Summary: (a) Arbitration Act, 1940: ----S. 20(4)----Reference to arbitrator----Mandatory requirement----Court must frame a formal reference before appointing an arbitrator and directing arbitration proceedings----Failure to issue an order of reference renders arbitration proceedings void ab initio----Arbitrator cannot proceed suo motu without a proper reference from the court----Award set aside due to procedural illegality. (b) Arbitration proceedings: ----Invalidity of arbitration award----Arbitration without a proper court reference is a fundamental procedural flaw----Trial court erred in making the award a rule of the court despite the absence of a valid reference----Entire proceedings declared null and void, necessitating fresh arbitration with proper court directives. (c) Administration of justice: ----Effect of procedural lapses----When arbitration proceedings suffer from inherent legal defects, the resulting award cannot stand----Court must ensure strict compliance with statutory requirements before allowing arbitration to proceed----Superstructure of arbitration proceedings crumbles when its foundation is legally defective. ----Disposition: Appeal allowed. Impugned judgment and decree set aside. Petition under Section 20 of the Arbitration Act, 1940, remanded to the Senior Civil Judge, Rawalpindi, for fresh proceedings, including appointment of an arbitrator and framing of reference. ----Cited Cases: China International Water v. Pakistan WAPDA (PLD 2005 Karachi 670) Pakistan through Ministry of Defence v. Ch. Fazal Muhammad (2005 YLR 2896) Oil and Gas Development Corporation Ltd. Pakistan v. Claugh Engineering Ltd. (1999 MLD 254)

Summary: (a) Arbitration Act, 1940: ----Ss. 14 & 17---Application for making arbitral award rule of court---Jurisdiction of civil court---Foreign arbitral award---Scope. Petitioner challenged the jurisdiction of the Civil Judge (Special Court Admin for Commercial Cases) to make an arbitral award the rule of court, contending that the award was a foreign arbitral award and should be enforced under the Recognition and Enforcement (Arbitral Agreement & Foreign Arbitral Award) Act, 2011. The arbitration, conducted under LCIA Arbitration Rules, 2014, was held in Lahore, Pakistan, where the sole arbitrator, appointed by the London Court of International Arbitration (LCIA), rendered the award. Supreme Court held that under the definition in the Act of 2011, a "foreign arbitral award" must be made in a contracting state or any other state notified by the Federal Government. Since the award was rendered in Lahore and both parties were Pakistani entities, it did not constitute a foreign arbitral award. The fact that LCIA Arbitration Rules were applied did not alter the domestic nature of the award. ----Cited Cases: SpaceCom International, LLC v. Wateen Telecom Limited (C.O No.25854 of 2023) Civil Appeal No.722 of 2012 (Supreme Court of Pakistan, 22.02.2024) M/s Tradhol International SA Sociedad Unipersonal v. Messrs Shakarganj Limited (PLD 2023 Lahore 621) (Distinguished) (b) Recognition and Enforcement (Arbitral Agreement & Foreign Arbitral Award) Act, 2011: ----Foreign arbitral award---Definition and applicability---Arbitration seat within Pakistan---Effect. An arbitral award is considered a "foreign arbitral award" only if it is made in a contracting state to the New York Convention or a state notified by the Federal Government. Mere adoption of foreign institutional arbitration rules, such as LCIA Rules, does not render an award foreign if the seat of arbitration is in Pakistan. Since the arbitral proceedings and the issuance of the award occurred in Lahore, the High Court correctly held that the Act of 2011 did not apply, and the award was enforceable under the Arbitration Act, 1940. (c) Administration of Justice: ----Judicial review of arbitral awards---Scope of constitutional petition---Interference by High Court. High Court reiterated that arbitral awards should be examined within the statutory framework applicable to their enforcement. The court found no illegality in the civil court's exercise of jurisdiction and dismissed the constitutional petition. ---Disposition: Constitutional petition dismissed.

