M.N Alam Associated Ltd. v. The Chairman, Rajdhani Unnayan Kartripakkhaya

Case No: CIVIL APPEAL NO. 223 OF 2005

Judge: Md. Muzammel Hossain,

Court: Appellate Division ,,

Advocate: Mahbubey Alam,Syed Amirul Islam,,

Appellant: M.N Alam Associated Ltd.

Respondent: The Chairman, Rajdhani Unnayan Kartripakkhaya

Subject: Arbitration,

Delivery Date: 2012-01-24

 

 

IN THE SUPREME COURT OF BANGLADESH

APPELLATE DIVISION


PRESENT:

Mr. Justice Md. Muzammel Hossain

-Chief Justice

Mr. Justice Md. Abdul Wahhab Miah

Ms. Justice Nazmun Ara Sultana

Mr. Justice Syed Mahmud Hossain

Mr. Justice Muhammad Imman Ali

Mr. Justice Md. Shamsul Huda

 

CIVIL APPEAL NO. 223 OF 2005

[From the judgment and order dated 27.07.2004 passed by the High Court Division in F.A. No. 282 of 2003]

 

M.N Alam Associated Ltd.

:

.....................Appellant.

 

-VERSUS-

 

The Chairman, Rajdhani Unnayan Kartripakkhaya

 

:

.................Respondents.

 

For the Appellant

 

:

Mr. Syed Amirul Islam with Mr. M.A. Samad, Senior Advocates, instructed by Mr. Md. Nawab Ali, Advocate-on-Record.

 

For the Respondents

 

:

Mr. Mahbubey Alam, Senior Advocate, instructed by Mr. Md. Wali-ul-Islam, Advocate- on-Record.

 

Date of Hearing

:

The 18th and 24th January, 2012

 

 

Date of Judgment : The 24th January,2012

 

( J U D G M E N T )

 Md. Muzammel Hossain, C.J:

This appeal at the instance of the appellant by leave is directed against the judgment and order dated 27.07.2004 passed by a Division Bench of the High Court Division in First Appeal No.282 of 2003 allowing the appeal with costs upon setting aside the judgment and decree dated 15.05.2002 passed by the learned Joint District Judge, 5th Court, Dhaka in Title Suit No.1 of 1999 making the award passed by the Arbitrator Rule of the Court.

The facts for disposal of this appeal, in short, are that in the year 1986, the respondent-RAJUK (the then DIT) undertook a number of survey and planning projects in different areas of Dhaka intending to implement those projects by engaging private Planning Consultancy Firms. The appellant consultancy firm submitted a technical and financial proposal for survey and detailed planning of Uttara East Project. The respondent having accepted the proposal of the appellant issued work orders dated 03.01.1987 and 05.07.1987. The rate of work was specified by the respondent in the work orders in the following terms: “The rate for work will be given by studying the rates of Royal Town Planning Institute (RTPI) determined for similar works”. Similar work orders were issued to three short listed firms. Because of urgency, the appellant was instructed to start work immediately. Accordingly, the appellant started the work with utmost sincerity investing necessary fund. The respondent in order to maintain the speed in the work made payment of Tk. 7,00,000/-(seven lacs) only as advance against consultant's fees pending execution of formal agreement between the parties. The appellant completed the work and submitted the draft final plans and reports on 14.06.1988. The appellant also requested the respondent on several times for payment of their professional bill for consultancy services but the respondent did not pay any heed to the request. In order to remove the uncertainty about the rate of fees for consultancy services, printed copies of recommendation on determination of fees were obtained from the Royal Town Planning Institute (RTPI) of U.K. and the minimum rate of fees for similar work was determined at Tk.2,000/- only per acre. The respondent agreed to accept the minimum rate of fees because that was the rate of fees agreed by the respondent to pay for the work and was specified in the first work order. But the respondent suddenly came up with an arbitrary and unreasonable rate of fees of Tk.690/- per acre and exerted pressure upon the appellant to accept the said rate threatening that otherwise, the agreement would not be signed and bills would not be paid.

