HAFEEZ CONSTRUCTION CO. Versus JAVEDAN CEMENT LTD.

1. Brief facts forming the background of this case are as follows:‑

1. The defendant formerly known as Valika Cement Ltd. and now Jawedan Cement Ltd. decided in 1975 to have additional construction of 12 flats of 3 bedrooms each and extension to office, house and workshop building carried out in its Factory.

2. Accordingly tenders were invited on 24‑12‑1975. The plaintiff's tender was accepted and on 21‑1‑1976, this work was awarded to the plaintiff. The tender besides the agreement and conditions of the contract became the contract documents. The completion period for the flats was 12 months and for other works was 8 months. Messrs Fida Hussain G. Ibrahim was appointed as an Architect and Consultant of the work. During the process and completion of the work the prices of the construction material and the cost of the labour went up and the work could not be completed within the scheduled time. Therefore, extensions were sought and granted on various occasions. Likewise escalations were claimed which were approved by the Consultants and agreed to by the defendant. Consequently the plaintiff completed the construction and handed over the same duly completed to the defendant on 24‑9‑1978. The plaintiff submitted his final bill for payment as follows:

(a) Amount of final bill as approved by Architect/ Consultants and submitted for payment Rs.9,73,365.12

(b) Retention money already matured Rs.4,41,717.21

(c) Interest paid by the plaintiff on Bank Guarantee w.e.f. 22‑3‑1978 to 6‑3‑1980. Rs. 81,000.00

(d) Interest accrued to the plaintiff tinder the con tract for withholding the settlement of the bill in (a) above. Rs 2,35,000.00

3. Total:‑ Rs.17,31,082.33

4. The defendants failed to make the payment and therefore on 6‑3‑1980 the plaintiff's Advocate addressed a notice demanding the said amount. On 20‑3‑1980 in their reply the defendant refused to make the payment. Therefore on 31‑3‑1980 a Suit bearing No.315 of 1980 was filed by the plaintiff under section 20 read with section 8 of the Arbitration Act 1940 before this Court. On 4‑6‑1980 by consent of the parties this Court passed an order as follows:‑

5. "It is agreed that all disputes and differences of any kind arising out of or in connection with the contractor carrying out of the work are first to be referred to Mr.Fida Hussain Ibrahim, Architect, except the excepted matters. In case that any of the parties to the contract is dissatisfied with his decision, the same is to be decided first by an independent Arbitrator. Accordingly the parties will first refer the matter to Mr. Fida Hussain G. Ibrahim Architect and in case they or any one of them is dissatisfied with his decision the same shall be referred to Mr. Mirza Arshad Beg, Ex‑District and Sessions Judge, Karachi as Sole ‑Arbitrator. The suit is disposed of in the above terms by consent. The application is also disposed." Therefore Fida Hussain G. Ibrahim, Architect, proceeded with the arbitration and gave an award of R.s.14,15,300.81 in favour of the plaintiff on 13‑10‑1980. In .para. D of his award the Arbitrator awarded the claim as follows: ‑

6. "Based on the above, I award the applicant against the respondents the following:‑

(a) Escalation claim Rs.9,73,365.12

(b) interest ‑on Escalation Claim Rs. 87,602.86

(c) Retention money. Rs.3,28,465.40

(d) Interest on Retention money payable after maintenance period. Rs.1,847.67

7. Total: Rs.14,15,300.81

8. The learned Arbitrator filed this award before this Court in Suit No.1036/1980 on 13‑11‑1980. The defendant filed a suit under section 20, Arbitration Act which was registered as Suit No.1164/1980. In both the above suits i.e. 1037/1980 and 1164/1980 this Court passed an order on 23‑2‑1981, referring the matter for the arbitration to Mr. Mirza Arshad Beg. Accordingly Mr. Mirza Arshad Beg proceeded with the arbitration and on 26‑6‑1981 he gave an award of Rs.14,15,300.81 in favour of the plaintiff. He filed his award before this Court which is the above suit. The defendant has filed objections to this award under sections 30 and 33 of the Arbitration Act. Before dealing with the objections filed by the defendant it will be pertinent to refer to the scope of section 30 of the Arbitration Act, which reads as under:‑

9. "30. Grounds for setting aside award . An award shall not be set aside except on one or more o the following grounds, namely:‑

(a) that an, arbitrator or umpire has misconducted himself for the proceeding;

(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35;

(c) that an award has been improperly procured or is other wise invalid."

