Messrs Mughals Pakistan (Pvt.) Limited v. Employees Old Age Benefits Institution

Title and Citation of the Case
Messrs Mughals Pakistan (Pvt.) Limited v. Employees Old Age Benefits Institution through Director Law, Lahore and others.
2025 CLD 150

Court:
Supreme Court of Pakistan

Judges on the Bench:
Mr Justice Syed Mansoor Ali Shah
Mrs Justice Ayesha A. Malik
Mr Justice Aqeel Ahmad Abbasi

Parties:
Appellant: Messrs Mughals Pakistan (Pvt.) Limited
Respondent: Employees Old Age Benefits Institution through Director Law, Lahore and others.

Facts of the Case:
A three-member bench of the Supreme Court heard an appeal against the decision of the Lahore High Court on 6 November 2024. The dispute arose between the appellant and the respondent regarding the extension of time and the encashment of Mobilization Advance Guarantees. The appellant filed petitions under Section 20 of the Arbitration Act, 1940, along with an application under Section 41 read with the Second Schedule to the Act, seeking injunctive relief and invoking arbitration before the Civil Court, Lahore. An arbitral award was subsequently announced on 18 May 2022, which dissatisfied the respondents and led to the present appeals.

The Lahore High Court had previously nullified the arbitration proceedings, finding the award was invalid[i] as notice was not served and EOBI should have been party to arbitration. Dissatisfied, the appellant approached the Supreme Court to challenge that decision.

Issues/Questions of Law:

1. Whether EOBI was necessary party to the arbitration and its absence renders the award invalid.
2. Whether PRIMACO, as EOBI’s agent, has the authority to represent EOBI in the arbitration proceedings.
3. Whether the award was validly made a rule of the court by the civil court.
4. Whether mediation could be lawfully directed by the Supreme Court as an alternative mechanism for dispute resolution.

Arguments Summary:

Appellant (Mughals Pakistan Pvt. Ltd):
The appellant argued that the arbitral award was lawfully passed and binding under Section 14 and 17 of the Arbitration Act, 1940. It contended that the Lahore High Court erred in setting aside the award, committing an error of law and raising a substantial question of law regarding the interpretation and application of arbitration principles. It contended that the powers under section 41, read with the second schedule, has been exercised in good faith and within jurisdiction. Hence, court should recognize the finality of arbitral decision to ensure efficiency and commercial certainty.

Respondent (EOBI):
Respondent filed an appeal arguing that EOBI was not a party to arbitration agreement making the award invalid. They claim that PRIMACO as EOBI’s agent did not have the authority to represent in the arbitration proceedings. The respondent also argue that the award was flawed due to lack of notice to the engineer before seeking extension of time and raising claims for additional payments. Thus, award is deficient in material details and should be remitted to tribunal. However, the court ruled that PRAMICO’s representation was not sufficient and EOBI should have been a party to the arbitration proceedings. In addition, the respondent has subsequently agreed with supreme court’s decision and express willingness to engage in mediation to resolve the dispute amicably.

 The Supreme Court highlighted the necessity of promoting Alternate Dispute Resolution (ADR) mechanisms to reduce the overwhelming backlog of cases in Pakistani courts—approximately 2.22 million nationwide, with 82% pending in district courts. The Court observed that “the courts of this country should not be the places where resolution of disputes begins; they should be the places where disputes end after alternative methods of resolving disputes have been considered and tried.” Mediation is one of the forms of ADR and the way it should be conducted is referred in Lahore high court decision.[ii]

In light of Sections 14 and 17 of the Arbitration Act, 1940, the Court acknowledged that judicial interference with arbitral awards should remain limited. However, given the procedural irregularities and dissatisfaction of one party, the Court directed that mediation be pursued first. Should mediation fail, the parties were allowed to return to court for re-fixation. The Court endorsed mediation as a voluntary and confidential process, consistent with the approach adopted in Faisal Zafar v. Siraj-ud-Din.[iii]

Citing Chief Justice Sundaresh Menon’s 2023 speech on “International Mediation and the Role of Courts,” the Supreme Court noted that mediation offers cost efficiency, confidentiality, flexibility, and reduced hostility—qualities essential to ensuring access to justice in overburdened systems. The Court further referred to the ADR Mediation Accreditation (Eligibility) Rules 2023[iv] and Mediation Practice Direction (Civil) Rules 2023[v], underscoring the institutional framework supporting ADR in Pakistan.

The judgment also made a comparative reference to the United Nations Convention on International Settlement Agreements Resulting from Mediation (the “Singapore Convention on Mediation”)[vi], recommending that Pakistan consider becoming a signatory to enhance access to justice and promote global standards.

Ultimately, the Court upheld the Lahore High Court’s directive for mediation, emphasizing that ADR is not merely an alternative to litigation but a complementary and integral part of the justice system.[vii] It concluded with a striking observation: “An ounce of mediation is worth a pound of arbitration and a ton of litigation.”

Ratio Decidendi:
The Supreme Court reaffirmed that mediation and ADR are essential components of the justice system, aimed at ensuring timely, cost-effective, and amicable resolution of disputes. Courts should promote ADR as the first step before adjudication, particularly in commercial and contractual matters.

Implications:
The decision strengthens Pakistan’s legal framework for Alternative Dispute Resolution (ADR), showing a shift toward non-adversarial dispute resolution. By integrating mediation and arbitration into judicial practice, as encouraged by article 34 of UNCITRAL Model Law on international commercial arbitration and reinforced by Pakistan’s ADR 2017, the judiciary acknowledges the need to balance procedural fairness with efficiency, alleviating the burden on overcrowded courts. As, a result the case sets a precedent for future commercial and civil litigation, potentially reducing pendency and fostering public trust. It also paves the way for Pakistan’s accession to the Singapore convention on Mediation, solidifying its position as a hub for international dispute resolution.

Conclusion:
The Supreme Court’s ruling in Mughals Pakistan (Pvt.) Ltd v. EOBI reaffirms that justice should not only be delivered but delivered efficiently. It underscored the value of ADR and directed the parties toward mediation as a legitimate and preferred means of resolving disputes. The decision reflects the Court’s forward-looking stance, recognizing ADR as indispensable to ensuring fair, swift, and community-cantered justice.

References:

[i] Section 30(c) of the arbitration act 1940.

[ii] 2024 PLD 315 LAHORE-HIGH-COURT-LAHORE

[iii] 2024 CLD 1 LAHORE-HIGH-COURT-LAHORE

[iv]https://molaw.gov.pk/SiteImage/Misc/files/ADR%20Mediation%20Eligibility%20Rules%20as%20amended.pdf

[v]https://mis.ihc.gov.pk/attachments/news/Mediation_Practice_Direction_Civil_Rules_2023___________638339321977608781.pdf

[vi] https://uncitral.un.org/sites/uncitral.un.org/files/singapore_convention_eng.pdf

[vii] 2024 PLD 545 LAHORE-HIGH-COURT-LAHORE