' SYED JAMSHED ALI, J.---This appeal calls in question the judgment and decree, dated 29-10-1998 passed by the learned Civil Judge, First Class, Lahore on the application of Messrs Hameed Masood, Private Limited, respondent No,1 (hereinafter called the Contractor), under section 20 of the Arbitration Act whereby the Award, dated 23-2-1998 was made the rule of the Court. It may be noted that respondent No,2, the Arbitrator and respondent No,3 the Engineer Consultant, employed by the appellant, Ibrahim Fibres Ltd., did not contest this appeal and were' proceeded against ex parte. The relevant facts are noted hereunder.
2. The appellant invited tenders for "construction of the building of Ibrahim Fibres near Shahkot".
The Contractor made the offer in its letter, dated 25-12-1994. After negotiations between the parties the terms were settled vide letter, dated 31-12-1994 of the appellant and letter of intent was issued to the appellant on 4-1-1995. The estimated costs of the project was Rs,18,47,06,846. The work of construction was started by the Contractor on 4-2-1995. The period of completion, agreed to by the parties was 12 months. The contract continued smoothly up to the 25th running bill of the Contractor which covered an amount of Rs,29,85,85,410. The reason therefor was that initially the tenders were invited for four items of work which were increased by mutual negotiation to eleven items. On 20-8-1996, 8-9-1996 and 28-9-1996, the Contractor submitted 26th, 27th and 28th running bills, duly verified by M.S. AA Associates the Engineer/Consultant engaged by the appellant.
Payment of these bills were withheld by the appellant on which the Contractor suspended the work on 21-9-1996 and a dispute arose between the parties. The contract was ultimately terminated on 16-10-1996. The Contractor submitted final Bill No,29 claiming a sum of Rs,38,96,042 from the appellant. This bill was also certified by the Engineer/ Consultant. It was not paid by the appellant on the ground that joint measurement of work done at the spot should first be carried out and that payment to the Contractor could only be made after adjustment of the claims of the appellant. It may be noted that the arbitration clause was contained in the tender documents according to which Engineer M.A. Aleem was the named Arbitrator. Accordingly, the Contractor approached the learned civil Court on 7-11-1996 with an application under section 20 of the Arbitration Act. Vide order, dated 13-11-1996 the named Arbitrator was directed to announce the Award. He could not do it and on 15-12-1996 the appellant was directed to file the arbitration agreement which was filed in the Court on 8-1-1997. On 21-1-1997, Engineering M.A. Aleem, the named Arbitrator, in a written application, expressed his inability to proceed in the matter whereby vide order, dated 8-4-1997 Mr. Justice (Retd.) Mian Qurban Sadiq Ikram was appointed the sole Arbitrator.
3. The parties filed claims and counter-claims against each other before the Arbitrator and produced documents in support of their respective claims. In the oral evidence before the Arbitrator, Tariq Hameed was examined by the Contractor as P.W.1 while Jalees Ahmad was examined as R.W.1 by the appellant. The award was announced by the Arbitrator on 3-2-1998 and submitted to the Court on 10-3-1998. Objections under sections 30 and 33 of the Arbitration Act, against the said award, were filed by the appellant while the Contractor did not file any objections.
4. The parties agreed not to claim issues or to produce evidence before the learned trial Court and relied on the evidence produced before the Arbitrator. The objections of the appellant were considered by the learned trial Court but the award was made the rule of the Court.
5. To appreciate the contentions of the learned counsel for the parties it will be appropriate to note the claims filed by the parties and the decisions of the learned Arbitrator in respect of each of the claims of the parties. The Contractor had submitted 12 claims out of which claim Nos. 1, 3, 6,. 7, 10 and 12 were allowed while all other claims of the Contractor were rejected. The appellant had filed 10 claims which were rejected except claim No,10 which was partly allowed.
6. Claim No,2 in the sum of Rs,38,96,802 as escalation charges from 4-2-1996 to 21-9-1996, Claim No,4 in the sum of Rs,2,93,047 on account of delayed payment of mobilization charges, Claim No,5 for Rs,1,43,739 for late payment of Bills Nos.1 to 28, Claim No,8, in the sum of Rs,6,28,875 for the "hold up" of the work during the contract, Claim No,9 for Rs,8,39,920 for the material at the site of the contractor were rejected while claim No,11 for award of 20% interest on the sum awarded was disposed of with the observation that the Contractor had been allowed interest against Claim No, 1 at the bank rate.
