IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: 
MR. JUSTICE MIAN SAQIB NISAR 
MR. JUSTICE IJAZ AHMED CHAUDHRY 
MR. JUSTICE QAZI FAEZ ISA 
 
 
CIVIL APPEAL NO.305 OF 2008 
(Against the judgment dated 19.4.2006 
of the High Court of Sindh, Karachi 
passed in HCA No.18/2005) 
 
 
Karachi Dock Labour Board 
 
…Appellant(s) 
VERSUS 
M/s Quality Builders Ltd. 
 
…Respondent(s) 
 
For the appellant(s): 
Mr. Zahid Ibrahim, ASC 
Mr. M. S. Khattak, AOR 
 
 
For the respondent(s): 
Dr. Muhammad Farogh Naseem, ASC 
Mr. Mehr Khan Malik, AOR 
 
 
Date of hearing: 
02.10.2015 
… 
JUDGMENT 
 
 
MIAN SAQIB NISAR, J.- This appeal involves the key 
question, in that, whether the award made, announced and signed by 
the sole arbitrator appointed by the respondent was with jurisdiction or 
not and thus should not have been made rule of the Court. The ancillary 
questions to the above are, whether the appellant had waived etc. its 
objection about the jurisdiction; whether lack of jurisdiction can be 
compromised; whether the court, considering the matter qua making the 
award rule of the Court, should itself consider the jurisdictional aspect 
and decline to make an award, made without jurisdiction, rule of the 
Court. In this context, leave was granted vide order dated 27.02.2008 
reproduced below to consider certain points highlighted therein:- 
 
C.A.305 of 2008 
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“After hearing learned counsel for the parties, leave to appeal is 
granted, inter alia, to consider:- 
1. Whether in the instant case sections 8 & 9 of the Arbitration 
Act, 1953 would apply; and 
2. Whether the award given by the Arbitrator was according to 
the terms of the agreements entered into by the parties. 
2. 
Since a short point is involved, as such office is directed to fix the 
case during 1st week of May 2008. Meanwhile interim order dated 
06.2.2008 shall hold the field.” 
 
 
2.  
 
The relevant facts of the case are:- The appellant (employer) 
entered into a contract dated 08.10.1989 with the respondent (contractor) 
for the construction of a hospital at Kemari, Karachi. The contract 
contained an arbitration clause (clause 131). The parties subsequently 
entered into multiple supplementary agreements dated 17.06.1991, 
12.11.1992, and 31.05.1993 which amended various clauses of the 
original contract including inter alia the time for completion of the 
contract. The fourth and final supplementary contract dated 01.03.1995 
not only extended the time for completion of the contract but also, 
according to the appellant, settled finally certain claims of the 
respondent. Subsequently the respondent, claiming that certain 
dues/claims remained unpaid, invoked the arbitration clause by 
referring to the consultants certain disputes vide letter dated 
05.06.1996. Due to non-determination by the consultant of the disputes 
alleged by the respondent, the latter proceeded to approach the appellant 
vide letter dated 19.01.1997 for the appointment of arbitrator and also 
suggested some names therein. Since the appellant did not appoint an 
arbitrator in response thereof, the respondent vide letter dated 
02.07.1997 informed the appellant that they had appointed one Mr. S. A. 
Nizami and requested them to appoint an arbitrator for resolution of 
their disputes, in the absence of which Mr. Nizami would become the sole 
C.A.305 of 2008 
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arbitrator. In response the appellant stated in its letter dated 12.07.1997 
that since the final supplementary agreement satisfied the respondent’s 
claim fully therefore the arbitration clause cannot be invoked and that 
the arbitrator cannot be appointed in the terms as suggested by the 
respondent. The respondent then sent a letter dated 20.08.1997 to the 
arbitrator stating therein that since the appellant had failed to appoint 
an arbitrator, Mr. Nizami should act as a sole arbitrator in terms of 
Section 9 of the Arbitration Act, 1940 (Act), after which the arbitrator 
issued notices to the parties dated 22.08.1997 and entered upon the 
reference. However, the appellant took the plea before the arbitrator 
which is envisaged by the letter dated 19.09.1997 to the effect that 
because the original contract was in effect superseded by the final 
supplementary agreement, therefore the arbitration cannot be invoked 
and, hence the arbitrator had no jurisdiction. Notwithstanding this the 
arbitrator conducted ex-parte proceedings as the appellant refused to 
appear and rendered the award dated 20.12.1997 in favour of the 
respondent which was filed in court on 19.01.1998 for making it the rule 
of the Court. Notice of the same was sent to the appellant on 27.01.1998 
pursuant to which they filed objections under the provisions of Section 
30 of the Act on 24.02.1998 on various grounds including inter alia that 
the arbitrator had no jurisdiction in the matter and therefore the award 
was a nullity in the eyes of the law. However the learned Single Judge 
vide judgment and decree dated 24.11.2004 overruled the objections and 
made the award a rule of the court pursuant to Section 17 of the Act. 
The appellant filed an appeal against the said judgment which was 
dismissed vide impugned judgment dated 19.04.2006, against which 
they have filed the instant appeal before this Court.  
3.  
 
