IN THE SUPREME COURT OF PAKISTAN

(APPELLATE JURISDICTION)

PRESENT:
MR. JUSTICE IJAZ UL AHSAN
MR. JUSTICE SAYYED MAZAHAR ALl AKBAR NAQVI
MR. JUSTICE JAMAL KHAN MANDOKHAIL

Civil Appeal No.3 15 of 2022

(On appeal against the judgment dated 27.04.2017
passed by the Peshawar High Court Peshawar in
RFA No. 328-P of 2016)

Appellant
Shahin Shah

Versus

The Government of Khyber Pakhtunkhwa Respondents

through Secretary Irrigation Department,
Peshawar and others.

For the Appellant(s): Qazi Jawad Ehsanullah, ASC.

Ch. Akhtar All, AOR.

For the Respondent(s): Mian Shafaqat Jan, Addl. AG, KP.

Nemo (for respdt.#6)

Date of Hearing: 20.06.2022.

JUDGMENT

IJAZ UL AUSAN, J: - The Appellants through the

instant appeal have challenged a judgment of the Peshawar

High Court, Peshawar dated 27.04.20 17 passed in Regular

First Appeal No. 128-P of 2016 ("Impugned Judgment").

Through their Regular First Appeal ("RFA"), the Respondents

had challenged the judgment and decree of the Trial Court

dated 19.03.20 16 whereby, the Arbitration Award given in

favour of the Appellants was made a Rule of Court. The

learned High Court set aside the judgment and decree dated

9,03.2016 and remanded the matter back to the Trial Court.

2. The case at hand has a complicated history,

hence, for the sake of clarity, the necessary facts of the case
Civil Appeal No.315 of 2022. 2

are divided into two parts i.e., the background of the case

containing facts from the award of the tender to the first

decision of the Trial Court and the history of litigation

comprising of the remand and post remand proceedings and

their outcome.

Background of the Case: -

On 01.03.2001, a tender submitted by the

Appellant for a contract for remodelling of the Surface

Drainage System in Tanda Dam, Kohat, was approved.

Resultantly, an Agreement dated 25.03.2001 between the

Appellant and the Respondents ("Agreement") was signed. In

the Agreement, Clause 21 provided that all disputes between

the parties would be settled by way of arbitration. The

Respondents (as alleged by the Appellants) did not hand over

the site in time, resulting in a dispute arising between the

parties. Consequently, a suit for recovery of damages was

filed by the Appellant on 16.01.2004. The suit was

accompanied by an application filed by the Appellant under

Section 8 of the Arbitration Act, 1940, seeking a direction by

the Trial Court to refer the matter to arbitration as provided

in clause 21 of the contract between the parties.

Subsequently, the Respondents also filed an application on

06.03.2004 for the grant of a stay in the suit to resolve the

dispute through arbitration.

The Appellant and the Respondents agreed that

the matter should be referred to Arbitration under the Rules

of Reconciliation and Arbitration of the International

Civil Appeal No.315 of 2022. 3

Chambers of Commerce. The applications to stay the suit

were dismissed and on 24.07.2004. However, the Trial Court

passed an order referring the matter to arbitration. The

Appellant and the Respondents submitted their nomination of

arbitrators on 17.02.2005.

The arbitration proceedings were conducted, both

parties freely and voluntarily participated in the proceedings.

The arbitrators appeared before the Trial Court to seek

extension of time to complete the proceedings and render an

award. Two-months time was granted to the arbitrators to file

the Arbitration Award ("Award"). The matter was then

adjourned to 14.02.2005. The arbitrators once again

appeared before the Trial Court on 14.02.2005 and sought a

further extension of two months, which was granted by the

Trial Court and the case was fixed for 15.07.2005. On

15.07.2005, the arbitrators sought another extension to file

the Award and were again granted two further months to ifie

the Award.

Ultimately, the Award was filed in Court on

15.09.2005. The case was adjourned to 15.10.2005. The

Appellant filed objections to the Award on 15.10.2005. The

Respondents filed their objections to the Award on

05.0 1.2006. The Respondent's objections to the Award were

replied to by the Appellants on 24.01.2006 as inter alia,

barred by time. The Respondents, on 26.07.2006, submitted

an application for condonation of delay in support of the

 Civil Appeal No.315 of 2022. 4
.4

objections filed by them which were filed four months beyond

the period of limitation.

Finally, the Award was made Rule of Court on

27.11.2006.

History of Litigation: -

The Respondents filed RFA No. 94/2007 against

the judgment and decree of the Trial Court dated 27.11.2006

whereby the award was made a rule of the Court. The RFA

was allowed. The matter was remanded to the Trial Court vide

judgment of the High Court dated 24.06.2009. However, in

post remand proceedings, the Award was once again made

Rule of Court vide judgment and decree dated 12.09.2009.

The Respondents filed another RFA No. 225/2009

on 17.11.2009. This RFA was also allowed on 13.10.15.

Resultantly, the matter was again remanded to the Trial

Court with directions to record statements of the Arbitrators.

The order of the trial Court regarding dismissal of objections

petition filed by the Respondents as barred by time was not

interfered with. Having not been challenged before any higher

forum by the Respondents, it attained finality. On

08.12.2015, the Respondents filed an application before the

trial Court for filing fresh objections against the award. The

said application was dismissed on 07.01.2016. Such

dismissal was not challenged before any higher forum.

Thereafter, the statements of the two Arbitrators

were recorded on 01.02.2016 and they were cross-examined

V
Civil Appeal No.315 of 2022. 5

by the Respondents. Finally, the Award was once again made

Rule of Court vide judgment and decree dated 19.03.2016.

Aggrieved, the Respondents filed an RFA against the

judgment dated 19.03.2016. Vide the Impugned Judgment,

the Award was set aside, and the matter was once again

remanded to the Trial Court to commence the proceedings

from where the Arbitrators were appointed.

Aggrieved by the decision of the learned High

Court, the Appellants have approached this Court.

