RAHMAT HUSSAIN JAFFERI, J.---On the basis of tender floated by Pakistan Water and Power Development Authority (hereinafter referred to as "the respondents") for the construction of Ratodero Pump Station contract R.T. D-I, (hereinafter referred as "the project"). The bid of China International Water and Electric Corporation (hereinafter referred to as "claimants") was accepted, therefore, an agreement was executed betheen the parties on 26-5-1996. The contract price was Rs,108,668,8000 and the contract period was 15 months from 28th June, 1996 up to 28th September, 1997. The claimants furnished the performance guarantee of 15% of the contract amount. The claimants mobilized to the site of work and commenced the execution of the project. In December 1996 the claimants submitted four running bills Nos. 1 to 4 but the bills were paid late. However, it was alleged that due to change in the Government there were changes in priorities of the respondents. Suddenly the fimds became unavailable and respondents started facing acute cash flow problems because of inability of respondents to make payment against running bills in time. The delayed payment was admitted by NESPAK Ltd. Consultant of the project in their letters. For the smooth execution of project 10 numbers of pumps costing more than Rs,12 Million were required, therefore, such letter was sent to the consultant of the respondents. The correspondence were exchanged between them. The claimants vide letter dated 25-4-1997 notified the consultant that the pumps were ready for inspection and testing with the manufacturer and the same may be inspected on 2-5- 1997. The consultant inspected the same and found them to be in order, therefore, a request was made that pending payments may be released to enable the claimants to procure all the delivery of the said pumps. The Engineer of the respondent's vide letter 25-6-1997 relied upon some technicalities, therefore, refused to meet the request of the payment for early procurement of the pumps in question.
2. The claimants submitted running bill No,5 on 31-1-1997. The miming bill was verified by the Engineer on 8-3-1997 but the payment was not made within the required period, as such, the claimants issued notice of termination of contract under clause 69 of C.O.C.
On the ground of failure of the respondents to pay the certified dues against running bill No,5. By another letter the claimant identified all outstanding dues which were unpaid as on that date amounting to Rs,58,686,903. The respondents replied the notice on 21-6-1997 by enclosing a copy of letter dated 20-6-1997 in which it was alleged that a cheque for a sum of Rs,6,448,925 had been forwarded to the claimants through Courier Service. It was further alleged that the cheque was sent within due time, therefore, the respondents were not in default under clause 69, C.O.C.
3. On 28-6-1997 the respondents referred the matter to the .Engineer seeking its decision under clause 67 of C.O.C. On the following issues: "(1) Whether or not the employer has paid to the contractor the amount due to him under the engineer Certificate No,AIP-5 in terms of clause 69(a) of C.O.C. Within 60 days after the same has become due? And
(2) Whether the contractor notice dated 21st June, 1997 to terminate the contract R.T.D.-1 of C.O.C.'s valid?"
4. On 2-7-1997, the claimants responded to the representation made by the respondent giving the entire background and supporting documents in favour of their. Claims.
5. On 4-7-1997 the claimants filed an application under section 20 of the Arbitration Act, 1940 before this Court which was treated as Suit No,875/1997 with the following prayer: "In view of the above it is most respectfully prayed that this Hon'ble Court may very graciously be pleased to direct the defendant No,1 to file the Arbitration Agreement in this Hon'ble Court and thereafter refer the various disputes to arbitration under the Arbitration Act, 1940 in accordance with the Arbitration Agreement."
6. In the said suit the respondent filed the written statement in which they filed the letter of Engineer dated 9th July, 1997 showing that the Engineer had to decide the matter under clause 67 of the contract. The Court considered all these documents and allowed the application vide order dated 21-10-1997 by appointing Mr. Justice (Red.) Saleem Akhtar as sole Arbitrator and referred the matter to him
7. The Sole Arbitrator proceeded with the matter. The claimants filed their claims before the Arbitrator. The respondents also filed their objections. The learned Sole Arbitrator framed the following consent issues:
(i) Whether the statement of claim as filed in these proceedings is covered by the reference made to the Sole Arbitrator and if so, to what extent?
