1. ' MRS. QAISER IQBAL, J.--- Pursuant to the provisions of section 14(2) of the Arbitration Act, 1940 in the matter of Messrs STFATamel Joint Venture and Karachi Port Trust a unanimous award dated 24th August, 2004 was filed in Court by the Arbitrators to be made rule of the Court.
2. ' Precisely the facts leading to the award are that Karachi Port Trust had floated a tender for the reconstruction of berths Nos.5 to 10 at the Karachi Seaport on 20-3-1994 Messrs STFA-Tamel a Joint Venture Company of Turkey, participated in the tender and out of the seven companies pre- qualified for the contract, its bid was accepted by the claimant who issued its letter of acceptance dated 5th July, 1995, whereby a contract price of Rs,1,468,866,577 was confirmed which included 30% Foreign Currency payment. The claimant deposited with the respondent as stipulated in the contract two bank guarantees in the sum of US $1,439,947.63 and Pak Rs,102,820,660.39.
3. Consequent thereupon, an agreement dated 22nd July, 1995 was executed between the parties.
4. The contract specified a period of 730 days for completion of work under the contract commencing from 12 days after the receipt of the letter of acceptance by the claimant It is an admitted position that the work could not be completed within the period provided under the contract, and was delayed by 551 days. The claimant attributed the delay in completion of the work to the respondent which was vehemently denied by the respondent. Consequent thereupon various disputes between the parties with regard to the performance of the contract could not be resolved, the parties thus, invoked the arbitration clause and as a consequence thereof three arbitrators were appointed, one by each party and 3rd arbitrator was appointed with the consent of the two arbitrators. As a consequence of the arbitration proceedings, the award dated 24-8- 2004 was filed. The award was pronounced by the Arbitral Tribunal in the following terms:--
(1) We allow 49 days time asked by the claimant in EOT-III request (29 days on account of partial handing over of the site; 16 days for stoppage of construction work on the section of quay wall capping and 4 days for the strikes).
(2) The respondents are directed to return Rs,3,651,554.74 (Rs,2,556,088 in local currency and US $35,796.63 in foreign currency) deducted as liquidated damages from the Retention Money of the claimant. The respondents will pay interest on the above amount at the rate of 12% per annum compounded per day of delay in terms of clause 60.3 from the date the Retention Money became refundable till the date of actual payment.
(3) The claimant is awarded Rs,2,213,360 as overhead expenses for 22 days of strike (Rs,1,549,352 in local currency and US $ equivalent to Pak Rs,664,008 converted at the agreed contract rate of conversion). The claimant will be entitled to interest at the prevailing bank rate from the date of award till the amount is paid.
(4) The claimant is awarded Rs,114,495 and US$ 14,980 on account of delay of 231 and 9 days respectively in reduction of Performance Guarantees. The claimant will be entitled to interest on the above amount according to prevailing bank rates from the date of award till the amount is paid.
(5) The claimant is awarded interest amounting to Rs,1,248,239 and US$ 13,466 respectively for 72 days delay in releasing the 50% of Retention Money. The claimant will be entitled to interest on the above amount according to prevailing bank rates from the date of award till the amount is paid.
(6) The claimant is awarded interest, for 53 days delay in the release of 25% of the Retention Money amounting to Rs,229,032 and US$ 2,417 respectively. The claimant will be entitled to interest according to prevailing rate of interest on the above amount from the date of award till the amount is paid.
(7) The claimant is awarded interest amounting to Rs,265,054.62 on account of 92 days delay in payment of local currency portions of Bill Nos.4/1, 5, 6, 7, 1, 6, SPC-5/2, 23, 40 and 45. The claimant is also awarded interest amounting to US$ 5,496.88 on account of 124 days delay in payment of foreign currency portions of Bills Nos.2, 4/1, 4/2, 6, SPC-1, SPC-3, 18, 41, 43 and 45. The claimant will be entitled to . Interest on these amounts at the prevailing bank rates from the date of award till the amount is paid.
(8) The claimant is awarded Rs,25,423,163 on account of adjustment in the contract price under 52.3 clause of the contract. The claimant will be paid Rs,17,796,214.1 in local currency and. US$ equivalent to Pak Rs,7,626,948 converted at the agreed contract rate. The claimant will receive interest on these amounts according to prevailing bank rates from the date of award till the amount is paid.
