1. ' NADEEM AZHAR SIDDIQI, J. The facts as stated in the award are that the defendant vide Letter of Acceptance, dated 27-8-1995 awarded contract to the plaintiff for execution of electrification work under Contract No. E-50-WB-4. The order to commence work at site was given on 6-11-1995. The time for completion of work was 600 days expiring on 28-7-1997. The contract price was Rs.66,621,635. The work was delayed and extension of time for 701 days was allowed by the Engineer which expired on 30-6-1999, which was also the date of completion of the work under contract. On 5-7-1999 the plaintiff notified its claim under Clause 52(3) of the Conditions of Contract to the Engineer and claimed a sum of Rs.22,282,972. The claim was assessed by the Superintendent Engineer under the instructions of the Engineer who vide his letter, dated 12-10-1999 assessed the claim at Rs.10,509,3.63. The Engineer vide his letter, dated 4-11-1999 decided that the amount to be added to the contract price under Clause 52(3) was Rs.2,578,230. The plaintiff aggrieved with the determination of the contract price as notified by the Engineer referred the dispute to the Engineer for his decision under Clause 67 of the Condition of Contract. Initially, the Plaintiff referred three issues to the Engineer but subsequently two issues were withdrawn and the only issue, which was adjudicated, is reproduced below:-- "Whether the Contractor is entitled to the sum of Rs.22,282,972 as originally claimed by the Contractor by its letter, dated 5-7-1999."
2. ' The Engineer vide his decision, dated 26-2-2000 notified his decision as under:--
(a) The Contractor` neither entitled for the sum of Rs.22,282,972 as originally claimed by him, nor for the sum of Rs.10,509,363 as recommended by the Engineer's Representative but he is entitled for the sum of Rs.2,578,230 on account of adjustment in the contract price under clause 52(3) of COC Part-II which has now been paid by the Employer.
(b) Settled as the Employer has made the payment to the Contractor.
(c) Settled as the Employer has made the payment to the Contractor.
3. ' The decision of the Engineer was not accepted by the plaintiff who served notice for referring the dispute to arbitration and appointed its arbitrator and in response the defendant has also appointed his arbitrator.
4. ' The learned Arbitrators proceeded with the matter and by consensus passed the award, the operating part of which is reproduced below:-- "(13) Applying the agreed percentage for overheads viz. 11.5% to the original Contract Price of Rs.66,621,635 the total sum earmarked for overheads in the quoted price was Rs.7,661,488 for the Contract Period of 630 days. However, the actual amount recovered by the Contractor on the actual cost of the completed work (which was Rs.40,770,888) was Rs.4,688,652. This shows a short recovery of Rs.2,972,836 on account of overheads. Moreover, for the extended period of 701 days the cost of overheads incurred at the rate of Rs.12,160 days per day (original overheads allocation of Rs.7,661,488 divided by the number of days as per the original Contract Price) for the said period of delay comes to Rs.8,524,160. He denied recovery of overheads during the Contract Period viz. Rs.2,972,836 and the extra cost incurred during the period of delay viz. Rs.8,524,160 add up to a total figure of Rs.11,496,990. This figure comes very close to the evaluation carried out by the Engineer's Representative, which was for a sum of Rs.10,509,363.
5. Although we are not fully convinced that the contractor, under these circumstances, should be denied his right to reasonable profit, the minimum that has to be payable to the contractor in these circumstances has to be unrecovered overheads costs (during the original Contract Period) and the additional overheads costs (incurred during the period of delay) which together, in this case, come to Rs.11,496,996. We see no reason why the same should not be awarded to the contractor. The Contractor has already been paid a sum of Rs.2,578,230 by the Employer and the balance of Rs.8,918,766 is therefore, payable by the Employer to the Contractor.
(14) We therefore, hereby award a sum of Rs.8,918,766 to be paid by the Employer i.e. WAPDA to the Contractor i.e. Al-Abdullah Constructors (Pvt.) Limited, and the Engineer's Decision, dated 26-2- 2000 on this issue is modified/amended accordingly.
6. ' The parties are left to bear their own costs."