The appellant vide its letter dated 17.06.1989 informed the respondent that the decision of RAJUK was not based on analysis in accordance with the recommendation of RTPI, U.K. and this was a deviation from the work order and as such it was not acceptable to the appellant. It was further stated that after a lapse of 8 years from the date of first work order, the respondent by letter dated 23.10.1995 informed the appellant that the RAJUK Board in its meeting dated 25.07.1995 determined the area under work measuring at 7,500/- acres and the rate of fees at Tk.690/- per acre and decided to sign the agreement though the respondent had already committed to pay a specified rate of fees for the work and accepted the area of coverage under the work of 8555 acres and approved the draft agreement on the basis of which final copy of the agreement was signed and submitted by the appellant long ago. However, due to financial crisis, which the appellant had been suffering for non-payment of the bills by the respondent, the appellant agreed under compulsion to sign the agreement on 14.12.1995 with the condition that the dispute would be resolved later through arbitration as per provision contained therein. The respondent signed the agreement and made part payment of the bills though it was verbally agreed to be paid at a time as arrears. The appellant continued to make appeal to the respondent- RAJUK for payment of remaining amount of bills vide its letters dated 09.11.1996, 16.11.1996, 24.11.1996, 02.12.1996, 09.12.1996, 29.12.1996, 29.01.1997, 24.04.1997 and 12.05.1997. The appellant also reminded the respondent that as per provisions of the agreement, the appellant was entitled to get payment of interest for the period during which the bills remained unpaid and requested the respondent to arrange payment of the bills. The respondent did neither arrange for payment of bills nor replied to the aforesaid letters of the appellant.

The appellant after realizing that the respondent will not make further payment which the appellant is legally entitled to, agreed to settle the dispute through arbitration. The appellant with that view in mind, to resolve the dispute through negotiation and to arrive at a mutually acceptable solution, submitted a written statement with details of the claim to RAJUK vide Memo dated 08.09.1997 with a request to make payment of the amount under the claim; otherwise the appellant would be constrained to refer the matter to arbitration as per provision of clause 12 of the contract. But the respondent did not reply and as such the appellant as per clause 12.1 of the contract served further notice upon the respondent informing that the respondent has failed to act and take necessary steps in compliance with the provisions of clause 12.1 and 12.2 of the contract even after the expiry 20 days of submission of the written claim. Then the appellant gave further time of 30 days for taking necessary steps in this matter stating that otherwise the case would be referred to the Arbitrator nominated by the appellant vide Memo dated 28.09.1997.

The respondent did not take any step for appointment of an Arbitrator on their behalf and as such the appellant had no other alternative but to appoint an Arbitrator and accordingly informed the respondent vide Memo dated 12.11.1997 that Professor Dr. Golam Rahman, Department of Urban and Regional Phanning, Bangladesh University of Engineering and Technology (BUET) was appointed by the appellant to act as their Arbitrator for resolution of the disputed claim as per provisions of the contract. The appellant requested the respondent to nominate their Arbitrator and advised to contact the appellant's Arbitrator. The respondent on receipt of the said letter of the appellant did not nominate / appoint their arbitrator. Thereafter, the appellant on 12.03.1998 appointed Professor Dr. Golam Rahman as the Sole Arbitrator and requested him to Arbitrate the dispute between the parties as per provisions of the contract. Professor Dr. Golam Rahman thus having been appointed as the Sole Arbitrator served notices upon both the parties on 31.05.1998 calling upon the appellant being the first party of the arbitration proceeding to file statement of claim in writing and advising the respondent to appear in the arbitration proceeding through agent/Advocate on 21.06.1998.

The appellant submitted claims to the Sole Arbitrator who served notices calling upon the respondent to submit its written statement, if any, on the claims of the appellant on 09.07.1998. The respondent did not appear to submit any prayer for time. But hearing of the arbitration proceeding was adjourned to 23.07.1998 to provide opportunities to the respondent to appear at the hearing and to present its case. The respondent sent its representatives Mr. Kazi Salam Hafiz, Chief Town Planner, RAJUK and Mr. M. Murtaza, Assistant Town Planner of RAJUK on 6.08.1998 when the date was fixed for hearing but they failed to produce any evidence of authorization by the respondent. The Sole Arbitrator in presence of the officers of the respondent adjourned the hearing to 27.08.1998 for enabling the respondent to appear with proper letter of authorization. It was also intimated to the parties that no further extension of time would be allowed because of time limitation for disposal of the case as per law. The respondent did not appear on 27.08.1998 and the Sole Arbitrator then proceeded ex-parte and the hearing was concluded in presence of the appellant only and the Sole Arbitrator passed the award on 19.09.1998 to the effect that the 1st party-appellant is entitled to get Tk. 3,92104,022.55 only from the second party respondent and that ‘‘the second party is allowed 90 days from today to pay the amount, in default, the first party may realize the same by execution of award through Court. No cost of the proceedings is allowed and the parties should bear their respective costs. No further interest is payable on the amount of the award, if paid, within 90 days as specified. The first party will, however, be entitled to get payment of interest at the rate of 16% per annum over the period the amount or part of it, if remains unpaid beyond 90 days period’’. The respondent RAJUK did not make any payment to the appellant as per award given by the Sole Arbitrator and thereafter the appellant filed Title Suit No.01 of 1999 before the Court of Joint District Judge, 5th Court, Dhaka to make the award rule of the Court.