(9) The claimant is awarded Rs,131,849,668.25 on account of amendment of the co-efficient of the contract price adjustment formulae given in the contract. The claimant will be paid Rs,92,294,768 in local currency and US$ equivalent to Pak. Rs,39,554,900 converted at the agreed contract rate. The claimant will be entitled to interest on the above amount according to prevailing bank rates from the date of award till the amount is paid.
(10) The claimant is entitled for payment of US$ 187,466 by way of amendment of foreign exchange component out of the amount payable to claimant in Pak Rupees but the rate of conversion of Pak Rupees into dollar will be that which was prevailing on the date of letter of credit was established by the claimant for import of steel plates and 40 mm diameter reinforcing steel bars.
(11) The claimant is awarded a sum of Rs,4,289,720 on account of Customs Duty, Sales Tax, Regulatory Duty and Additional Income Tax paid on the import of barge "Bahar Ann". The claimant will be paid Rs,3,002,804 in local currency and US$ equivalent to Rs,1,286,916 converted according to exchange rate mentioned in the contract. The claimant will be entitled to interest on this amount at the prevailing bank rate from the date of award till the amount is paid.
(12) The claimant is allowed interest amounting to Rs,1,302,951 and US$ 30,625 calculated upto 28- 1-2002 on the excess amount of withholding tax deducted from the interim payment of claimant.
5. The claimant will be entitled to interest on the above amounts according to prevailing bank rates from the date of award till the amount is paid.
(13) The claimant is awarded cost of Arbitration proceedings amounting to Rs,2,500,000.
(14) The counter-claim made by the respondent is rejected. In response to the notice issued to the respondent objections have been filed by the respondent. Learned counsel for respondent has assailed the award on the following points:--
(a) The arbitrators travelled beyond the reference and exceeded their power in awarding interest on most of the grounds specifically interest awarded from the date of the award till the date of decree also interest awarded beyond the date of decree.
(b) The arbitrators in allowing EOT-III wrongly reviewed EOT-III as the arbitrators were aware that the decision of the Engineer in deciding EOT-I, EOT-II, the date of the performance of the completion of contract was extended upto 21st December, 1998. The arbitrators erroneously decided EOT-III in favour of the plaintiff award extension of 49 days.
(c) Arbitrators considered EOT-I and II past and closed transaction. The plaintiff did not adduce new evidence in support of EOT-III request. The Engineer vide letter dated 27-5-1997 left open the question considering certain grounds raised in EOT-I, EOT-II, Court is empowered to review whether fresh evidence was adduced in EOT-I and II and III on the ground of partial handing over and strikes.
(d) The plaintiff had claimed extension of time in the following maimer:-
(a) Partial handing over (49 days).
(b) Escalation cost on account of delay in awarding contract; and
(c) Delay in payment of contractual claims.
(d) The finding that the liquidated damages be returned by the defendant given by the arbitrators was erroneous and a case of misconduct.
(e) Compensation for extension of time for 43 days strikes was reduced to 22 days whereas strikes had actually taken up only 20-49 days. Thus, by giving 22 days arbitrators had actually over- compensated the plaintiff.
(f) Arbitrators exceeded their reference by interpreting clause 10.1 of the contract thereby adding that it does not vest a discretion performance security from 10% of the contract price to 5% of the contract price, clause 10.1 was mandatory in nature, but was erroneously construed as discretionary by the arbitrators. The arbitrators have failed to specify the date on which the retention money was due to the plaintiff. Liquidated damages were returned to the plaintiff on the basis of calculation from the date of retention money becoming due without specifying the date in contravention of clause 60.12 of the contract as the arbitrators had awarded 12% compoundable interest on this amount. The arbitrators have misconducted by refusing to consider the evidence adduced by the respondent showing that the contract price did not reach the 15% of the contract price lit, the price being the one named in the letter of acceptance. The arbitrators had himself interpreted clause 52.3 of the contract viz. The purpose of the clause was not to enable the Engineer to compensate the party which may suffer on account of the variation. The arbitrators have failed to provide reasons for their finding that the plaintiff had a right to amend co-efficients and have merely recorded the letter dated 24-3-1999 written by the Engineer as an admission by the Engineer that plaintiff had the right to amend co-efficients. The arbitrators had awarded a change of foreign currency requirement on the basis that plaintiff had not been able to obtain the required steel plates from the local market and had to import the same from abroad. The arbitrators had contradicted themselves since they had replied that (the responsibility for the procurement of steel plates under the contract was that of the contractor/claimant).