(ii) Whether the statement of claim as filed is maintainable particularly in view of clause 67 of the C.O.C. And if so, to what extent?
(iii) Whether the claimants were justified in invoking clause 69 of the C.O.C. And if so, to what extent and effect?
(iv) Whether the claimants' notice dated 21st June, 1997 terminating the contract R.T.D.-I is contractually valid under the provision of clause 69(I) of C.O.C.?
(v) Whether the claimants are entitled to the sum of Rs,8,48,79,270 as damages or any other amount due under the contract?
(vi) What the award should be?
8. Learned Sole Arbitrator decided the issues Nos. 1 to 5, in favour of the claimants. Under Issue No,6, the claimants submitted claim containing 12 parts. The decision of the Arbitrator on the said claims is as under:-- ITEMS CLAIM AWARD PART I Retention money, amount due under IPC No.8 and escalation charges.Rs.42,11,784 Disallowed PART II Uncovered cost of mobilization Rs.30,98,247 Rs.225,000 PART III De-mobilization Rs.7,37,000 Disallowed PART IV Dewatering due to revised drawing Rs.4,83,261 PART V Constriction of Staff Quarters Rs.12,50,000 Rs.600,000 PART VI Work of removal of existing embankment and other earth workRs.4,55,831 Disallowed PART VII Ten items enumerated at page 86 of volume I Rs.47,77,839 Disallowed PART VIII Interest on delayed payment Rs.5,91,234 Rs.3,49,240 PART IX Cost of pumps and motors Rs.25,322,630 Rs.21,62,000 Subject to such adjustment as may appear to be necessary after joint inspection. If respondents refused to accept the motors, the difference between auction price and the cost as stated above.
PART X Cost of electric equipment Rs.10,541,450 Rs.91,43,000 In case of improper refusal by the respondents, then difference between cost price and auction price.
PART XI Cost of 34" discharge Pipe Rs.35,81,179 Disallowed PART XII Loss of overheads and profits on account of termination of contractRs.25,629,394 Rs.80,09,185 with costs of Rs.2,00,000
9. The Sole Arbitrator has sent the award, which was received by this Court on 16-9-1999. The parties have filed objections to the award.
10. I have heard the parties' Advocates and perused the record very carefully.
11. The learned Advocate for the respondents has challenged the findings of the Arbitrator under issues Nos. 1 and 2 on the ground that the claims filed by the claimants before the Arbitrator was not referred to Engineer as provided under Clause 67 of the C.O.C.
Therefore, the Arbitrator had no jurisdiction to consider the said claims.
12. This Court while granting the application under section 20 of the Arbitration Act in Suit No,875/1997 passed the following order: "That the plaintiff has been able to establish existence of Arbitration Agreement between itself and defendant No,1 and a dispute thereunder. The application under section 20 of the Arbitration Act in the circumstances is granted and is referred to the Sole Arbitrator Mr. Justice (Retd.) Saleem Akhtar."
13 The respondents raised objection before the Arbitrator that the said order did not cover the claims filed before him. The Arbitrator took the view that all disputes were referred to him, therefore, he was competent to decide the matter. However, the parties were advised to obtain clarification from the Court. The respondents filed application before this Court to clarify the order dated 21-10-1997. This Court passed the following order: "In the present case plaintiff has confined its claim before the learned Arbitrator to the matters referred to in the application under section 20 of the Arbitration Act and the order dated 21-10-1997 indeed had permitted all the disputes mentioned in the application under section 20 of the Arbitration Act to be considered by the learned Arbitrator. The observations made by the learned Arbitrator in his order dated 18-3-1998 on an application similar to the present application are in consonance with the order dated 21-10-1997.
No exception can be taken thereto."
14. Thus from the above two orders of the Court it is clear that all the disputes were referred to the Arbitrator to decide the same.
15. It is an admitted position that before filing the application under section 20 of the Arbitration Act in suit No,875/1997, the respondents had sent the dispute to the Engineer on the following questions: "(1) Whether or not the employer has paid to the contractor the amount due to him under the Engineer Certificate No,AIP-5 in terms of clause 69(a) of C.O.C. Within 60 days after the same has become due? And
(2) Whether the contractor notice dated 21st June, 1997 to terminate the Contract R.T.D.-I of C.O.C's valid?"