3. Leave to appeal was granted by this Court vide

order dated 09.02.2022 in the following terms: -

"After hearing the learned Counsel for the Petitioner

and the learned Counsel for the Respondents, who has
appeared pursuant to our notice to the Respondents, leave to
appeal is granted to examine, whether the petitioner was
non-suited on the ground that on account of delay in passing
the award, the arbitrators committed misconduct and
whether the learned High Court misread the evidence and
the record to come to the conclusion that the arbitrators had
committed misconduct, despite the fact that in the three
rounds of litigation, the award had repeatedly been upheld
by the Civil Court. Further, whether the High Court has
correctly interpreted the law of limitation..."

4. The learned ASC for the Appellant submits that

the High Court could not have exercised jurisdiction as a

Court of Appeal over a judgment making an Arbitration Award

a Rule of Court. Arbitration awards can be interfered with on

limited grounds provided in the law. He further submits that

when an Award has been rendered by an Arbitrator(s) in

accordance with the law, the High Court as per Section 17 of

the Arbitration Act, 1940 ("Act, 1940") cannot set aside the

judgment and decree making an Award, Rule of Court, except

where the Award rendered is against the law. Learned ASC for

the Appellants further submits that the Objections to the

Civil Appeal No.315 of 2022. 6

Award filed by the Respondents were barred by time which

fact was not interfered with by the High Court in the

Impugned Judgment. As such, the High Court could not have

remanded the case to the trial Court for the third time. The

learned ASC has further argued that, after the case was

remanded for the second time, the Respondents filed

objections which were dismissed vide order dated 07.01.16

and, the said order was never challenged or questioned by the

Respondents, therefore, the order dated 07.01.2016 had

attained finality and could not be reopened by the High

Court. The learned ASC for the Appellants further submits

that the filing of the Award beyond the period of limitation of

04 months was not fatal and, was within the confines of

Section 28 of the Act, 1940 which provides that an extension

of time for the submission of an Arbitration Award may be

sought from, the Court. The learned ABC further argued that

notice as per Section 14 of the Act, 1940 was served by the

arbitrators and, the High Court misread the record in holding

that no such notice was served and, even if no such notice

was served, substantial compliance of Section 14 of the Act,

1940 was done since the Award was filed in Court in the

presence of the parties and their counsel. He has submitted

that the statements of the two Arbitrators were recorded and

the Award was tendered in evidence on which no objection

was raised. Learned ASC has further argued that Section 34

of the Act, 1940 was not attracted in the present case arid,

that if objections in this regard were not raised before the trial
Civil Appeal No.315 of 2022. 7

Court, such objections could not be raised before the High

Court.

5. The learned Additional Advocate General, Khyber

Palchtunkhwa ("AAG KP") argued that the entire proceedings

before the Trial Court were illegal since the Trial Court failed

to observe the procedure provided in Section 34 of the Act,

1940 before sending the reference to arbitrators. Learned AAG

KP, while accepting that the objections filed by the

Respondents were barred by time, has further argued that the

Trial Court was bound to examine the Award notwithstanding

the delay in filing the objections. Learned AAG KP further

argued that since the Act, 1940 was not followed in letter and

spirit, therefore, the High Court correctly remanded the case

to the Trial Court to be examined afresh, in the interest of

justice. The learned AAG KP has further argued that the

Arbitrators misconducted themselves by not filing the Award

within the prescribed time limit of 04 months, which itself

was sufficient to render the Award invalid.

6. We have heard the learned Counsel for the parties

and perused the record. The questions which require

adjudication by this Court are as follows: -

(I) Was the order of the Trial Court making the

Arbitration Award, Rule of Court, appealable?

(ii) Did the Arbitrators misconducted themselves by

not filing the Arbitration Award within time?

Whether notice under Section 14 of the Arbitration

Act, 1940 was serued by the Arbitrators Were the
Arbitrators required to file the Arbitration Award in
Court within 90 days as per Article 178 of the
Limitation Act, 1908?
Civil Appeal No.315 of 2022. 8

(iv) Was the fact that the Respondents did not file their
objections to the Arbitration Award within time,
fatal to the Respondent's case?

(v) Were the proceedings before the Trial Court illegal

due to the absence of a formal order under Section
34 of the Act, 1940?

WAS THE ORDER OF THE TRIAL COURT MAKING THE

ARBITRATION AWARD, RULE OF COURT, APPEALABLE?

7. Section 39 of the Act, 1940 provides five instances

in which an aggrieved party may file an appeal against an

order passed under the Act, 1940. Section 39 of the Act, 1940

is reproduced below: -
"39 Appealable orders: (1) An appeal shall lie from the
following orders passed under this Act (and from no others)
to the Court authorised by law to hear appeals from original
decrees of the Court passing the order: -
An order-
(i)superseding an arbitration;
(ii)on an award stated in the form of a special case;
(iii)modifying or correcting an award;
(iv)filing or refusing to file an arbitration agreement;
(u)staying or refusing to stay legal proceedings where there is
an arbitration agreement;
(vQsetting aside or refusing to set aside an award:
Provided that the pro visions of this section shall not
apply to any order passed by a Small Cause Court.
(2) No second appeal shall lie from an order passed in appeal
under this section, but nothing in this section shall affect to
take away any right to appeal to the Supreme Court."

The aforenoted provision of the Act, 1940 restricts

and limits the instances in which an appeal may be filed. This

is evident from the words "and from no others" provided in

Section 39 ibid which essentially means that except for an

appeal that falls in the limited parameters provided in the

aforenoted provision, no appeal would be competent. The use

of specific words by the legislature is an expression of the

legislative intent and, Courts cannot interfere with the same

unless a literal interpretation of the law would not correct the

Givil Appeal No.315 of 2022. 9

mischief sought to be corrected. As evident from the grounds

agitated by the Respondents in RFA No. 94/2007, the

Respondents inter a/ia, out rightly denied the existence of an

Arbitration Agreement; denied the existence of an arbitrable

dispute between the parties, and essentially, prayed for the

Arbitration Award to be set aside. This Court's discussion,

therefore, will be confined in the present question to Section

39 (vi) which covers the situation where an order is passed

that either sets aside the Arbitration Award or refuses to set

aside an Arbitration Award.