7. ' The defendant challenged the award by filing objections under sections 30/33 of Arbitration Act, 1940. The grounds taken in the objection are that in terms of the decision of the Engineer an amount of Rs.2,578,230 was paid by the defendant and unconditionally accepted by the plaintiff leaving no dispute under clause 52(3) of the Contract. The reference to arbitration was illegal and that the defendant participated in the proceedings after clearly stating so in para.12 of its statement. The defendant also exhibited the receipt of payment. The award was based on no evidence and a biased formula was adopted to enrich the plaintiff. The arbitrators have not determined as to by whose default or conduct, the contract price was affected. The award is based on conjectures, assumptions, presumptions and the clauses of the contract have not been properly applied. The unrebutted evidence was ignored and award made on speculation perversely and the award has been procured illegally and the award has been signed without any adjudication and the errors are apparent on the face of award. The defendant submits that the award is liable to be set aside being manipulated and illegal.
8. ' I have heard the learned counsel for the parties and perused the record submitted by the learned Arbitrators.
9. ' The contention of Mr. Samiuddin Sami, learned counsel for the defendant, is that the learned arbitrators, misconducted themselves and the proceedings for the following reasons:--
(a) The terms of contract were not produced before the learned arbitrators and without going through the terms of contract an illegal award was passed.
(b) Clause 52(3) of the Contract is declaratory, in nature and no payment is warranted and only adjustment can be allowed.
(c) The arbitrators did not allow the parties to lead evidence to prove their respective contentions.
(d) The matter was decided by the arbitrators on the basis of their own knowledge instead of looking at the material before them.
(e) The arbitrators have not determined that due to whose fault the contract price was reduced and the time for completion of work was extended.
(f) The arbitrators travelled beyond the terms of reference and awarded damages not warranted under the contract.
(g) That the errors are apparent on the face of the award and can be found by reading the award.
10. ' The learned counsel for the defendant relied upon the following reported cases:-- Aslam Saeed v. Trading Corporation of Pakistan (PLD 1985 SC 69); WAPDA v. Ice Pak. International (2003 YLR 2494); Farida Malik v. Khalida Malik (1998 SCMR 816); Karachi Transport v. Karachi Tameerat Ltd. (PLD 1992 SC 479) and Ghulam Nabi v. Khuda Bux (PLD 1984 Karachi 245).
11. On the other hand, Mr. Bilal A. Khawaja, learned counsel for the plaintiff, has contended as under:--
(a) That the arbitrators have not misconducted themselves and have passed a proper award after examining the material placed before them.
(b) That the nature of the jurisdiction of the Court is supervisory and not appellate.
(c) The Court cannot interfere with the award on the ground of insufficiency of evidence, non- consideration of evidence and failure to take into account any evidence.
(d) The award should be considered liberally and Court should lean in favour of upholding the award and not to vitiate the same.
(e) The Arbitration Tribunal is neither obliged to frame issues nor to give a finding on each and every issue and the procedural laws are not Applicable to arbitration proceedings.
12. ' The learned counsel for the plaintiff relied upon a number of reported cases, few of which are quoted as under:--
(1) Messrs Waheed Brothers (Pakistan) Ltd. Lahore v. Messrs Izhar (Pvt.) Ltd., Lahore (2002 SCMR 366); Tribal Friends Co. v. Province of Balochistan (2002 SCMR 1903); Joint Venture v. Federation of Pakistan (PLD 1996 SC 108 119(B)); Ashfaq Ali Qureshi v. Municipal Corporation of Multan (1984 SCMR 597; Khasmir Corporation v. PIA (PLD 1995 Karachi 301); Hussain Textile v. Dada Sons (PLD 1973 Karachi 413); A. Qutubuddin v. KESC (1980 CLC 1997); Premier Insurance v. Ejaz Khawaja (1981 CLC 311); Alpine Construction v. University of Karachi (1990 MLD 1764) and (Ibad and Co. v. Government of Sindh (PLD 1981 Karachi 236).
13. ' I have heard the learned counsel for the parties and perused the record produced by the learned arbitrators.