16. Thus the main disputes were referred to the Engineer. The claims filed before the Arbitrator are consequential relief to the termination of contract after the contract was found to be validly terminated by the claimants. Thus there is no fault in the finding of the Sole Arbitrator.
17. However, the learned Advocate for the respondents has stated that the Arbitrator has not given finding on issue No,2, therefore, the award is invalid. It is settled principle of law that it is not necessary for the Arbitrator to frame issues or to give finding on each issue and if some omission is made it does not invalidate the award. Reference is invited to the cases of Messrs. Alpine Construction Co. Ltd. v. University of Karachi NLR 1991 CLJ 546; Ibad and Co. v. Government of Sindh and others PLD 1981 Karachi 236; Trading Corporation of Pakistan Limited v. Aslam Saeed and Co. PLD 1973 Kar.
65.
18. The basic question on which the learned Advocate for the respondents has stressed upon is that the Arbitrator had no jurisdiction to decide the matter as the conditions mentioned in clause 67 of C.O.C. Were not fulfilled. Conversely the learned Advocate for the claimants has stated that all the requirements of clause 67 of C.O.C. Were fulfilled as the respondents had referred the disputes to the Engineer for decision and then the matter was referred to the Arbitrator.
19. The question revolves around clause 67 of C.O.C. In order to understand the correct position it will be advantageous to reproduce the said clause which reads as under:-- "67. Settlement of disputes.--If any dispute or difference of any kind whatsoever shall arise between the Employer and the Contractor or the Engineer and the Contractor in connection., with, or arising out of the Contract, or the execution of the Works, whether during the progress of the Works or after their completion and whether before or after the termination, abandonment or breach of the contract, it shall, in-the first place, be referred to and settled by the Engineer who shall, within a period of ninety days after being requested by either party to do so, give written notice of his decision to the Employer and the Contractor. Save as hereinafter provided such decision in respect of every matter so referred shall be final and binding upon the Employer and the Contractor and shall forthwith be given effect to by the Employer and by the contractor, who shall proceed with the execution of the Works with all due diligence whether he or the Employer requires arbitration as hereinafter provide, or not. If the Engineer has given written notice of his decision to the Employer and the Contractor and no claim to arbitration has been communicated to him by either the Employer or the Contractor within a period of ninety days from receipt of such notice, the said decision shall remain final and binding upon the Employer and the Contractor. If the Engineer shall fail to give notice of his decision, as aforesaid, within a period of ninety days after being requested as aforesaid, or if either the Employer or the Contractor be dissatisfied with any .Such decision, then and in any such case either the Employer or the Contractor may within ninety days after receiving notice of such decision, or within ninety days after the expiration of the first-named period of ninety days, as the case may be require that the matter or matters in dispute be referred to arbitration as hereinafter provided. All disputes or differences in respect of which the decision, if any, of the Engineer has not become final and binding as aforesaid shall be finally settled under the rules and provisions of Pakistan Arbitration Act of 1940 by one or more Arbitrators appointed under such rules. The said arbitrator/s shall have full power to open up, revise and review any decision, opinion, direction, certificate or valuation of the Engineer. Neither party shall be limited in the proceedings before such arbitrator/s to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision. No decision given by the Engineer in accordance with foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitrator/s on any matter whatsoever relevant to the dispute or difference referred to the arbitrator/s as aforesaid. The reference to arbitration may proceed notwithstanding that the Works shall not then be or be called to be complete, provided always that the obligations of the Employer, the Engineer and the Contractor shall not be altered by reason of arbitration being conducted during the progress of the Works."
20. Perusal of above clause reveals that the parties had agreed to dual arbitration in the contract in case of any dispute arises between them.
21. It was agreed between the parties that in the first instance the dispute would be referred to the Engineer, who was required to decide the dispute within 'a required period. If any party is aggrieved from the decision of the Engineer or the Engineer did not decide the dispute within the required period then the said dispute can be referred to the Arbitrator.