10. The plain reading of section 30 makes it clear that scope of the application for setting aside the award under section 30 is limited to the following grounds:‑

(1) If the arbitrator has miss conducted himself or proceedings.

(2) If the award has been made after an order by the Court superseding the Arbitration is passed.

(3) If the award has been improperly procured.

(4) If the award is otherwise invalid.

11. The grounds for holding the award as vitiated have been given in the affidavit filed by the defendant in support of the application under sections 30 and 33 of the Arbitration Act. In ground (A) it has been stated that the learned Sole Arbitrator was in error in holding that the Architect was a general agent of the defendant. In this connection it will suffice to refer to page 16 of the Award where the learned Sole Arbitrator has given detailed reasons for his holding the decision of the Architect to be of great significance. It is an admitted fact that the Architect was appointed as Consultant by the defendant itself and it was the defendant who had assigned the Architect the job of supervising the entire project. Therefore, the Architect was an agent of the defendant. In any case, any opinion expressed by the learned Sole Arbitrator about any person cannot vitiate the award. As far as the Award given by the learned Sole Arbitrator is concerned he has properly analysed the entire evidence and has given his own reasons for the Award. Mr. Noor Muhammad who appeared for the defendants elaborating ground (B) submitted that the Arbitrator had not perused the actual documents of contract but had read the summary of its clauses given by the Advocate for the other side, which is clear from the award itself in which the summary of the clauses of the contract given by the Arbitrator is an exact copy of the notes of the Advocate of other side. He relied upon 1983 C L C 1068/1076 Toyo Menka Kaisha Ltd. v. Trading Corporation of Pakistan Ltd. wherein the Arbitrator had considered something other than what was there in the agreement and therefore the award was set aside. He also relied upon PLD 1978 Kar. (D.B) 585‑‑ Messrs Jaffer Brothers Ltd. v. Islamic Republic of Pakistan where it was held that the Arbitrator was duty bound to enquire into the terms of the contract and to have awarded‑ compensation to the injured party. He also relied upon AIR 1951 Patna 201 (D.B_) The Union of India v. Premchand Satram Das and 1980 CLC 470 (D.B.) M/s. Barisons (Pak.) Ltd. v. Pakistan through Secretary, Ministry‑ of Industries and Natural Sources where it was .held that an erroneous construction placed on the contracts vitiate award.

12. The contention of Mr. Noor Muhammad does not hold any water. The .fact that the Arbitrator had given a gist of the terms of the contract in his award which tallied with the gist given by the Advocate the other side does not necessarily mean that he had not perused 'he terms of the contract. The reproduction of the gist of contract by the Arbitrator from the notes of the Advocate of the other side can not vitiate the award because there is nothing on record to show that the gist was wrong or inconsistent with the terms of the contract. In 1983 CLC 1068 the Arbitrator had referred to a charter party to which. the defendant was not a party at all and not to the contract itself which is not so in this case.

13. Similarly PLD 1978 (D.B) Karachi 585 Jaffer Brothers v_ Islamic Republic of Pakistan is distinguishable with this case on facts. In the case under ruling the contract had been fully performed and the supplier had been paid the price of the cement stipulated in the contract. It was a fixed price of liner terms i.e. it was agreed that the supplier was responsible for payment of stevedoring and light rage charges. The Arbitrator held that the increase in the labor charges was not contemplated at the time of entering into contract and therefore awarded extra stevedoring and light rage expenses to the supplier. It was held that the Arbitrator had erred in implying a term in the contract for reimbursement of extra labour charges to the supplier and thus placed a wrong interpretation on the contract‑ Whereas there is nothing in the present case to show that there was any sum construing of the, terms of tale contract.