 

The respondent RAJUK upon receipt of the summons from the Court of Joint District Judge, 5th Court, Dhaka appeared in the suit on 03.02.1999 with a prayer for time to submit written objection which was allowed by the learned Joint District Judge and thereafter the respondent took several adjournments and lastly submitted written objection on 28.03.2000. The learned Joint District Judge, 5th Court, Dhaka upon hearing the parties rejected the written objection on 07.05.2000 holding that the same is barred by Article 158 of the Limitation Act and also for failing to deposit security money with the written objection in violation of the provisions of Section 33 of the Arbitration Act,1940. Being aggrieved by the aforesaid order dated 07.05.2000 passed by the learned Joint District Judge, the present respondent RAJUK unsuccessfully preferred revisional application being Civil Revision No.1778 of 2000 before a Division Bench of the High Court Division. After discharge of the Rule in the Civil Revision the Title Suit No.01 of 1999 was heard and decreed on 15.05.2002 ex-parte against the respondent RAJUK and thereby the award was made Rule of the Court.

The respondent being aggrieved by the aforesaid judgment and decree passed by the learned Joint District Judge, preferred an appeal being First Appeal No.282 of 2003 before a Division Bench of the High Court Division which was allowed by the impugned judgment and order dated 27.07.2004.

Being aggrieved by the impugned judgment and order passed by the High Court Division the appellant by leave preferred the instant appeal before this Court.

In this appeal leave was granted to consider the following submissions of the learned Advocate for the petitioner- appellant:

“I.  That Section 33 of the Arbitration Act has clearly provided that the security deposit as contemplated in the above section of the Arbitration Act is a condition precedent for filing the application challenging the award of the Arbitrator and non-compliance of the aforesaid mandatory provision, the deposit having been made during the pendency of the case cannot be treated as valid deposit under aforesaid section of the Arbitration Act and as such the application so filed by the respondent is not an application in the eye of law. It was further argued that since the respondent failed to file the written objection within the period as contemplated under Article 158 of the Limitation Act, the so-called deposit made under Section 33 of the Arbitration Act is a nullity as the same has rendered the written objection non-est in the eye of law. The High Court Division having failed to consider that the respondent RAJUK did not deposit the security money and also did not file the written objection within time as required under Article 158 of the Limitation Act and in such view of the matter, the judgment and decree passed by the High Court Division can not be sustained in law and the same is liable to be set aside.

 

II.  That the Trial Court having found that the award has been rightly made by the Arbitrator and accordingly made the award a Rule of the Court but the High Court Division failed to consider the attending facts and circumstances of the case, misconstrued the judgment and decree passed by the learned Joint District Judge and set aside the same under misconception of law and facts and as such the impugned judgment of the High Court Division is liable to be set aside.

 

III. That Section 17 of the Arbitration Act clearly provided that appeal shall not lie from such a decree except on the ground that it is in excess of or not otherwise in accordance with the award and as such the judgment and decree passed by the learned Joint District Judge being in accordance with the award and also not in excess of the same passed by the Arbitrator, the appeal filed by the respondent under Section 17 of the Arbitration Act is not maintainable inasmuch as in the instant case, the petitioner has raised the dispute before the respondent-RAJUK claiming an amount of Tk.4,68,11,000/- but as the respondent did not take any step for settlement of the claim of the petitioner, the petitioner had to invoke arbitration clause which has been stated in clause 12 of the agreement executed between the petitioner and the respondent. The High Court Division having failed to consider this vital aspect of the case, the findings and decisions arrived at by the High Court Division are liable to be set aside.”

 

Mr. Syed Amirul Islam, the learned Senior Advocate appearing for the appellant submits that as per Section 33 of the Arbitration Act deposit as contemplated under the law is a condition precedent for entertainment of the application challenging the award and without deposit it is to be construed that there was no application in the eye of law and even the deposit made during the pendency of the case cannot be treated as valid deposit as the provisions of the law is mandatory and not directory and as such the application filed by the defendant-respondent before the trial Court of Joint District Judge is non-existent in the eye of law. He submits that the respondent having not deposited in the Court the amount which he was required to pay under the award as per provision of Section 33 of the Arbitration Act,1940 and non-compliance with the proviso to Section 33 of the Arbitration Act rendered the said written objection under Section 33 of the Arbitration Act as non-existent in the eye of law and the High Court Division has failed to consider that as the respondent did not deposit in Court the amount which it was required to pay under the award or did not furnish security to the satisfaction of the Court for the payment of such amount and also did not file written objection within 30 days as required under Article 158 of the Limitation Act and as such the First Appeal No.282 of 2003 was not maintainable and the judgment and decree dated 27.7.2004 passed by the High Court Division is not tenable in law and liable to be set aside. Having referred to Section 17 of the Arbitration Act Mr. Islam submits that as the decree passed by the learned Joint District Judge, was in accordance with the award and not in excess of the award passed by the Arbitrator, the appeal filed before the High Court Division under Section 17 of the Arbitration Act is not maintainable.