8. The Respondents are aggrieved of a "composite

order" dated 19.03.2016, passed by the Trial Court, whereby

the objections filed by the Respondents were dismissed and

the Arbitration Award was made Rule of Court. The word

"composite" means that the order is comprised of two distinct

elements or parts. An example of a composite order can be

seen in the case titled Rashida Begum v. Ch. Muhammad

Anwar and Others (PL.D 2003 Lahore 522) in which, the

objections raised by the Appellant (before the High Court then)

were dismissed and, the Court made the award rule of Court,

followed by a decree dated 05.03.1985. The said order is a

"composite order" because it comprises two distinct parts i.e.,

the dismissal of the objection petition filed by one party and,

the making of an arbitration award, Rule of Court. Another

example of a composite order can be seen in the case of

Muhammad Alam Khan v. Jewan Khan (PLD 1985 Lahore

181) in which, the Court held as follows:-

Civil Appeal No.315 of 2022. lii

"It would be seen that under clause (b) the relief claimed is
undervalued. Therefore, the Court after determination of the
real value should direct the plaintiff to correct the valuation
in the relevant para of the plaint within the specified time. It
means that order under clause (b) is to be followed by order
under clause (c) to make up the deficiency in the court-fee. It
may be a composite order. Conversely speaking when the
plaintiff is directed under clause (b) to correct the valuation
of the suit for purposes of court-fee and jurisdiction, then it
becomes his duty not only to amend the plaint but also to
pay the court-fee accordingly. This means making up of the
deficiency in the court-fee in cases covered by clause (b) is
automatic. To mu mind, the proper order would be a
comp osite order i.e. the p laintiff should be directed to amend
the p laint and also to fix the court-fee accordingl y and the
failure shall entail the rejection of the plaint. But in a case
under clause (c) the relief claimed is valued properly but
plaint had been written upon a paper insufficiently stamped,
therefore, the Court would simply direct the plaintiff to
supply the requisite stamp paper within the time to be fixed
by the Court. This way there is a clear distinction between
the two provisions. The same was not kept in mind by the
Thai Court while invoking clause (b) of Order VII, Rule 11,
C.P.C. in this case. "(Underlining is ours)
In the present case, the Trial Court's order has
two distinct parts as well. The Trial Court has not only
dismissed the objections of the Respondents as being barred
by time by four months but has also made the Arbitration

Award, Rule of Court.

9. The learned High Court has held that even where
an application to set aside an Award is rejected by the Trial
Court under Section 17 of the Act, 1940, nonetheless, the
right of an aggrieved party under Section 39 of the Act, 1940
cannot be circumscribed since, in a composite order, each
part of the order may be taken as an independent and
separate order and can be challenged under Sections 39 and
17 separately. The learned High Court has further held that a
challenge under Section 17 "shall only be maintainable if

conditions laid down in Section 17 of the Act were met". It,

therefore, becomes necessary to examine Section 17 of the

Act, 1940, which is reproduced as under: -
Civil Appeal No.315 of 2022. 11

"17. Judgment in terms of award. Where the Court sees

no cause to remit the award or any of the matters referred to
arbitration for reconsideration or to set aside the award, the
Court shall, after the time for tucking an application to set
aside the award has expired, or such application having
been made) after refusing it, proceed to pronounce judgment
according to the award, and upon the judgment so
pronounced a decree shall follow, and 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."

Section 17 ibid provides that an appeal under the

said provision may only be filed against a decree on the

grounds that (a) the decree is in excess of the award and (b) it

is otherwise not in accordance with the award.

10. The difference between Section 39 and Section 17

is that Section 39 provides more grounds under which an

order passed under the Act, 1940 may be challenged, than

the grounds of challenge under Section 17. It is evident from

the grounds taken by the Respondents in RFA 94/2007 that

they did not dispute the decree of the Trial Court as being

either in excess of the Arbitration Award or otherwise, against

the Arbitration Award. The learned High Court conceded that,

for a challenge to be maintainable under Section 17, the

conditions prescribed therein must be met. However, it

escaped the learned High Court's notice that the Respondent

had not challenged the decree of the Trial Court on the

grounds mentioned in Section 17 (supra) inasmuch as it was

not the stance of the Respondents that the judgment and

decree of the Trial Court was either in excess of the

Arbitration Award or otherwise against the Arbitration Award.

Since the Respondents had not taken the stance that the

decree of the Trial Court was in excess of or against the

Arbitration Award; they effectively admitted that the decree of

Civil Appeal No.315 of 2022. 12

the Trial Court was correct to the extent that the decree was

in accordance with the Award. As such, the findings of the

learned High Court in this respect are in our opinion

erroneous and unsustainable. If the High Court found that

the order of the Trial Court had two distinct parts, then, it

had to examine whether the Respondents had challenged

both parts of the order independently by raising independent

grounds in terms of Section 17 and Section 39. The High

Court could not have suo motu implied that such grounds had

been taken. The High Court was required to proceed on the

basis of record which clearly showed that the Respondents

had nowhere taken the stance that the decree of the Trial

Court was in excess of or against the Arbitration Award. As

such, the Nigh Court could not have assumed jurisdiction in

the matter, especially when the Respondents did not question

the decree on the grounds mentioned in Section 17 of the Act,

1940. Even otherwise, the failure of the Respondents to

agitate the grounds mentioned in Section 17 before the Trial

Court barred them from raising any such grounds before the

High Court since the Respondent was appealing against the

judgment of the Trial Court. They were to show that the

judgment of the trial Court was hit by any of the grounds

available under Section 17 ibid which they failed to do. The

High Court, in our opinion, erred in law and exceeded its

jurisdiction in proceeding beyond the grounds agitated by the

Respondent in its appeal.

