) Malik Manzoor Ahmed, retired Judge of Peshawar High Court.

Before the arbitrators could further proceed with the matter, the court vide order and judgment dated 09.10.2023, without getting report from the arbitrators, decided the suit in favor of the appellant/petitioner. Being aggrieved therefrom, the respondent approached this court through a Civil Revision which was allowed and the order, judgment and decree of trial court dated 09.10.2023 alongwith the order dated 15.11.2023 passed under section 152 of the CPC, was set aside and the case was remanded to the learned District Judge for a decision in accordance with law. The learned District Judge vide order dated 21.09.2024, after hearing the parties, dismissed the application for filing the award with the observations that the applicant retains the right to seek legal redress against respondents, should such a remedy be available or deemed appropriate. The appellant being aggrieved of the order dated 21.09.2024, filed the instant RFA.

4.I have heard the arguments of learned counsel for the parties and have gone through the record with their able assistance.

5.In order to grasp the situation, it would be most appropriate to reproduce the operative as well as the relevant

portion of the penultimate para of the judgment of learned District Judge, below:

“Albeit wording of the section 17 of the Act is clear and emphatic on the point, but the fact that the appointments to the PST posts have already been made, coupled with the applicant's passive acquiescence, renders it impossible to enforce the award as the Rule of Court. In light of the respondents' actions following the trial court's directives in the initial judgment, the applicant could have sought amendments to its application or pursued any other legal remedies available. However, it failed to do so, making its application ineffective in the current circumstances to obtain the substantial reliefs, it sought against the respondents. Given that the appointments in question have already been effectuated, and the applicant, by its conduct, has ceded to the proceedings, any order deciding application on merit, shall leave the employees, appointed subsequently, in the lurch. Consequently, the applicant's claim, in the existing situation, has become absolutely contentious to accede to.

13] As a consequence of the foregoing, it is held that had there been no appointments to the PST posts so far, the arbitration award, based on the majority view of the arbitrators, would have been affirmed as a Rule of Court, followed by the appropriate decree. However, due to the shifting circumstances, as thoroughly examined and discussed, and the applicant's tacit acceptance of the current state of affairs, without seeking amendments to the application after appointments by the respondents, there exists no compelling or substantial grounds to address the contentious issue at hand but to consider the application inadequate to answer the applicant's solicited reliefs in affirmation. Accordingly, this application stands dismissed with the observation that the applicant retains the right to seek legal redress against the respondents, should such a remedy be available or deemed appropriate. Costs shall follow the events.”

A cursory view of the aforesaid paragraphs would reveal that the reasons prevailed with the learned District Judge

for dismissal of the suit are mostly based upon the premise that the appointments in questions have already been effectuated and the applicant by its conduct, has ceded to the proceedings, therefore, any order deciding the application on merit shall leave the employees appointed subsequently in a lurch and since, the applicant has not sought any amendment to the application after appointment by the respondent, there exists no compelling or substantial grounds to address the contentious issue at hand. However, the application was dismissed with the observation that the applicant shall retain the right to seek legal redress against respondents, should such a remedy be available or deemed appropriate. Furthermore, it can be easily gathered from the order that the appellant/petitioner, was predominantly, non suited on the ground that report of the arbitrators has, by majority view, not recommended re-examination of test already conducted by the petitioner for the post of PST which was set at naught due to ineligibility of one of the arbitrators on the ground of partisanship. So even if, for that matter, previous opinion is even reversed by the new Arbitration team and the applicants are ordered to conduct a retest, still it would not bear any fruit because the process of appointment has already been concluded and the recommendees thereof have already been employed on the posts of PST and are serving their department since the date of their appointment. To this extent, the observations of the learned District Judge, are apparently correct, however, while deriving such a conclusion, the

applicant could not have been outrightly non suited for the sole reason rather there exist other pertinent matters, between the parties that asked for its resolution. Following are some of the points that skipped the attention of the learned court;

i. As afore-stated, the learned District Judge and also his predecessors in office, had predetermined that the sole and actual controversy between the parties related to the holding of re-examination of tests already conducted by the applicant which was marred by allegations of irregularities and under the circumstances petitioner/applicant was duty bound, as per terms and conditions of the agreement, to conduct a retest for the given posts without claiming any extra charges.