Mr. Mahbubey Alam, the learned Senior Advocate appearing for the respondent submits that the Arbitrator having called upon to act by notice dated 12.11.1997 issued by the appellant and the alleged award having been passed on 19.09.1998 that is beyond four months from the date of his appointment and the same having not been passed in accordance with provision of Section 3 of the Arbitration Act,1940, the learned Joint District Judge committed an error in making the same Rule of the Court. Mr.Mahbubey Alam contends that the Arbitrator having not been appointed by the Court as per provision of Section 8 of the Arbitration Act and his appointment having not been made in accordance with law, the learned Joint District Judge committed an error in making the said award Rule of the Court. He further contends that the Arbitrator committed misconduct in proceeding as the Sole Arbitrator without any order from any competent Court and on the instigation of the first party-appellant and the learned Joint District Judge committed an error in making the said award Rule of the Court. He finally submits that the facts and circumstances of the instant case clearly show that the award passed in the instant case is not valid and the learned Joint District Judge committed an error in making the award Rule of the Court and that High Court Division committed no illegality in passing the impugned judgment and order allowing the appeal upon setting aside those passed by the learned Joint District Judge, and as such the appeal is liable to be dismissed.

We have heard the learned Advocate for both the parties and perused the award made by the Arbitrator, exparte decree passed by the learned Joint District Judge, impugned judgment and order passed by the High Court Division, concise statements of both the parties and other materials available on record. The appellant’s case is that the respondent having accepted the proposal of the appellant issued work orders dated 03.01.1987 and 05.07.1987 for survey and planning of 8555 acres of Uttara East Project. The rate of work would be given by studying the rates of Royal Town Planning Institute (RTPI) determined for similar works. The appellant started the work and invested huge amount of money with utmost sincerity. The respondent made payment of Tk.7,00,000/-  only as an advance against Consultant’s fees pending execution of formal Agreement between the parties.

The appellant completed the work and submitted the draft final plans and reports on 14.06.1988. The appellant demanded payment of their professional bill for consultancy services at the rate of fees of RTPI,

at Tk.2,000/- per acre. The appellant faced financial crisis and under compulsion entered into an agreement on 14.02.1995 for conducting survey and preparation of detail land use plans of Uttara East area of Gulshan Thana and the rate of consultancy was settled at Tk.690 per acre. On 27-07-1997 the appellant received the first installment of payment but the dispute arose with regard to the quantum of works and consultancy fees. In the contract it is stipulated that in case of dispute which cannot be satisfactorily  disposed of  by mutual agreement be resolved later through arbitration as per provisions of clause 12 the contract. Clause 12 of the Contract provides for resolution of the dispute and appeal. The appellant having failed to get payment of the bill invoked arbitration clause 12 of the contract and referred the matter to arbitration. As per Clause 12.2 of the contract the respondent was required to decide on the claim of the appellant within 10 days after receipt of its statement of claim and furnish a written copy of its decision to the appellant and specify if it intend to remove the disagreement through further discussions and mutual agreement or it prefers to solve the problem through arbitration. The respondent did not concur in the appointment of arbitrator. The arbitration clause does not provide for any mode of appointment of arbitrator or arbitrators. Since Clause 12.3 contemplates that in case of arbitration the Arbitration Act of 1940 as adopted in Bangladesh is applicable in the instant case we may refer to the relevant provisions of the Act in resolving the dispute between the parties. Arbitration agreement has been defined in Section 2(a) of the Arbitration Act,1940 as a written agreement to submit present or future differences to arbitration, whether an arbitrator is named thereon or not. According to Section 3 of the Arbitration Act arbitration agreement shall be deemed to include the provisions set out in the First Schedule to the Act in so far as they are applicable to the reference. The implied conditions of arbitration agreement are enumerated in the First Schedule to the Act. Article 1 of the First Schedule provides that unless otherwise expressly provided in the agreement the reference shall be to a sole arbitrator. Accordingly in the instant case the reference should have been made to a Sole Arbitrator. In the circumstances when both the parties failed to concur in the appointment of an arbitrator the only course open to a party to the contract was to move the court under Section 8 of the Act for appointment of an arbitrator. None of the parties in the case invoked Section 8 of the Arbitration Act for appointment of an arbitrator. Rather the appellant mistakenly proceeded with the assumption that there should be a reference to 2 arbitrators, one to be appointed by each party as contemplated in Section 9 of the Act. Here the appellant on misconception of law and fact unilaterally appointed Professor Dr. Golam Rahman as an Arbitrator and notified the respondent to appoint their Arbitrator. The respondent did not response to the notice issued by the appellant. Consequently, the appellant named, Professor Dr. Golam Rahman as the Sole Arbitrator.  It appears that the respondent by the letter dated 30.08.1998 challenged the authority of the Sole Arbitrator who had entered into the reference. The respondent did not respond and appear before the Sole Arbitrator. Consequently the Sole Arbitrator by order dated 19.09.1998 gave an exparte award of Tk.3,92,68,022.55 (Tk.1,19,35,000/- on account of balance consultancy fees, (Tk.1,36,00,000/- as interest and Tk.3,92,000/- as compensation).