Learned counsel for the appellant, while relying upon 
Textile Machinery Corporation Ltd v Nalinbhai B. Munshaw (AIR 
C.A.305 of 2008 
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1969 Calcutta 146), submits that in order to invoke the provisions of 
Section 9 of the Act as the respondent necessarily did, certain pre-
conditions need to be met, in that, the agreement should provide a 
reference to two arbitrators, one to be appointed by each party. He then 
referred to the arbitration clause, i.e. clause 131 of the contract and 
pointed out that since it did not specifically provide for two arbitrators, 
one to be appointed by each party, therefore the application of Section 9 
was ousted. Reliance in this regard was placed on Port Qasim 
Authority, Karachi v Messrs Nadeem Brothers and another (1982 
CLC 1506). Instead, recourse should have been made to Section 8 read 
with Section 20 of the Act according to which the Court, and not the 
respondent, was empowered to appoint an arbitrator. He relied on 
Muhammad Azam Muhammad Fazil & Co., Karachi v Messrs N. A. 
Industries, Karachi (PLD 1977 Karachi 21). He further submitted that 
where the number of arbitrators is not specified in the arbitration 
agreement, as was so in the instant case, recourse has to be made to 
Section 3 which when read with clause 1 of the First Schedule of the Act 
implies a condition that unless otherwise expressly provided, the 
reference shall be to a sole arbitrator. Reference was also made to the 
respondent’s letter dated 02.07.1997 requesting the appellant to appoint 
their arbitrator, and the appellant’s response dated 12.07.1997 wherein 
it was specifically pointed out to the arbitrator that lacking jurisdiction, 
he should abstain from entering upon the reference and proceeding with 
the matter. He stated that whenever the appellant was sent a notice by 
the arbitrator, they raised an objection regarding the latter’s jurisdiction. 
The propositions which have been framed by the learned counsel for the 
appellant’s counsel is as follows:- 
 
C.A.305 of 2008 
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i. 
The arbitrator rendered the award having no jurisdiction as 
his appointment was not in terms of the arbitration 
agreement, therefore the award is a nullity; 
 
ii. 
The pre-conditions of reference to the consultant to invoke 
the arbitration clause was not met as the respondent did not 
apply to the consultant before asking for the appointment of 
the arbitrator and making a reference thereto; 
  
4.  
 
When confronted as to why the appellant did not invoke the 
provisions of Section 5 of the Act, learned counsel for the appellant 
responded by stating that in order for the said section to be applicable 
there has to be a validly appointed arbitrator, which he contends was not  
in the present case. Further, that Section 5 assumes valid conferment of 
authority, hence that said section is about revocation of authority and 
does not deal with challenge to jurisdiction of the arbitrator. While 
elaborating on his first proposition, in support of the contention that the 
Court as opposed to the arbitral tribunal will examine the power of the 
latter, learned counsel for the appellant relied upon Abdul Hamid v H. 
M. Qureshi (PLD 1957 SC (Pak) 145). He also submitted that the 
Courts have the power under Section 17 to set aside the award on its 
own where the award is patently invalid and not enforceable under the 
law and in this regard placed reliance upon M/s Awan Industries Ltd v 
The Executive Engineer, Lined Channel Division and another (1992 
SCMR 65) and A. Qutubuddin Khan v Chec Millwala Dredging Co. 
(Pvt.) Limited (2014 SCMR 1268). 
5.  
 
Learned counsel for the respondent has controverted the 
arguments of the learned counsel for the appellant by stating that the 
appellant did not challenge the jurisdiction of the arbitrator on the basis 
of non-applicability of Section 9 before the arbitrator himself, thus such 
objection is deemed to have been waived and the same cannot be raised 
C.A.305 of 2008 
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subsequently. Rather the appellant’s objection was based on the fourth 
supplementary agreement rendering the arbitration agreement non-
existent allegedly being a full and final settlement of the respondent’s 
claims. He also stated that despite repeated notices to the appellant, they 
stayed quiet. He built his defence on the premise of the arbitration 
principles prevalent today, which according to him are: 
 
(i) 
The role of the court is supportive; 
(ii) 
Doctrine of least intervention; 
(iii) 
Sections 8 and 9 are machinery provisions; 
(iv) 
The arbitration clause is to be interpreted in a workable 
manner – liberal construction; 
(v) 
Principle of Kompetenz-Kompetenz - arbitral tribunal shall 
determine its own jurisdiction; and 
(vi) 
If a particular objection, even if it pertains to the jurisdiction 
of the arbitrator, was not raised earlier it cannot be raised 
subsequently; if the particular ground was not taken earlier 
it will be deemed to have been waived off. 
 
6.  
 
The primary contention of the learned counsel for the 
respondent was that since the appellant did not raise their objection to 
jurisdiction specifically vis-à-vis Sections 8 and 9 before the arbitrator 
nor the learned Single Judge, hence they are estopped from doing so 
now. He also attempted to draw a parallel of arbitral tribunals with tax 
tribunals in that with respect to the latter, if a question of law is not 
raised before the tribunal it cannot be raised subsequently and this 
concept should apply to the former alike. Further while relying upon 
Federation of Pakistan, through Secretary, Ministry of Food, 
Islamabad and others vs Messrs Joint Venture Kocks K.G./Rist (PLD 
2011 SC 506) he stated that objections must be taken with sufficient 
clarity, and that this was not the case with the appellant. He also placed 
C.A.305 of 2008 
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reliance on Messrs Vaseem Construction Co. vs Province of Sindh 
through Secretary to Government of Sindh, Communication and 
Works Department, Karachi and 4 others (1991 CLC 1081) in 
furtherance of his argument that objections to an award cannot be 
subsequently raised. He also relied upon Muhammad Saghir Bhatti & 
Sons vs The Federation of Pakistan and another (PLD 1958 SC (Pak.) 
221) that a subsequent challenge to appointment of arbitrator is not 
sustainable when it was not raised before.  
7.  
 
