 |
 |
 |
THE ARBITRATION ACT
(X OF 1940)
[
An Act to consolidate and amend the law relating to Arbitration.
Preamble :
Whereas it is expedient to consolidate and amend the law relating to Arbitration
in
It
is hereby enacted as follows:-
CHAPTER 1
Introductory
a) “arbitration agreement” means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not
b) “award” means an arbitration award;
c)
“Court” means a
d)
“legal representative” means a person who in law represents the estate
of a deceased person, and includes any person who intermeddles with the
estate of the deceased, and, where a party acts in a representative character,
the person on whom the estate devolves on the death of the party so acting;
CHAPTER II
Arbitration without intervention of a court
1.
Provisions implied in arbitration
agreement: An arbitration agreement, unless
a different intention is expressed therein, shall be deemed to include
the provisions set out in the First Schedule in so far as they are applicable
to the reference.
1) An arbitration agreement shall not be discharged
by the death of any party thereto, either as respects the deceased or
any other party, but shall in such event be enforceable by or against
the legal representative of the deceased.
(2)
The authority of an arbitrator
shall not be revoked by the death of any party by whom he was appointed.(3)
Nothing in this section shall
affect the operation of any law by virtue of which any right of section
is extinguished by the death of a person.
5.
Provisions in case of insolvency:
(1) Where it is provided by
a term in a contract to which an insolvent is a party that any differences
arising thereout or in connection therewith shall be referred to arbitration,
the said term shall, if the receiver adopts the contract, be enforceable
by or against him so far as it relates to any such differences.
(2)
Where a person who has been
adjudged an insolvent had before the commencement of the insolvency proceedings,
become a party to an arbitration agreement, and any matter to which the
agreement applies is required to be determined in connection with, or
for the purposes of, the insolvency proceedings, then, if the case is
one to which sub-section
(1) does not apply, any other party to the agreement
or the receiver may apply to the Court having jurisdiction in the insolvency
proceedings for an order directing that the matter in question shall be
referred to arbitration in accordance with the agreement, and the Court
may, if it is of opinion that, having regard to all the circumstances
of the case, the matter ought to be determined by arbitration, make as
order accordingly.
(3)
In this section the expression
“receiver” includes an Official Assignee.
6.
Power of Court to appoint arbitrator
or umpire:
(1) In any of the following cases
–
(a)
where an arbitration agreement provides that the reference shall be to
one or more arbitrators to be appointed by consent of the parties, and
all the parties do not, after differences have arisen, concur in the appointment
or appointments; or
(b)
if any appointed arbitrator or umpire neglects or refuses to act, or is
incapable of acting, or dies, and the arbitration agreement does not show
that it was intended that the vacancy should not be supplied, and the
parties or the arbitrators, as the case may be, do not supply the vacancy;
or
(c)
where the parties or the arbitrators are required to appoint an umpire
and do not appoint him; any party may serve the other
parties or the arbitrators, as the case may be, with a written notice
to concur in the appointment or appointments or in supplying the vacancy.
2)
If the appointment is not made within fifteen clear days after the service
of the said notice, the Court may, on the application of the party who
gave the notice and after giving the other parties an opportunity of being
heard, appoint an arbitrator or arbitrators or umpire, as the case may
be, who shall have like power to act in the reference and to make an award
as if he or they had been appointed by consent of all parties.
7.
Power to party to appoint new
arbitrator, or, in certain cases, a sole arbitrator: Where an arbitration agreement
provides that a reference shall be to two arbitrators, one to be appointed
by each party, then, unless a different intention is expressed in the
agreement,-
(a)
if either of the appointed arbitrators, 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 arbitrator made under clause
(b)
and either, on sufficient cause being shown, allow further time to the
defaulting party to appoint an arbitrator or pass such other order as
it thinks fit.
Explanation: The fact that an arbitrator or umpire, after
a 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.
8.
Provision as to appointment
of three or more arbitrators:
(1)
Where an arbitration agreement
provides that a reference shall be to three arbitrators, one to be appointed
by each party and the third by the two appointed arbitrators, the agreement
shall have effect as if it provided for the appointment of an umpire,
and not for the appointment of a third arbitrator, by the two arbitrators
appointed by the parties.