Since the respondent RAJUK did not make any payment to the appellant as per award given by the Sole Arbitrator, the appellant filed an application under Section 14(2) of the Arbitration Act,1940 which was registered as Title Suit No.1 of 1999 before the Court of Joint District Judge, to make the Award Rule of the Court. Ultimately, the Title Suit No.01 of 1999 was heard and decreed ex-parte on 15.05.2002 against the respondent- RAJUK and thereby the award was made Rule of the Court.

The respondent being aggrieved by the aforesaid judgment and decree passed by the learned Joint District Judge, preferred an appeal being First Appeal No.282 of 2003 under section 17 of the Arbitration Act 1940 before the High Court Division and a Division Bench of the High Court Division by the impugned judgment and decree dated 27.07.2004 allowed the appeal after setting aside the aforesaid judgment and decree passed by the learned Joint District Judge and thereby set aside the award.

It appears that the High Court Division observed as under:

“The contract was executed on 14.01.1995, Clause 4.1 of the contract stipulates that the time for completion of survey and planning works and submission of all maps and reports would be eight months from the date of signing of the agreement..................................................................................

Besides, the work orders dated 03.01.1987 and 05.07.1987 appear to be self-contained contracts and do not indicate any intention of the parties to enter into any contract in future for said works.”

However, the parties to a contract are at liberty to vary the terms and conditions of the contract at any stage of the contract provided that  the change does not contravene any provision of law or against the public policy.

In this context it is pertinent to reproduce Clause 12 of the Contract which reads as under:

“12.0. DISPUTES AND APPEALS:

12.1. In the event of a disagreement under this Agreement, which cannot be satisfactorily disposed of by mutual agreement, the Consultant shall, within a reasonable time, submit a written statement to the Kartripakkha briefly describing the nature of the problem the position of the Consultant regarding the issue and a narrative of the facts in support of the Consultant’s position and express its desire for settlement of the dispute through Arbitration.

12.2. Within 10 (ten) days after receipt of the Consultant’s statement, the Kartripakkha shall decide the issue and furnish a written copy of the decision to the Consultant and specify if the Kartripakkha intends to remove the disagreement through further discussion and mutual agreement or it prefers to solve the problem through Arbitration.

12.3. In case of Arbitration, the Arbitration Act of 1940 as adopted in Bangladesh shall be applied. “

It appears that Clause 12 provides for resolution of disputes which cannot be satisfactorily disposed of by mutual agreement be resolved through arbitration. But there is neither any provision in the contract as to the mode of the appointment of arbitrator or umpire nor any provision in the arbitration clause as to the number of arbitrators. However, Clause 12.3 contemplates that in case of arbitration the Arbitration Act of 1940 as adopted in Bangladesh shall be applicable. Section 2(a) of the Arbitration Act defines arbitration agreement which means a written agreement to submit present or future differences to arbitration whether an arbitrator is named therein or not. According to section 3 of the Arbitration Act an arbitration agreement shall be deemed to include the provisions set out in the First Schedule insofar as they are applicable to the reference. Article I of the First Schedule contemplates that unless otherwise expressly provided, the reference shall be to a Sole Arbitrator.  In the case of National Small Industries Corporation -vs- National Metal Craft reported in AIR 1981 (Delhi) 189 it has been held that where the agreement does not provide for the number of Arbitrators and the mode of their appointment there it will be assumed to be one for reference to a single Arbitrator pursuant to the provisions of Article I of the First Schedule of the Arbitration Act,1940. The pertinent question to raise in such circumstances is how a Sole Arbitrator be appointed under the provisions of Arbitration Act, 1940. Section 8 of the Arbitration Act provides for power of court to appoint  arbitrator or  umpire.

In this context it is profitable to reproduce Section 8 of the Arbitration Act, 1940 which reads as follows:

“8. Power of Court to appoint arbitrator or umpire-(1) In any of the following cases-

(a)  Where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or

(b)  If any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or

(c)  Where the parties or the arbitrators are required to appoint an umpire and do not appoint him;

any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments Or in supplying the vacancy.

(2) If the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties.”