14. 1980 CLC 470 (D.B.) ,M/s. Bari sons (Pak.) Ltd. v. Pakistan through Secretary, Ministry of Industries and Natural Sources is also distinguishable on facts inasmuch as no dispute with regard to claim for profit or damages arising from alleged loss of business sustained by claimant having been referred to the Arbitrator award in respect of such compensation or profit was held beyond the scope of reference and without jurisdiction which is not so in the present ease because the provision for escalation is there in the contract,

15. AIR 1951 Patna 201 (D.B.) The Union of India v. Premchand Satram Das. In this case there was a dispute between the respondent and Central P.W.D. in connection with the supply of bricks and the matter was referred to the Arbitrator. This ruling is also distinguish able from the present case on facts.

16. Mr. Fida Hussain G. Ebrahim, the consultant in his award had given detailed reasons for holding that the extension of time in completion period and escalations were agreed to and given by the defendant. The learned Sole Arbitrator also framed issues 1, 2, 3, 4, 5. 6, 7 and 8. The learned Sole Arbitrator in his award had given detailed reasonings from page 8 to 25 of the award. As a matter of fact both the parties had sufficient time to lead the evidence and to produce the documents. Even the Consultant Mr. Fida Hussain G. Ebrahim was summoned by the Sole Arbitrator and was cross examined by the defendant. Therefore, at this stage, the said issues of facts cannot a reopened. The learned Sole Arbitrator has decided those issues of facts conclusively after elaborately hearing the parties. In Ghulam Abbas v. Trustees of the Port of Karachi P L D 1987 SC 393 and 404 it was held as under:‑

17. In any event this being a question of fact whether the work under this item was executed or not and whether it was an anticipated risk, was a matter within the exclusive jurisdiction of the Arbitrator to decide. We find force in this submission as there appears no error on the face of the award in view of the positive findings by the Arbitrator that the contractor had executed this item of work which finding was based on the evidence produced before the Arbitrator."

18. There is sufficient evidence on the record of the learned Arbitrator whereby the plaintiff has proved that not only he was given extrusions to complete the work but also that due to sharp rise in prices of construction materials the defendant had agreed to the escalations, Amongst the documents exchanged between the parties Exh. C/8, C/9 and C/10 are important. The learned Sole Arbitrator at page 14 and at page 18 of the Award has dealt with this correspondence. He has held at page 19: "Therefore the import of these three documents is to be taken for its value to the detriment of. the case of the respondents, who cannot wriggle out of their own commitments". Thus, the learned Sole Arbitrator has held that the defendant is liable to pay escalation. Likewise at pages 20 and 21 of the Award the learned Sole Arbitrator has discussed in detail the causes of the delay in the completion of the work and the extensions given after discussing the reasons for the same and ultimately at page 22 (9th line from above) he has stated as follows; "All these taken together go to prove the fact that extension was granted and delay was due to the circumstances over which the applicant had no or very little control". In this connection reliance was placed on Messrs Waseem Construction Company v. Government of Sind and others PLD 1987 Kar. 575 at 581 and 582. In this case this Court on the authority of the case of Nanakevaka v. Nana Sri Ogori AIR 1933 P.C. 46 has held as under:‑‑

19. "The Arbitrator is final Judge of a matter of fact and so long as he acts within the powers conferred on him with fairness, the parties are bound by his decision and the Court has no jurisdiction to say that the evidence was not sufficient to come to the conclusion at which the Arbitrator had arrived. An award cannot be set aside for being against the weight of evidence or even for misperception of the evidence. The Arbitrator is fully justified in rejecting the case set up by either party irrespective of weight of evidence in his favour and in accepting the case of the other party in whose favour the evidence is less weighty. Whether his conclusion is right or wrong is not a matter for consideration of the Court."