(2)
Where an arbitration agreement
provides that a reference shall be to three arbitrators to be appointed
otherwise than as mentioned in sub-section
(1), the award of the majority
shall, unless the arbitration agreement otherwise provides, prevail.
(3)
Where an arbitration agreement
provides for the appointment of more arbitrators than three, the award
of the majority, or if the arbitrators are equally divided in their opinions,
the award of the umpire shall, unless the arbitration agreement otherwise
provides, prevail.
9.
Power to Court to remove arbitrators
or umpire in certain circumstances:
(1)
The Court may, on the application
of any party to a 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 the
umpire is removed under this section, he shall not be entitled to receive
any remuneration in respect of his services. (4) For the purposes
of this section the expression “proceeding with the reference” includes,
in a case where reference to the umpire becomes necessary, giving notice
of that fact to the parties and to the umpire.
10.
Power of Court where arbitrator
is removed or his authority revoked:
(1)
Where the Court removes an
umpire who has not entered on the reference or one or more arbitrators
(not being all the arbitrators), the Court may, on the application of
any party to the arbitration agreement, appoint persons to fill the vacancies.
(2)
Where the authority of an arbitrator
or arbitrators or an umpire is revoked by leave of the Court or where
the Court removes an umpire who has entered on the reference or a sole
arbitrator or all the arbitrators, the Court may, on the application of
any party to the arbitration agreement, either –(a)
appoint a person to act as sole arbitrator in the place of the person
or persons displaced, or
(b)
order that the arbitration agreement shall cease to have effect with respect
to the difference referred.
(3)
A person appointed under this
section as an arbitrator or umpire shall have the like power to act in
the reference and to make an award as if he had been appointed in accordance
with the arbitration agreement.
11.
Powers of arbitrator:
The arbitrators or umpire shall, unless a different
intention is expressed in agreement, have power to
–(a)
administer oath to the parties and witnesses appearing;
(b)
state a special case for the opinion of the Court on any question of law
involved, or state the award, wholly or in part, in the form of a special
case of such question for the opinion of the Court;
c)
make the award conditional or in the alternative;
(d)
correct in an award any clerical mistake or error arising from any accidental
slip or omission;
(e)
administer to any party to arbitration such interrogatories as may, in
the opinion of the arbitrators or umpire, be necessary.
12.
Award to be signed and filed:
(1)
When the arbitrators or umpire have made their award, they shall sign
it and shall give notice in writing to the parties of the making and signing
thereof 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 party to the arbitration agreement or any person
claiming under such party or if so directed by the 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 a signed
copy of it, together with any depositions and documents which may have
been taken and proved before them, to be filed in the Court, and the Court
shall thereupon 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.
13.
Power of Court to modify award
:
The Court may by order modify
or correct an award
–(a)
Where it appears that a part of the award is upon a matter not referred
to arbitration and such part can be separated from the other part and
does not affect the decision on the matter referred; or
-(b)
Where the award is imperfect in form, or contains any obvious error which
can be amended without affecting such decision; or
(c)
Where the award contains a clerical mistake or an error arising from an
accidental slip or omission.
14.
Power to remit award :
(1)
The Court may from time to
time remit the award or any matter referred to arbitration to the
arbitrators or umpire for reconsideration upon such terms as it thinks
fit
–(a)
where the award has left undetermined any of the matters referred to arbitration,
or where it determines any matter not referred to arbitration, and such
matters cannot be separated without affecting the determination of the
matters referred; or
(b)
where the award is so indefinite as to be incapable of execution; or
(c)
where an objection to the legality of the award is apparent upon the fact
of it.
(2)
Where an award is remitted
under sub-section (1) the Court shall fix the time within which the arbitrator
or umpire shall submit his decision to the court: Provided that any time so fixed may be extended by subsequent order
of the Court.
(3)
An award remitted under sub-section
(1) shall become void on the failure of the arbitrator or umpire to reconsider
it and submit his decision within the time fixed.
15.
Judgement 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 making 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.
16.
Power of Court to pass interim
orders:
(1) Notwithstanding anything contained in Section
17, at any time after the filing of the award, whether notice of the filing
has been served or not, upon being satisfied by affidavit or otherwise
that a party has taken or is about to take steps to defeat, delay or obstruct
the execution of any decree that may be passed upon the award, or that
speedy execution of the award is just and necessary, the Court may pass
such interim orders as it deems necessary.