14. ' Before proceedings further it is appropriate to consider the grounds for remitting the award and setting aside the award.
15. In Ashfaq Ali Qureshi v. Municipal Corporation Multan the. Honb. Supreme Court observed that an award may be remitted under section 16: if
(i) the award leaves any of the matters which were referred to arbitration undetermined;
(ii) a part of the award is upon a matter which was not referred to arbitration and that part cannot be separated from the remaining part without affecting the decision of the matter which was referred to the arbitration;
(iii) the award is so indefinite as to be incapable of execution;
(iv) there is an objection to the legality of the award and such objection is apparent upon the face of it.
16. ' In the same reported case the Honb. Supreme Court further observed that the award can be set aside on one of the following grounds:
(i) that an arbitrator or umpire has misconducted himself;
(ii) that an arbitrator or umpire has misconducted the proceedings;
(iii) that the award is made after the arbitration is suspended;
(iv) that the award is made after the proceedings become invalid under section 35;
(v) that the award is improperly procured; and
(vi) that the award is otherwise invalid.
17. ' The learned counsel for the Defendant has also stressed that the arbitrators have misconducted themselves and also misconducted the proceedings.
18. ' The "misconduct and misconducted the proceedings" was considered in Brooke Bond (Pakistan)
19. Ltd. v. Government of Sindh (PLD 1977 SC 237) as under:-- "The term misconduct used in connection with arbitration does not imply anything in the nature of fraud or moral turpitude. In the judicial sense the misconduct of an Arbitrator means his failure to perform his essential duty, resulting in substantial miscarriage of justice between the parties.
20. According to Atkin, J. In Williams v. Wills 83 LJ KB 1296 the words `misconducted the proceedings' mean such a mishandling of arbitration as is likely to cause some substantial miscarriage of justice. In the American Jurisprudence Vol. 3 on pages 964-5 it is observed that awards which are valid on their faces may be set aside in equity for misconduct on the part of the arbitrators, and the extrinsic evidence is admissible to prove such misconduct. Conduct inconsistent with the duties imposed upon those selected as the arbitrators, either at the hearing, or in reaching their conclusions will frequently constitute misconduct as will impeach an award.
21. ' In case of Kashmir Corp. Ltd. v. PIA (PLD 1995 Karachi 301) it was held as under:-- "As the word 'misconduct' has not been defined in the Act, therefore it has several ambiguities hidden in it. This fact is not disputed by anyone and that this word cannot be limited to moral turpitude but it includes legal misconduct also, which its judicial sense, means failure to perform duty judiciously by some breach and neglect to do justice resulting in substantial miscarriage of justice, though erroneously. The Superior Courts, while interpreting the word misconduct, have included several acts of arbitrators to be termed as misconduct. For example, the acts of neglecting of duties and responsibilities, refusing to provide chance to the parties for engaging Advocates, not providing reasonable opportunities for evidence, recording evidence behind the back of the parties, indicating gross negligence or recklessness apparent from the face of the evidence on record, etc. Have been treated as misconduct. Similarly awarding an award beyond the scope of reference or on no evidence or opposed to the evidence on record amounts to legal misconduct."