22. Thus the parties may refer the dispute to the Arbitrator on their own reference or through a reference made by the Court. As such, in the both cases the Arbitrator would assume the jurisdiction on the reference. Thus a valid and legal reference is the pre- condition to give jurisdiction to the Arbitrator to decide the dispute. If the reference is invalid or illegal then through that reference no jurisdiction can be conferred upon the Arbitrator to decide the dispute. A similar question was considered by the Privy Council in a case Chhabba Lal v. Kallu Lal AIR 1946 PC72 and at page 75 it has been observed as under: "In their opinion all the powers conferred upon the Court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made which may be open to question. If there is no valid reference, the purported award is a nullity, and can be challenged in any appropriate proceeding.
23. Until the decision of Privy Council is modified, by the Supreme Court the same will be binding upon the Court, as held in the case of The State of Pakistan v. Mehrajuddin PLD 1959 SC (Pak.)
147. The relevant portion appearing at page 165 is as under: "The law laid down by the Federal Court and the Privy Council should be binding upon all the Courts of the sub-continent of India, and after 1947 that law remained applicable to the Courts in Pakistan."
24. In the present case on 28-6-1997, the respondents referred two above mentioned disputes to the Engineer. He started the proceedings on 2-7-1997. The claimants filed reply before the Engineer showing entire background of the matter. Before the Engineer could decide the dispute, on 4-7-1997 the claimants filed application under section 20 of Arbitration Act before this Court, which was converted into Suit bearing No,875/1997. The respondents filed a written statement in which they produced a letter dated 9-7-1997 of the Engineer. The Court after considering the said letter referred the disputes to the Arbitrator. I have perused the record of this case and Suit No,875/1997. There is nothing on the record to show that the Engineer had ever decided the dispute referred to him by the respondents on 28-6-1997 except his letter dated 9-7-1997. On the contrary, the order dated 21-10-1997 shows that the Engineer did not pass any order because of Suit No,875/1997. However, the letter dated 9-7-1997 of the Engineer is as follows: "The Site Agent China International Water & Electric Corporation, H.No,12, Block A, New Housing Colony, Larkana.
LOWER INDUS RIGHT BANK AND IRRIGATION DRAINAGE, PROJECT (STAGE-I) PRIORITY WORKS CONTRACT RTD-I-CONSTRUCTION OF RATODERO PUMP STATION. Sir, The Employer through his letter No, GM (WS)/RTD- 1-2887 dated Rine 21, 1997 did not accept your Notice of Termination dated June 21, 1997 through your letter No, CWE/RTD-1/97-057 as contractually valid, claiming that he had paid the amount due to you under Engineer's Contract. The employer's letter No, GM(WS)/LIRBP-02/2893 dated June 23, 1997 & GM(WS)/ RTD-1/3030 dated July. 1, 1997 may also be referred. You however through your letter No, CWE/RTD-1/97-061 dated June 23, 1997 & CWE/RTD-1/97-062 dated June 24, 1997 insisted that you have not paid the amount due to you under Engineer's Certificate No, AIP-5 within the sixty (60) days after the same had become due and contended that your Notice dated June 21, 1997 to terminate the contract RTD-1, is valid as per provisions of the Contract. The contractual dispute therefore, had arisen between the Employer and you which was referred by the Employer for settlement by the Engineer, under clause 67 of COC through his letter No, GM(WS)/LIRBP-021/2997 dated June 28, 1997, copies of which were endorsed to your Karachi office as well as delivered to you at site on July 3, 1997 through CRE's letter No, SKR/1596/RTD-I/97/978 dated June 30, 1997. Since a contractual dispute has arisen between the Employer and you and has been referred to the Engineer for settlement, the Contractor is not to stop the execution of the Contract RTD-1 and proceed and continue with the Works and fulfills his contractual obligations till the Engineer's decision is notified. The Chief Resident Engineer (CRE) through his letter No, SKR/1596/RTD-1/97/980 dated June 30, 1997 which was delivered to you at the site on July 3, 1997, also advised you that in view of the dispute between the employer and you which has been referred to the Engineer for settlement under clause 67 of COC, the contract shall remain operative and in the meantime you should proceed with the Works under Contract RTD-1 with due diligence and expedition. In spite of the foregoing development, advice and instructions you had