(g) The arbitrators did not consider the evidence when deciding claim No,9 holding defendant liable for the taxes the plaintiff had to pay due to dump barge "Bahar Ann" being unable to berth in the wharf before 31st December, 1995. The arbitrators had compensated the plaintiff for the deducting of the advance tax on the payment made to the plaintiff in compliance with legal and statutory requirements. The claimant/plaintiff has filed reply to the objections filed by the defendant. I have heard Mr. Bilal A. Khawaja and Zahid Jamil learned counsel for respondent. Much of the emphasis has been laid by Mr. Zahid Jamil on the submission that the plaintiff was not entitled to interest by way of compensation for breach of contract. It is manifestly stressed that the plaintiff ought to have been allowed interest consistent with any express or implied terms of the contract or on the basis of any mercantile usage of statutory provisions. The award reflects that interest was granted from the date of the award until the payment of principle sum. The arbitrators under no circumstances were competent to award interest for the period beyond the date of passing of the decree for the simple reason that statutory provisions contained in section 29 of the Arbitration Act provides so and vests this power in the Court who may order payment of interest from the date of decree deemed reasonable by the Court, to be paid on the principal sum as adjudged by the award and confirmed by the decree. From the above analogy it follows that the future interest with effect from the date of decree could not legally be awarded by the arbitrators.
6. The arbitrators had exceeded the authority to award future interest for the period beyond the date of award and the date of decree. Referring to the award it is stressed that merely by inclusion of the question of interest payment in the issues settled on the pleadings of the parties influence cannot be drawn that parties had agreed to refer specifically the question of grant of interest. In this context reliance is placed on the case of A.Z. Company v. S. Maula Bukhsh Muhammad Bashir PLD 1965 SC 505.
7. ' The rule enunciated in the light of the dictum laid down by the Honourable Supreme Court the arbitrators could not have awarded interest from the date of the arbitration award till the date of the payment. Learned counsel for the plaintiff Mr. Khawaja Bilal has candidly conceded that the arbitrators had no powers to award A interest beyond the date of decree and the award be modified to this effect.
8. ' The interest has been awarded by the arbitrators at the prevailing bank rate till the amount is paid. The contract does not specifically provide for interest being awarded at prevailing bank rate.
9. Thus, arbitrators could not have awarded interest on this rate viz, till the date of the decree. In the case of Ghulam Abbas v. K.P.T. PLD 1987 SC 393 it has been laid down that:-- "In order to further examine this question it is necessary to analyze the nature of the right to interest in many claims beforea Court of law and on the same analogy before the domestic forum of an arbitrator. The right to interest, for the period prior to the date of suit or prior to the reference to arbitration is a matter of substantive law, as contrasted with the power given to a Court of law under section 34, Cr.P.C. Or section 29 of the Arbitration Act which is a statutory power within the domain of procedural law. The right to interest, for the period prior to the suit arises in one of the four following ways:--
(i) agreement, express or implied between the parties,
(ii) mercantile usage,
(iii) statutory provisions,
(iv) interest may be also allowed on equitable grounds in proper cases.
10. ' In Messrs A.Z. Company v. S. Maula Bukhsh Muhammad Bashir PLD 1965 SC 505, the rule enunciated is that in absence of express or implied contract, or of usage of trade, interest cannot be allowed on damages for breach of contract. Therefore, liable to pay compensation for breach of contract claims could not be subjected to a further liability to pay interest as according to the case record (supra). The interest could not have been awarded by the arbitrators in view of the pronouncement reported in Messrs Ibad & Co. v. Province of Sindh through Secretary to the Government Commission and Works Department and 2 others PLD 1980 Kar. 207 and Messrs Alfa v.