According to section 8 (1) of the Act any party to the arbitration agreement may propose, on the happening of any of the three contingencies as enumerated  in clauses (a), (b) and (c) thereof, the appointment of an arbitrator or umpire and serve written notice upon the other parties or arbitrators  to concur in  the appointment and according to section  8(2) when the other parties failed to  concur in the appointment within fifteen clear days after the service of written notice and if the appointment is not made within the said period the court may on the application of the party who gave the notice and after giving the other parties opportunities of being heard appoint an arbitrator who shall have like power to act in the reference and to make an award  as if he had been appointed by consent of both parties. Precisely, under Section 8 of the Arbitration Act, Court has power to appoint arbitrator or umpire on the happening of any of the three contingencies when one party defaulted to concur within fifteen days in the appointment of an arbitrator made by the other party. Under Section 8(2) failure of the parties to concur in the appointment within 15 days is the condition precedent for invoking the power of the court in the appointment of the arbitrator or umpire. In the case of Government of Bangladesh and others –vs- Samir and Co reported in 28 DLR (AD) 21 at page 29 para 32 this Division having considered various decisions of different High Courts of the Sub-Continent observed as under:

“ Service of notice by one party asking the other party to concur in the appointment proposed by him and the failure of the other party to concur in the said proposal in compliance with the said  notice is the essential condition precedent  to the exercise of the jurisdiction by the Court to make the necessary appointment. The correct construction of the provision of section 8(2)also lends support  to this view.”

Pursuant to section 4 of the Arbitration Act,1940 the parties to an arbitration agreement may agree as to the mode of appointment of an arbitrator or arbitrators to be appointed by a person designated in the agreement either by name or as the holder for the time being of any office or appointment. In the instant case none of the parties agreed as to the mode of appointment of an arbitrator. However there is no clause in the contract naming an arbitrator or arbitrators or any mechanism for appointment of arbitrator or arbitrators. In the circumstances and on the failure of the parties to concur in the appointment of an arbitrator within fifteen days  after service of notice it would have been proper for the appellant to move the Court under Section 8(2) of the Act for appointment of an arbitrator. In this context the High Court Division rightly observed :

“None of the parties has any right to appoint any arbitrator independent of the agreement and ask other party to concur. The course adopted by the consultant could only be accepted when the agreement provides that the reference shall be to two arbitrators, one to be appointed by each party within the understanding of section 9 of the Act.”

 

Though Clause 12.3 stipulates that Arbitration Act of 1940 shall be applicable in the instant case yet, neither the appellant nor the respondent took recourse to the provisions of the Arbitration Act,1940 in the appointment of the Sole Arbitrator rather the appellant unilaterally appointed Professor Dr. Golam Rahman as the Arbitrator and requested the respondent -RAJUK to nominate an Arbitrator on their behalf. As the respondent did not appoint an arbitrator on their behalf the appellant appointed Professor Dr. Golam Rahman as the Sole Arbitrator. The appellant had not followed the procedure contemplated in section 8 of the Arbitration Act. In fact the appellant had mistakenly followed the procedure laid down in section 9 which had no manner of application in the instant case.

The respondent did not appear before the Sole Arbitrator. Consequently, the award was passed ex-parte on 19-09-1998 by the Sole Arbitrator. The respondent failed to make payment as per award made by the Sole Arbitrator whereupon the Court of Joint District Judge, 5th Court, Dhaka on the prayer of the appellant under section 14(2) of the Arbitration Act directed the Sole Arbitrator to cause the award to be filed in the court for making the same Rule of the Court which was registered as Title Suit No.1 of 1999. The learned Joint District Judge by ex-parte decree made the award Rule of the Court. Being aggrieved by the judgment and decree passed by the learned Joint District Judge, the respondent RAJUK preferred an appeal  being First Appeal No. 282 of 2003 before a Division Bench of the High Court Division of the Supreme Court under section 17 of the Arbitration Act 1940. It appears that the High Court Division having considered the relevant provisions of Arbitration Act i.e. section 8 power of court to appoint arbitrator or umpire,  Section 17 judgment in terms of award, section 30 grounds for setting aside award and section 33 arbitration agreement or award to be contested by application, rightly allowed the appeal and set aside the award.

Section 17 of the Act contemplates that when an award is filed in the court for making it rule of the Court, the court is required to see whether there is any cause to remit the award or any of the matter refers to arbitration for reconsideration or to set aside the award. If the answer is negative in all the three options then only the court shall proceed to pronounce judgment according to the award and upon such judgment so pronounced a decree shall follow. According to section 17 no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award. Having considered the materials on record the High Court Division rightly observed as follows:

“when the Court is satisfied on both of the requirements and after the time for objection to an award passed and or the objection, if any filed, is rejected, it shall proceed to pronounce judgment in accordance with the award and upon the judgment so pronounced a decree shall follow. After going through such procedure, when the Court signs a decree, which could only be challenged on the ground that the decree is in excess of the award or not otherwise in accordance with the award. Scope of such an appeal is intended to be very limited.”