DID THE ARBITRATORS MISCONDUCTED THEMSELVES

BY NOT FILING THE ARBITRATION AWARD WITHIN
TIME?
Civil Appal No.315 of 2022. 13

11. Section 39(vi) of the Act, 1940 provides that an

order shall be appealable which either sets aside or does not

set aside an Arbitration Award. The grounds under which an

Arbitration Award may be set aside are enumerated in Section

30 of the Act, 1940 which reads as follows: -

1130. 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'

It has been argued by the Respondents that the

Arbitrators misconducted themselves within the meaning of

Section 30(a) by not filing the Arbitration Award within time.

It is further alleged in the grounds of the RFA that the

Arbitrators were close friends of the Appellant, they did not

provide a proper hearing to the Respondents and they did not

properly scrutinize the record before rendering the Award.

The learned High Court has, however, only given a finding on

the fact that the Arbitrators misconducted themselves only to

the extent of not filing the Arbitration Award within time. The

heart of the Respondent's argument, therefore, is, that the

alleged misconduct of not filing the Arbitration Award within

time was so glaring that, if it is overlooked, it would lead to a

miscarriage of justice. We, therefore, deem it appropriate to

examine the term "misconduct" on part of the Arbitrator. The

term misconduct was interpreted in the judgment titled

Gernis International (Pvt.) Ltd v. Aeroflot Russian

ciiñl Appeal No315 of 2022. 14

International Airlines 12018 SCMR 662 Supreme _Q0U41

wherein, this Court held as follows:

two types: legal misconduct' and
"(27) Misconduct is of
moral misconduct. Legal misconduct means misconduct in
the judicial sense of the word, for example, some honest,of
though erroneous, breach of duty causing miscarriage
justice; failure to perform the essential duties which are cast
on an arbitrator; and any irregularity of action which is not
consistent with general principles of equity and good
conscience. Regarding moral misconduct; it is essential that
there must be lack of good faith, and the arbitrator must be
shown to he neither disinterested nor impartial, and proved
to have acted without scrupulous regard for the ends of
justice."
The term "misconduct" was further interpreted in

the case of Pakistan Steel Mills Corporation. Karachi v.

Messrs Mustafa Sons (Put.) Ltd. Karachi (PLD 2003

Supreme Court 301) in which, the Court held as follows: -

"The word 'misconduct" with reference to arbitration
proceedings, is interpreted in the sense in which it is used in
English Law and it is not akin to fraud, but it means neglect
of duties and responsibilities of the Arbitrator." (Underlining
is ours)
This Court in the case of GernIs International

(supra) further held that the misconduct alleged by the

parties must be prima fade apparent on the surface of the

Arbitration Award and, that the Court cannot sit as a Court of
Appeal on the award given by the Arbitrator(s) and substitute
its view for the one taken by the Arbitrator(s). The aforenoted
view of this Court finds support from the case of A.
Qutubuddin Khan v. CHEC Mill Wala Dredgin g Co. Put.

Ltd. 12014 SCMR 1268) As such, the Court cannot

reappraise the evidence relied upon by the Arbitrator(s) and

engage in a roving inquiry to discover infirmities in the

Arbitration Award. The illegality or infirmity in the Arbitration
Award must be apparent on the lace of the Award. Reliance in
this respect is placed on Mian Corporation through

IT
0ft4L Appeal No.315 of 2022. 15

Managing Partner v. Messrs Lever Brothers of Pakistan

Ltd (PLD 2006 Supreme Court 169) and National

Construction Co. a WAPDA (1987 PLD 461 Supreme

Court). The Court is required to examine the Arbitration

Award filed in Court to see whether there was an infirmity

within the Award itself. We have gone through the judgment

of the Trial Court dated 19.03.2016. The judgment of the Trial

Court, making the Award Rule of Court is comprehensive and

touches upon all aspects of the case. The learned Trial Court

in paragraph 12 of its judgment has held as follows: -

'It is a hard fact that Arbitrator being final judge on question

of law and fact, his decision is entitled to utmost respect and
weight unless misconduct was alleged and proved against
him to the satisfaction of the court. Although the objection on
Award was filed beyond the period of limitation, but the
objection so filed if gone through, no alleg ation of misconduct
is either alle ged or proved. "(Underlining is Ours)

It is clear and obvious to us that the Trial Court

not only considered the Award but also examined the

objections raised by the Respondents. The Trial Court in

paragraph 13 of its judgment has minutely examined the

record and concluded that a total of fourteen meetings were

held by the Arbitrators in which the controversy was sought

to be resolved. The Trial Court, therefore, judicially

scrutinized the record by applying its mind to the facts and

circumstances of the case. As such, the findings of the High

Court that the Trial Court did not act properly, are repelled

and held to be factually and legally unsustainable.

12. The learned Counsel for the Appellant has taken

us to the orders of the Trial Court, whereby, the Arbitrators

CiuiIAppeaI No.315 of 2022. 16

were given extensions in time to file the Arbitration Award

vide orders dated 14.03.2005 and 15.07.2005. It is apparent

from the orders of the Trial Court that the parties i.e.,

Appellant and Respondents were present at the time when the

Arbitrators sought extensions of time to file the Award. There

is nothing on the record to show that the Respondent's

Counsel objected to any extension in filing the Award. As

such, the plea that the Arbitrators committed misconduct and

should have filed the Award within four months is totally

misconceived. If the Respondents were aggrieved by the Trial

Court's orders dated 14.03.2005 and 15.07.2005, they ought

to have challenged the same. In absence of any appeal against

the aforenoted orders, the said orders attained finality.