According to learned counsel for the respondent the concept 
of inherent defect in jurisdiction applies differently in the world of 
arbitration, in that it would only arise if the arbitration agreement was in 
dispute which was not, it is argued, the case at hand, and while relying 
on several cases of foreign jurisdictions he further contended that there 
has been a development in arbitration, that even inherent defects are 
now to be raised before and decided by the arbitral tribunal itself.  
8.  
 
When confronted as to why the respondent did not file the 
arbitration agreement in court under the provisions of Section 20, 
learned counsel for the respondent stated that as per the scheme of the 
Act, the respondent had three options available to them under Chapters 
2, 3 and 4 and they chose Chapter 2, which they could not forgo for 
Chapter 4 without exhausting it in its entirety. Reliance in this regard 
was 
placed 
upon 
Messrs 
Commodities 
Trading 
International 
Corporation vs Trading Corporation of Pakistan Ltd and another 
(1987 CLC 2063). 
9.  
 
Heard. The issues in this case mainly revolve around the 
construction of the arbitration clause and the scope, interpretation and 
application of the provisions of Sections 3, 5, 8, 9, 11 and 20 and 
Paragraph 1 of the First Schedule of the Act, hence we find it expedient 
to reproduce the same in the order so stated: 
C.A.305 of 2008 
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“131. SETTLEMENT OF DIPUTES/ARBITRATION 
 
 
If any dispute or difference of any kind whatsoever shall 
arise between the Employer and the Contractor or the 
consultants and the Contractor in connection with, or arising out 
of the contract, or the execution of the works, whether during the 
progress of the works or after their completion and whether 
before or after the termination, abandonment, or breach of the 
contract, it shall in the first place, be referred to and settled by 
the Consultants who shall within a period of ninety (90) days 
after being requested by either party to do so give written notice 
of his decision to the employer and the Contractor. Such 
decision in respect of every matter so referred shall be binding 
upon the Employer and the Contractor who shall proceed with 
the execution of the works with all due diligence whether he or 
the Employer requires arbitration. If the Consultant has given 
written notice of his decision to the Employer and the Contractor 
and no claim to arbitration has been communicated to him by 
either the Employer or the Contractor within a period of thirty 
(30) days from receipt of such notice, the said decision shall 
remain final and binding upon the Employer and the Contractor. 
 
 
If the Consultant shall fail to give notice of his decision, 
as aforesaid, within a period of ninety (90) days after being 
requested as aforesaid or if either the Employer or the 
Contractor be dissatisfied with any such decision, then in any 
such case either the Employer or the Contractor within ninety 
(90) days after receiving notice of such decision, or within ninety 
(90) days after the expiration of the first named period of thirty 
(30) days, as the case may be, require that the matter or matters 
in dispute be referred for pre-consideration then only in that 
case the matter shall be referred to the Arbitrator(s) and/or 
Umpire as the case may be within the meaning of Arbitration 
Act, 1953, whose decision shall be final and binding upon the 
parties. 
[Emphasis added] 
_____________________________ 
 
Arbitration Act, 1940 
 
3. Provisions implied in arbitration agreement. An arbitration 
agreement, unless a different intention is expressed therein, shall 
C.A.305 of 2008 
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be deemed to include the provisions set out in the First Schedule 
in so far as they are applicable to the reference. 
 
5. Authority of appointed arbitrator or umpire irrevocable 
except by leave of Court. The authority of an appointed 
arbitrator or umpire shall not a revocable except with the leave 
of the Court, unless a contrary intention is expressed in the 
arbitration agreement. 
 
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 
difference 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 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 made an award as if he or they had been 
appointed by consent of all parties. 
 
9. Power to party to appoint new arbitrator or, in certain cases, 
a sole arbitrator. Where an arbitrations agreement provides that 
a reference shall be to two arbitrators, one to be appointed each 
C.A.305 of 2008 
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party, then, unless a different intention is expressed in the 
agreement. 
 
(a) If either of the appointed arbitrator, neglects or refuses to 
act, or is incapable of acting or dies, the party who 
appointed him may appoint a new arbitrator in his place. 
 
(b) If one party fails to appoint an arbitrator, either originally 
or by way of substitution as aforesaid, for fifteen clear days, 
after the service by the other party of a notice in writing to 
make the appointment, such other party having appointed 
his arbitrator before giving the notice, the party who has 
appointed an arbitrator may appoint that arbitrator to act as 
sole arbitrator in the reference, and his award shall be 
binding on both parties as if he had been appointed by 
consent. 
 
Provided that the Court may set aside any appointment as sole 
arbitrators made under clause (b) and either, on sufficient cause 
being shown, allow further time to the defaulting party to appoint 
an arbitrator or pas such other order as it thinks fit. 
 
Explanation. The fact that an arbitrator or umpire, after request 
by either party to enter on and proceed with the reference, does 
not within one month comply with the request may constitute a 
neglect or refusal to act within the meaning of Section 8 and this 
section. 
 
11. Power of Court to remove arbitrators or umpire in certain 
circumstances. (1) The Court may, on the application of any 
party to reference, remove an arbitrator or umpire who fails to 
use all reasonable dispatch in entering on and proceeding with 
the reference and making an award. 
 
(2) The Court may remove an arbitrator or umpire who has 
misconducted himself or the proceedings. 
 
(3) Where an arbitrator or umpire is removed under the section, 
he shall not be entitled to receive any remuneration in respect of 
his services. 
 