7. The claims of the Contractor which were allowed by the learned Arbitrator are noted hereunder.
Claim No,1 - Rs,38,96,042 amount of final bill
8. The learned Arbitrator found that the Engineer/Consultant had verified the total amount of bills at Rs,31,17,11,117 out of which an amount of Rs,29,85,85,410 had been received by the Contractor. The deduction of the amounts of Rs,3,91,125, Rs,71,45,945 and Rs,21,09,279 respectively for cement, mobilization advance due from the Contractor, and the steel were agreed to be adjusted except an amount of Rs,18,186 for the steel. After the adjustment, the Contractor was found entitled to an amount of Rs,34,97,554 and the amount 3% deducted as income tax. Thus, against the claim of the Contractor in the sum of Rs,38,96,042 an amount of Rs,38,77,856 was allowed against final Bill No,29 with interest at the bank rate w.e.f, 1-9-1996, the date from which payment against bill No,26 was withheld, till the final payment Claim No,3 - Rs,27,64,431
9. This amount was deducted by the appellant from Bills No,1 to 25 of the Contractor at the rate of 5%. The basis of this claim was that the agreed rate of deduction of income tax was 3%. This claim was allowed on the ground that deduction of 5% tax by the appellant was not justified within the terms of the contract. Claim No, 6 - Rs, 3,09,750
10. This was claimed on account of suspension of work from 22-9-1996 to 16-10-1996. It was allowed by the learned Arbitrator on the ground that payment of running bills Nos. 26, 27 and 28 of the Contractor were wrongly withheld by the appellant despite certification by the Consultant/Engineer.
Claim No,7- Rs,4,74,650
11. It was claimed on account of detention of the plant of the Contractor from 6-10-1996 to 16-10- 1996. It represented the rental charges. It was allowed to the extent of Rs, 1,00,000.
Claim No, 10 - Rs,3,54,900
12. This was the amount which could not be included in the final bill. It was conceded before the learned Arbitrator by the appellant. Claim No, 12
13. It was for the costs of the Arbitration. The Arbitrator found that the Contractor was constrained to stop the work on account of non-payment of running bills. He was, therefore, compelled to approach the Court. Accordingly, the Arbitrator allowed Rs,50,000 as fee of the counsel and Rs,1,50,000 the fee of the Arbitrator.
14. The counter-claims of the appellant before the learned Arbitrator were as follows:--- Claim No,1 - Rs,3,25,00,000
15. As liquidated damages for delay in completion of the work by the Contractor. The basis of this claim was that the completion date was 3-2-1996 within which the work was not completed by the Contractor. The learned Arbitrator found that not only the time was not of the essence of the contract but also that the appellant did not object to the continuation of the construction work after the said date. Therefore, it was estopped to claim damages, there was no evidence to prove entitlement of the appellant to liquidated damages, and till the payment against 25 bills was made to the Contractor no such claim was lodged against him. It was further noted that not only the mobilization advance was not given to the Contractor within the agreed time but even the payment of running Bills Nos. 1 to 25 was not made in accordance with the terms of the contract although these bills had duly been verified by the Consultant. It was also noted that Jalees Ahmad, a witness of the appellant, had admitted that the drawings were supplied to the Contractor in May and August, 1996.
Claim No, 2 - Rs,11,57,99,000
16. The basis of this claim was suspension of the work on 21-9-1996 and a resultant loss of 45, working days. The Arbitrator found that neither the basis of the claim nor any evidence in support of such a huge claim was produced. Also that the running bills of the Contractor were not paid.
Claim No, 3 - Rs, 3,19,262
17. This amount was for electricity charges. The Arbitrator noted that the said charges were paid by the Contractor and no evidence was produced in support of this claim. Claim No, 4 - Rs,20,16,194
18. This was on account of demolition of the office and residential buildings constructed by the Contractor. It was rejected on the ground that the colony belonged to the Contractor. It was further noted that the Contractor was prepared to sell the said structure to the appellant for the agreed amount Rs,20,00,000 but the appellant did not opt to purchase it. Claim No, 5 - Rs,12,70,000
19. This was on account of repairs and rectification of the defective work and for maintenance of the project for 12 months. It was also rejected on the ground of want of evidence. Claim No, 6 - Rs,10,89,653
20. It was for removal of the materials by the Contractor. The learned Arbitrator noted that there was no evidence about the quantity of material supplied by the appellant to the Contractor and the quantity wrongly taken away by the Contractor and the material was removed by the Contractor with the permission of the appellant. Claim No, 7 - Rs,62,40,000