Summary: (a) Arbitration Act, 1940 (X of 1940): ---- Ss. 17 & 29 – Arbitration award – Execution of decree – Interest on decretal amount – Interpretation of arbitral award – The award granted by the sole arbitrator directed the National Highway Authority (NHA) to pay the respondent, M/s. Sardar Muhammad Ashraf D Baloch (Pvt.) Ltd., an amount of Rs.52,183,412/- along with financing charges at an annual rate of three (03) percentage points above the discount rate of the State Bank of Pakistan from 26.09.2014 until full payment – The award was made a rule of court vide judgment and decree dated 25.03.2022 – The dispute in execution proceedings arose regarding the calculation of financing charges, whether they should be calculated on a simple or compound interest basis – Executing court ruled that financing charges were to be calculated on a compound interest basis, as per Clause 14.8 of the contract – Held, that the arbitrator explicitly referred to Clause 14.8, which mandated financing charges to be compounded monthly – Once the award was made a rule of court, NHA was bound to make payments strictly in accordance with its terms – High Court upheld the executing court’s ruling, dismissing NHA’s appeal. ----Cited Cases: • Syed Waqar-ul-Hassan Shah Bukhari v. Small Business Finance Corporation (2024 CLD 1481) • Jajodia (Overseas) (Pvt.) Ltd. v. Industrial Development Corporation of Orissa Ltd. (1993 (2) SCC 106) • Azad Government of the State of Jammu and Kashmir v. Muhammad Aslam Khan (1990 MLD 2333) • Bhavan Vaja v. Solanki Hanuji Khodaji Mansang (AIR 1972 SC 1371) • Topanmal Chhotamal v. M/s. Kundomal Gangaram (AIR 1960 388) (b) Contract Law: ---- Construction contract – Delayed payments – Financing charges under contractual terms – Interpretation of Clause 14.8 – NHA contended that financing charges under the decree should be computed using a simple interest formula, whereas the respondent maintained that they should be compounded monthly as per Clause 14.8 of the contract – Reports submitted by HBL and JS Bank Ltd. confirmed that financing charges were to be compounded – Held, that Clause 14.8 unambiguously stipulated financing charges at a rate of three percentage points above the discount rate of the central bank, compounded monthly – Arbitrator enforced this contractual mechanism in his award, and the decree passed by the court merely upheld the agreed terms – No scope existed for interpreting the financing charges on a simple interest basis – High Court ruled that the executing court had rightly directed the respondent to provide accurate calculations based on the compound interest formula. (c) Civil Procedure: ---- Execution of decree – Powers of the executing court – Whether an executing court can alter the terms of a decree – NHA argued that the executing court, by interpreting the decree to mandate compound interest, effectively altered its terms and increased its liability – Held, that an executing court cannot go beyond the decree but must interpret its terms in accordance with the judgment it enforces – Since the arbitrator had explicitly applied Clause 14.8, which required compound interest, and the award was made a rule of court without modification, the executing court did not exceed its jurisdiction – The court merely ensured that the decree was implemented as intended, without any alteration. (d) Interest on Decretal Amount: ---- Suspension of accrual of interest – Effect of furnishing a bank guarantee – NHA contended that its liability to pay financing charges ceased when it furnished a bank guarantee on 12.09.2022 – Held, that a bank guarantee is not equivalent to actual payment – Financing charges continued to accrue until the decretal amount was actually paid to the respondent – The Rs.52 million principal amount was not received by the respondent until 31.03.2023, and financing charges were to be calculated accordingly – The principle that interest continues until actual payment is made was affirmed, citing relevant precedents. (e) Disposition: ---- Appeal dismissed – Executing court’s order upheld – NHA directed to ensure compliance with the decree in accordance with the compound interest formula set out in Clause 14.8 of the contract.