C.A.305 of 2008 
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(4) For the purposes of this section the expression "proceeding 
with the reference" includes, in a case where reference to the 
umpire become necessary, giving notice of that fact to the parties 
and to the umpire. 
 
20. Application to file in Court arbitration agreement. (1) 
Where any person have entered into an arbitration agreement 
before the institution of any suit with respect to the 
subject-matter of the agreement or any part of it, and where a 
difference has arisen to which the agreement applies, they or any 
of them, instead of proceeding under Chapter II, may apply to a 
Court having jurisdiction in the matter to which the agreement 
relates, that the agreement be filed in the Court. 
 
(2) The application shall be in writing and shall be numbered 
and registered as a suit between one or more of the parties 
interested or claiming to be interested as plaintiff or plaintiffs 
and the remainder as defendant or defendants, if the application 
has been presented by all the parties, or, if otherwise, between 
the applicant as plaintiff and the other parties as defendants. 
 
(3) On such application being made the Court shall direct notice 
thereof, to be given to all parties to the agreement other than the 
applicants, requiring them to show cause within the time 
specified in the notice why the agreement should not be filed. 
 
(4) Where no sufficient cause is shown, the Court shall order the 
agreement to be filed, and shall make an order of reference to 
the arbitrator appointed by the parties, whether in the agreement 
or otherwise, or, where the parties cannot agree upon an 
arbitrator, to an arbitrator appointed by the Court. 
 
(5) Thereafter the arbitration shall proceed in accordance with, 
and shall be governed by, the other provisions of this Act so far 
as they can be made applicable. 
 
First Schedule 
Implied Conditions of Arbitration Agreement 
 
1. Unless otherwise expressly provided, the reference shall be to 
a sole arbitrator.” 
 
C.A.305 of 2008 
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10.   
Before proceeding further we find it expedient to mention 
what is arbitration and also about the empowerment of the arbitrator. In 
this context it is stated that arbitration is a forum which under the law 
can be chosen by the parties for the resolution of their present or future 
disputes. The condition for a valid arbitration agreement is that it should 
be in writing (see Section 2(a) of the Act) and as it is a contract between the 
parties it is essential that it must qualify the test of a valid contract in 
terms of the law of contract. It may also be stated that there are three 
modes and approaches to arbitration: (i) without the intervention of the 
court; (ii) with the intervention of the court (see Section 20 of the Act); and (iii) 
again with the intervention of the court but where a suit/lis is pending 
between the parties and they agree for the resolution of their disputes 
through the mechanism of arbitration, keeping the suit pending and that 
the fate thereof (suit) be decided on the basis of the decision rendered by 
the arbitrator. It may be relevant to state that subject to the terms of 
reference an arbitrator(s) is the judge on both the points of fact and law; 
and this shall also include the question to determine his own 
jurisdiction. However where the arbitrator goes patently and blatantly 
wrong on facts, which wrong is inconceivable and incomprehensible in 
relation to the determination of rights of parties in dispute, such as 
assumption of non-existing facts or ignoring the facts duly established on 
the record, which in legal parlance is also called the misreading and non-
reading; and especially going wrong on the points of law, the court 
obviously has the power in its appropriate jurisdiction to correct such a 
wrong; as under Article 4 of the Constitution of the Islamic Republic of 
Pakistan, 1973 it is inalienable right of every person to be treated and 
dealt with in accordance with law [See cases reported as Utility Stores 
Corporation of Pakistan Limited v Punjab Labour Appellate Tribunal 
and others (PLD 1987 SC 447); Muhammad Anwar and others v Mst. 
C.A.305 of 2008 
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Ilyas Begum and others (PLD 2013 SC 255) and Muhammad Ashraf 
Butt and others v Muhammad Asif Bhatti and others (PLD 2011 SC 
905)].  
11. 
 
Coming to the present case, having regard to the fact that 
the agreement in which the arbitration clause is contained is not denied, 
it is not disputed that there was a valid arbitration agreement between 
the parties. The first issue is which out of the two Sections 8 or 9 of the 
Act is attracted to the arbitration clause (reproduced above). In order to 
resolve this, an exercise of interpretation of the arbitration clause needs 
to be undertaken. Ordinarily, parties have a right to agree upon the 
number of arbitrators and the manner in which the arbitrators will be 
appointed. However, a perusal of the arbitration clause shows that it is 
silent on both these aspects. The arbitration clause talks of referral of 
disputes to “arbitrator(s)”. Had the arbitration clause spoken of the 
appointment of an “arbitrator”, there will be no scope for the application 
of Para 1 of the First Schedule, because a single arbitrator would be 
indicated by the agreement itself. Also, had the arbitration clause 
provided for the appointment of “arbitrators”, then the application of 
Para 1 of the First Schedule would have been excluded because the word 
“arbitrators” certainly refers to more than one arbitrator. Thus we find 
much force in the contentions of the learned counsel for the appellant 
that the instant case will be governed by Section 3 and the reference 
shall be presumed to have been intended to be made to a single 
arbitrator by virtue of Para 1 of the First Schedule, necessarily to be 
appointed by the consent of both parties. [See cases reported as Mujtaba 
Hussain Siddiqui v Sultan Ahmed (2005 YLR 2709), In the matter of 
Arbitration between Ghufran Ahmed and others (PLD 1959 (W.P.) 
Karachi 43), Muhammad Jamil v Iqbal Ahmed (PLD 1977 Karachi 
886), Government of Sindh and others v Tausif Ali Khan (2003 CLC 
C.A.305 of 2008 
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180), M/s National Small Industries Corpn Ltd v M/s National Metal 
Craft, Delhi and others (AIR 1981 Delhi 189), India Hosiery Works v 
Bharat Woollen Mills Ltd (AIR 1953 Cal 488)] 
12.   
The second aspect of this issue is whether in the facts and 
circumstances it was in the power of the respondent to appoint the 
arbitrator in terms of Section 9 or whether an application should have 
been made to the Court under Section 8 for appointment of the 
arbitrator. This would depend on the construction of Sections 8 and 9 of 
the Act. As a plain reading of the sections would suggest, the question of 
whether Section 8 or 9 applies ultimately boils down to whether an 
arbitration agreement provides for reference to a sole arbitrator to be 
appointed by the consent of both parties, or to two arbitrators each to be 
appointed by each party separately, respectively. From the clear wording 
and the mandate of the Section 9(b) we also find the Respondent could 
have appointed their arbitrator to act as a sole arbitrator in terms of the 
said section only if the following essential conditions were met:- 
 
