1. ' Plaintiff who is a building contractor, filed an application under section 8 of the Arbitration Act in this Court for appointment of an arbitrator. This application was numbered as J. M. No, 80 of 1976, and was allowed by consent of the defendant, by the order dated 18-4-1978, and parties were given time to suggest the name of the arbitrator. The order may be reproduced herein extenso for it would be necessary to refer it in connection with one of the contentions raised by the learned Assistant Advocate-General in support of objections filed to the award, which will be mentioned at appropriate stage hereinafter :- "Mr. S. E. Hussain Advocate for the plaintiff. Mr. Usman Ghani Rashid, Additional Advocate-General for the defendants.
2. ' Mr. Usman Ghani Rashid has no objection if the prayer contained in clause (a) of the prayer clause in the application is granted and an arbitrator is appointed.
3. ' The learned Advocates, however, further state that they would suggest the name of the arbitrator on the next date. I therefore, grant the application and adjourn the hearing for nominating the arbitrator to 30-4-1978." Thereafter, by the order dated 30-4-78, Mr. Mehdi All Siddiqui, a retired Additional District & Sessions Judge, Karachi was appointed as arbitrator to decide the dispute.
4. ' The arbitrator as agreed at the bar, entered upon the reference on 27-8-1978 when he issued notice to the parties and after hearing the parties he made his award on 8-1-1979 which he filed in this Court alongwith an application under section 14 of the Arbitration Act. The defendants have filed their objections under sections 30 and 33 of the Arbitration Act to the award by which the arbitrator has awarded a sum Rs, 90,000 to the plaintiff as against his claim for Rs, 4,89,000.
5. ' I have heard Mr. Samiuddin Sami, Advocate for the plaintiff and Mr. Sarfraz Ahmed, Assistant Advocate-General for the defendants.
6. ' The learned Assistant Advocate-General has raised the following objections to the award :-
(1) That the arbitrator was not appointed in accordance with the arbitration agreement as well as the provisions of section 8 of the Arbitration Act.
(2) The award is beyond time.
(3) That there is error of law apparent on the face of the award.
(4) That the arbitrator has awarded an amount of Rs, 60,000 without any evidence.
7. ' I have therefore to deal with these objections and I propose to deal with them in the same order in which they are raised.
8. ' The first objection of the learned Assistant Advocate-General that the arbitrator was not appointed in accordance with the section 8 of the Arbitration Act, has now no force whatsoever in view of the consent order quoted hereinabove whereby the application for appointment of an arbitrator was allowed. Further, the defendants have taken part in the arbitration proceedings before the arbitrator without taking any objection as to his jurisdiction whatsoever. The defendants having consented to the appointment of the arbitrator and having taken a chance for a favourable decision are now, therefore, estopped from challenging the award on this ground. Here I may refer to a Division Bench decision of erstwhile High Court of West Pakistan, Lahore Bench viz. Haji Ghulam Mohyuddin v. Federation of Pakistan (1) wherein Karam Ellahi Chauhan, J. (now a Judge of Supreme Court of Pakistan) at p. 208 of the report observed as follows :- "On the other hand the conduct of the appellant in not taking objection to the appointment of the arbitrator and in submitting to his jurisdiction, leading evidence before him and taking the choice of a favourable decision from the said arbitrator shows that he accepted the appointment of Mr. Chughtai as an arbitrator and ratified clause 11 of the Arbitration Agreement."
9. ' I may also refer to another Division Bench decision of this Court in Messrs Habib & Sons v. Messrs Virak Co. (2) wherein Waheeduddin Ahmad, J. Sitting with Constantine, J. Relying on two decisions from Indian Jurisdiction reported in AIR 1945 Born. 497 and AIR 1941 Mad. 129, at p. 249 of the report observed as follows :- {{FOOT NOTE}}
(1) PLD 1967 Lah. 204 (2) PLD 1957 Kar. 245 {{FOOT NOTE}} "Applying the above-mentioned test in the present case there is no doubt in or minds that the respondents in the present case knew fully well that the arbitrators ought to have been appointed under bye-law 40 of the Karachi Cotton Association; that they were not so appointed but appointed under by law 39 of the said Association. They could have raised objection to the jurisdiction of the arbitrators to proceed with the matter; they did not choose to do so and allowed them to proceed with the arbitration proceedings and permitted them to give an award in respect of the matter in dispute between the parties. After participating in the arbitration proceedings and by net raising any objection to the jurisdiction of the arbitrators, in or opinion, they waived their objection to the jurisdiction of the arbitrators to deal with the matter and any irregularity in the appointment of the arbitrators on account of this conduct of the respondent was cured. They could not, at the time of the hearing of objections in the trial Court be allowed to agitate the question about the defect in the appointment and jurisdiction of the arbitrators to decide the matter."