According to section 41 of the Arbitration Act, 1940, subject to the provisions of this Act and of Rules made thereunder, the provisions of the Code of Civil Procedure, shall apply to all proceedings before the Court and to all appeals, under this Act. The word judgment is not defined in the Arbitration Act,1940. We may take recourse to section 2(9) of the Code of Civil Procedure which  defines judgment meaning the statement by the judge of the grounds of a decree or order. Order 20, Rule 4(2) of the Code of Civil Procedure requires that judgments of all Courts shall contain a concise statement of the case, the points for determination, the decision thereon, and the reasons for such decision. In Title Suit No.1 of 1999 ex-parte decree was passed by the learned Joint District Judge, in making the award rule of the Court. Section 17 of the Arbitration Act empowers the Court to pronounce judgment after the time for making an application to set aside the award has expired or such application having been made after refusing it. So pursuant to Section 17 Court is required to see whether there is any cause to remit the award or any of the matters to arbitration for reconsideration or to set aside the award. From the scheme of the Arbitration Act, 1940 we find that Section 15 empowers the Court to modify the award and section 16 empowers the Court to remit the award to the arbitrator or umpire for reconsideration upon such terms as it thinks fit. Section 17 is the enabling section which empowers the appellant to prefer an appeal against the judgment and decree passed by the trial Court only on the ground that it is in excess of, or not otherwise in accordance with , the award. So under section 17 Court has to see whether there is any reason for setting aside the award before making the award Rule of the Court. Section 30 contains the grounds for setting aside the award which reads as under:

“30. Grounds for setting aside award-An award shall not be set aside except on one or more of the following grounds, namely:- 

(a)  That an arbitrator or umpire has misconducted himself or the proceedings;

(b)  That an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35;

(c)  That an award has been improperly procured or is otherwise invalid.”

On careful scrutiny of the judgment passed by the High Court Division it appears that the High Court Division has considered the order of the learned Subordinate Judge which reads as under:

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On perusal of the aforesaid order passed by the learned Joint District Judge, in making the award rule of the Court we find that he has not considered the requirements of section 17 of the Arbitration Act,1940 which provides for pronouncement of judgment in terms of award. Section 17 contemplates that in order to pronounce judgment according to award the Court is required to examine the award to see as to whether there is any cause to remit the award or any of the matters to arbitration for reconsideration or to set aside the award and that after the time for making an application for setting aside the award has expired or such application having been made, after refusing it, proceed to pronounce judgment according to the award. The Court would also further require to see that the decree is not in excess of or not otherwise in accordance with the award. Having considered the facts and circumstances of the case the arbitration clause and the relevant provisions of the Act, we can easily form the opinion that, there is no valid appointment of the Sole Arbitrator, Professor Dr. Golam Rahman because the appointment has been made unilaterally by the respondent and without application to the court under section 8 of the Act. Moreover, the appointment of the Sole Arbitrator was invalid and the reference was made to a wrong forum having no authority and as such  it is a coram non judice. Consequently, the award passed by him is a nullity in the eye of law. In this context reference may be made to a decision of the Supreme Court of Pakistan in the case of M/S. Awan Industries Ltd. Vs. Executive Engineer, Lined Channel Division, (1992) SCMR, 65 wherein it has been held that the provisions of section 17 of the Arbitration Act imposes a duty on Courts “17.................. to see that there is no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award. This can be done by the Court suo motu, apart from the application which a party may make for either remission of the award or its reversal. Where, therefore, an award is found to be nullity because of the invalidity of the arbitration agreement or, for any other reason, or the award is prima facie illegal and not fit to be maintained, the Court has power under section 17 of the Act to set it aside, without waiting for an objection to award being filed or without considering any application for setting it aside, if there be any, and irrespective of the question whether or not any objection to the award was filed or whether the objection, if filed, was not within time. In such cases section 30, clause (c) of the Act is also attracted. Another example can be where a party appoints a sole arbitrator without prior notice to the other party, the award would be prima facie illegal and may be set aside. .....................................

18 --------------------

19 .............................

20. ............................. Even otherwise while examining the award for the purposes of making it rule of the Court, the Court could consider whether there was a valid arbitration agreement or reference to arbitration pursuant to which the award was given or whether the award was in existence. It is correct that an award could be set aside only on the grounds mentioned in section 30 of the Act, but besides section 17, this section also contains clause (c), which provides the ground that an award has been improperly procured or is otherwise invalid.”

 

In the instant case the learned Joint District Judge passed the judgment ex-parte in making the award rule of the Court. Even in a case where a Court is required to pass judgment in making the award Rule of the Court and in so doing even if an ex-parte decree be passed under section 17 of the Arbitration Act, 1940 a duty is cast upon the Court to see as to whether the requirements of the said section has been followed which have been clearly enumerated above in the case of  M/S. Awan Industries Ltd. Vs. Executive Engineer, Lined Channel Division, (1992) SCMR, 65.