(1) 
The agreement itself provides that a reference shall be to two 
arbitrators; 
 
(2) 
The agreement further provides that, of the two arbitrators, 
one has to be appointed by each: one by the appellant and 
the other by the respondent; 
 
(3) 
One arbitrator has in fact been appointed by one of the 
parties, and the other party has failed to appoint an 
arbitrator; 
 
(4) 
The party who has appointed their arbitrator has served a 
notice in writing (after the appointment of their arbitrator) to the party 
who has failed to appoint their arbitrator; and 
 
C.A.305 of 2008 
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(5) 
15 days have passed since a notice in writing to make the 
appointment was served to the party who has failed to 
appoint their arbitrator. 
 
This was also the view of the Calcutta High Court in the Textile 
Machinery Corporation Ltd case (supra), albeit with respect to Section 
9(a) of the Act. In the case before us, as has been established above, the 
arbitration clause speaks of reference to a sole arbitrator to be appointed 
by the consensus of both parties. It does not provide for a reference to 
two arbitrators, and neither does it provide (as it cannot) that one of the two 
arbitrators is to be appointed by each party. Hence we find that the first 
two ingredients, which necessarily form the basis of the last three 
ingredients, and are sine qua non for attracting this section and having 
resort thereto, are conspicuously missing from the arbitration clause at 
hand. Therefore Section 9(b) could not have been pressed into service by 
the respondent and resultantly, the appointment of the arbitrator 
pursuant thereto was absolutely invalid, being in contravention of the 
Act. It is a settled principle that where the law requires an act to be done 
in a particular manner it has to be done in that manner and not 
otherwise and this rule shall be stringently applicable when it comes to 
the question of appointment of arbitrators; as the conferment of 
jurisdiction upon the arbitrator should be strictly in line with the letter 
and spirit of the agreement between the parties and the express 
provisions of law. Obviously, any award passed by such an arbitrator 
who is not appointed in the above manner shall also be invalid, having 
been passed by an arbitrator without jurisdiction. In fact it was the 
provisions of Section 8 that were squarely applicable to this case and 
should have been made recourse to. A bare reading of Section 8 makes it 
sufficiently clear that it is meant to be applied to a case where the 
C.A.305 of 2008 
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reference provides for a sole arbitrator (as also more than one arbitrator as the case 
may be) to be appointed by the consent of the parties. As mentioned above, 
the arbitration clause in this case provides, albeit impliedly, for the 
appointment of a sole arbitrator with the consent of both the parties. 
According to Section 8(2) an application has to be made to the Court to 
appoint an arbitrator after hearing the parties, in the event of non-
appointment within 15 clear days of the service of notice to concur in 
appointment. Therefore the respondent did not have the power to appoint 
the arbitrator unilaterally after the appellant even failed to concur to 
appointment of the arbitrator; rather it was the exclusive jurisdiction of 
the Court to make such appointment if approached by the respondent 
[See cases reported as Muhammad Azam Muhammad Fazil & Co., Karachi 
(supra) Hariram Khiaram, a firm v Gobindram Rattan Chand, a firm 
(PLD 1949 Sind 30), Mujtaba Hussain Siddiqui, S. L. Balmokand v 
Uttamchand Brijlal (AIR 1927 Sind 177), M/s National Small 
Industries Corpn Ltd (supra), Anjuman–i-Ahmadiya Ashait-i-Islam, 
Lahore through Secretary, Jamaat Ahmadiya, Lahore, and another v 
Hafiz Ghulam Ahmad and others (PLD 1955 Lahore 23)]. It is an 
admitted position in this case that no such application was ever made to 
the Court, and consequently, as the mandate of law prescribed by 
Section 8, was not followed by the respondent, the award passed by the 
arbitrator cannot be deemed to be valid as the arbitrator, having not 
been appointed in terms of the arbitration agreement and the law, lacked 
the requisite jurisdiction, and it is settled law that a determination made 
and decision given by a Court or other forum performing judicial 
functions (or even quasi-judicial functions) having no jurisdiction is a nullity in 
the eyes of law. Apart from applying to the Court for appointment of an 
