Section 30 of 1940 Act: SC explains court's jurisdictional extent
A three-judge bench, headed by Chief Justice Yahya Afridi and comprising Justice Muhammad Shafi Siddiqui and Justice Miangul Hassan Aurangzeb, rendered this verdict on Pakistan Railways' petition against Lahore High Court (LHC) judgment dated 04.03.2024.
The disputes between the petitioner (Pakistan Railways) and the respondent (CRRC Ziyang Co Limited) arose from a contract executed on 01.11.2017 were referred to arbitration by a two-member arbitral tribunal, which rendered the award on 02.07.2021 and filed it before the civil court. The petitioner on 01.09.2021 filed objections to the said award praying for the award to be set aside and the disputes to be remitted back to the arbitrators.
The civil court on 23.11.2022 under amended provisions of the Code of Civil Procedure, 1908, framed the issues requiring the parties to submit the list of witnesses for the production of evidence within a period of seven days.
The respondent under Section 30 of the Arbitration Act, 1940, assailed the civil court's order dated 23-11-2022 before the LHC, which on 04-03-2024 set aside the said order and remanded the case to the civil court for a decision afresh on the basis of available record. The petitioner approached the apex court against the LHC verdict.
The nine-page judgment authored by Justice Miangul Hassan Aurangzeb, upholding the LHC order, dismissed the petition. It said objections to arbitration awards, ought to avoid framing issues and record evidence unless absolutely necessary. 'The framing of issues and recording of evidence; however, undermines the core objectives of the 1940 Act, which are efficiency, finality, and minimal judicial intervention.'
The judgment noted that arbitration offers several time-related advantages compared to traditional court litigation. Arbitration typically takes less time because the process is more streamlined, with fewer procedural steps and less formality than court proceedings.
Justice Hassan wrote that the Courts are expected to pronounce judgment and decree in terms of the award, intervening only on narrow grounds such as misconduct or invalidity of the award, without re-opening factual issues through evidence recording.
It is now well settled that arbitrators are entitled to regulate their own procedure and are not governed by the strict procedure prescribed by the CPC and the rules regarding evidence contained in the Qanun-e-Shahadat Order, 1984. Arbitrators decide disputes based on evidence presented during arbitration proceedings. They are under no obligation to frame issues as provided in the CPC.
The judgment said that courts recording fresh evidence disregard the procedural safeguards in arbitration, such as the Arbitrator's exclusive jurisdiction to assess evidence and apply law. This may lead to inconsistent outcomes and procedural unfairness. If the court frames issues and records evidence after objections to an award are filed, parties may use this as an opportunity to re-litigate the entire dispute, leading to multiple proceedings on the same issues besides undermining both the legislative intent and the integrity of the arbitral process.
The framing of issues, recording of evidence and hearing arguments post the filing of the award in the court is bound to increase litigation costs for parties and add to the already heavy workload of courts. This again defeats the purpose of arbitration as an economical and efficient alternative dispute resolution mechanism. The recording of evidence and conducting a trial effectively converts the court into an appellate or fact-finding forum, which would be contrary to the statutory scheme envisaged by the 1940 Act.
Copyright Business Recorder, 2025
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