SPECIAL STEELS OF PAKISTAN LIMITED Versus PAKISTAN INSURANCE CORPORATION

In this matter, the Umpire Mr.Ghulam Kibria has riled his award dated 11 August, 1984 in this Court on 24th December, 1986 under the cover of an Application under section 14(2) of the Arbitration Act, 1940 read with Rule 282(1) of the Sind Chief Court Rules (Original Side). Notices were issued to the parties by this Court and in response thereto the defendants, Pakistan Insurance Corporation and National Insurance Corporation, Karachi, have filed objections under sections 30 and 33 of the Arbitration Act, supported by an Affidavit of Tajuddin, Assistant Manager of the Defendants.

I have heard MrA.Rarraq Puri on behalf of the plaintiff's‑company and Mr. Ibrahim Pishori on behalf of the Aefendants. The facts leading to the filing of the above objections are that Special Steel of Pakistan Limited (formerly, Peoples Steel Mills Limited) obtained an Erection of All Risks Policy in respect of the machinery for establishing of Steel Mill for the period covering 1‑1‑1973 to 31‑12 1973 plus six months' trial period from 1‑1‑1974 to 30‑6‑1974. The plaintiffs discovered that 390 metres cables were missing. A report was lodged with the Police and so also the plaintiffs lodged their claim with the defendants as under:‑‑

1. H.T. Cable JY 10,740,000

2. Controllers JY 886,600

The defendants appointed the Surveyor and upon receipt of Survey Report they repudiated the plaintiffs' claim. Originally the plaintiffs vide their letter dated 31 5‑1977 suggested the name of Mian Tajammul Hussain, President of Lahore Chamber of Commerce and Industries as the Sole Arbitrator. The defendants instead of agreeing or disagreeing to the appointment of the Sole Arbitrator by the defendants, filed a Petition in this Court being J.M. No.22/1977 under sections 11 and 33 of the Arbitration Act and obtained a stay order. This petition was dismissed by a learned single Judge of this Court on 2‑9‑1979. The Court found that under the Arbitration Clause an Arbitrator is to be a qualified Engineer and the Arbitration Reference is to be made to a Sole Arbitrator to be appointed by both the parties. The learned Judge, therefore, observed that 'it will be open to the parties to appoint Arbitrators in terms of the Arbitration Clause if they cannot agree upon a Sole Arbitrator. Pursuant to the above direction of this Court the Plaintiffs appointed Mr.S.Muhammad Ali, Consultant Engineer as their Arbitrator, whereas the defendants appointed Commodore (Retired) Syed Shahid Hussain Rizvi as their Arbitrator. Later on, the two above-named Arbitrators on 14‑6‑1981 appointed Mr.Ghulam Kibria, Engineer to act as an Umpire.

The Arbitration proceedings commenced in July 1981. On the day of the evidence produced by the parties both the Arbitrators agreed that the theft did take place and the claim regarding the same was not time‑barred and that Insurance Policy was current. The Umpire also agreed with them. However. Arbitrator Commodore Syed Shahid Hussain Rim, was of the view that the theft had been committed with connivance of the Security Staff, whereas Mr.S.Muhammad Ali, Engineer appointed by the plaintiffs was of the view that in the absence of conclusive proof and also in view of the Police Report etc., this contention was not maintainable. The Umpire, however, found that there is no proof of wilful connivance or wilful negligence of insured and ruled that the Insurer (Defendants) is under obligation to settle the claim in respect of theft of Cable. The Arbitrators also differed in respect of claim relating to Controller The Umpire, however, ruled that because of the delay in reporting, the Insurer could not lodge claim on the carriers in time hence this claim was not maintainable. The Umpire has, therefore. made the following Award:‑‑

(a) Claim regarding theft of H.T. Cable is valid and, therefore, the Insurer is under obligation to settle the claim of JY 10,740,000 C & F. Therefore, the Insurer is directed to pay the same to the Insured.

(b) Claim regarding Controller's value JY 886,600 C & F cannot be accepted because of delay in reporting, on account of which the Insurer could not lodge claim on the Carriers m time.

Mr. Ibrahim Pishori, learned counsel for the defendants made the following submissions before me:‑‑

1. That there was no privity of contract between the Pakistan Insurance Corporation and the plaintiffs. The Policy of Insurance in question was issued by National Co‑Insurance Scheme and hence the claim in question could be made by the plaintiffs against the member Companies only.

2. The Award is given in Japanese Yen without conversion rate and hence it cannot be enforced.

The conditions No.6 and 9 of the "Erection All Risks Policy" had been violated but the Arbitrators and so also the Umpire did not examine this aspect of the case. The first information about the alleged theft had been given after three months by the plaintiffs to defendants and hence the defendants were not liable for the loss in question. The delay in reporting the theft to the defendants as well as to the Police, deprived the defendants from carrying out immediate investigation. MrA. Razzaq Puri, learned counsel for the plaintiffs, on the other hand, contended that the defendant No.l, having accepted this liability in the application made by it under sections 11 and 33 of the Arbitration Act before this Court vide J.M. No.22/1977, was not legally competent to raise this issue at this stage. The case as sought to be pleaded now that all member Insurance Companies of the National Co‑Insurance Scheme was not raised. He also urged that the plaintiffs while notifying the loss in question had in Column No.12 of the prescribed Form claimed the loss being made good in the following manner:‑‑

"12. Remarks: The cable in question appears to have been stolen. Matter is being investigated. This type of cable is not available in Pakistan. The Japanese Suppliers will arrange shipment on payment of cost. Quotations received from the Suppliers are enclosed. C & F cost Japanese JY 10,740,000. Quantity of cable is to be imported immediately for Erection Work."

I have given due consideration to the submissions made by the learned counsel for the defendants and I am of the opinion that there is no merit in any of the contentions raised by Mr.Pishori. The learned Umpire has given due consideration to each and every relevant aspect of the case and it is not open to me to examine his Award as a Court of Appeal. The first abovenoted objection pressed before me was not as such urged before the Arbitrator or the learned Umpire inasmuch as there is no mention of it in the Award. It is not a question of law simpliciter so as to be allowed to be urged at this stage. The Arbitrators or the Umpire, in the absence of specific plea to the effect raised by the defendants, could not be expected to have examined it suo motu. The Arbitrators or Umpire could not therefore be held to have committed an error of law within the purview of Section 30 of the Arbitration Act. Had the Umpire gone into this aspect of the case suo motu he would have obviously acted in excess of his authority.

In view of the claim as set up by the plaintiffs the Award as given by the Umpire without conversion rate, cannot be said to be bad in law. The Arbitrators and so also the learned Umpire have had in view the conditions No.6 and 9 of the Policy and they have given their Award thereon. The validity of the reasons assigned by them for their conclusion could not be legally made the subject -matter of scrutiny by this Court. I find no ambiguity or illegality in the Award so as to justify its being set aside.

In the result, the objections raised by the learned counsel for the defendants against the Award are held to be devoid of force and they are dismissed accordingly. Consequently, the Award is made a Rule of the Court and I pass the decree in terms thereof. There will, however, be no order as to cost of I these proceedings.

AA./S‑309/K Order accordingly,