However, in the process, it was not considered that under prayer “C” of the application, the applicant has also requested for payment of the 3rd installment of fee as per agreement and its release thereof to the applicant forthwith. To elaborate the matter further, clause 12 of the agreement provide that the payment has to be released to the appellant/petitioner after successful completion of each deliverable. Out of the three stages, payment has already been received at the ratio of 40% and 30%, for completion of the relevant two stages respectively but the dispute remains outstanding towards the payment of the last deliverable to the tune of remaining 30% which pertains to categorized merit list of

candidates based on aggregate score calculated using education and test weightages agreed with the department. This controversy still remains unresolved.

According to section 20 of the Arbitration Act,1940, “any person who has entered into an arbitration agreement with respect to subject matter of the agreement or any part thereof, may apply to the court having jurisdiction in the matter to which the agreement relates with a prayer that the agreement be filed in the court in case where a difference has arisen to which the agreement applies”. Accordingly, the release of payment of the last deliverable, to the tune of 30% of the agreed per candidate fee, has remained subject of the agreement or atleast part of the agreement and the same has duly been sought in the prayer clause and upto this extent, the arbitration proceedings should have been carried out between the parties, for the ends of justice. Although, in the original TORs, the dispute regarding the release of payment does not figure anywhere in the reference to the arbitrators but once it is a part of the subject matter, courts could, and therefore should, have referred the matter by amending the TORs, to ascertain the real controversy between the parties and procure a decision thereon through the medium of arbitration. By leaving the issue undecided and thereby ignoring to make such an issue part of terms of reference and inviting a report

thereof from the Arbitrators is more likely to prejudice the interests of the applicant which needs to be rectified.

Reliance is being placed on 2021 YLR 194 titled “Capital Development Authority through Chairman versus Messrs Signage Security Systems (Pvt.) Ltd.

through Accounts and Administrative Manager.

ii. In the last portion of the operative part of the judgement, the learned District Judge has dismissed the application with observations that applicant retains the right to seek legal redress against respondents, should such a remedy be available or deemed appropriate. Such observations of the learned District Judge are apparently in derogation of the existing laws. In this regard, section 31 of the Arbitration Act, being relevant is hereby reproduced:

31.Jurisdiction.-(1) Subject to the provisions of this Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates.

(2)Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court.

(3)All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where the award has been, or may be, filed, and to no other Court

(4)Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force, where in any reference any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent

applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court

Subsection 2 of section 31 starts with a non obstante clause which clearly emphasize that all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court. Such express provision of law requires the court to decide all questions pertaining to the award or an arbitration agreement between the parties to the agreement without reserving any option to leave certain matters undecided. By necessary implications, it specifies that a corresponding duty has been cast upon the court to determine the actual controversies involved in the matters of arbitration agreement, followed by taking appropriate steps for resolution of said disputes, through the medium of arbitration, in accordance with the Arbitration Act, 1940. In furtherance thereof, section 32 of the Arbitration Act, 1940, is also relevant which has given an overriding effect to the act and expressly contain a barring provision that “no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set

aside, amended, modified or in any way affected otherwise than as provided in this Act.”