again through your letter No, CWE/RTD-1/97-078 dated July 5, 1997 notified the Employer that your fourteen (14) days period had expired and your employment under this Contract is terminated, which is not contractually proper and tenable. You had also completely started suspended your work's activities on the site of Contract RTD-1 since July 5, 1997 and stated demobilization of Plant, Equipment and Machinery without the written consent of the Engineer. You did not stop the demobilization process despite our Resident Engineer's instruction through his letter No,1-RK/1596/RTD-1/97/1473 dated July 5, 1997. During your meeting at the site with our Chief Resident Engineer, on the afternoon of July 6, 1997, you verbally informed that notwithstanding his instructions dated June 30, 1997 you are proceeding with complete demobilization from the Site of Works under Contract RTD-1. Our latest report from the Site is that you have virtually abandoned the Site of Contract RTD-1 on the afternoon of July 7,1997. Your action as above tantamount to the abandonment of the Contract under Clause 63(1)(a) of COC and hence default under the Contract. You are therefore, directed to please follow proper contractual procedure in settlement of dispute and continue with the works in the meantime and proceed with the works under the contract RTD-1, with due diligence. You are further directed to immediately (i) bring back all your Plant and Equipment unauthorized removed from the Site, (ii) remobilize your staff and workers, and (iii) recommence the Works in fulfillment of your contractual obligations under the Contract.
Failing to comply with these directions will render you liable for appropriate contractual action and you will be fully responsible for all the consequences resulting from such action. Yours faithfully, For National Engineering Services Pakistan (Pvt) Ltd.
(Sd.)
(Z.M.PIRZADA)
The Engineer/Vice-President W&A Division."
25. From the bare reading of the letter of the Engineer, it is clear that pending decision of the dispute, he gave certain interim directions to the claimants. It is not necessary to examine, whether or not the Engineer was competent to give such directions. The question is whether or not the Engineer had decided the dispute through that letter. The letter itself speaks that the Engineer had not decided the matter, when the letter was issued but he simply issued interim directions or passed interim orders pending decision of the dispute. Thus the Engineer through the letter did not decide the dispute.
26. It is pertinent to point out that the respondents referred the dispute to the Engineer on 28-6-1997, on 2-7-1.997 the claimants filed reply before the Engineer. On 4-7-1997 the claimants filed the application under section 20 of Arbitration Act, before the Engineer decided the dispute. Even on 9-7-1997, the Engineer, did not decide the said dispute. The Engineer appears to have stopped the proceedings because of Suit No,875/1997. The arguments in the suit were heard on 24-9-1997 and the Court gave the decision on 21-10-1997. As such till the date of hearing of arguments the required period of 90 days from the date of reference of the dispute to the Engineer by the respondents for giving decision by the Engineer had not expired. In such a situation the reference to the Arbitrator through order dated 21-10-1997 was in violation of clause 67 of COC. The Hon'ble Supreme Court of Pakistan in the case of Board of Intermediate and Secondary Education, v. Fine Star & Company, Engineers and Contractors (1993 SCM R 530) has observed as under: "It cannot therefore be said that the respondent had fulfilled the requirement of the arbitration clause by referring the disputes in the first instance to the Chairman for decision before applying to the Court for filing of the arbitration agreement. The learned Single Judge was clearly in error in recording a finding to the contrary. "
27. Thus without fulfilling or properly invoking the clause 67 of COC, no finding contrary could have been given. Consequently, no reference could have been made to the Arbitrator, as such, the reference made to the Arbitrator through order dated 21-10-1997 was a invalid reference, therefore, the Arbitrator had no jurisdiction to decide the dispute. Hence, award passed on invalid reference is required to be set aside.
28. As regards the findings of Arbitrator on issues Nos.3, 4 and 5 being interconnected the learned Advocate for the respondents has argued that the Arbitrator was not justified in taking cut of date for termination of contract as 20-6-1997 and took the date of payment of Cheque dated 20-6-1997 as 24th June 1997.