(2)
Any person against whom such
interim orders have been passed may show cause against such orders, and
the Court, after hearing the parties, may pass such further orders as
it deems necessary and just.
17. Power to supersede arbitration where award becomes void or is set aside: Where an award has become void under sub-section (3) of Section 16 or has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred.
CHAPTER III
Arbitration with intervention of a Court where there is no suit pending
18.
Application to file in Court
arbitration agreement:
(1) Where any persons 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 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.
CHAPTER IV
Arbitration in Suits
19.
Parties to suit may apply for
order of reference: Where in any suit all the parties
interested agree that any matter in difference between them in the suit
shall be referred to arbitration, they may at any time before judgment
is pronounced apply in writing to the Court for an order of reference.
(1) The
Court shall, by order, refer to the arbitrator the matter in difference
which he is required to determine, and shall in the order specify such
time as it thinks reasonable for the making of the award.
(2)
Where a matter is referred to arbitration, the Court shall not, save in
the manner and to the extent provided in this Act, deal with such matter
in the suit.
22.
Reference to arbitration by
some of the parties: Where some only of the parties
to a suit apply to have the matters in difference between them referred
to arbitration in accordance with, and in the manner provided by, Section
21, the Court may, if it thinks fit, so refer such matters to arbitration
(provided that the same can be separated from the rest of the subject-matter
of the suit) in the manner provided in that section, but the suit shall
continue so far as it relates to the parties who have not joined in the
said application and to matters not contained in the said reference as
if no such application had been made, and an award made in pursuance of
such a reference shall be binding only on the parties who have joined
in the application.
23. Provisions applicable to arbitration under this Chapter: The provisions of the other chapters shall, so far as they can be made applicable, apply to arbitration under this Chapter: Provided that the Court may, in any of the circumstances mentioned in Sections 8, 10, 11 and 12, instead of filing up the vacancies or making the appointments, make an order superseding the arbitration and proceed with the suit, and where the Court makes an order superseding the arbitration under Sec.19, it shall proceed with the suit.
CHAPTER V
General
24.
Application of Chapter : Save as otherwise provided
in this Act, the provisions of this Chapter shall apply to all arbitrations.
(1) The arbitrators or umpire shall
state in the award the reasons for the award in sufficient detail to enable
the Court to consider any question of law arising out of the award.
(2)
Where the award does not state
the reasons in sufficient detail, the Court shall remit the award to the
arbitrators or umpire and fix the time within which the arbitrator or
umpire shall submit the award together with the reasons in sufficient
detail: Provided
that any time so fixed may be extended by subsequent order of the Court.
(3)
An award remitted under sub-section (2) shall become void on the failure
of the arbitrators or umpire to submit it in accordance with the direction
of the Court.]
25.
Power of arbitrators to make
an interim award:
(1) Unless a different intention
appears in the arbitration agreement, the arbitrators or umpire, may,
if they think fit, make an interim award.
2.
All references in this Act
to an award shall include reference to an interim award made under
sub-section (1).
26.
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 provision 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.
27.
Interest on awards: Where and in so far as an award is for the payment
of money the Court may in the decree order interest, from the date of
the decree at such rate as the Court deems reasonable, to be paid on the
principal sum as adjudged by the award and confirmed by the decree.
28.
Grounds for setting aside award: An award shall not be set aside 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 the arbitration proceedings have become invalid
under Section 35;
(c)
That an award has been improperly procured or is otherwise invalid.
29.
Jurisdiction:
(1) Subject to the provisions of this Act, an
award may be filed in any Court having jurisdiction in the matter to which
the reference relates.
(2)
Notwithstanding anything contained in any other law for the time being
in force and save as otherwise provided in this Act, all questions regarding
the validity, effect or existence of an award or an arbitration agreement
between the parties to the agreement or persons claiming under them shall
be decided by the Court in which the award under the agreement has been,
or may be filed, and by no other court.
(3)All applications regarding the conduct of arbitration proceedings or otherwise arising out of such
proceedings shall be made to
the Court where the award has been, or may
be filed, and to no other Court .