11. Nizam Deen and others 2001 CLC 289.
12. ' The interest could not have been awarded on the amount awarded on account of extra charges paid, on account of delay in reduction of performance guarantee, the interest awarded for 72 days delay in realizing 57% retention money. The interest awarded to the claimant in relation to 25% of the retention money, the interest awarded on account of 92 days delay in payment of local currency and on account of 124 days delay in payment of foreign currency, the interest awarded on account of withholding deducted from the inter payment of the claimant.
13. ' The award has been challenged by the respondent in terms of section 30 of Arbitration Act which reads as under:-- "Grounds for setting aside award.--- An award shall not be set aside except on one or more of the following grounds, namely:--
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; and
(c) that an award has been improperly procured or is otherwise invalid.
14. ' It is contended by the learned counsel for defendant that the arbitrators had misconducted by travelling beyond the scope of the reference. It is however, conceded that as the Court does not sit in appeal over an award while hearing section 30 application it has no power to open the entire record of the proceedings and substitute its own finding with that of the arbitrator but the Court is empowered to look at the evidence and documents which are referred to in the award or such evidence that form part Qf the award to adjudge whether there is an error apparent on the face of the award.
15. ' Mr. Zahid Jamil has contended that a serious error is apparent on the face of the award as the total delay in the performance of the contract is 551 days EOT-I (198 Days) EOT-II (236 days) and EOT-III (496 days) awarded by the arbitrators total sums up (483 days) which leads to the gap of 68 days. The arbitral award referred to letter dated 16th October, 1998, on the basis of which the arbitrators allowed the extension of 4 days due to strike which clearly shows that no four days extension of time was claimed but only 1-27 days were claimed. Since the document was the sole basis for the determination for extension of time for strike only by the arbitrators whereas on actual number of days affected 1-27 days and not 4 days. The decision of the arbitrators to award 4 days extension in case of strike based upon the letter dated 16th October is an error on the face of award.
16. ' The stress has been laid on the case of Champsey Bhara &Company v. Jivarajh Baloo Spinning and Weaving Company Ltd. AIR 1923 PC 66, Privy Council laid down:-- "Where a cause of matters in difference is referred to an arbitrator, whether a lawyer or a layman, he is the constituted the sole and final Judge of all questions both of law and fact. The only exceptions to that rule are cases where the award is result of corruption or fraud and one other, which tough it is to be regretted is now firmly established viz. Where the question of law necessarily arises on the fact of the award or upon some paper accompanying and forming part of the award."
17. This rule is followed in the case of Tribal Friends v. Province of Balochistan 2002 SCMR 1903 as well as in the case of Pakistan Steel Mills v. Mustafa Sons PLD 2003 SC 301:-- "We may mention here that the Court while examining the validity of an award does not act as Court of appeal. Therefore, a Court hearing the objection to the award cannot undertake reappraisal of evidence recorded by the arbitrator in order to discover the error or infirmity in the award. The error or infirmity in the award which rendered the award invalid must appear on the face of the award and should be discoverable by reading the award itself. Where reasons recorded by the arbitrator are challenged as perverse, the perversity in the reasoning has to be established with reference to the material considered by the arbitrator in the award."
18. ' Learned counsel for the defendant has contended that while awarding compensation for strikes the documents were misread by the arbitrators who held that the compensation could be awarded for 22 days while the plaintiff's claim could be only for 20-79 days. The calculation made by the Engineer in letter. Dated 24th March, 1999 determining the amendments to co-efficients of the contract price the arbitrators adopted the calculation of the Engineer including the value of steel plates, awarded double compensation to the plaintiff for an increase in the price of steel by increasing in the exchange of cost of steel which tantamounts to double compensation on the part of the arbitrators. In the case of Ghulam Abbas v. KPT (supra) the principles laid down by the Supreme Court are bound to be followed by the arbitrators with regard to follow ordinary legal principle. The limits on the standard of review by a Court are laid through insertion of section 26-A of Arbitration Act, 1940 by section 3 of the Arbitration Amendment Ordinance (XV of 1981), which provides as a mandatory requirement for arbitrators to record reasons in support of the award. If arbitrators fail to provide the reasons Court has power to remand the award back to the arbitrators and require them to provide further and sufficient details/reasons in support thereof.