13. The record indicates and it is an admitted position

that the Respondents participated in the arbitration

proceedings despite extensions without raising an objection

whatsoever. It is categorically mentioned in the minutes of the

arbitration proceedings that the Respondents "expressed their

confidence" in the nominated Arbitrators i.e., Mr Imdad

Hussain and Mr Inamullah Khan. As such, the argument that

the Arbitrators were "close friends" of the Appellant is

baseless and unsubstantiated. As such, when the

Respondents were present before the Trial Court and did not

raise the objections to extension of time and voluntarily

participated in the proceedings without raising any objection

at any stage, they could not be allowed to change their stance

at the appellate stage having practically waved their right to

object to extension of time. If they were aggrieved of the

Civil Appeal No.315 of 2022. 17

conduct of the Arbitrators, they could have filed an

application under Section 11 of the Act, 1940 which

empowers the Court to remove an arbitrator if the conditions

in Section 11 are fulfilled. No such application is available on

the record.

14. It is pertinent to mention that the time limit of

filing an Arbitration Award within four months is not

absolute. Section 28 of the Act, 1940 clearly provides that

said time limit can be enlarged. As such, the non-filing of an

Award within four months does not ipso facto make the

Award invalid. For ready reference, Section 28 of the Act,

1940 is reproduced as under: -

"28. Power to Court only to enlarge time for making

award. (1) 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.
(2) Any provisions in an arbitration agreement whereby the
arbitrators or umpire may, except with the consent of all the
parties to the agreement, enlarge the time for making the
award, shall be void and of no effect."

We have already found that the time limit

mentioned in Section 28 ibid was enlarged by orders of the

Trial Court in presence of the parties and even otherwise the

Respondents by willingly and voluntarily participating in the

proceedings held during extended periods had waved their

right to object, the fact that the Award was filed after expired

the four-month period was not fatal and the finding of the

High Court with all due respect has been found by us to be

legally and factually erroneous and unsustainable. Reliance

in this respect is placed on the case of WAPDA v. Khanzada

Cluil Appeal No 315 of 2022. IS

Muhammad Abdul Hague Khan Ehattak & Co (PLD 1990

SC 359)

WHETHER NOTICE UNDER SECTION 14 OF THE

ARBITRATION ACT, 1940 WAS SERVED BY THE
ARBITRATORS & WERE THE ARBITRATORS REQUIRED
TO FILE THE ARBITRATION AWARD IN COURT WITHIN
90 DAYS AS PER ARTICLE 178 OF THE LIMITATION ACT,
1908?
The record indicates that the Arbitrators had duly

served notice of signing and making of the Award to the

Respondents in substantial compliance of the provisions of

Section 14 of the Arbitration Act, 1940. There is clear

misreading/non-reading of the record on the part of the High

Court in holding that such notice was not served by the

Arbitrators. Notice in question which bears the date of signing

by the Arbitrators on 14.09.2005 is available on the record.

Such notice was filed in Court with the Award as is apparent

from the notice itself which bears the signatures of the Trial

Court on the date when the Award was filed in Court on

1509.2005. Even otherwise, if an Award is filed by the

Arbitrator in Court in the presence of the parties or their

authorized agents then the requirements of Section 14 qua

serving of notice of signing and making of the Award are

substantially met. This is on the basis of the principle of the

issuance of notice of making and signing of the Award under

Section 14 is connected with the start of period of limitation

as prescribed in Article 158 of the First Schedule of the

Limitation Act, 1908 to file objections on the Award. The

rationale is that the parties must know that the Award has

been filed in Court and if the Award is filed in Court in the

presence of parties or their authorized representatives then in

Cvil Appeal No315 of 2022. 19

that case strict compliance of serving of notice is not

mandatory. Reference in this regard may be made to Tribal

Friends Co. Province of Balochistan 12002 SCMR 1903),

Pakistan throu g h General Manager Pakistan Railway s (PLD

1990 Sc 800), Ashfap Ali Oureshi v. Munici p al Corporation

Multan (PLD 1985 Sc 597) and Sheikh Mehboob Alam v.

Sheikh Mumtaz Ahmed (PLD 1956 (WP) Lahore 276).

15. As far as the question of limitation is concerned,

Article 178 of the Limitation Act, 1908 provides a 90-day

limitation period from "the date of service of notice of the

making of the award" to file an application for the Arbitration

Award to be made Rule of Court. This provision applies to

situations where a party to arbitration receives notice from

the Arbitrator(s) to the effect that an Arbitration Award has

been made. The parties then either request the Arbitrator(s) to

file the Arbitration Award in Court or, file an application

before the Court to direct the Arbitrator(s) to file the

Arbitration Award in Court so that it may be made a Rule of

Court. As such, Article 178 of the Limitation Act, 1908

applies to parties to an arbitration agreement who have been

given notice of making of the award and not to the

Arbitrator(s). The Arbitrator(s) must be requested by the

parties to file the Arbitration Award or must be given a

direction by the Court to do so. The said view is further

provided in Section 14 of the Act, 1940 which reads as

under:-

j4• Award to be signed and filed. (1) When the arbitrators or

umpire have made their award, thew shall si gn it and shall give
notice in writing to the parties of the making and signing thereof
Civil Appeai No.315 of 2022. 20

and of the amount of fees and charges payable in respect of the

arbitration and award.

(2) The arbitrators or umpire shall, at the request of any partg to

the arbitration agreement or any person claiming under such paTti,
or if so directed bit Court and upon payment of the fees and
charges due in respect of the arbitration and award and of the
costs and charges of filing the award, cause the award or signed
copy of it, together with an y depositions and documents which mall
have been taken and proved before them, to be filed in Court, and
the Court shall thereu pon give notice to the parties of the filing of
the award.