22. ' In the light of the above, the objection raised by Mr. Samiuddin Sami was considered. The contention of Mr. Samiuddin Sami appears to be correct that the terms and conditions of contract were not before the arbitrators as the terms and conditions of contract are not the part of the record produced by the arbitrators. Mr. Khawaja Bilal submits that the Arbitrators have perused the various conditions of the contract and have rightly given effect to the same and forming it as part of the record is not necessary. From the record produced by the learned arbitrators it is evident that the terms and conditions of contract were not placed before them and the award was passed without perusing the terms of contract. In the case of WAPDA v. Ice Pak International at page 2504 it was held that failure of the arbitrator in not giving effect to the terms of the contract also constitutes an error apparent on the face of the award. In this case also the arbitrators have not consulted the contract and unless the contract was before them they could not give effect to the terms of the contract. The failure of the learned arbitrators to give effect to the terms of contract constitutes an error apparent on the face of the award. The other contention of Mr. Sami is that this is a case of no evidence as the learned arbitrators have not recorded any evidence oral or documentary. It appears that the learned arbitrators have given their findings on the basis of statement of claim of the plaintiff and reply of the defendant. From perusal of clause 52(3) of the contract it appears that the amount of contract price is to be adjusted by such sum as may be agreed between the contractor and the engineer or failing agreement fixed by the engineer having regard to all material and relevant factors including the contractor's site and general overhead costs of the contract. Since the contractor and engineer could not agree the engineer fixed the amount, which was not accepted by the contractor and he invoked arbitration clause. The nature of claim lodged by the contractor was in the nature of compensation of the losses incurred by the contractor due to reduction in the cost of contract and extension in the completion period. From the decision of the Engineer it appears that the cost of contract was reduced due to deferment of Sanghar Interception Drains by the donors but it is not clear that on whose default the period of completion was extended. The Engineer in his discussion has not given any finding in this regard and has stated as under:- "These works to be completed in 600 days commencing from the last day of 30 days period following the receipt of order to commence. However the work could not be completed during the original period of completion. The competent authority has approved extension of time for 701 days with revised completion date as 30th June, 1999."
23. ' The learned arbitrators in the award at page 7 have discussed the issue as under:-- "---Whenever a Contractor can show that his performance was delayed by reasons attributable to the Employer, he can always successfully claim reasonable compensation to offset the additional expense incurred by way of overheads during the period of delay."
24. ' From reading of the award it appears that the learned arbitrators were conscious of the fact that in case of claim of overheads due to extension in time the contractor has to show that time was extended due to acts of the employer. In the award the learned arbitrators failed to discuss the same and without fixing the responsibility of committing default overheads were allowed on the contract period of 630 days as well as extended period of 701 days. The learned arbitrators have not discussed at all that on whose account the delay was caused. If the delay was on account of the contractor he is not entitled to claim overheads for the extended period.
25. ' The learned arbitrators have neither taken any evidence nor rendered any findings in this regard and without any findings in this regard directed the defendant to pay overheads. Since the claim is in the nature of damages, the learned arbitrators ought to have asked the parties to lead evidence in support of their respective claims/ contentions. Mr. Bilal A. Khawaja states that the Arbitrators are not bound to frame issues to record evidence. It is true that the Arbitrators are not bound to frame issues but as far as evidence is concerned, if the disputed questions of facts are before the learned arbitrators that cannot be resolved without evidence. From the award, it is not clear whether the opportunity to lead evidence was given or not and whether the parties availed the same or not.
26. The case-laws relied on by Mr. Bilal A. Khawaja, learned counsel for the plaintiff, are (i) Messrs Alpine Construction Co. Ltd. v. University of Karachi etc. (1990 MLD 1764), (ii) Messrs Ibad and Co. v.
27. Government of Sindh and others (PLD 1981 Karachi 236). In the first case, the Court observed as under:-- "The award spells out the tacit consensus between the parties as to the manner in which the proceedings were to be conducted by the arbitrators which it is pertinent to note, have not been specifically denied by the defendants. The award refers to evidence, inquiry and inspection which forms the basis of the award."
28. ' From the above reported case it is clear that the evidence was available before the Arbitrators and that a procedure was followed by the Arbitrator with the consent of the parties.
29. ' In other reported case, the Court has held as under: "-- "The third challenge of learned counsel for the defendant was that it was a case of no evidence. As observed earlier, the contention was that admittedly this was a case of damages but no evidence was adduced by the plaintiffs for proving any damage suffered by them. Counsel, in the circumstances, urged that the record be perused by the Court to determine whether there was evidence before the arbitrator that the plaintiff had suffered the damages which, had been awarded by the Arbitrator. To the extent that where there is an allegation that the award is based on no evidence, the Court can, even in a case of non-speaking award, peruse the record including the evidence while considering the objections/ application under sections 30 and 33 of the Arbitration Act, 1940 the contention of learned counsel is correct. And if the Court on such perusal finds that the award is based on no evidence, will be lawfully exercising jurisdiction in setting aside the award However, it is also settled law that insufficiency of evidence or that on the evidence adduced before the arbitrator the Court would have reached a different conclusion is not a ground for setting aside or interfering with the award. Keeping these principles in mind, I have perused the record of the arbitration proceedings in this case."