Summary: (a) Arbitration Act, 1940 (X of 1940): ----S. 34—Stay of legal proceedings—Scope—Discretion of the Court—Joint Venture Agreement (JV Agreement) containing an arbitration clause—Plaintiff (PEB) filed a civil suit for damages against its JV partners and third parties (ERRA and PERRA)—Defendants (A&ACC and Buildcore) invoked S. 34 of the Arbitration Act, 1940, seeking stay of proceedings—Civil Court allowed the stay—Held, where parties to a contract have agreed to arbitration, the Court must ordinarily hold them to their bargain, but this rule is not absolute—Section 34 grants the Court discretion to stay proceedings or not, based on the peculiar facts of each case—Court must assess whether all conditions under S. 34 are satisfied and whether there exist sufficient reasons to refuse a stay—Where a party to an arbitration agreement is joined with non-parties in a suit and the claims are not severable, staying proceedings may lead to conflicting decisions by different forums—Civil Court erred in staying proceedings against all defendants, including those not party to the JV Agreement—Appeal allowed, order of stay set aside—Case law discussed: Eckhardt & Co. Marine GmbH v. Muhammad Hanif (PLD 1993 SC 42); Uzin Export Import Foreign Trade Co. v. Macdonald Layton & Co. Ltd. (1996 SCMR 690); Rachappa Gurudappa Bijapur v. Gurudiddappa Nurandappa (AIR 1989 SC 635). (b) Civil Procedure Code, 1908 (V of 1908): ----O. VII, R. 11—Rejection of plaint—Territorial jurisdiction—Suit filed at Islamabad—Defendants (ERRA and PERRA) contended that the Civil Court at Islamabad lacked territorial jurisdiction, as the contracts were executed and performed in Mansehra—Held, determination of territorial jurisdiction requires evidence and cannot be decided at the preliminary stage—ERRA’s role in project meetings at Islamabad established some connection to the forum—Application for rejection of plaint dismissed—Case law discussed: Tradesmen International (Pvt.) Ltd. v. Federation of Pakistan (2005 MLD 541); National Development Leasing Corporation Ltd. v. Chairman, Banking Tribunal (2000 YLR 1769). (c) Contract Law—Joint Ventures— ----Arbitration clause and multi-party litigation—Scope—Plaintiff’s claims against JV partners intertwined with claims against a non-party to the arbitration agreement—Held, where claims against multiple defendants arise from a common transaction and are not severable, bifurcation of proceedings is improper—Allowing arbitration for some claims while continuing a civil suit for others risks contradictory findings—Arbitration clause in a JV Agreement does not bind a non-party (ERRA, PERRA) absent a clear contractual obligation—Court exercised discretion correctly in refusing to reject the plaint—Appeal allowed, suit to proceed before Civil Court. (d) Administration of Justice— ----Stay of proceedings and multiplicity of litigation—Scope—Courts must avoid a situation where disputes are split between different forums leading to conflicting decisions—Where third parties are impleaded in a suit alongside parties to an arbitration agreement, Courts must carefully assess whether the joinder is genuine or aimed at evading arbitration—In the instant case, PEB’s claim against ERRA and PERRA was integral to its claims against the JV partners, making arbitration an inadequate remedy—Appeal allowed, revision petition dismissed. ----Disposition: Appeal allowed, stay of proceedings set aside—Civil Court directed to continue proceedings—Revision petition dismissed.

Summary: (a) Arbitration Act, 1940 (X of 1940)---- ----S. 34---Stay of proceedings pending arbitration---Scope and applicability---Disputes relating to rectification of company register, allegations of fraud, and fraudulent misrepresentation---Whether arbitrable---Petitioners challenged the fraudulent transfer of shareholding and sought rectification of the company register under the Companies Act, 2017---Respondents invoked an arbitration clause in an agreement dated 12.04.2020 and sought a stay of proceedings under S. 34 of the Arbitration Act, 1940---Held, that arbitration agreements generally do not oust the jurisdiction of the courts, and the right to arbitrate cannot be enforced by non-signatories to the arbitration clause except under exceptional circumstances---Disputes concerning rectification of company registers, corporate fraud, and mismanagement involve the rights of third parties and, therefore, fall within the exclusive jurisdiction of company courts, making them non-arbitrable---Stay of proceedings under S. 34 of