(3) Where the arbitrators or umpire state a special case under

clause (b) of section 13, the Court, after giving notice to the parties
and hearing them, shall pronounce its opinion thereon and such
opinion shall be added to, and shall form part of the award?
(Underlining is ours)

This view finds reliance from the case of Inagat

IJllah Khan v. Obaidullah Khan and Others 11999 SCMR

2 702) in which, this Court held as follows: -

X6 Moreover, in view of the special Article 178 of the Limitation Act
which governs an application for filing in Court of an award to be
made rule of the Court under the Arbitration Act the question of
applying the residuary Article 181 of the Limitation Act would not
arise. In Article 178 the period is 90 days from the date of service
of notice of the making of the award as rule of the Court and in the
circumstances of this case the said Article would apply. The
judgments referred to by the learned counsel in his support are
distinguishable as PLD 1972 SC 123 deals with a case under
section 20 of the Arbitration Act, whereas present is the case
covered by section 14 of the Act and both the sections regulate
entirely distinct situations. The judgment reported as AIR 1941
Peshawar 3 appears to have dealt with the original Article 178
which then applied only to the application under the Civil
Procedure Code and not to the amended Article 178 which
specially covers section 14 of the Arbitration Act. Even otherwise,
this point could lose significance and nothing would turn on it
because in the latter part of this judgment we are going to hold that
the arbitrators bu themselves were not com petent to file the award
in Court as such filin g of an award was not envisa ged under
section 14 of the Act because the arbitrators had neither been
requested by an y party to the arbitration agreement to file the
award in Court nor had been so directed bu the Court.'
(Underlining is Ours)

17. It has been argued by the learned Counsel for the

Respondents that the Arbitrators did not serve a notice on the

Respondents under Section 14 of the Act, 1940. The learned

High Court has held that there is nothing on the record to the

effect that the said notice was served before the Arbitration

Award was signed. We are unable to agree with the High

Court. It is pertinent to mention that the parties were present

before the Trial Court when the Arbitration Award was filed in
Cft4I Appeal No.315 of 2022. 21

Court, as such, they had knowledge of the proceedings and

had notice of the same. Substantial compliance of Section 14

of the Act, 1940 was made. Since the parties were present in

Court when the Arbitration Award was filed, issuance of

formal notice under Section 14 of the Act, 1940 was a mere

technicality which could not vitiate the proceedings. The

purpose of a notice is to inter alia make the parties aware of

the proceedings before a Court so that they may participate

or, as in the present case, may file objections, if any, within

the prescribed time provided by law.

18. It is a settled principle of the law that the law

favours the vigilant and not the indolent. If the Respondents

were present before the Trial Court, they cannot object on the

ground that formal notice to them was not issued. Reliance in

this respect is placed on Ash fag All Oureshi v. Municipal

Corporation, Multan and another (1984 SCMR 597) in

which the Court held as follows: -

"9. Apparently, the prevalent view is that as the provision of

the law is meant to enable the parties to know that the
award has been filed in Court so that they may file their
objections, if any, within the time prescribed, a - formal

would be a mere technicality. Even otherwise, an objection

on this score had neither been taken before the Trial Court
nor in the memorandum of appeal before the High Court and
was, therefore, only an afterthought not entitled to serious
consideration." (Underlining is ours)

The Respondents have argued that the Court

should have issued a formal notice in terms of Section 14 of

the Act, 1940. We are unable to agree with this argument. In

Civil Appeal No.315 of 2022. 22

ordinary circumstances, a Court of law is required to issue

notice to the parties so that they may be able to participate in

the proceedings. However, if the parties were present in Court

and were aware that the award had been signed and filed. If

at all a formal notice was not issued it was inconsequential

and would in any event have been an exercise in futility. In

such circumstances, the doctrine of substantial compliance

would apply which provides that the procedural fault in

complying strictly with a provision of the law is so minor that

it does not have a bearing on the essence of the dispute and

the object sought to be achieved. The applicability of the

doctrine of substantial compliance depends on the facts and

circumstances of a dispute. It is for the Court to determine

whether the object, purpose, and intent of a statutory

prerequisite have been fulfilled and, formal compliance would

be unimportant. The question of substantial compliance arose

in the case of The State through Regional Director ANt v.

Imam Bakhsh (2018 SCM]? 2039) wherein, this Court held
as follows: -

"To distinguish where the directions of the legislature are

imperative and where they are directory, the real question is
whether a thing has been ordered by the legislature to be
done and what is the consequence, if it is not done. Some
rules are vital and go to the root of the matter) they cannot be
broken; others are only directory and a breach of them can
be overlooked provided there is substantial compliance. The
duty of the court is to try to unravel the real intention of the
legislature. This exercise entails carefully attending to the
scheme of the Act and then highlighting the provisions that
actually embody the real purpose and object of the Act. A
provision in a statute is mandatory if the omission to follow it
renders the proceedings to which it relates illegal and void,
while a provision is directory if its observance is not
necessary to the validity of the proceedings. Thus, some
parts of a statute may be mandatory whilst others may be
directory. It can even be the case that a certain portion of a
provision, obligating something to be done, is mandatory in
nature whilst another part of the same provision, is directory,
owing to the guiding legislative intent behind it. Even parts of
CÜ4I Appeal No.315 of 2022 23

a single provision or rule may be mandatory or directory. "In

each case one must look to the subject matter and consider
the importance of the provision disregarded and the relation
of that provision to the general object intended to be
secured. Crawford opined that "as a general rule, fthose
provisions that] relate to the essence of the thing to be
performed or to matters of substance, are mandatory, and
those which do not relate to the essence and whose
compliance is merely of convenience rather than of
substance, are directory.' In another context, whether a
statute or rule be termed mandatory or directory would
depend upon larger public interest, nicely balanced with the
precious right of the common man. According to Maxwell,
"Where the prescription of statute relates to the performance
of a public duty and where the invalidation of acts done in
neglect of them would work serious general inconvenience or
injustice to persons who have no control over those entrusted
with the duty without promoting the essential aims of the
legislature, such prescriptions seem to be generally
understood as mere instructions for the guidance and
government of those on whom the duty is imposed or in other
words as directory only. The neglect of them may be penal
indeed, but it does not affect the validity of the act done in
disregard of them. Our Court has held while determining the
status of a mandatory or directory provision that 'perhaps
the cleverest indicator is the object and purpose of the statute
and the provision in question.' And to see the 'legislative
intent as revealed by the examination of the whole Act."
19. The legislative intent of Section 14 of the Act, 1940