(4)
Notwithstanding anything contained
elsewhere in this Act or in any other law for the time being in force,
where in any reference any application under this Act has been made in
a Court competent to entertain it, that Court alone shall have jurisdiction
over the arbitration proceedings and all subsequent applications arising
out of that reference and the arbitration proceedings shall be made in
that Court and in no other Court.
30.
Bar to suits contesting arbitration
agreement or award: Notwithstanding any law for the time being in force,
no suit shall lie on any ground whatsoever for a decision upon the existence,
effect or validity of an arbitration agreement or award, nor shall any
arbitration agreement or award be enforced, set aside, amended, modified
or in any way affected otherwise than as provided in this Act.
31.
Arbitration agreement or award
to be contested by application: Any party
to an arbitration agreement or any person claiming under him desiring
to challenge the existence or validity of an arbitration agreement or
an award or to have the effect of either determined shall apply to the
Court and the Court shall decide the question on affidavits: Provided that where the Court deems it
just and expedient, it may set down the application for hearing on other
evidence also, and it may pass such orders for discovery and particulars
as it may do in a suit.
32.
Power to stay legal proceedings
where there is an arbitration agreement: Where any party to an arbitration
agreement or any person claiming under him commences any legal proceedings
against any other party to the agreement or any person claiming under
him in respect of any matter agreed to be referred, any party to such
legal proceedings may, at any time before filing a written statement or
taking any other steps in the proceedings, apply to the judicial authority
before which the proceedings are pending to stay the proceedings; and
if satisfied that there is no sufficient reason why the matter should
not be referred in accordance with the arbitration agreement and that
the applicant was, at the time when the proceedings were commenced, and
still remains, ready and willing to do all things necessary to the proper
conduct of arbitration, such authority may make an order staying the proceedings.
33.
Effect of legal proceedings
on arbitration:
(1) No
reference nor award shall be rendered invalid by reason only of the commencement
of legal proceedings upon the subject-matter of the reference, but when
legal proceedings upon the whole of the subject-matter of the reference
have been commenced between all the parties to the reference and a notice
thereof has been given to the arbitrators or umpire, all further proceedings
in a pending reference shall, unless a stay of proceedings granted under
Section 34, be invalid.
(2) In this section the expression “parties to the
reference” includes any persons claiming under any of the parties and
litigating under the same title.
35.
Limitations:
(1) All
the provisions of the Limitation Act, 1908 (IX of 1908), shall apply to
arbitrations as they apply to proceedings in Court.
(2)
Notwithstanding any term in an arbitration agreement to the effect that
no cause of action shall accrue in respect of any matter required by the
agreement to be referred until an award is made under the agreement, a
cause of action shall, for the purpose of limitation, be deemed to have
accrued in respect of any such matter at the time when it would have accrued
but for that term in the agreement.
(3)
For the purposes of this section
and of the Limitation Act, 1908 (IX of 1908), an arbitration shall be
deemed to be commenced when one party to the arbitration agreement serves
on the other parties thereto, a notice requiring the appointment of an
arbitrator, or where the arbitration agreement provides that the reference
shall be to a person named or designated in the agreement, requiring that
the difference be submitted to the person so named or designated.
(4)
Where the terms of an agreement
to refer future differences to arbitration provide that any claims to
which the agreement applies shall be barred unless notice to appoint an
arbitrator is given or an arbitrator is appointed or some other step to
commence arbitration proceedings is taken within a time fixed by the agreement,
and a difference arises to which the agreement applies, the court, if
it is of opinion that in the circumstances of the case undue hardship
would otherwise be caused and notwithstanding that the time so fixed has
expired, may on such terms, if any, as the justice of the case may require,
extend the time for such period as it thinks proper.
(5)
Where the Court orders that
an award be set aside or orders, after the commencement of an arbitration,
that the arbitration agreement shall cease to have effect with respect
to the difference referred, the period between the commencement of the
arbitration and the date of the order of the Court shall be excluded in
computing the time prescribed by the Limitation Act, 1908 (IX of 1908),
for the commencement of the proceedings (including arbitration) with respect
to the difference referred.
36.