the Arbitration Act, 1940, is discretionary and not mandatory, especially where staying proceedings may cause a miscarriage of justice, delay, or increased litigation costs---Application for a stay was dismissed. Cited Cases: • M.A. Chowdhury v. Messrs Mitsui O.S.K. Lines Ltd. (PLD 1970 SC 373) • House Building Finance Corporation v. Shahinshah Humayun Cooperative House (1992 SCMR 19) • Messrs Eckhardt & Co, Marine GmbH v. Muhammad Hanif (PLD 1993 SC 42) • Karachi Dock Labour Board v. Messrs Quality Builders Ltd. (PLD 2016 SC 121) • Messrs Mastersons v. Messrs Ebrahim Enterprises (1988 CLC 1381) • Pakistan Real Estate Investment and Management Co. v. Sohail A. Khan (PLD 2018 Islamabad 115) • Eckhardt & Company v. Muhammad Hanif (PLD 1993 SC 42) • Pakistan International Airlines Corporation v. Messrs Pak Saaf Dry Cleaners (PLD 1981 SC 553) (b) Companies Act, 2017 (XIX of 2017)---- ----Ss. 126, 127, 257, 277, 278, 286, 301 & 304---Exclusive jurisdiction of company courts---Scope---Whether disputes concerning rectification of registers, oppression, mismanagement, or fraudulent transactions can be referred to arbitration---Petitioners challenged the fraudulent transfer of shares and sought an investigation into the affairs of the company, disqualification of certain directors, and prevention of further transfers---Held, that under the Companies Act, 2017, company courts are vested with exclusive jurisdiction over company-related disputes, including rectification of registers, oppression, and mismanagement---Matters concerning third-party rights, public interest, and factual controversies require court adjudication and cannot be subject to private arbitration---Company courts are empowered to frame issues, record evidence, and conduct trials, whereas arbitrators lack such jurisdiction---Petition for stay of proceedings on the basis of an arbitration clause was dismissed. Cited Cases: • Mian Javed Amir v. United Foam Industries (Pvt) Ltd (2016 SCMR 213) • Lt. Gen (Retd) Mahmud Ahmad Akhtar v. Allied Developers (Pvt) Ltd. (2022 CLD 718) (c) Contract Act, 1872 (IX of 1872)---- ----Ss. 19 & 23---Allegations of fraud and fraudulent misrepresentation---Effect on arbitration clause---Whether arbitration clause remains valid despite allegations of fraud in the main agreement---Petitioners contended that the agreement containing the arbitration clause was fraudulently executed and sought its annulment---Held, that an arbitration clause remains valid unless the contract is void ab initio under S. 23 of the Contract Act, 1872---Where allegations of fraud render a contract voidable under S. 19 of the Contract Act, 1872, the arbitration clause may still be enforced unless the court determines that the fraud allegations affect the arbitration agreement itself---However, where fraud allegations relate to corporate transactions involving statutory rights and third-party interests, such disputes are non-arbitrable and must be adjudicated by courts---Stay of proceedings was refused. Cited Cases: • Fiona Trust & Holding Corporation v. Privalov (2007 EWCA Civ 20) • Harbour Assurance Co. (UK) Ltd. v. Kansa General International Insurance Co. Ltd. [1992 1 LILR 81] • Fiona Trust & Holding Corporation v. Privalov [2008] 1 LI LR 254 Disposition: Application for stay of proceedings under S. 34 of the Arbitration Act, 1940, was dismissed as disputes involving rectification of registers, corporate fraud, and mismanagement fall under the exclusive jurisdiction of the company court and are non-arbitrable.

Summary: (a) Arbitration (Protocol and Convention) Act (VI of 1937): ---- Ss. 5, 7(2), 8(1) – Foreign award – Enforcement – Finality of arbitration award – Jurisdiction of Pakistani courts – Limitation – Plea of reciprocal arrangement between Pakistan and Switzerland – Technical objections – Role of courts in enforcement of foreign awards. Plaintiff, a Swiss company, sought enforcement of a foreign arbitration award rendered by the Liverpool Cotton Association (LCA) on 07-04-1995, following a contractual dispute with the defendant. Defendant failed to fulfill its obligations under the contract, leading to arbitration proceedings where both parties appointed arbitrators under the LCA Rules. Defendant’s appeal was dismissed due to non-payment of fees, rendering the award final, binding, and conclusive under LCA Rules. Plaintiff initiated enforcement proceedings under the Arbitration (Protocol and Convention) Act, 1937. Defendant opposed the enforcement, raising multiple objections: (i) the award was not properly