can be ascertained from a reading of the provision which is

that parties should be aware of the filing of an Award before

the Court through their participation in the proceedings. This

is because the parties either request the arbitrator to file an

Award in Court or, seek a direction from the Court in this

respect to be given to an arbitrator. In the present

controversy, since the parties were aware of the date when

the Award was going to be filed and were present on such

date, strict compliance with Section 14 was not required and,

the argument of the Counsel for the Respondents in this

respect is misconceived. The High Court of Peshawar

examined a similar situation in Labab Gut a Badshah Gui

(PLD 1952 Peshawar 23) wherein, it was held as follows:-

"I do not think the failure by the arbitrators to give a notice
under section 14 of the Act i5 such an omission which would
invalidate the award. It should be noticed that an award
Civil Appeal No.315 of 2022. 24

cannot be set aside except on one or more of the grounds

given in section 30 of the Act. They are, (a) that an arbitrator
or umpire has mis-conducted himself or the proceedings, (/4
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, and (c)
that an award has been improperly procured or is otherwise
invalid. The omission to give notice cannot be covered by (a)
or (/4, and this is even conceded by the learned counsel for
the appellant. He, however, wishes to bring it under
otherwise invalid" mentioned in (c). By no stretch of
imagination can it be said that the omission to give the notice
can invalidate the award, and I consequently hold that it is
not covered by "otherwise invalid' too. In any case, I do not
think that it is the intention of the law that notice in order to
be valid should be given by all the arbitrators. If a notice is
given by one, arbitrator only, it shall be deemed to have been
given by all, unless the contrary is proved, and it will thus be
a perfectly good notice."

20. The Arbitrators were summoned before the Trial

Court and their statements were recorded, who had tendered

the Award in evidence as Ex.CW. 1 / 1 to 1/4. The Respondents

neither raised any objection to the filing of the Award nor was

the question of limitation raised. In any event there was, in

our opinion, no question of operation of law of limitation

involved in the facts and circumstances of this case.

WAS THE FACT THAT THE RESPONDENTS DID NOT FILE

THEIR OBJECTIONS TO THE ARBITRATION AWARD
WITHIN TIME, FATAL TO THE RESPONDENT'S CASE?

21. The learned High Court has held that even though

the Respondent's objections were filed beyond the prescribed

period of limitation of 30 days, nonetheless, the Trial Court

was required to examine the Award to do complete justice

and, by not doing so, the Trial Court committed illegality. It is

manifestly clear from the judgment of the Trial Court that it

did not merely dismiss the objections of the Respondents as

barred by time without examining the Award. The Trial

Court's judgment in paragraph 10 specifically notes that the

Respondents were given a chance to cross-examine the

Cvil Appeal No.315 of 2022 25

Arbitrators who appeared as CW-01 and CW-02. The Trial

Court has further held that the Arbitrators remained firm in

their viewpoint. The Trial Court at paragraph 12 categorically

stated as follows:
although the Award was filed beyond the period of
limitation but the objection so filed if gone tbram-gtb no
is either alleged or
allegation of misconduct
proved. "(Underlining is Ours)

A bare perusal of the aforenoted excerpt

establishes that the objections filed by the Respondents were

examined by the Trial Court which also applied its mind to

the contents of the award and thereafter an opinion was

formed that it was appropriate to make it a rule of Court. We

are satisfied that the trial Court fulfilled its duty to examine

the Respondent's objections as well as the award before

making it a rule of Court. As such, the finding of the High

Court to the effect that the Trial Court erred in law in making

the award a rule of Court is unsustainable and against the

record.
22. Even otherwise, it is to be noted that the first

objections filed by the Respondents were barred by 04

months. The prescribed limitation period as provided in the

Limitation Act, 1908 is 30 days from date of notice of filing of

the award to object to an Award being made a rule of Court. A

party must explain each day of delay and, the Court ought to

adjudge whether each day of delay has been sufficiently

explained to the satisfaction of the Court with evidence. If

such discretion has been exercised properly, then, an

appellate Court cannot arbitrarily disregard the reasons so

Civil Appeal Nc.315 of 2022. 26

given by the Trial Court while discounting the reasons

provided by one party in an application for condonation of

delay by the Trial Court unless there is misreading or non-

reading of the record. It is a matter of record that the

Respondents first filed objections on 05.0 1.2006 which were

barred by time and, not in the proper form as admitted by the

Respondents since they sought permission from the Trial

Court during post-remand proceedings on 08.10.20 15 to file

their objections afresh in "proper form". The said application

was dismissed on 07.01.2016. As such, in the facts and

circumstances of the case, the belated objections were fatal to

the Respondent's case because (a) they were filed after a delay

of 04 months (b) they were not in proper form (c) the

application for condonation of delay was rejected (d) the

Respondents were well aware of the filing of the Award in

Court.

WERE THE PROCEEDINGS BEFORE THE TRIAL COURT

ILLEGAL DUE TO THE ABSENCE OF A FORMAL ORDER
UNDER SECTION 34 OF THE ACT, 1940?