21. It was claimed on account of maintenance of mills for 12 months from 22-12-1996 to 26-12-1997.
It was rejected on the basis of the letter, dated 20-10-1996 of the appellant according to which the matter had been settled amicably and no claim, apart from the final settlement of payment for work actually done, was to be raised. Through this letter the appellant asked the Contractor to submit the final bill. The Arbitrator noted that in view of the termination of the contract, by the appellant the Contractor was absolved of maintenance of the work for 12 months and that there was no evidence that the appellant had incurred the said amount as expenditure on the maintenance. Claim No, 8 - Rs,33,85,000
22. This represented the amount statedly incurred by the appellant on completion of the unfinished work. This was also rejected on the ground that there was no evidence in support of this claim and further that there Was no certificate of the Engineer/Consultant to show that the said amount was spent by the appellant. Claim No, 9 - Rs,30,255
23. It was on account of outstanding electricity and telephone bills. The Contractor agreed before the learned Arbitrator that if the amount was established by the appellant through necessary document the same will be paid. Claim No, 10
(a) The Contractor should undertake full measurement at the site, of the work done.
(b) "As Built Drawings" drawings should be supplied by the Contractor to the appellant. This was conceded by the Contractor.
(c) It related to the dues of the Social Security Items such as the Employees Old Age Benefits and Education Cess etc. It was rejected.
24. Before the respective contentions of the learned counsel for the parties are adverted to it may also be noted that the appellant had moved C.M. No, 1/C/2000 under Order XLI, rule 27 of the Code of Civil Procedure for permission to produce in additional evidence a letter of Razzaq Usmani and Co. (Engineering Surveying Inspector, Valuation, Loss Assessment) along with the complete B.O.Q.
(bills of quantities) of the building of the mills of the appellant wherein it was pointed out that the difference in the amount claimed by the Contractor and the amount payable was Rs,66,46,325.
This report was on the request of the appellant made on 4-6-1999, during pendency of this appeal.
This application was rejected vide order, dated 26-2-2004.
25. As far as the claims of the Contractor are concerned, the learned counsel for the appellant contended that none of the claims was sustainable within the terms of the contract between the parties and the law applicable on admitted facts. His broad submission was that by not applying correct law to the admitted facts, by ignoring material evidence by not equally treating the parties and not complying with the direction of the learned trial Court the Arbitrator was guilty of legal misconduct and, therefore, his Award was not sustainable.
26. As far as Claim No,1 is concerned, he relied on the order, dated 8-4-1997 passed by the learned trial Court whereby the learned Arbitrator was appointed. Perusal of the said order shows that it was agreed by the parties before the learned trial Court that since the matter was of a technical nature, assistance with regard to measurement and other items through expert opinion of an Engineer was required. Accordingly, Mr. Zaheer Aslam Sheikh, an Architect, be appointed to assist the Arbitrator. He was accordingly, appointed and his fee was fixed at Rs,50,000. He submits that the Arbitrator did not associate or call upon the expert for the purpose of actual measurement of the work done. He was bound to act in accordance with the direction of the Court and, therefore, the Award, as far as Claim No,1, of the Contractor is concerned, stands vitiated. Reliance was placed on Ram Protap Chamria v. Dorga Prosad Chamria AIR 1925 Privy Council 239. According to him unless the work done was actually measured on the spot the claim could not have been awarded. Reliance of the Arbitrator on the letter, dated 21-11-1996, as having been produced by the appellant, was also questioned. He maintains that it was in fact produced by the Contractor. He further submits that the Court had directed joint measurement vide order, dated 13-11-1996 which was received by the appellant on 21-11-1996 and, therefore, the so-called joint measurement statedly made on 21-11-1996 was fictitious because it could not have been completed on the same day. Clause 13.2 of the General Conditions of Contract was relied upon. He was also critical of the role of appellant's own consultant. According to him the consultant had misconducted himself and the appellant had filed a suit against him.
27. As far as Claim No,3 of the Contractor is concerned, his submission was that the contract between the parties did not specify the rate of income tax to be deducted from the bills of the Contractor. The Contractor had assailed deduction of 5% income tax in Writ Petition No,11516 of 1996 which was dismissed and, thus, there was an inter party judgment. It was noted by the learned Arbitrator but its effect was not adverted to. Another grievance was that income tax was the liability of the Contractor, which was advance tax and the Contractor could claim its adjustment while under section 50(4) of the Income Tax Ordinance, the appellant was bound to deduct 5% income tax from all payments made to the Contractor.
