Lahore High Court Sets Aside Arbitration Award Due to Procedural Irregularity

Islamabad 11-03-2025: In a significant decision, Mr. Justice Mirza Viqas Rauf of the Lahore High Court, Rawalpindi Bench, has set aside an arbitration award, emphasizing the necessity of procedural compliance under Section 20 of the Arbitration Act, 1940. The judgment was delivered in the case titled Choudhry Muhammad Nisar and others Vs. Waqar Ali Khan and another [F.A.O. No. 121 of 2014].

The case involved disputes arising within a registered partnership firm, M/s Econo Express, operating a CNG station business in Rawalpindi. Initially, disagreements among partners led to arbitration proceedings initiated through the Civil Court under Section 20 of the Arbitration Act, 1940. Advocate Raja Abdul Wahid was appointed arbitrator by mutual consent. However, the appellants challenged the validity of the arbitration proceedings, arguing that no formal reference order identifying specific disputes was made by the trial Court, a requirement under Section 20(4) of the Arbitration Act.

Mr. Justice Mirza Viqas Rauf, accepting the Appellants’ arguments, emphasized that the failure of the trial Court to frame a formal order of reference to the arbitrator was a fundamental procedural violation, citing precedents such as Oil and Gas Development Corporation Ltd. Pakistan Vs. Claugh Engineering Ltd. (1999 MLD 254), and others.

The Court thus set aside the arbitration award and directed the Senior Civil Judge, Rawalpindi, to appoint an arbitrator afresh and frame a formal order of reference clearly identifying the issues to be arbitrated.

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