20. . As far as ground (C) of the objection filed by the respondent is concerned suffice it to say that the issues 1 to 8‑A pertain to the escalation and extension of time. The learned Sole Arbitrator has discussed the entire evidence in connection with these issues. It is submitted that although the Sole Arbitrator has framed the issues and has discussed the evidence in detail, yet he was not required to give separate findings on each issues. Although the recently added section 26‑A provides that the Arbitrator 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; yet it is nowhere made compulsory for the arbitrator to frame issues and to give separate findings 'on each of the issues in strict sense. In this connection reliance was placed on Muhammad Salim Butt v. M/s. Trading Corporation of Pakistan 1986 CLC 254 at 261, where it was held as under:‑

21. ,, To meet this objection it would suffice to say that the umpire has impliedly found that the defendant was not entitled to forfeit the performance bond by encashing the bank guarantee. Since under the law he was not required to give separate findings on each issue of point raised before him and he was also not required to give reasons for his findings or award. However, if any. authority is needed reference may be had to Hamdard Dawakhana (Wakf), Karachi v. K.B. Josheph & Co. Ltd., Lahore and another PLD 1971 Kar.

179. In this case the arbitrator had framed the' issues and had not given separate decision thereon and it was observed by Dorab Patel, J (as he then was) that the issues were framed by the arbitrator merely for his own convenience and he was not required to consider every issue and as such the arguments of the learned counsel were without merits." The Sole Arbitrator has given a "speaking award" and thus he has sufficiently complied with these provisions. As far as ground (D) of the objections filed i)y the defendant is concerned the three letters i.e. Exhs.C/8, C/9 and C/10 and their effect has been discussed by the learned Sole Arbitrator in detail and the same has already been referred to above.

22. As far as ground (E) is concerned it is submitted that at pages 24 and 25 of the Award the learned Sole Arbitrator has considered in detail the conditions of the contract and he has given his detailed reasons for the Award. These reasons are based on the evidence produced before him and are at pages 24 and 25 of the Award.

23. As far as ground (F) is concerned it is submitted that the learned Sole Arbitrator has rightly referred to section 55 of the 'Contract Act which enunciates the principle of "PROMISSORY ESTOPPEL". The learned Sole Arbitrator although has come to a definite conclusion that the extension was given by the defendant for the completion of the construction, yet he, as an additional reasoning as stated that even if it is assumed that no such extension was granted and the plaintiff carried on with the work within the sight and with the knowledge of the defendant and completed the same, the defendant now cannot turn around and take the plea that the work was completed beyond time. At page 24 of the Award the learned Sole Arbitrator has very rightly stated that "if the respondents did not want extension of time, they could have stopped the work then and there and would have penalised the applicant in keeping with the contract. They on the other hand showed laxity and allowed him to carry on the work".

24. As far as ground (G) of the objections filed by the defendant is concerned it will be sufficient to refer to pages Nos.l and 2 of the Award. The learned Sole Arbitrator in giving the reasons for the delay has relied on the evidence produced before him. Gounds (H), (I) and (J) are general in nature and no specific allegation has been made against the learned Sole Arbitrator whereby it could be alleged that the Award is illegal or the same was vitiated.

25. The entire claim of the plaintiff can be categorized as under:‑

(1) Escalation claim.

(2) Claim of Retention Money.

(3) Interest paid by the plaintiff on the Bank Guarantee.

(4) Interest on the retention money and the interest on the money Withheld.

26. Against the above claim the learned Sole Arbitrator has awarded as follows:‑

(1) Escalation claim.

(2) Interest on Escalation Claim.

(3) Retention money.

(4) Interest on Retention Money.

(5) Interest on Retention Money payable after the maintenance period.