arbitrator under Section 8, the respondent also had the option of doing 
so under the provisions of Section 20 of the Act. As mentioned above 
C.A.305 of 2008 
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Section 20 is an alternative procedure whereby the arbitration 
proceedings would have been conducted with the intervention of the 
Court, which the respondent certainly had the choice of opting for 
instead of further proceeding under Chapter II of the Act.  
13.   
The second issue, as put forward by the learned counsel for 
the respondent, is that of the failure of the appellant to raise the 
objection to the jurisdiction of the arbitrator due to defective 
appointment which is deemed to have been waived by them. The learned 
counsel for the respondent has primarily relied upon the case of Chief 
Engineer, Building Department v Pakistan National Construction 
(1988 SCMR 723) and Saghir Bhatti’s case (supra) to support this 
contention. However it is pertinent to mention that the principles laid 
down in the Chief Engineer case is in relation to non-compliance with 
the machinery aspect for the arbitrator’s appointment contained in the 
arbitration 
agreement, 
and 
not 
non-compliance 
with 
essential 
mechanism of appointment prescribed in the Act. It is clearly stipulated 
in this dictum that “An inherent want of jurisdiction results in vitiating the proceedings 
taken by the Tribunal and is incurable notwithstanding waiver by conduct or otherwise, whereas 
irregular assumption of jurisdiction is always subject to waiver”. In the case of Saghir 
Bhatti the appointment of an arbitrator was cancelled and a new 
arbitrator was appointed without the leave of the Court and the parties 
participated in the said proceedings without objection, however 
subsequent objection to such arbitrator’s jurisdiction was disallowed 
ostensibly on the principle of waiver, whereas as established from the 
facts given in the preceding paragraphs, the instant case is such where 
there has been sheer failure to comply with the express and the 
mandatory provisions of the Act (referred to above), which in view of the 
unambiguous wording of the arbitration agreement between the parties 
was the only remedy available to the respondent, as opposed to 
C.A.305 of 2008 
-: 18 :-
unilateral appointment by either of the parties. It is proper to mention 
here that according to the settled rules of law, parties cannot confer 
jurisdiction upon a Court or other judicial or quasi-judicial forum 
through consent which otherwise in law would have no jurisdiction and 
the same is the position regarding waiver and acquiescence qua the 
Courts etc. which lack jurisdiction and such being an inherent defect 
cannot be cured on the rules of consent, waiver, estoppel, acquiesce etc. 
Though under the arbitration law the parties, as mentioned above, can 
choose their own forum for the adjudication of their disputes, but that 
forum has to be constituted strictly in terms of the arbitration agreement 
and in any case according to the express mandate of law and not in 
violation thereof. If the constitution is violative of both, the agreement 
and the law, and the objecting party has also not submitted to the 
jurisdiction of the arbitrator, the rule of waiver and acquiescence cannot 
be pressed into service against such party. However in this context there 
then needs to be express consent to submit to the jurisdiction of an 
arbitrator having no jurisdiction otherwise, and if there is clear 
acquiescence and waiver on part of the party aggrieved of the 
jurisdiction, such as participation in proceedings without any protest or 
objection, which conduct shall mean that they have accepted by choice 
the jurisdiction of the arbitrator. However in the instant case we do not 
find any material on the record to hold that the appellant either waived 
their objection or acquiesced to the arbitration of Mr. Nizami, rather to 
the contrary the record clearly suggests that the appellant had 
persistently objected to the arbitrator’s lack of jurisdiction even before 
the arbitrator himself. Letters dated 12.07.1997, 28.07.1997 and 
27.09.1997 from the appellant to the respondent all contain the former’s 
objection to the arbitrator’s lack of jurisdiction. With respect to the 
objection taken before the arbitrator himself, reference may be made to 
C.A.305 of 2008 
-: 19 :-
the letters dated 13.09.1997, 27.07.1997 and 13.12.1997. For the sake 
of clarity and brevity, the relevant extract from the letter to the arbitrator 
dated 13.12.1997 is reproduced herein below: 
 