19. ' This view finds support from the case of Balwal Khan v. Muhammad Alam Khan PLD 1956 Lah., 494 and Muhammad Yousuf v. Gul Zaman 2004 MLD 735. After provided definition of what would constitute a reason, it is observed:-- "From the perusal of the award it appears that sole arbitrator has not given any reason to his award for his findings except that defendant failed to cross-examine the plaintiff's witnesses and their evidence, as such is un-shattered. In my opinion the learned arbitrator ought to have given reasons for holding that plaintiff has 50% share in the property in question. It was incumbent upon the arbitrator to examine the evidence before him after discussing the same and documents, if any, give the findings whether the plaintiff has any right in the property in question or not."
20. ' In my, opinion the learned arbitrator ought to have given reasons for holding that plaintiff has ,50% share in the property in question. It was incumbent upon the arbitrator to examine the evidence before him after discussing the same and documents, if any, give the findings whether the plaintiff has any right in the property in question or not.
21. ' Mr. Zahid Jamil has contended that in the award no reasons had been given by the arbitrators for extension of time granted on the ground of partial handing over, the arbitrators have observed, "There is nothing on record to show that the statement regarding strikes is not correct or that it did not affect the progress of the work as claimed by the claimant". While dealing with the interim and special certificates no finding has been recorded by the arbitrators. No reasons have been specified on the awarded compensation for the total strikes days, variation in the contract price were over or under 15%. Arbitrators have failed to provide reasons for holding that plaintiff had right to amend coefficient, no reason as to 'why they choose a figure of 10% of the value of prevented works to calculate the value awarded to the plaintiff, thus, the arbitrators have failed to consider the crucial documents which tantamounts to misconduct of the proceedings justifying setting aside of the award under section 30 of the Arbitration Act, 1940. In support thereof reliance has been placed on the case of Government of Pakistan v. Overseas Enterprises (Pvt.) Ltd. 1992 CLC 1139, Bawany Sugar Mills Ltd. v. Karachi Trading Agency 1987 MLD 3036, Director of Industries and Mineral Development v. Dadabhoy Hormusjee and Sons 1990 MLD 301 and Khalid Abbas v. Muhammad Farooq 2004 YLR 274 has laid down types of situations tantamount to misconduct for the purpose of section 30 of Arbitration Act, 1940 enumerated as under:--
(a) neglect of duties and responsibilities by arbitrators;
(b) something contrary to what Courts of justice expect from them before allowing finality to their award;
(c) if arbitrator has refused to postpone a meeting for purpose of allowing a party to engage a counsel, when other ,party unexpectedly turns up with a counsel;
(d) if award is made without having heard all the evidence;
(e) if evidence of witnesses is recorded behind the back of a party;
(f) if a party has not been allowed reasonable opportunity of proving his case;
(g) if arbitrator has not brought to the notice of opposite party a document received by him from his adversary or not given him an opportunity of meeting the inferences deducible from them;
(h) if irregularities in the proceedings are proved, which amount to improper hearing of the matter in dispute;
(i) if finding is perverse or unsupported by evidence before. Him;
(j) if arbitrator decides a disputed question without going into evidence as in such a case he would be said to have decided blindly;
(k) if there is indication of gross negligence or recklessness on the face of record;
(1) if there is some mistake of fact, provided it is either admitted or at leas clearly beyond reasonable doubt.
22. ' It is urged by the learned counsel for defendants that arbitrator is a primary finder of law and fact between the parties to dispute on issue referred to by the parties. Wherein issue of law or contractual interpretation is not specifically referred to the arbitrators, the arbitrators will be deemed to have gone beyond the scope of reference. In support of the above contention reliance is placed on the case of Sadiq Muhammad Afzal v. Ministry of Industries PLD 1966 (W.P.) Kar. 412 and Barisons (Pak.) Ltd. v. Pakistan 1980 CLC 470.
23. ' Mr. Khawaja Bilal, learned counsel for the plaintiff, has contended that the role of the Courts under Arbitration Act, 1940 is of supervisory nature and not that of the usual appellate powers under C.P.C.
24. Which are not available to the court. Award may be modified or corrected when it falls within the scope of section 15 of the Arbitration Act, 1940 and it can be set aside, if attacked on the grounds in section 30 as there is no provision of review of an award in'the Act as laid down in the case of Messrs Waheed Brothers (Pakistan) Ltd. Lahore through Chief Executive v. Messrs Izhar (Pvt.) Ltd.