Disputes as to arbitrator’s
remuneration or costs:
(1) If in any case an arbitrator or umpire refuses
to deliver his award except on payment of the fees demanded by him, the
Court may on an application in this behalf, order that the arbitrator
or umpire shall deliver the award to the applicant on payment into Court
by the applicant of the fees demanded, and shall, after such inquiry,
if any, as it thinks fit, further order that out of the money so paid
into Court there shall be paid to the arbitrator or umpire by way of fees
such sum as the Court may consider reasonable and that the balance of
the money, if any, shall be refunded to the applicant.
(2)
An application under sub-section (1) may be made by any party to the reference
unless the fees demanded have been fixed by written agreement between
him and the arbitrator or umpire, and the arbitrator or umpire shall be
entitled to appear and be heard on any such application.
(3)
The Court may make such orders
as it thinks fit respecting the costs of an arbitration where any question
arises respecting such costs and the award contains no sufficient provision
concerning them.
Appeals
37.
Appealable orders:
(1) An appeal shall be 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;
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.
38.
Small
CHAPTER VII
Miscellaneous
39.
Procedure and powers of Court: Subject to the provisions of this Act and of
rules made thereunder:-
(a)
the provisions of the Code of Civil Procedure, 1908, shall apply to all
proceedings before the court, and to all appeals, under this Act; and
(b)
the Court shall have, for the purpose of, and in relation to arbitration
proceedings, the same power of making orders in respect of any of the
matters set out in the Second Schedule as it has for the purpose of, and
in relation to, any proceedings before the Court:Provided that nothing
in clause
(b) shall be taken
to prejudice any power which may be vested in an arbitrator or umpire
for making orders with respect to any of such matters.
40.
Service of notice by party
or arbitrator: Any notice required by this Act to be served
otherwise than through the Court by a party to an arbitration agreement
or by an arbitrator or umpire shall be served in the manner provided in
the arbitration agreement, or if there is no such provision, either
–(a)
by delivering it to the person on whom it is to be served, or
(b)
by sending it by post in a letter addressed to that person at his usual
or last known place of abode or business in Pakistan and registered under
Chapter VI of the Post Office Act, 1898.
41.
Power of Court to issue processes
for appearance before arbitrator:
(1)
The Court shall issue the same processes to the parties and witnesses
whom the arbitrator or umpire desires to examine as the Court may issue
in suits tried before it.
(2)
Persons, failing to attend in accordance with such process, or making
any other default, or refusing to give their evidence, or guilty of any
contempt to the arbitrator or umpire during the investigation of the reference,
shall be subject to the like disadvantages, penalties and punishments
by order of the Court on the representation of the arbitrator or umpire
as they would incur for like offences in suits tried before the Court.
(3)In
this section the expression “processes” includes summonses and commissions
for the examination of witnesses and summonses to produce documents.
42.
Power to High Court to make
rules: The High Court may make rules consistent with
this Act as to
–
(b)
the filing and hearing of special cases and all proceedings consequent
thereon or incidental thereto;
(c)
the staying of any suit or proceeding in contravention of an arbitration
agreement;
(d)
the forms to be used for the purposes of this Act;
(e)
generally, all proceedings in Court under this Act.
43.
Government to be bound: The provisions of this Act shall be binding
on the Government.
44.
Application of Act to statutory
arbitrations: The provisions of this Act except
sub-section
(1) of Section 6 and Sections 7, 12, 36 and 37, shall apply
to every arbitration under any other enactment for the time being in force,
as if the arbitration were pursuant to an arbitration agreement and as
if that other enactment were an arbitration agreement, except in so far
as this Act is inconsistent with that other enactment or with any rules
made thereunder.
45.
Act to apply to all arbitrations: Subject to the provisions of Section 46, and
save in so far as is otherwise provided by any law for the time being
in force, the provisions of this Act shall apply to all arbitrations and
to all proceedings thereunder:
Provided that an arbitration
award otherwise obtained may with the consent of all the parties interested
be taken into consideration as a compromise or adjustment of a suit by
any Court before which the suit is pending.
46.
Saving for pending references:
The provisions of this Act shall not apply to any reference pending at
the commencement of this Act, to which the law in force immediately before
the commencement of this Act shall, notwithstanding any special repeal
effected by this Act, continue to apply.
49. Repeals and amendments: [Repealed by Sec.2 and Schedule 1 of the Repealing and Amending Act, 1945 (6 of 1945)].