“It may be specifically stated here that KDLB has never 
accepted you as a sole arbitrator. In fact all the proceeding 
before you are without jurisdiction with no legal effect.”  
 
We do not see how an objection phrased in these very terms could 
amount to the appellant’s consent to Mr. Nizami acting as a lawfully 
appointed sole arbitrator or a waiver of their objection to his lack of 
jurisdiction. The Kerala High Court in Cochin Refineries Ltd v C. S. 
Company, Engineering Contractors & Another [(1988) 2 Ker LJ 452] 
has held that when the sole arbitrator has been appointed irregularly, 
participation in the proceedings under protest does not amount to 
consent on part of such a party and it can approach the court to set 
aside such appointment. We do not feel hesitant in subscribing to such a 
rule. In fact in the instant case, the record reveals that the appellant 
never appeared before the arbitrator even under protest. They have been 
denying the arbitrator’s jurisdiction from the very outset and boycotted 
the arbitrator’s proceedings throughout as has been established 
hereinabove. We thus opine that the appellant had not, by its conduct, 
waived its right to object to the jurisdiction of the arbitrator.  
14.   
Attending to the argument of the learned counsel for the 
respondent regarding the principle of Kompetenz-Kompetenz (German), 
Competence de la Competence (French) or Competence Competence (English), 
that an arbitral tribunal has the competence to determine its 
competence. This principle has its roots in Germany, which is now 
employed in the European Union and other international arbitral 
tribunals as also India. Learned counsel for the respondent has relied 
C.A.305 of 2008 
-: 20 :-
upon several judgments of the United Kingdom and India wherein 
broadly it has been held that where a party has not raised an objection 
with regard to the competence or jurisdiction (or lack thereof) of the 
arbitrator before the arbitrator himself, it would be deemed to have been 
waived. Our courts have acknowledged the principle that an arbitral 
tribunal is a judge of both fact and law, the latter of which includes the 
question of its own jurisdiction. However the law in our country has 
developed somewhat differently. With respect to the English judgments 
relied upon by the learned counsel for the respondent, they have held 
that the parties were deemed to have waived their right to object and 
precluded from raising such objections if not raised before the arbitrator 
himself. This however was based on a provision in the English 
Arbitration Act, 1996 unique to it, which specifically provides for loss of 
right to raise objections when not raised before the arbitrator. We have 
no such corresponding provision in our Act hence do not feel that the law 
laid down in the English judgments can hardly be of any help to our 
jurisdiction. The Indian judgments on the other hand revolve around the 
Indian Arbitration Act, 1996 which contain a particular provision vis-à-
vis waiver with respect to non-compliance with the arbitration 
agreement. However it is pertinent to mention that the said provision 
does not pertain to non-compliance with the Act. Thus, although our 
international counterparts have, as have we, retained the concept that 
an arbitral tribunal’s decision on its jurisdiction is open to review by the 
courts, the course that the law has taken in our country with respect to 
applicability of the concept of waiver is slightly different, particularly due 
to variance in our respective arbitration statutes. We have not adopted 
wholesale the concept that if the question of proper constitution of an 
arbitral tribunal is not raised before the tribunal itself, this would 
constitute a waiver of the right to object which objection cannot be 
C.A.305 of 2008 
-: 21 :-
subsequently raised for setting aside the award. Indeed this principle 
may hold true where the appointment of the arbitrator has not been 
made in compliance with the terms of the arbitration agreement, as the 
parties may by way of waiver amend the terms of their arbitration 
agreement. However where such appointment was made in contravention 
of the provisions of the Act, then this principle has no application. In this 
respect, guidance may be sought from a five member bench judgment of 
this Court in Abdul Hamid (supra), while considering the question as to 
whether the appointment of an arbitrator made in terms of Section 9 
where it was claimed to be not applicable thus rendering the 
appointment of arbitrator and the subsequent award invalid, held that: 
 
“In the present case, only one arbitrator, who may be described as the 
arbitrator for H. M. Qureshi, was appointed and his award which was 
based upon an inquiry in which Abdul Hamid took no part, has been 
made the basis of a decree for a large sum in favour of H. M. Qureshi. 
It cannot be denied that the aspect of one-sidedness appears most 
prominently. It is sought to be justified by reference to clause (b) of 
section 9 of the Arbitration Act, 1940. The question goes to the 
competency of the arbitrator nominated by one of the parties, to give 
an award which shall be binding upon both parties. In order that the 
award should qualify, within the context of law for being made a rule 
of Court, it should be the act of a tribunal validly invested with 
authority to investigate and pronounce upon the rights of the parties 
to the submission. The Court will, of necessity, examine the power 
which such person or persons appear to exercise, with the care 
necessary for the purpose of ensuring that the decree which it 
proposes to make in relation to the rights of the parties, does not rest 
upon a conclusion reached by a private tribunal which was itself not 
competent in law to deal with the matter in the light of the agreement 
between the parties, and the relevant law. 
 
The question of the competency of Mr. G. H. Lodhi's appointment was 
not raised in the terms indicated above at any earlier stage of this 
case, but that is not a circumstance which need stand in the way of 
this Court undertaking the duty of examining the point. 
[Emphasis added] 
C.A.305 of 2008 
-: 22 :-
The case of Abdul Hamid (supra) seems to satisfactorily resolve the issue 
of objection to the arbitrator’s jurisdiction in favour of the appellant. In 
relation to the argument of learned counsel for the respondent of the 
principle of least intervention, we are of the view that it is a valid 
principle, but we will not apply it where there has been sheer non-
compliance with the provisions of the Act, as it is not fathomable as to 
how the court can abstain from intervening in such a situation. 
15.   
With respect to the reliance placed on Joint Venture Kocks 
(supra) by the learned counsel for the respondent in that objections must 
be made with sufficient clarity, it is stated that such reliance is 
misplaced, as in that case, the objections could not even have been 
implied, whereas in the instant case, the objection vis-à-vis jurisdiction 
of the arbitrator was without fail taken up by the appellant at every stage 
of the proceedings as highlighted above. Furthermore, an objection 
regarding inherent jurisdiction of an arbitrator is a point of law, which 
goes without saying, can be raised at any stage and it is an incurable 
defect per the law laid down in Chief Engineer’s case supra. 
16.   
Another important and related aspect of this matter is that of 
the Court’s role vis-à-vis making an award the rule of the Court. The 
appellant raised an objection regarding lack of jurisdiction of the 
arbitrator before the learned Single Judge in their application under 
Section 30 of the Act in the following terms: 
 
“10. As already stated above, there was/is no provision in the 
contract for a reference to the Board of Arbitrators or to a sole 
arbitrator. There is an Arbitration was to be invoked, it had to be 
done through an intervention of the court. This having not been 
done, the entering of the Arbitrator in the present case upon the 
reference as a sole arbitrator amounts to legal misconduct.” 
 