28. As far as Claim No,7, which pertains to detention of the plant of the Contractor, is concerned, he contends that the learned Arbitrator, even after noting, that the Contractor should have proved the hire charges allowed a sum of Rs,1,00,000 which was arbitrary and without any basis.
29. As far as Claim No,12 is concerned, his contention was that according to the order, dated 13-11- 1997, the fee of the learned Arbitrator of Rs,3,00,000 was to be equally shared and, therefore, the award of the said amount to the Contractor was totally unjustified.
30. In support of his contentions that legal misconduct was constituted, reliance was placed on the following judgments.
(1) Messrs Jaffar Bros. Ltd. v. Islamic Republic of Pakistan and another PLD 1978 Kar. 585, (2) M/s Joint Venture KG/Rist through D.P. Griesler G.M. Bongard Strasse 3, 4000, Dusseldorf-30, Federal Republic of Germany, C/O 15-Shah Charagh Chambers, Lahore and 2 others v. Federation of Pakistan through Secretary Food Agriculture and Coop and another PLD 1996 SC 108, (3) Inayat Ullah Khan v. Abaid Ullah Khan and others 1999 SCMR 2702, (4) Province of Punjab through Collector Bahawalpur v. Sufi Habibullah 1982 SCMR 243, (5) Pakistan Steel Mills Corporation, Karachi v. Messrs Mustafa Sons Pvt. Ltd. Karachi PLD 2003 SC 301, (6) Brooke Bond (Pakistan) Ltd. v. Conciliator Appointed by the Government of Sindh and 6 others PLD 1977 SC 237, (7) Water and Power Development Authority through Chairman and another v. Messrs Ice Pak International Consulting Engineers of Pakistan through Chairman and another 2003 YLR 2494, (8) Province of Punjab through Collector Bahawalpur v. Sufi Habibullah 1982 SCMR 243, (9) Muhammad Iqbal v. P.I.D.C.
2000 CLC 876, (10) I.F.C. Gollaher v. Samad Khan 1993 MLD 726, (11) Associated Engineering Co. v.
Government of Andhra Pradesh and another AIR 1992 SC 232 State of Kerala, represented by the Secretary, Irrigatiun Department Government of Kerala Thiruvananthapuram and another v. N.K.
Aboobacker, Government Contractor AIR 1995 Kerala 327, Union of India and others v. Santiram Ghosh and others AIR 1989 SC 402, (14) Union of India v. M.S. Ajit Mehta and Associates Pune and others AIR 1990 Born. 45, (15) State of Punjab v. M/s Chahal Engg. & Co. AIR 1991 Punjab and Haryana 258, (16) The Indian Minerals Co. v. The Nothern India Lime Marketing Association AIR 1958 Allahabad 692 (17) Messrs Awan Industries Ltd. v. The Executive Engineer, Lined Channel Division and another 1992 SCMR 65.
31. Syed Najam-ul-Hasan Kazimi, Advocate who appeared for respondent No,1 contended that the Award could only be interfered with on the grounds contemplated by section 30 of the Arbitration Act, the Court deciding the legality and propriety of the Award does not sit in the appeal over the findings of the Arbitrator because he is the sole Judge of all questions of law and fact, merely wrong view of evidence taken by the Arbitrator is not a ground recognized to disturb the Award and all possible efforts have to be made to uphold it. According to him, the Court cannot examine the correctness of the award and even interpretation of the terms of the contract lies within the exclusive jurisdiction of the Arbitrator. He also laid emphasis on the Arbitrator being a retired Judge of this Court. According to him, to constitute misconduct of the Arbitrator legal or otherwise the error should be discoverable by reading the Award itself and not after it has to be found by a detailed exercise of appreciation of the material placed before the learned Arbitrator. Reliance was placed on the cases of M.S. Joint Venture KG/Rist, Inayat Ullah Khan supra, Zakaullah Khan v.
Government of Pakistan through Secretary Buildings and Road Department Lahore PLD 1998 Lah.
132; Pakistan Defence Housing Authority v. Meer Brothers 1992 CLC 1252; Haji Abdul Hameed and Co. v. Insurance Company of North America and others 1999 YLR 1213; Rais Chiragh-ud-Din v.
Muhammad Aslam 2001 YLR 2162; Puri Construction Pvt. Ltd. v. Union of India 1990 MLD 947; Messrs Maqbool Associate Ltd. v. Messrs Sindh Sugar Corporation Ltd. 1990 CLC 55 and Messrs Hindustan Tea Co. v. Messrs K. Sashikant & Co. 1989 MLD .212.