30. In the above reported case the parties filed their affidavits and the Court has held that if the Court finds that the award is based on no evidence, the Court will be lawfully exercising jurisdiction in setting aside the award.
31. ' In the case in hand as per the record produced by the learned arbitrators no evidence was recorded and no opportunity was also afforded to the parties to lead their evidence.
32. ' The learned arbitrators in the award referred the case of Karachi Transport Corporation v. Karachi Tameerat Limited (PLD 1992 SC 479) and referred placitum 'B' of that judgment which reads as under:-- "Mr. Khawaja while referring to these Authorities, contended that 10% of the total value of the contract should have been awarded as overhead expenses. The sole Arbitrator had awarded at the rate of 7-1/2%, which was confirmed by the learned Single Judge. However, in High Court Appeal a Division Bench maintaining the same percentage, reduced the amount on which it should be calculated. In our view the overhead expenses on percentage basis are to be calculated on the entire value of the contract for the period for which delay has been caused due to default or negligence of the employer. Flat rate of 10% which according to the learned counsel for the appellant is supported by the Hudson's formula, cannot be applied for the reason that as stated earlier it does not exclude the profits which cannot be made a basis for calculating the overhead expenses on percentage basis. There is no other evidence on the basis of which it can be estimated that the actual loss suffered by the appellant would have been the amount claimed by the appellant at the rate of 10% of the value of the contract. In the absence of any such evidence, it would be safe to restrict for overheads claim to 5% - of the total value of the contract for the period of 23 months. We, therefore, partly allowed Appeal No.144-K of 1991 filed by the Karachi Tameerat Limited, as indicated above. The appellant would thus be entitled to Rs.12,50,000."
33. In the above reported case it was held that overhead expenses on percentage basis are to be calculated on the entire value of contract for the period for which delay has been caused due to default or negligence of the employer. The learned arbitrators before allowing overheads have to decide who was at fault and until this is established the defendant cannot be penalized. In view of the judgment reported in Brooke Bond and Kashmir Corporation non-recording of evidence is inconsistent with the duties imposed upon the arbitrators and amounts to misconducting the proceedings.
34. ' The other contention of Mr. Samiuddin Sami is that Clause 52(3) of the Contract is declaratory in nature and no payment is warranted and only adjustment can be allowed. Mr. Bilal A. Khawaja states that the amount fixed by the Engineer was paid by the defendant to the plaintiff and the purpose of the adjustment is to pay the party who was paid less. I have considered Clause 52(3) of the Contract. The contention of Mr. Samiuddin Sami appears to be not correct for the simple reason that if the payment is not warranted, the purpose of adjustment will be frustrated and if the contractor is paid more, he will not return the same and similarly if the contractor is paid less he cannot claim the balance. This appears to be not the intention of the parties to the contract.
35. Furthermore, once the amount fixed by the Engineer was paid by the defendant to the plaintiff it is not open for the defendant to argue this point. This ground was also not taken before the learned arbitrators as is evident from the reply of defendant filed before the learned arbitrators.
36. The contention of Mr. Bilal A. Khawaja that the jurisdiction is supervisory and not appellate is correct in view of chain of authorities in this regard. However, even in supervisory jurisdiction the Court can examine whether the award is based on the material placed before the arbitrators and that sufficient opportunity was afforded to the parties to prove their respective contentions. From the award and the record produced by the arbitrators, it is apparent that no evidence was recorded and this is a case of no evidence. It is an error apparent on the face of the award.
37. ' I, therefore, set aside the award and remit the same to the learned Arbitrators to hear the parties afresh and provide them opportunity to lead evidence and after fixing the responsibility of causing delay in completion of work to determine the overheads. This exercise should be completed within four months.
38. ' The suit is disposed of in the above terms.