authenticated under S. 8(1) of the 1937 Act, (ii) Sindh High Court lacked jurisdiction as the defendant’s principal office was in Lahore, (iii) the suit was time-barred under Article 181 of the Limitation Act (IX of 1908), (iv) arbitrators committed misconduct by failing to consider material evidence regarding discrepancies in the letter of credit (L/C), and (v) Pakistan was not a signatory to the Convention, and no reciprocal arrangement existed with Switzerland under S. 2(1) of the 1937 Act. Held, that none of the objections raised by the defendant had merit. The award was properly authenticated by competent Swiss authorities and attested by the Pakistan Embassy, fulfilling the requirements of S. 8(1) of the 1937 Act. The Sindh High Court had jurisdiction as the defendant’s registered office was in Karachi, the contract was executed in Karachi, and the L/C was opened there. The suit was not time-barred as enforcement of a foreign award falls under Article 120 of the Limitation Act, which provides a six-year limitation period. The arbitrators had acted in accordance with LCA Rules, and the defendant’s failure to pursue its appeal barred it from raising objections at the enforcement stage. Furthermore, the 1937 Act was amended through Ordinance LIII of 1962, declaring that notifications issued under British India continued to have effect in Pakistan, thereby enabling enforcement of foreign awards. Suit decreed, and the foreign award made rule of the Court. (b) Arbitration – Courts acting as executing courts – Limited grounds for challenging a foreign award: Pakistani courts, when enforcing a foreign award, do not act as appellate courts to reappraise evidence but function as executing courts. Under S. 7(2) of the 1937 Act, enforcement of a foreign award can only be refused on limited grounds, such as an award exceeding the scope of arbitration or an award being contrary to public policy. Held, that objections related to factual errors, evidentiary issues, or the arbitrators' reasoning do not fall within the permissible grounds under S. 7(2) of the 1937 Act. (c) International Commercial Arbitration – Pakistan’s obligation under the 1937 Act – Doctrine of reciprocity: Defendant argued that Pakistan was not a signatory to the Convention and that no reciprocal arrangement existed with Switzerland for enforcement of awards. Held, that following Ordinance LIII of 1962, notifications issued under British India continued to be effective in Pakistan, and courts were bound to enforce foreign awards unless explicitly restricted by the government. Reciprocal arrangements were a matter of executive policy, and courts should not create obstacles to enforcement. ----Disposition: Suit decreed – Foreign award made rule of the Court – Costs awarded to the plaintiff.

Summary: (a) Capital Development Authority (Abatement of Arbitration Proceedings) Act (XXVII of 1975) ----S. 3---Scope of abatement of arbitration proceedings---The Act applies only to contracts and arbitration proceedings entered into before the enactment of the Act in 1975 and does not extend to agreements or arbitration proceedings initiated after its enactment---Provisions under the Act abrogate arbitration clauses and annul ongoing arbitration proceedings only for pre-1975 agreements. (b) Arbitration Act (X of 1940) ----Ss. 8 & 20---Appointment of arbitrator---Order passed with the consent of both parties appointing an arbitrator for resolving disputes was challenged on the basis of the Capital Development Authority (Abatement of Arbitration Proceedings) Act, 1975---Held, the 1975 Act was inapplicable as the agreement between the parties was executed after 1975, and the consent order was valid. (c) Interpretation of Statutes ----Preamble as an interpretative aid---Preamble of the 1975 Act clarified that its scope was limited to pre-1975 contracts, and such preambles, while not part of the statute, serve as important tools for understanding legislative intent---Courts are required to construe statutory provisions purposefully, ensuring that the legislative objective is realized. (d) Consent Orders ----Binding nature---Order appointing an arbitrator, passed with the consent of both parties, cannot be challenged on grounds unrelated to the legislative framework governing arbitration---Consent orders are binding unless vitiated by fraud, misrepresentation, or lack of jurisdiction. Disposition: Appeal dismissed; no applicability of the Capital Development Authority (Abatement of Arbitration Proceedings) Act, 1975, to post-1975 agreements.