32. As far as the objection of the appellant's learned counsel that Mr. Zaheer Aslam Sheikh was not associated, is concerned, his contention was that the object of the association of the Architect was to provide technical assistance to the Arbitrator, he was not a co-arbitrator and in view of the joint report of inspection and measurement, dated 21-11-1996 the learned Arbitrator did not feel any necessity to associate the said expert, that application under section 41 of the Arbitration Act was moved by the Contractor and not the appellant, no objection was taken by the appellant before the learned Arbitrator and, therefore, he was estopped to raise the plea on the principle of acquiescence and waiver. He also relied on the reasoning of the learned Arbitrator in allowing Claim No,1 in favour of the Contractor. Reliance was placed on Messrs Combind Enterprises v.
Water and Power Development Authority, Lahore PLD 1988 SC 39.
33. As far as the interest allowed on Claim No,1 is concerned he contended that interest could be awarded by the learned Arbitrator on the ground that it was just and equitable. Reliance was placed on Ghulam Abbas v. Trustees of the Port of Karachi PLD 1987 SC 393, the case of Pakistan Steel Mills supra and Sh. Mahboob Alam v. Sh. Mumtaz Ahmad PLD 1960 Lah.
601.
34. As far as Claim No,3 is concerned his contention was that the rate, at the time of contract was 3% and, therefore, any Additional tax liability was the responsibility of the appellant.
32. As far as Claim Nos. 6 and 7 are concerned, he submits that these were within the discretion of the learned Arbitrator and were rightly allowed.
36. As far as Claim No,12 is concerned, his contention was that by withholding the payment of the final bill of the Contractor, he was compelled to have recourse to the remedy under the Arbitration Act and, therefore, the costs were rightly allowed. Para.8 of the First Schedule to the Arbitration Act and section 38 thereof were relied upon. Reliance was also placed on Messrs Pakistan Builders Co.
Karachi v. Pakistan PLD 1961 Kar.
365.
37. The learned counsel for the appellant made submissions in rebuttal also. He relied on section 26-A of the Arbitration Act which provides for recording of the reasons for the Award by the Arbitrator to contend that the Court was competent to look into those reasons not only under sections 17 and 30 but also under sections 15 and. 16 of the Arbitration Act. Therefore, with the insertion of section 26-A, the Arbitrator cannot be said to be the sole Judge of all questions of law and fact and, therefore, if any finding of the Arbitrator is perverse, and not backed by the material on the record or against an express provision of law or the agreement of the parties, or no reason could be found for the award, it will constitute an error apparent on the face of the record warranting interference. He submits that the Arbitrator performs quasi-judicial functions, particularly, after insertion of section 26-A, he cannot act arbitrarily in the matter which concept, of course, might hold good if section 26-A was not there.
38. As far as the contention based on section 41 of the Arbitration Act is concerned, he submitted that joint measurement was agreed to by the parties before the Court and with the consent of the parties the Architect was appointed. The Arbitrator was bound to follow the direction of the Court.
39. As far as the interest on claim No,1 is concerned, he submitted that all bills up to Bill No,25 were paid up to the due date. He also relied on the agreement of the parties contained in letter, dated 20-10-1996 according to which except for the final payment of the bill for the work done the parties had no claim against each other. He maintained that the contract between the parties did not provide for any interest on the allegedly delayed payments. He also pointed out that the letter, dated 21-11-1996 as regards measurement done on the said date was wrongly relied upon because the author of the said letter was not examined.
40. The submissions made by the learned counsel for the parties have been considered and the record examined with their assistance. Except for the objection based on non-association of the Architect for the purpose of measurement, no other objection was specifically dealt with by the learned trial Court. For once, I thought that it was a case for re-consideration of the award by the learned trial Court but after having heard the case at great length and the fact that the parties are involved in litigation for the last about six years, I thought it appropriate to decide the case myself.
It may also be observed that the learned counsel for the appellant was more concerned about the claims of the Contractor which were allowed, in particular Claims Nos. 1 and 3, rather than rejection of the claims of the appellant although he generally made submissions as regards rejection of the appellant's claims.
' However, in the grounds of the appeal, except a passing reference in ground (xviii) that the Arbitrator failed to provide cogent reasons while disallowing the claims of the appellant, the grounds as such, to assail that part of the Award which rejected the claims of the appellant have not been specified.