24. The High Court has held that the proceedings

carried out by the Trial Court were in violation of Section 34

of the Act, 1940 and, the proceedings in the suit were not

stayed. We are unable to agree with this conclusion. The

parties had mutually agreed to refer their disputes arising out

of their contract to be resolved under the Rules of

Reconciliation and Arbitration of International Chamber of

Commerce (hereinafter referred to as the "ICC Rules"). The

Respondent, however, out rightly argued that the trial Court

lacked jurisdiction. This plea was rejected by the Trial Court

Clvi? Appeal No.315 of 2022. 27

vide order dated 24.07.2004 while relying on the provisions of

the Agreement. The Counsel for the Respondents has been

unable to take us to any document to show that the

Respondents ever challenged the order dated 24,07.2004. It is

essential to point out that the ICC Rules do not divest the

Courts in Pakistan of their jurisdiction. This matter was

decided by this Court in the case of Hitachi Limited and

Another a Ru pall Polyester and others (1998 SCMR

1618) in which, it was held as follows: -

"The legal position obtaining in Pakistan is that the L C. C.
Rules are recognised but they cannot divest the Courts of the
jurisdiction vested in them under the law. In England the
English Courts recognise the I.C.C. Rules and they decline to
exercise discretionary jurisdiction under the English
Arbitration Act in derogation to the I.C.C. Rules not because
of lack of jurisdiction but to ensure that the parties should
adhere to their contractual commitment. It may be pointed
out that it has also been consistently held by the English
Courts that they have the power to pass appropriate order in
a fit case notwithstanding the application of I. C. C. Rules. In
this regard, reference may be made to a recent judgment in
the case of Coppee-Lavalin v. Ken-Ron Chemicals Ltd. (1994)
2 All England Law Reports 449), in which the House of Lords
directed for the deposit of costs of arbitration for the
respondent though the LC. C."

Even otherwise, Article 21(1) of the ICC Rules

provides the following: -

'The parties shall be free to agree upon the rules of law to be

applied by the arbitral tribunal to the merits of the dispute. In
the absence of any such agreement, the arbitral tribunal
shall apply the rules of law which it determines to be
appropriate."
The record shows that the parties decided that the

law of Pakistan would apply to the case at hand. As such, the

intent of the parties is clear insofar as the law governing the

Arbitration proceedings is concerned. The question is whether

the Trial Court performed functions of a faciliatory nature or,

was it required adjudicate on the merits of the case. If the

trial Court facilitated the Arbitration, then, it did not commit

Civil Appecil No.315 of 2022. 28

any illegality. It is clear from the orders of the Trial Court

that it acted in a faciliatory manner. The Trial Court

facilitated the arbitration and did not adjudicate the merits of

the (is. When the Respondents objected to the jurisdiction of

the Trial Court; the Trial Court rejected the objections while

relying upon the Agreement between the parties and,

proceeded to refer the matter to Arbitrators nominated by the

parties as per Section 8 of the Act, 1940. Essentially, the

Court referred the matter to Arbitration nominated/ appointed

by the parties. Nowhere have the Respondents argued that

they had filed a written statement which constituted a step in

the proceedings within the meaning of Section 34 of the Act,

1940. The minutes of the Arbitration Proceedings are

available on the record which show that the Arbitrators

adjudged the merits of the case. As such, proceedings in the

suit were stayed for intents and purposes with express or

implied consent of the parties who consciously, willingly and

voluntarily participated in the proceedings throughout. At

this stage, the respondents cannot be heard to say that

certain technical and procedural formalities were not followed

stricto sensu. While they never raised any objections to the

same during the arbitration proceedings and even during

multiple rounds of litigation in Courts.

25. The Respondent took an objection to the

proceedings as an afterthought when the Award was made

Rule of Court, which cannot be permitted. It is worth

mentioning that when parties opt to settle their disputes out

of Court, they must be facilitated and, they ought to live up to

Civil Appeal No3150f 2022. 29

the terms that they agree upon in Eckhartd & Compan y v.

Muhammad Ilanif 11993 PLD 42 Supreme Court) in which

Ajmal Mian, J (as he then was) opined as follows:-

"I may observe that while dealing with an application under

section 34 of the Arbitration Act in relation to a foreign
arbitration clause like the one in issue, the Courts approach
should be dynamic and it should bear in mind that unless
there are some compelling reasons, such an arbitration
clause should be honoured as generally the other party to
such an arbitration clause is a foreign party. With the
development and growth of International Trade and
Commerce and due to modernization of
Communication/ Transport systems in the world, the
contracts containing such an arbitration clause are very
common nowadays. The title that the Court should not lightly
release the parties from their bargain ) that follows from the
sanctity which the Court attaches to contracts, must be
applied with more vigour to a contract containing a foreign
arbitration clause. We should not overlook the fact that any
breach of a term of such a contract to which a foreign
company or person is a party, will- tarnish the image of
Pakistan in the comity of nations. A ground which could be in
contemplation of party at the time of entering into the
contract as a prudent man of business, cannot furnish basis
for refusal to stay the suit under section 34 of the Act. So the
ground like, that it would be difficult to carry the voluminous
evidence or numerous witnesses to a foreign country for
arbitration proceedings or that it would be too expensive or
that the subject matter of the contract is in Pakistan or that
the breach of the contract has taken place in Pakistan, in my
view, cannot be a sound ground for refusal to stay a suit
filed in Pakistan in breach of aforeign arbitration clause
contained in contract of the nature referred to hereinabove. In
order to deprive a foreign party to have arbitration in a
foreign country in the manner provided for in the contract, the
Court should come to the conclusion that the enforcement of
such an arbitration clause would be unconscionable or would
amount to forcing the plaintiff to honour a different contract,
which was not in contemplation of the parties, and which
could not have been in their contemplation as a prudent man
of business.

The crux of the matter is that once a party has

agreed to arbitration, it should be the Court's responsibility to

either facilitate the said party in the arbitration while staying

within the confines of the Act, 1940 or, to compel the party to

abide by the terms and conditions of a contract. The purpose

of arbitration is defeated if a party refuses to abide by the

agreed mode of dispute resolution. This trend must not be

encouraged.
 CirAl AppeoNo.3I5of 2022. 30
I

26. The High Court has proceeded on erroneous

grounds and has misapplied the applicable law to the facts

and circumstances of the instant controversy, which warrants

interference of this Court. We have been unable to agree with

the conclusions reached by the High Court in the Impugned

Judgment. Accordingly, the Impugned Judgement is found to

be unsustainable in law as well as facts and is therefore set

aside. \1IS.A IA

27. Consequently, the judgment and decree dated

19.03.20 16 whereby the Award was made Rule of Court is

restored and affirmed and the

arbitrators is made Rule of Court.

ISLAMABAD, THE
20th of June, 2022.
Hafs Ishtiaq/*
tApproved ForRQ4rttg'