Summary: (a) Arbitration Act (X of 1940) – S. 17: Civil Procedure Code (V of 1908) – S. 12(2) Dispute over demarcation of pastures—Validity of Award—Finality of judicial decisions—Appellants (Zamindaran of Village Somal) challenged the order of the Collector, which was based on an Award rendered by a panel of Ulema mutually appointed by the parties—Award was made a rule of the court by the Collector’s order dated 26-8-1981—Appellants initially challenged the decision before the Civil Court, where their suit was dismissed on 31-7-1982—Subsequent appeal before the District Judge, Gilgit, was also dismissed on 19-3-1985 for non-prosecution—Appellants remained inactive for eight years before filing an application under S. 12(2), C.P.C. for setting aside the dismissal order—Held, that all previous decisions, including those of the Collector, Civil Judge, and District Judge, were in favor of the respondents (Zamindaran of Raushan)—Demarcation of land was the exclusive jurisdiction of the revenue authorities, and the Collector had acted within his lawful authority—Appellants were bound by the acts of their agent and counsel, and their long delay in challenging the decision disentitled them to relief—Appeal dismissed. ----Cited Cases: • 1986 SCMR 1496 • 1985 CLC 217 • PLD 1977 SC 220

Summary: (a) Arbitration Act (X of 1940) – S. 30: Arbitration Award—Challenge on grounds of misconduct—Consent of parties—Estoppel—Plaintiff-appellant (Naib Shah) filed a suit for restitution of conjugal rights against defendant-respondent No.1 (Mst. Rubab Khatoon), which was dismissed by the Trial Court—On appeal, with mutual consent of both parties, the case was referred to a Shari Arbitrator—Arbitrator found that no valid Nikah was proved between the parties—Plaintiff-appellant challenged the Award, alleging misconduct by the Arbitrator—Held, that the parties had voluntarily consented to arbitration and fully participated in the proceedings—Plaintiff-appellant was estopped from later challenging the Award—Arbitrator conducted due inquiry and provided reasoning for his decision—No valid Nikah was established, thus eliminating the question of its repudiation—Delay in submission of the Award was justified as adjournments were granted with the knowledge and consent of the parties—Lower court correctly upheld the Award and made it Rule of the Court—Appeal dismissed. ----Cited Cases: • PLD 1981 Azad J&K 71 • 1981 CLC Karachi 379 • 1983 CLC Lahore 513 ----Disposition: Appeal dismissed with no order as to costs.

Summary: (a) Arbitration Act, 1940 (X of 1940): ---Ss. 30, 33 & Preamble Arbitration award—Objections thereto—Scope and jurisdiction of courts—Maintainability of objections and allegations of misconduct against the arbitrator. An appeal was filed under section 39 of the Arbitration Act, 1940, challenging the dismissal of objections to an arbitration award. The court emphasized that the jurisdiction under sections 30 and 33 is limited to examining whether the arbitrator had misconducted himself or the proceedings. It was held that courts cannot act as appellate bodies to reappraise evidence or review the merits of the arbitrator’s findings unless an error of law or fact is apparent on the face of the award. ----Cited Cases: Pakistan Steel Mills Corporation v. Mustafa Sons (Pvt.) Ltd. PLD 2003 SC 301 Federation of Pakistan v. Joint Venture Koeks K.G./Rist PLD 2011 SC 506 Union of India v. M/s Sohan Singh & Co. AIR 1989 J&K 14 (b) Limitation: ---Notice of claim—Objections raised for the first time during arbitration proceedings—Effect. The objection regarding the claim being time-barred was dismissed on the ground that it was not raised in the reply to the statement of claim before the arbitrator and was introduced for the first time during evidence. The court held that such objections must be raised clearly and timely before the arbitrator; otherwise, they cannot be entertained later. Further, even if a claim is barred by time, the award based on such a claim is not rendered a nullity. ----Cited Cases: Andison Co-operative Industries Ltd. v. Nazir Ahmad Cheema 1970 SCMR 531 Gujrat W.S. & S.B. v. Unique Erectors (P) Ltd. AIR 1989 SC 973 (c) Misconduct of arbitrator: ---Definition and scope—No misconduct found in the proceedings. The appellant alleged misconduct on the part of the arbitrator for not addressing questions of limitation and maintainability. The court observed that misconduct in arbitration does not necessarily imply fraud but includes neglect of duties. In the present case, the arbitrator addressed all legal and factual issues and followed due process. Mere disagreement with the findings of the arbitrator or an erroneous decision does not amount to misconduct. ----Cited Cases: Food Corporation of India v. Joginderpal Mohinderpal AIR 1989 SC 1263 Superintending Engineer, Somasila Project v. R. Ramana Reddy AIR 1990 Andhra Pradesh 283 (d) Arbitration proceedings: ---Technicalities—Role of courts in arbitration disputes. Courts are not to interfere with the arbitrator’s findings unless there is a blatant error or misconduct. Parties who voluntarily submit to arbitration must adhere to the arbitrator’s decision. Courts cannot reappraise evidence or disturb findings merely because they would have arrived at a different conclusion. ----Disposition: The appeal against the dismissal of objections to the arbitration award was found to be without merit and was dismissed by the Islamabad High Court.