41. It may also be observed that the learned counsel for the parties have cited a large number of precedent cases particularly on the question of misconduct of the Arbitrator. The general principles discernible from the judgments are not disputed as for instance both the parties are relying on the judgments of the Hon'ble Supreme Court in the cases of Joint Venture K.G./Rist and Pakistan Steel Mills supra as to the scope of interference by the Court. The- cases of arbitration have peculiar features and therefore, misconduct of the Arbitrator is to be judged in the light of facts of a particular case. And, now since reasons in support of the award have to be given by the learned Arbitrator, the Court can examine the validity of the said reasons with reference to the admitted facts, and the law applicable thereto. The proposition that the Arbitrator is the sole Judge of all questions of law and fact is too broad to be applied to all cases. It may also be observed that role of a precedent has been explained by the Hon'ble Supreme Court in Trustees of the Port of Karachi v. Muhammad Saleem 1994 SCMR 2213. Para 19 of the judgment is reproduced for ready reference.
"Precedent cases fall in two distinct categories. In the first category fall the decisions which decide a question of law or are based upon or enunciate a principle of law within the meaning of Articles 198 and 201 of the Constitution and are, therefore, binding, if the decision be by the Supreme Court on all Courts in Pakistan and if the decision be by a High Court, on all Courts subordinate to it. In the second category falls the cases which are not so binding but are merely illustrations of the application of the principles of law enunciated in the first category of precedent cases. So in order that a decision on a question of law is binding within the meaning of Articles 198 and 201 of the Constitution it is not enough that a legal proposition follows logically from it, that question must have been actually decided."
42. Claim No,1 of the Contractor was for payment of the final bill. As far as the amount of bill and the adjustment of the claims of the appellant is concerned, the basis of the calculation was the final verified bill of the Contractor by the Engineer/Consultant, an employee of the appellant, and the adjustment of the claims of the appellant was agreed to. Therefore, as far as the calculation of the learned Arbitrator is concerned, there is hardly any scope for interference.
43. The objections of the learned counsel for the appellant was non-association of the Architect by the learned Arbitrator without which, according to him, the final outstanding bill of the Contractor could not be determined. As he sees it, the Arbitrator was bound to get the measurement conducted through the Architect. The Arbitrator considered the objection and repelled it on the ground that joint measurement had already been done As per letter, dated 21-11-1996 Exh.P.W.1/2 which was produced by the appellant when P.W.1 was being cross-examined. It was noted by the learned Arbitrator that the bill was duly certified by the Engineer/Consultant, Jalees Ahmad, who was examined by the appellant as RW1, as its witness, admitted that all bills paid to the Contractor were verified by the Consultant including the final bill, the consultant was an employee of the appellant and they did not point out any defect or claim for rectification. It may be noted that it was not disputed that in accordance with the terms of the contract between the parties, on verification by the Consultant/Engineer, the appellant was bound to release payment of the bills of the Contractor. Another reason to repel the objection regarding measurement by the Architect was that after the rescission of the unfinished job through some other contract the appellant completed the Contractor and, therefore, it was not possible to undertake joint measurement of the work "at this stage". I have also noticed that except during the course of the arguments, before the Arbitrator the appellant did not make any application for the joint measurement. The powers of the Court to regulate the proceedings of the Arbitrator are provided by section 41 of the Arbitration Act and the orders which could be passed are specified in the Second Schedule to the Arbitration Act. The order of appointment of the expert did not, therefore, fall under the provisions of section 41.
The beneficiary of the order of the Court regarding joint measurement was the Contractor and he was, therefore, at liberty not to have pressed the order which was passed on his application. The appointment of the Architect was a consent arrangement between the parties and it did not amount to a direction of the Court under section 41 of the Arbitration Act. It may be observed that a distinction is to be kept in mind regarding a case in which an order is passed under section 41 by the Court and agreement of the parties before the Court in respect of conduct of arbitration proceedings. While the order of the Court passed under section 41 is binding on the Arbitrator, the same C principle cannot be said to be applicable to the agreement of the parties before the Court in the matter of conduct of the arbitration proceedings. In the case of Ram Protap Chamria supra the Privy Council noted that the order in the said case was passed by the Court under paras.1 and 2 of the Second Schedule and, therefore, it was incumbent upon the Arbitrator acting under such an order, to strictly comply with its terms. The contention of the learned counsel for the respondents that the appellant, not having raised the objection before the learned Arbitrator, was estopped has no merit because this objection was raised before the learned Arbitrator, was dealt with at page 11 of the Award and was repelled. The question as to the effect of non-association of the expert, despite agreement of the parties, was a question within the competence of the Arbitrator and this Court cannot substitute the reasons of the Arbitrator with its own.