Conjoint effect of the aforesaid provisions of law, would glorify that once an agreement carries an arbitration clause then no alternate remedy is available to the applicant to seek redressal of his grievance except by resorting to the provisions of the Arbitration Act. The aggrieved person is expressly precluded from approaching any other forum for redressal of his grievance under any other prevalent laws. The word ‘otherwise than as provided in this Act’, used in S.32 signifies that no other court has the authority and jurisdiction to entertain any such request. Therefore, the observations of the learned Appellate Court by suggesting the applicant to seek its remedy before another forum, in the presence of arbitration clause in the agreement, is untenable.

iii. Last but not the least, as a subsidiary to the preceding para, the quest of the applicant for an alternate remedy, as advised by the court, would also be hindered by the provisions of section 11 and Order II Rule 2 of CPC after dismissal of instant suit. As per section 41 of the Arbitration Act, the provisions of CPC are very much applicable to all the proceedings before the court and to the appeals under the Arbitration Act, therefore, bringing another suit on the same cause of action would be either

hit by the principle of Resjudicata or be declared not entertainable under the express provisions of Order II Rule 2 r/w section 12(1) of CPC. On this score too, the impugned judgment is not maintainable. Reliance is being placed on 1989 MLD 4750 titled “Muhammad Anwar versus M/s Associated Trading Co. Ltd”, wherein it was held that;

“Where in proceedings under S.20, Arbitration Act, 1940, question as to existence of contract was heard and finally decided, the same question between the same parties could not be adjudicated upon by the Court in a subsequent suit-Plaint in subsequent suit, wherein same question, as had been finally decided in previous proceeding, was re-agitated, was rejected being barred by the principle of res judicate.”

6.The most important aspect of the case remains the release of payment of last and final installment of 30% remaining outstanding after successful completion of 3rd deliverable duly mentioned in the table annexed to clause 12 of the agreement. The agreement between the parties has been signed on 07.09.2020 and the tests conducted till 07.02.2021 and since then the parties are at loggerhead with each other but the main dispute still remains unresolved. Clause 12 of the agreement postulates that “the service provider shall open a designated account in a commercial bank agreed with the department for every test to be conducted during the course of this agreement. This account shall be a joint account operated

under the signatures of Director E&SE and an authorized representative of the service provider. Tests fee from all the candidates shall be collected in this account. Payments out of this account shall be made to the service provider based on degree of completion of service under this agreement to the satisfaction of the department”.

Above referred clause 12 of the agreement makes it abundantly clear that the entire amount collected in the shape of fee from the candidates shall be deposited in the designated joint account in a commercial bank with mutual agreement of the parties and the same shall be operated under the signatures of the Director E&SE and an authorized representative of service provider. Since the fee has already been deposited for conduct of tests by the candidates in the designated account and since there is a dispute regarding the payment of deliverable depending upon the performance of agreement, unless such a dispute is resolved, the amount will remain stuck in the joint account to the benefit of neither party. In view of the peculiar circumstances, resolution of the dispute is inevitable. On this score too, the courts need to adopt and resort to proactive approach in order to do complete justice between the parties.

7.The upshot of the above discussion, although taking a retest is no more an appropriate solution in the give circumstances, there are certain other matters unresolved relating to the arbitration agreement that has skipped the worthy attention of learned District Judge which are likely to affect the

valuable rights of the appellant/petitioner. The learned District Judge, has fallen in error in nonsuiting the appellant by ignoring material aspects of the case which cannot be lost sight of by this court in its appellate jurisdiction. Resultantly, for the reasons stated above, this appeal is allowed. The judgment, decree and order dated 21.09.2024 passed by the learned District Judge, is set aside. The case is remanded to the District Court with the direction to redecide the matter after taking stock of the aforesaid observations. Without prejudice to the generality, the learned District Judge shall cause necessary alteration in the TORs by including the real controversy between the parties especially the dispute about entitlement/release of the payment of the 30% outstanding amount, whereafter the same with the concurrence of the parties, shall be referred either to the already appointed set of Arbitrators or to the newly appointed Arbitrators as the case may be, who shall return their verdict in accordance with the fresh TORs, within a period to be specified by the learned District Judge. Parties are left to bear their own cost.

Announced.

JUDGE

SB Hon’ble Mr. Justice Muhammad Faheem Wali Abdur Rehman JSS