PAKISTAN STEEL MILLS CORPORATION, KARACHI vs Messrs MUSTAFA SONS

NAZIM HUSSAIN SIDDIQUI, J.---This judgment will dispose of Civil Petitions Nos.524-K and 525-K of 2002, as in these matters common questions of facts and law are involved. Both these matters, through High Court's Appeals Nos.125 and 136 of 2000, were disposed of by a common judgment dated 27-3-2002 'delivered by a learned Division Bench, High Court of Sindh. Karachi.

2. The facts relevant for decision of these matters are that petitioner, Pakistan Steel Mills, Karachi and respondent, M/s. Mustafa Sons (Pvt.) Ltd. Are the companies incorporated under the Companies Act. In the year 1978 and again in 1980, the respondent entered into a contract with the petitioner for a construction work in the latter's factory, which was completed and the respondent had obtained maintenance certificate in respect of both the contracts from engineers appointed by the petitioner under the contract. The dispute between the parties was about compensation for increase in wages' rates during the period of performance of the contract. So happened, the petitioner repudiated the claim of the respondent and the latter tiled two suits against the petitioner for appointment of Arbitrator. Accordingly, Mr.Justice (Retd.) Durab Patel was appointed an Arbitrator in both suits.

3. In Suit No,818 of 1987, hereinafter referred to as "the First Suit", the contract, granted to the respondent by the petitioner, was in respect of access road to the petitioner's sewage plant. The respondent filed its claim with the engineers, appointed under the contract, for escalation in its labour costs on 10-11-1982. In the meanwhile, the respondent's claim was examined by the Board of Directors of the petitioner and certain directions were issued under a Memorandum dated 1-6-1983 regarding the manner in which the respondent was to submit its claim. Pursuant thereto the respondent submitted its claim in accordance with the petitioner's Board of Directors resolution on 1-7-1983. Meanwhile NESPAK, who were the engineers, examined the claim of the respondent for Rs,4,23,220 but certified for payment of Rs,2,30,747.20 only and this payment was to be made within 20 days of certification. The respondent completed the contract on 31-7-1983 and the maintenance period for contract expired on 31-7-1984 and the maintenance certificate was issued on 28-11-1984, but even after issuance of the maintenance certificate and in spite of several reminders sent by the respondent, the payment of aforesaid amount, as certified by the engineers was not made by the petitioner, which resulted in invoking the arbitration clause by the respondent.

4. The facts relating to Suit No,69 of 1998, hereinafter referred to as "the Second Suit" are almost identical to the First Suit, except the following. In the Second Suit, the contract related for construction of flyover bridge and it was accepted by the petitioner on 3-12-1987. In this case also the issue was escalation of labour charges and the claim of the respondent, like the previous one, was considered and examined by the petitioner's Board of 'Directors and similar memorandum, as in the First Suit, was issued giving directions to the respondent, as to how the claim was to be filed In this case, the engineers were M/s. Wahid Associates, who gave a certificate to the respondent, recommending payment of Rs,15,275.53 which was to be paid within 30 days of the certification.

This contract was completed on 31-7-1983 and the maintenance period ended one year after and the maintenance certificate was issued by the engineers on 8-1-1985. In this case also, the claim of the respondent for escalation was not paid in spite of repeated reminders.

5. The petitioner in both the matters filed its objections. The main plea raised on behalf of the petitioner was that the respondent had not completed the contract in time and the claim being time-barred could not be entertained. Also, it was urged that the claim was not properly documented. As regard certificates issued by the engineers, the petitioner maintained that said certificates were issued by the engineers in breach of their duties, as such, the same were without any legal effect.

6. All objections in depth were examined by learned Arbitrator, and thereafter, he reached the conclusion that the time for limitation was, as per Article 115 of the Limitation Act, to run from the date of issuance of certificates, while on the other hand the case of the petitioner was that Article 65 of the Limitation Act was attracted and the claim of the respondent was time-barred.

7. Learned Arbitrator awarded Rs,237,747.20 in the First Suit with interest @ 15% per annum from the date of award till its realization and in the Second Suit awarded Rs,1,052,057.53 -with interest @ 15% per annum till its realization.

8. Thereafter, learned Single Judge on original side passed judgment in Suits Nos.704 and 705 of 1994 and award in both the suits were made rule of the Court and the suits were decreed in terms of the award.

9. Above order of learned Single Judge was impugned before a learned Division Bench and the same was maintained by the judgment, which has been impugned in these petitions.

10. We heard learned counsel for the parties and with their assistance perused the record.

11. Mr. Akhtar Ali Mahmood, Advocate Supreme Court appearing for the petitioner contends that both learned Single Judge and the Judges of Division Bench failed to appreciate the facts in their true perspective and reached wrong conclusion. He argued that the impugned award was liable to be set aside, inter alia, on the ground that learned Arbitrator misconducted the proceedings insofar as claim of the respondent was concerned. Learned counsel also argued that the award was passed totally ignoring the impact of the provisions of Article 19 of the conditions of Contract.

Article 19 (4) of the Contract reads as under:-- "19.4. The amount of any adjustment in the contract price in accordance with this Article 19 shall be determined by the Engineer and his certificate shall be final and binding on the Contractor."

12. As against above, Mr.Bilal A Khawaja learned counsel for the respondent argued that award is strictly in accordance with the law and both learned Single Judge and learned Judges of Division Bench, after scrutinizing it both on facts and law, have rightly upheld the same.