29. On these issues the dispute is with regard to the running Bill No,5 which was submitted by the claimants to the consultant on 11- 1-1997 and was verified by him on 8-3-1997.
30. The case of the claimants is that the respondents were required to make the payment of the said bill on or before 21-4-1997 as per clause 60(5)-1 of COC and as the payment was not made on or before 21-4-1997, therefore, the claimants were entitled under clauses 60, 69(1)(a) of COC to terminate the agreement. Whereas the case of the respondents is that the computation of 45 days and 60 days as required under clauses 60 and 69 (1)(a) of COC was incorrect as the period of 60 days was to begin from 23-4- 1997 ending on 21-6-1997. The learned advocate for the respondent contended that 21-6-1997 was holiday being Shah Abdul Latif Bhitai day and 22-6-1997 was Sunday, therefore, the payment of IPC-5 could not be made up to 23-6-1997. He further contended that the respondent had issued the cheque on 20-6-1997 and delivered to OCS Courier on the same day, therefore, the date of payment shall be taken from the date of issuance of the cheque and not when the cheque was received or en cahsed.
31. The cases of the parties were fully considered by the Arbitrator, in a detailed finding on issue No,3. He took all the aspects of the case into consideration including the legal; factual and evidence available on the record. He formed the opinion that the practice between the parties while computing such period was that the opening date was not excluded and if that practice is taken into consideration then the payment was made late. He further observed that the cheque was issued on 20-4-1997 but it was dispatched on the next date. He took into consideration the receipts of Courier Service and, oral evidence of DW-3. He formed the opinion that the receipt created a doubt as it did not bear the signature of shipper as stated by DW-3 who deposed that it was obtained on the next date i,e, 21-4-1997. The Arbitrator also took serious note of the non-examination of witness of Courier Service to prove the receipt, which also did not bear the stamp of Courier Service. On the said point the Arbitrator also considered the WAPDA Accounting Manual, as it was contended before him that, according to the said manual, the date of payment of cheque should be the date of issuance of the cheque provided it is dispatched on the same day. The learned Arbitrator formed opinion that said manual contains rules and regulations about the internal working of WAPDA. It is not binding upon third party nor there was agreement between the parties that the said manual would be applicable in respect of payments through cheques. The learned Arbitrator also took into consideration the case law on the subject on the interpretation of payment and formed the opinion that the payment would mean when the amount is received. In this case the cheque was received on 23-6-1997. The cheque was en cahsed and amount was received by the claimants on 24-6-1997., therefore, he formed the opinion that the claimants were entitled to invoke the clause 69 and terminated the agreement validly.
32.. I have considered the detailed discussion of the Arbitrator on the issues Nos.3 to 5 and find that there is no apparent mistake of facts and law. Even otherwise the jurisdiction of the Court in this respect is a supervisory and not appellate. Furthermore it is not the requirement of law to reject the finding of the Arbitrator on the ground that different conclusion can be drawn from the evidence and examination of record. It is well-settled that the award is not to be lightly interfered with on insufficiency, non-consideration and failure to take into account the evidence by the Arbitrator. As such, the findings of the Arbitrator on the above issues do not require any interference.
33. As regards Issue No, 6, the learned Arbitrator has considered various claims of the Claimants. Out of them some were rejected and some were allowed with modification as mentioned in the earlier part of the judgment. The said findings do not require any interference.
34. After considering the material available on the record I am of the considered view that the objections raised by the respondents-on merits and law on the award are without any force.
35. As regards the objections raised by the claimants, during the course of arguments the learned Advocate for the claimants has not touched the grounds mentioned in the objections filed in the matters, as such, it appears that the learned Advocate for the claimants has abandoned the said objections.
36. In the light what has been discussed above the findings of the Arbitrator on merits of the disputes referred to him do not require any interference. However, the award was passed on an invalid reference dated 21-10-1997, therefore, the Arbitrator had no jurisdiction to decide the disputes and pass the award, as such, the award cannot be made the rule of the Court, hence it is set aside.