44. The other attack against Claim No,1 was that the learned Arbitrator was not competent to grant interest from 1-9-1996. It was awarded on the ground that running Bills Nos.26, 27 and 28, although duly verified by the Consultant/ Engineer, were illegally withheld by the appellant.
45. There is ample authority that the Arbitrator can award interest on just and equitable grounds even in the absence of a specific contract between the parties. The cases of Ghulam Abbas and Pakistan Steel Mills supra support the above proposition. However, the question which attracted my attention was whether in the circumstances of the case, it was just and equitable to grant interest.
In this context, the letter dated 20-10-1996 of the appellant, addressed to the Contractor which has material bearing on the controversy is reproduced:--- "We refer to our discussion and the meeting held in the office of the undersigned on Tuesday October 15, 1996 and accordingly confirm that the matter has been settled amicably and no claims or other outstanding issues apart from final settlement of payments of work actually done will now be raised and further to this we have already allowed you on 16th October, 1996 to remove plant and machinery from the site and the contract accordingly stands finished.
' You are now required to submit the final bill for actual work done up to finalization of the contract so that after due verification of the final bill the balance amount payable to you can be finally settled. Thanking you."
' It may also be noted that while declining Claim No,7 of the appellant, the learned Arbitrator himself relied on the said letter, the contents of which are not otherwise in dispute. Therefore, the direction for payment of interest from 1-9-1996 when the payment of running Bills No,26 was withheld is clearly contrary to the express agreement between the parties. However, as far as withholding of payment of final bill is concerned, the learned Arbitrator found no justification for the same because in accordance with the terms of the contract the appellant was bound to make payment of the bill duly certified by the consultant. Therefore, within the scope of this agreement between the parties, the Contractor was entitled to the interest from the date on which the final bill was due for payment.
46. It may be observed that when the interest is awarded by the Arbitrator and is affirmed by the Court, it becomes a direction of the Court which is fully covered by section 29 of the Arbitration Act.
The learned Arbitrator, while ignoring an admitted document i.e, letter, dated 20-10-1996 and extending the benefit thereof to one party was, therefore, guilty of legal misconduct.
47. The net verified claim of the Contractor was for Rs,34,97,554. Besides the said amount, the income tax deducted by the appellant at the rate of 3% was also allowed in favour of the Contractor. The income tax on the advances was the liability of the Contractor who could claim its adjustment. Therefore, while allowing the income-tax deducted by the appellant on mobilization advance, the Arbitrator acted contrary to the provisions of the Income Tax Act particularly section 50(4) thereof.
48. Therefore, the award of the Arbitrator on Claim No,1 of the Contractor is modified to the extent that the Contractor will be entitled to an amount of Rs,34,97,554 with the interest at bank rate till payment from the date when the final bill was due for payment.
49. Claim No,3 pertained to the deduction of income tax at the rate of 5% from the running Bills Nos.
1 to 25 at the rate of 5% instead of 3% after 1-7-1995. This claim was not admissible because of the agreement of the parties reflected in the letter, dated 20-10-1996. The learned Arbitrator relied on clause "h" of the General Conditions of Contract (page 98) of Book Part-II which is reproduced for facility of reference.
50.
"All Government and or Municipal taxes leviable at the time of tender, custom dues, excise duties, stamp duties or any other dues, taxes or charges were the responsibility of K the Contractor".
' The learned Arbitrator while interpreting the words "at the time of tender" came to the conclusion that the rate of intcome-tax "at the time of tender" being 3% the increase was the liability of the appellant and, therefore, the Contractor was entitled to an amount of Rs,27,64,431 as the tax amount of additional 2% deducted by the appellant. The said covenant does not include the rate of the taxes, it talks of leviable taxes at the time of tender.
50. There is an error apparent on the face of the record inasmuch as that although interpretation of this clause was within the jurisdiction of the Arbitrator yet the issue regarding income tax liability was governed by the Income Tax Ordinance, 1979 and section 50(4)(a) of the said Ordinance enjoined upon the appellant to deduct the tax from the bills of the Contractor in accordance with the rates specified in the L First Schedule. This provision of law could not be over-ridden even by the contract of the parties because to give effect to such a contract would be against an express provision of law. It may be noted that the rate of deduction of income-tax from 3 to 5% was provided by Finance Act, 1995 w.e.f, 1-7-1995. The deduction of the 5% amount from the payments to the Contractor was advance tax, the Contractor could claim adjustment from his tax liability.