Admittedly there was a dispute between the appellant and the respondent and the matter was referred to the arbitration. But the arbitration agreement is silent as to the mode of appointment of arbitrator in which case recourse could have been made under section 8 of the Arbitration Act which empowers the Court to appoint an arbitrator when the parties have failed to come to an agreement in the appointment or when difference had arises and both the parties failed to concur in such appointment after service of notice by one party to the other party, the Court can appoint an arbitrator who shall have all the powers to act in the reference and to make an award as if he has been appointed by concurrence of all the parties.

We have already found that the appellant unilaterally appointed the Sole Arbitrator without having any provision of appointment of arbitrator in the arbitration clause of the contract and also in violation of the provisions of Arbitration Act, 1940. In that view of the matter the appointment of the Sole Arbitrator is invalid, without jurisdiction and not in accordance with law. Therefore, we are of the view that the High Court Division rightly allowed the appeal in setting aside the judgment and decree passed by the learned Joint District Judge and consequently the award being a nullity was set aside. In this case the High Court Division while setting aside the award has not superseded the reference by invoking section 19 of the Act. Section 19 of the Act reads as follows:-

“ 19. power to supersede arbitration where award becomes void or is set aside:- where an award has become void under sub-section 3 of section 16 or has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred.”

When an award is set aside the court has a discretion under section 19 to supersede the reference.  In the case of Abdul Hakim Khan Vs Lahore Improvement Trust, The Mall, Lahore reported in PLD 1950 Lah 32 it has been held that where the court sets aside an award but does not expressly  supersede the reference the arbitration ag- reement remains in full force. In the case of Juggilal Vs. General Fiber Dealers reported in A.I.R. 1962 S.C. 1123 the Supreme Court of India held that in a case where the Court does not supersede the reference while setting aside the award, the reference and the arbitration agreement subsist and further arbitration can take place. In this case the Supreme Court of India observed as follows:

‘’Section 19 provides, inter alia that where an award has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred. The section therefore leaves it to the discretion of the Court when it decides to set aside an award, whether to supersede the reference or not. It may not supersede the reference at all in which case though the award may be set aside the reference will continue ..................... ................................. ......................... ............ ................... ..........................................

....................The legislature has therefore given discretion to the Court under section. 19 to decide when it sets aside an award what the consequences of its order setting aside the award will be. If the Court finds that the arbitration agreement is of the kind which exhausts itself after the first reference is made or if it finds on account of the reasons which have impelled it to set aside the award that there should be no further reference of the dispute to arbitration, the Court has the power to supersede the reference and thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred. On the other hand if the Court finds that the arbitration agreement is of a general nature and contemplates continuation of the reference with respect to the same dispute or successive references with respect to different disputes arising under the terms of the arbitration agreement it may not supersede the reference with the result that the reference as well as the arbitration agreement on which it is based survives. In such a case there can in our opinion be no doubt that where the reference and the arbitration agreement survive the same dispute may go before the arbitrators again provided there is machinery provided in the arbitration agreement which makes this possible.[AIR 1962 SC,1123 at page 1126 para-8]

 

In the instant case, the Sole Arbitrator was illegally appointed by the appellant without having any authority to do so. The reference to an Arbitral Tribunal which was wrongly constituted is a coram non judice, without jurisdiction and consequently, any award passed by the same is a nullity and not tenable in law. In that view of the matter the submission of the learned Advocate for the appellant in respect of section 33 of the Arbitration Act, 1940 and Article 158 of the Limitation Act, 1908 do not require any consideration by this Division.

In view of the above observations and findings we are of the view that the High Court Division rightly allowed the appeal and set aside the judgment and decree passed by the learned Joint District Judge, and thereby set aside the award without superseding the reference. But it failed to pass necessary order as to how the dispute would be resolved. The appellant will be seriously prejudiced if an order is not passed by this Division with regard to the fate of the reference. It is true that the reference was not superseded in this case when the award was set aside. The pertinent question at this stage is whether it is possible to have further arbitration with respect to the same dispute. In order to find out an answer to this question examination of clause 12 of the contract is required. On meticulous examination  of the terms of the contract relating to arbitration as enumerated in clause 12 it is found that the  term is very wide enough  which contemplates  reference of any dispute as and when arises between the parties to the contract. In the facts and circumstances of the case we are of the opinion that the parties may apply to the court in accordance with the provisions of the Arbitration Act, 1940 for appointment of an arbitrator who shall be competent enough to resolve the same dispute when the reference remains pending and has not been superseded under section 19 of the Act and the arbitration agreement subsists.  Having considered the facts and circumstances of the case, in the interest of justice, we are of the view that both the appellant and respondent are at liberty to apply to the Court under the provisions of the Arbitration Act, 1940 for appointment of an arbitrator who shall have like power to act in the reference and to make an award as if he has been appointed by consent of all parties. In other words, arbitration may proceed afresh in accordance with law.

With the above observations and findings the appeal is disposed of.