13. The grounds for setting aside award are given in section 30 of Arbitration Act, 1940, which is as follows:- "30. Grounds for setting aside award.--An award shall not be set aside except on one or more of the following grounds, namely:--

(a) That an arbitrator or umpire has misconducted himself or the proceedings;

(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 wider section 35;

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

14. As regards first ground, it is noted that nothing has been brought to our notice from the record to substantiate the plea of alleged misconduct on the part of Arbitrator. The word "misconduct" with reference to arbitration proceedings, is interpreted in the sense in which it is used in English Law and it not akin to fraud, but it means neglect of duties and responsibilities of the Arbitrator.

15. Mr, Akhtar Ali Mahmood, Advocate Supreme Court submitted that, in fact it was a legal misconduct on the part of Arbitrator. According to him, the procedure adopted was against the principles of natural justice. It is noted that whatever Mr.Akhtar Ali Mahmood has submitted is not substantiated by the material available on record. On the contrary, it is evident that normal procedure was followed and not only this but all pleas raised by learned counsel for the petitioner were considered and answered accordingly. Neither there was any violation of any principle of natural justice nor any conclusion was drawn in haste, nor the conclusion so drawn shocks the conscience. We are of the view that learned Arbitrator has not acted capriciously or arbitrarily.

16. Subsection (b) of section 30 (ibid) on the basis of which the validity and propriety of the award could be challenged, has not been invoked before us.

17. Much stress has been laid by learned counsel for the petitioner on subsection (c) of section 30

(ibid) saying that the award is otherwise invalid. It is noted that the Arbitrator is the final Judge on the law and facts and it is not open to a party to challenge the decision of the Arbitrator, if it is otherwise valid. If the Arbitrator has given his decision in terms of the submission nothing adverse could be attributed to him. Even, if there was wrong interpretation of a clause in a contract, in such cases, view has been taken that an Arbitrator is not bound to give specific findings on each and every issue nor he is required to state reasons for his conclusion, if the findings are within the parameters of submissions made before him. It is also no ground to set aside an award on the plea that different view was possible if the facts would have been appreciated with different. Angle.

18. In the case reported as 1141/s. Joint Venture KG/RIST v. Federation of Pakistan (PLD 1996 SC 108), at page 119 the following dictum has been laid down:-- "We may mention here that the Court while examining the validity of an award does not act as a Court of appeal. Therefore, a Court hearing the objection to the award cannot undertake reappraisal of evidence recorded by the arbitrator in order to discover the error or infirmity in the award. The error or infirmity in the award which rendered the award invalid must appear on the face of the award and should be discoverable by reading the award itself. Where reasons recorded by the arbitrator are challenged as perverse, the perversity in the reasoning has to be established with reference to the material considered by the arbitrator in the award."

19. The Award in these cases was given by a renowned Judge of this Court Mr.Justice (Retd.) Durab Patel. It appears that he was appointed sole Arbitrator because of his long experience, as a Senior Advocate, a Judge of High Court and a Judge of Supreme Court. Distinctly, he noted down the submissions made before him and then recorded his findings. We are of the view that each and every aspect of the case was minutely examined and learned counsel for the petitioner was not able to point out any flaw in it.

20. As regards, the question of applicability of;; Articles 65 and 115 of the Limitation Act, learned Arbitrator while dealing with this contention held that the respondent's claim fell under Article 115 .

(ibid) and observed as follows:-- "The next point for determination is whether the plaintiff's claims fall under Article' 65, as contended by the defendant, or under Article 115. The period under both Articles is 3 years, but the starting point of limitation is not the same, because the description of the suit under Article 65 is 'compensation for a breach of a provision to do anything at a specified time', while the description of the suit in Article 115 is compensation for any breach of any contract. Even on the assumption that the defendant's obligation to reimburse the plaintiff under Article 19 for the statutory increases in wages was 'a promise to do- anything', the defendant's refusals to make the payments certified by its Engineers under Article 19 clearly amounted to a breach of its contractual obligations, and as the Limitation Act has, to be construed liberally in favour of the plaintiff, I hold that the plaintiff s claims fall under Article 115, and as I pointed out, the period of limitation under this Article is three years while the starting point of limitation is the date of the breach or the breaches of contract by the defendants. But according to Mr.Mahmood the starting point of limitation under Article 115 could not be later than the payment by the defendant of the plaintiff's final bill in the two suits. If this submission is correct, the claims might be time-barred, therefore, Mr.Khalid Jawaid Khan submitted that the starting point of limitation was the date when the plaintiff received the Maintenance Certificates under the two Contracts from the defendants Engineers, and if this submission be correct, it was not disputed before fine that the plaintiff's claims were in time:.."

21. As per Article 19 (4) quoted earlier, it is evident that the certificates issued by the engineers, who were appointed by the petitioner, were final. The petitioner now cannot challenge the authority of the engineers, who acted on its behalf. In fact, these certificates clinch 'the main issue in favour of the respondent, whereby its claims after scrutiny were recognized. The plea that the engineers exceeded their power is without any substance. It only means that so long they supported' the petitioner, they acted according to law and when they exercised their authority in favour of the respondent, their act has become mala fide. This plea of the petitioner deserves to be rejected out- rightly.

22. In consequence, 'leave to appeal is refused and the petitions are dismissed.