Further the judgment in Writ Petition No, 11516 of 1996, decided on 3-10-1996 according to which the income L tax was the liability of the Contractor although noted by the learned Arbitrator, yet it was ignored. Therefore, the Award of the Arbitrator to the extent of Claim No,3 is set aside.
51. No reason is forthcoming from the award to allow Claim No,6 of the Contractor. A number of claims of the appellant were rejected by the learned Arbitrator on the ground that the basis to claim compensation or the' supporting evidence was not produced by the appellant. The Arbitrator himself noted that vide letter, dated 6-10-1996 of the appellant the Contractor was directed to resume the work. In any case the basis to assess compensation for suspension of the work from 22-9-1996 to 16-10-1996 is not forthcoming from the Award. Therefore, to this extent it is not based on any reason. I have also noticed that Claim No,8 of the Contractor, for an amount of Rs,6,28,875 was also of the same nature i.e, stoppage of construction work. The finding of the learned Arbitrator was that actual damage on account of the "hold up" of the construction work during the contract should have been proved by the Contractor and the claim of the Contractor was rejected.
Therefore, partial grant of Claim No,6 was inconsistent with the decision of Claim No,8 of the Contractor by the Arbitrator. It is accordingly rejected.
52. Claim No,7 was for detention of the machinery of the Contractor which was allowed to be shifted by the appellant on 16-10-1996. After finding that the Contractor did not bring on record the details of the amount claimed as damages, that it was in the shape of hire charges and the Contractor had failed to prove the actual hire charges in support of the said claim it could not have been allowed even to the extent of Rs,100,000. This claim of the Contractor is rejected.
53. Claim No,10 was conceded by the appellant and is therefore, not required to be discussed.
54. It may also be observed that Claims Nos. 3, 6 and 7 were otherwise contrary to the agreement of the parties reflected by the letter, dated 20-10-1996.
55. The learned Arbitrator allowed Rs,50,000 as the fee of the counsel while a sum of Rs,1,50,000 was allowed to the Contractor as the arbitration fee under Claim No,12 of the Contractor.
56. As far as the arbitration fee is concerned, it was fixed at Rs,3,00,000 vide order, dated 13-11-1997 of the learned trial Court and the parties had agreed to share it jointly. Therefore, while granting Rs,1,50,000 to the Contractor (the share of fee paid by him) the learned Arbitrator again kept out of consideration the agreement of the parties. Reference may be made to Syed Altaf Hussain v.
Pakistan Steel Mills Corporation 1985 CLC 914 according to which the fee of the Arbitrator was a necessary incident for arbitration but if the parties agree between themselves to bear the costs of the arbitration equally it has to be shared by them equally.
57. As far as the fee of the counsel is concerned to my mind, it does not fall within the scope of the costs of an arbitration because the parties are not bound to engage a lawyer and if it is done for their own convenience or assistance of a professional the other party cannot be burdened with the fee of the lawyer. Therefore, this claim of the Contractor is rejected.
58. As far as the claims of the appellant are concerned, apart from the reasons given by the learned Arbitrator another reason to decline its claims is the agreement reflected by letter, dated 20-10-1996 of the appellant whereby it was specifically agreed that except for the final bill the parties will not have any claim against each other.
59. As far as the claim No,1 of the appellant is concerned, it was on account of delay in completion of the work beyond 3-2-1996. It was with the consent of the appellant that the work was continued beyond the said period. Till the payment of 25 bills was made by the appellant to the Contractor no such claim was lodged by the appellant. Further, in view of the finding of the Arbitrator that withholding of the running bills of the Contractor was not justified, this claim of the appellant was not sustainable.
60. As far as the other claims of the appellant are concerned, the finding of the Arbitrator that there was no evidence to support the said claims was not shown to be perverse or unsustainable on the basis of the record produced before him. Further these were also beyond the scope of the agreement of the parties reflected by the letter, dated 20-10-1996.
61. For what has been stated above, this appeal is partly allowed. The award of the Arbitrator on Claim No,1 of the para.48 of this judgment while his award on Contractor is modified as indicated in Claims Nos.3, 6, 7 and 12 of the Contractor is set aside and the said claims of the Contractor rejected. Rest of the award of the Arbitrator is maintained. No order as to costs.