REPUBLIC OF PAKISTAN vs MESSRS HAMID CONSTRUCTION Co.
This matter arises from a petition for leave to appeal against the order of the High Court upholding an arbitration award made in favour of the respondent contractor. The petitioner and the respondent entered into a construction agreement containing an arbitration clause for disputes arising out of or relating to the contract. During execution, deviations occurred, leading to claims for extra payment. After an initial award was set aside, a second arbitrator awarded Rs. 1,33,000 to the respondent, which was made a rule of the court by the lower court and upheld by a learned Single Judge. The petitioner sought leave to appeal, contending that extra items outside the contract schedule were not covered by the reference clause and that the arbitrator improperly awarded costs based on special rates rather than scheduled rates. The Supreme Court found that the points argued needed examination and granted leave to appeal.
- Whether disputes regarding extra items of work not expressly listed in the contract schedule fall within the purview of the arbitration reference clause?
- Whether an arbitrator is justified in awarding costs for additional work based on special rates rather than scheduled rates?
1. MUHAMMAD GUL, J.-The petitioner and the respondent herein entered into an agreement in writing on 28th January, 1960 by which the latter undertook certain construction work in connection with the Fouji Sugar Mill at Tando Mohammad Khan at a total cost of Rs. 1,75,000. The contract provided for reference to arbitration in the event of an disputes between the parties "arising out of or relating to the contract". The construction work was to be carried out according to the specifications in schedule attached to the agreement. It appears however, that in the course of the execution of the contract, certain deviations were made which entailed work outside the agreed specifications for which the respondent claimed extra payment, but which the petitioner declined to pay under the arbitration clause, the dispute was initially referred to Mr. Riazul Haq as the sole arbitrator who on 12th September, 1966 gave an award for Rs. 4,300 in favour of the respondent herein. The award on being challenged by the respondent was set aside by a learned Single Judge on 18th January, 1968.
2. A fresh reference was then made to another arbit--rator, namely Vasif Hussain, who announced the award on 22nd July, 1969 for Rs. 1,33,000 in favour of the respondent. The petitioner filed objection against the award which were overruled by the court of Ist instance. Appeal, the learned Single Judge upheld, order of the lower court and made the award a rule of the court. Certificate for appeal under the Letters Patent being refused, the petitioner now seeks leave to appeal.
3. Learned counsel for the petitioner urged the following two points I support of the petition
(1) That the extra items in respect of which the respondent had lodge his claim and for which the Arbitrator had awarded Rs. 1,33,000 not being covered by the schedule were not within the purview for the reference clause, the dispute with regard thereto, could no be referred to the arbitrator for decision.
(2) That assuming for the sake of arguments, that the extra items o work were covered by the terms of agreement then the respondent should have been awarded costs for the additional work on the scheduled rates and not on the special rates which were virtually twice the sates in the schedule.
4. The points argued by the learned counsel need examination. Accord--ingly, we grant leave.