27. The defendant has never disputed the payment of other items excepting the escalation. However the defendants have withheld the entire bill pf the plaintiff. This shows the high handedness on the part of the defendant. It is a matter of common knowledge that the Retention Money is retained by the Employer to make sure about the construction during the maintenance period. This is the money of the contractor which is retained by the employer after deducting the same from his several bills. The maintenance period has passed long back and after the expiry of the same the first Award by Mr. Fida Hussain G. Ebrahim was given. 'However, the defendants have unreasonably withheld the said amount and instead of paying the same challenged the said Award. Again the Sole Arbitrator gave his award and held that the amount was payable by the defendant. The defendant, however, again challenged the said Award before this Court in 1981.

28. Mr. Noor Mohammad Advocate has cited a number of rulings and it will be appropriate to have a glance at them. PLD 1977 SC 237 Brooke Bond (Pakistan) Ltd. v. Government of Sind and PLD 1974 Karachi 155 Pakistan v. Asian Associated Agency. In both these rulings section 30 of the Arbitration Act has been interpreted and the meaning and scope of the words "misconduct" and "miss-conducted'! has been explained. These rulings are general in nature with which there can be no cavil. It is now well settled that the words "misconduct" and "miss-conducted himself or the proceedings" in relation to an Arbitrator do not necessarily imply anything in the nature of fraud or moral turpitude. The jurisdiction or competency of the Arbitrator to determine a question is strictly limited by terms of the submission or reference. They cannot traverse beyond the reference or submission. Even within the scope of their. reference they have not to conduct E the proceedings in such a manner which may amount to mishandling of the Arbitration as is likely to cause some substantial miscarriage of justice. None of these' 2 rulings applies to the present case. Arbitrator has neither traversed out of the settled scope of reference or submission nor has he conducted the proceedings in violation of the principles of natural justice. He also cited PLD 1981 Karachi 236 Ibad & Co. v. Government of Sind and 1982 SCMR 243 Divisional Forest Officer v. Ghanda. ThP former ruling enunciated the general principle of law that an award based on no evidence can be set aside, which is not so in the case before us. This ruling on the contrary goes against Mr. Noor Mohammad because it makes it quite clear that insufficiency of evidence or possibility of Court having to reach a different conclusion on evidence adduced before Arbitrator was no ground for setting aside or interfering with an award. The Court ‑ had in that ruling made the award a rule of Court and dismissed the objections. In the latter ruling Maulvi Mushtaq Hussain, J. has held that the reasons given by the Arbitrator are not based upon the evidence produced before him and the law applicable to it and therefore the High Court was justified in setting aside the award. This is not the situation in the present case. The last objection of Mr.Noor Mohammad relates to the award of interest by the Arbitrator. He has submitted that the Arbitrator had no power to grant interest prior to the date of award .In this connection he has relied upon 1985 CLC 1398 Mohammad Amin Mohammad Bashir Ltd. v. Khairpur Textile Mills Limited where a single Judge of this Court had held that the award of interest on damages from a date prior to the award by the Arbitrator was not lawful. In this connection it may he pointed out that this ruling relates to the award of interest or damages and not on principal amount. Where according to the agreement between the parties a matter is referred to an Arbitrator to settle a dispute relating to monetary dealings, the authority given to the Arbitrator to settle the dispute about the monetary dealings would include the power to award interest on the principal amount. The law on this point is well settled. In AIR 1964 Punjab 395 Sujant Singh v. Mohinder Paul it was held that the Arbitrator had powers to award interest. In AIR 1920 Cal. 143 Uttam Chand Saligram v.Mahmood Jewa Mamooji and AIR 1936 Nag. 197 Tulsi Ram v. Chanak Lal it was also held that the Arbitrator had jurisdiction to allow past interest though he had no jurisdiction to award future interest as he was not a "Court". I am therefore of the clear view that the objections raised by the defendant against the award are without substance and accordingly 1 dismiss the same arid make the award a rule of the Court. Suit is decreed with costs in terms of the award.

29. A.A./H‑119JK Suit decreed.