C.A.305 of 2008 
-: 23 :-
Therefore although in the instant case an express objection to 
jurisdiction of the arbitrator was sought, we are of the view that 
notwithstanding the absence of objections filed by any party and/or the 
fact that parties may consent to the making the award a rule of Court, 
the Court is duty bound to examine the validity and legality of an award 
and it may sua sponte modify or set aside the award if the facts and 
dictates of justice so demand. The Court, in our opinion, cannot and 
certainly should not, remain dormant by merely affixing the judicial 
stamp on an award. The Court is not a part of an assembly line which 
has to churn out finished products mechanically without applying its 
judicial mind to the process involved [See case reported as Rashida Begum v 
Ch. Muhammad Anwar and others (PLD 2003 Lahore 522)]. Thus Mr 
Nizami, the supposed arbitrator, who for the reasons mentioned above 
was incompetent to act as an arbitrator and pronounce the award, could 
not possibly have passed an award that would be valid in law. This error 
was floating and apparent on the face of the award, rendering it invalid, 
thus it could not have been made the rule of the Court. 
17.   
With respect to the contention of the learned counsel for the 
respondent that the appellant should have made an application under 
Sections 5 or 11 of the Act, we find force in the learned counsel for the 
appellant’s argument that Section 5 speaks of the authority of an 
“appointed arbitrator” hence making valid conferment of authority a pre-
requisite for the application of Section 5. Therefore an application under 
Section 5 would not have been sustainable in law. The same reasoning 
applies to Section 11, which although does not use the words “appointed 
arbitrator”, talks about the removal of arbitrators and we are of the 
opinion that only those arbitrators can be removed, who have been in 
fact appointed, and a defective appointment made in contravention of the 
provisions of the Act is no appointment, hence removal can certainly and 
C.A.305 of 2008 
-: 24 :-
logically not follow. In any case, non-filing of an application under the 
said sections would not, in our view amount to waiver on part of a party 
and it would not preclude a party from challenging the jurisdiction of an 
arbitrator subsequently. 
18. 
 
Learned counsel for the appellant has also argued that the 
pre-condition of reference to the consultant to invoke the arbitration 
clause was not met as the respondent did not apply to the consultant 
before asking for the appointment of the arbitrator and making a 
reference thereto. We are of the opinion that this contention is 
unfounded, as a perusal of the record reveals that the respondent vide 
letter dated 05.06.1996 had forwarded their claims to the consultant, 
who had failed to render a decision within the period stipulated in the 
contract, after which they proceeded with arbitration. 
19. 
 
Now we come to the contention of the learned counsel for the 
appellant that the respondent’s claim was already settled by payment 
made under the fourth and final supplemental agreement. A perusal of 
all four supplementary agreements does not suggest that the arbitration 
clause was amended or removed in any way thus it was valid for all 
intents and purposes. Furthermore, clause 5 of the fourth supplemental 
agreement provides: 
 
“Claims by both parties if unresolved shall be adjudicated as per terms 
of Contract after handing-over the entire project to the employer 
according to this Agreement.” 
 
This clause clearly suggests that the parties were not precluded from 
utilising the method of adjudication provided for in the contract, which 
was reference of the dispute to the consultant and then the arbitrator. 
Furthermore, the factum of a final settlement may be subsequently 
disputed by the parties. Adjudication in this regard would be required to 
C.A.305 of 2008 
-: 25 :-
be undertaken by the process stipulated by the parties in the contract. 
Therefore, we are not convinced by the argument of the learned counsel 
for the appellant in this respect. In any case this point has been rendered 
irrelevant due to the jurisdictional point. 
20. 
 
In view of the foregoing, we find that the appellant has a case 
for setting aside of the award passed by the arbitrator whose 
appointment was not in consonance with the arbitration agreement and 
the law contained in the Act. The learned Single Judge and the learned 
Division Bench of the High Court had erroneously made and upheld the 
award as a rule of the court respectively by incorrectly observing that 
arbitral tribunal was properly constituted and that the award was not 
invalid in law. 
21. 
 
The above are the detailed reasons for the short order of even 
date whereby the appellant’s appeal was accepted, which reads as:- 
 
“Upon hearing learned counsel for the parties, for 
reasons to be recorded later, we allow this appeal and set aside 
the judgment and decree of the learned Single Judge dated 
24.11.2004 making the award rule of the court, and the judgment 
dated 19.4.2006 regarding dismissal of appellant’s appeal. 
However, while the short order was being dictated in Court, the 
learned counsel for the respondent has made a request to the 
Court for appointment of a new Arbitrator in terms of Section 20 
of the Arbitration Act, 1940 for resolution of the dispute between 
the parties as this has been the argument of the appellant in 
attacking the award and the two decisions of the learned High 
Court that the respondent should have resorted to the provisions 
ibid (Section 20). When confronted, learned counsel for the 
appellant has no objection if learned retired judge of this Court 
is appointed as an Arbitrator in the matter to resolve the dispute 
emanating out of the reference filed by the respondent before 
former Arbitrator (whose award has been set aside in these 
proceedings). Thus, with the consent of learned counsel for the 
parties, Mr. Justice (R) Khilji Arif Hussain is appointed as a sole 
Arbitrator and the reference which the respondent filed before 
C.A.305 of 2008 
-: 26 :-
the former Arbitrator, namely Mr. S. A. Nizami, shall be 
considered and deemed to be the reference in this case before 
the learned Arbitrator. The appellant shall file a reply to the said 
reference which shall be proceeded upon by the Arbitrator in 
accordance with law. The parties are directed to appear before 
the Arbitrator on 03.11.2015. The learned Arbitrator shall 
determine his own fee which shall be paid by the parties in equal 
share. The award shall be made and signed within the time 
provided in law, however, in case any reasonable extension of 
time is required for making the Award, the Arbitrator can extend 
such further period with the consent of the parties.” 
 
 
 
 
JUDGE 
 
 
 
 
JUDGE 
 
 
 
 
JUDGE 
Islamabad, the 
2nd October, 2015 
Approved For Reporting 
Waqas Naseer/* 