25. Lahore through Managing Director 2002 SCMR 366, Tribal Friends v. Province of Balochistan (supra), Messrs Joint Venture KG/Rist v. Federation of Pakistan PLD 1996 SC 108, Ashfaq Ali Qureshi v.
26. Municipal Corporation of Multan 1984 SCMR 597, National Fibers Ltd. And another v. Pakistan through Secretary Privatization Commission, Ministry of Finance, Islamabad PLD 2004 Lah. 722 and Lahore Development Authority v. Messrs Faisal International Construction Corporation Ltd. 2004 CLC 1879. It is contended that if the arbitrators adequately considered and decided every item of the claim made by the parties and no misconduct was established against them then law would lean in favour of upholding such an award and avoid vitiating the same. In support thereof reliance is placed on Province of Punjab v. Sh. Fazalul Hussain 2003 CLC 1780, Board of Governors, Divisional Public High School, Lyallpur v. Sh. Fazal Hussain & Company 2002 CLC 159, Kashmir Corporation Ltd. v. Pakistan International Airlines PLD 1995 Kar. 301 and Messrs Hussain Textile Mills Ltd. Karachi v.
27. Messrs Dada sons Limited, Karachi PLD 1973 Kar.
28. 413.
29. ' From the award it appears that the claims were filed by the parties supported by documentary evidence, affidavits were filed, witnesses were duly cross-examined. The arbitrators had considered entire evidence, interpreted clauses 10:1, 44.4, 42.1 and 60.12. Explanation of the time urged in EOT-I and III, area in the proximity of berth 7 was made available in lieu of the area occupied by the power house. It had operated for only 70% contractual specified area. However by a mere mention in the award that the parties had evidence before the Arbitrator, law does not raise a presumption that the evidence becomes a part of the award upon the scrutiny through an application under sections 30 and 33 of the Arbitration Act because the Court hearing objections for setting aside the award cannot convert itself into a Court of appeal over the decision of the arbitrators and cannot make a sifting investigation of the entire proceeding as to whether award suffered from any patent error, or legal infirmity, on the record. So far as the question of interpretation of the clauses in agreement is concerned it is settled principle that award should be construed liberally and the interpretation of any relevant clauses of the contract does not vitiate the award. Since both the parties to arbitration had pressed into service the provisions of certain clauses in the agreement the clauses have been interpreted within the scope of reference, without interpreting the clauses the dispute referred to the arbitration could not be resolved.
30. ' Russell on-Arbitration 22nd Edition, stressed that an award is final determination of a particular issue or claim in the arbitration and the arbitrators in consonance of the agreement arrived at between the parties can determine payment of money if payment is to be made by one party with reference to the other party.
31. ' Finding by arbitrators on claim which relates to question of facts and comes within the exclusive domain of arbitrators cannot be disturbed when sufficient reasons for coming to the conclusion have been furnished. Insufficiency of evidence, non-consideration of evidence, failure to take into account any evidence and even if a court would have come to a different conclusion cannot be the ground for interference by the court under section 30 or any other provision of the Act. The above contentions are fully supported by various decisions of this Court in the cases of Qutabuddin Khan v. K.E.S.C. 1980 CLC 1977, The Premier Insurance Co. Pakistan Ltd., Karachi v. Ejaz Ahmed 1981 CLC 311, Province of Balochistan v. Haji Gul NLR 1982 AC 398 and Messrs Ebad & Company v.
32. Province of Sindh PLD 1980 Kar.
207. Dictum laid down in these judgments is that, insufficiency of evidence or that the Court would have taken a different view on the basis of same evidence as was on record of arbitration proceedings do not warrant interference with the award while deciding the objections under sections 30 and 33 of the Arbitration Act I am not sitting in appeal against the award given by the arbitrators. In my view the issue involved finally determined the controversy between the parties and cannot be set aside on the ground of insufficiency of evidence, non-consideration of any part of the evidence and failure to take into account any evidence. In my view the award is in clear terms, no misconduct and illegality having been committed by the arbitrators. For the reasons discussed above, the award is made rule of the Court excluding the award of interest on all counts.
33. However, the defendant shall be liable to pay interest at the rate of 14% per annum from the date of the judgment till the date of realization of the entire amount.