10. ' To the same effect is the decision of this Court in Messrs Sind Cotton Exporters v. A. B. Sadiq Brothers (1). In this case, Inamullah, J. Relied on a passage from Paruk on Arbitration which reads :- "A defect in the nomination of the arbitrator can be cured by waiver by the party going before the arbitrator and taking his chance of a favourable decision but not if the party appears under protest, Sheonath v. Ramnath (10 M A A 414). If there is irregularity in the appointment of the arbitrators, and if any party knowing such irregularity takes part in the proceedings and does not raise the point at the first opportunity and an award to be made without raising any protest, he will be deemed to have acquiesced and waived his objection; but the waiver to be effective must be an intended act and with knowledge of the necessary facts, Chaturbhug v. Deokaran (26 Born. L. R.
11. 84 at 96), Kupu Rau v. Venkataramayar (4 Mad. 311), Unniraman v. Chathan (9 Mad. 451), Choudhari Murtaza v. Mst. Bibi (53 I A 209), Nadir Chand v. Gobind (2 C L J 61), Ramjiwan v. Kali Charan (29 All.
12. 429), Saturjit v. Dulhin (24 Cal. 469), Mahindra v. Mahananda (15 C L J 360)."
13. ' His Lordship also made reference to the following passage from Russel on Arbitration, p. 183 (15 Edn.) : "If the parties to the reference either agree before-hand to the method of appointment, or afterwards acquiesced in the appointment made, with full knowledge of all the circumstances they will be precluded from objecting to such appointment as invalidating subsequent proceedings.
14. Attending and taking part in the proceedings with full knowledge of relevant facts will amount to such acquiescence."
15. ' The present case is better than the case cited above for in the present case not only the defendants have participated in arbitration proceedings but the application for appointment of arbitrator was granted by the Court with their consent.
16. ' However, I may state that the learned Assistant Advocate-General relies on Messrs Hafiz Abdul Aziz Cotton Ginning Factory v. Messrs Haji Ali Muhammad Abdullah & Co. And another (2) in support of his submission {{FOOT NOTE}}
(1) PLD 1955 Sind 268 (2) PLD 1966 Kar. 197 {{FOOT NOTE}} ' that under section 8(1)(b) Court has no power to substitute original agreement of parties by entirely a new agreement of its own choice. -There cannot be any dispute with the proposition, but parties have always power to agree to substitute one agreement with another agreement and in the present case when the parties if it is assumed that there was an agreement to the contrary, they are deemed to have agreed to substitute one agreement with the other and therefore in the present case it was not the Court which on its own substituted one agreement (assuming that there was a different agreement) 3 with the other. I, therefore, find no substance in this contention and therefor repel it.
17. ' The next ground which is raised by the learned Assistant Advocate-General is that the award is beyond time.
18. ' It is agreed at the bar that notice for the arbitration proceeding was issued by the learned arbitrator on 27-8-1978 for appearance before him on 9-9-1978 and he gave the award on 8-1- 1979.
19. It is now well settled that the period for giving award is to be counted from the date of entering upon the reference by the arbitrator and an arbitrator enters upon the reference when he does something in pursuance of reference such as issuing a notice to the parties. If accordingly time is calculated it appears that the award was delivered 12 days beyond the statutory time of for months. However, during the pendency of these proceedings the plaintiff made an application under section 21 of the Arbitration Act for condoning the delay in filing the award by the arbitrator and in the affidavit filed in support of the application he has stated that the arbitration proceedings were concluded on 3-1-1979 upto which date the defendants submitted to the jurisdiction of the arbitrator without protest or demur and the arbitrator gave his award within five days of the conclusion of the proceedings. In the lengthy counter-affidavit filed by the defendants it is not denied that the proceedings were concluded on 3-1-1979. From the case diary filed by the learned arbitrator it appears that on 3-1-1979, Mr. Memon, Executive Engineer had appeared before the arbitrator and he was heard in defence. Thus it is clear that the defendants participated in the proceedings upto 3-1-1979. The arbitrator took only five days time in giving the award.
20. ' Here I must refer to two cases relied on by learned Assistant Advocate-General viz. Messrs Sind Cotton Exporters v. Messrs A. B. Sadiq Bros (1) and Pakistan v. Guyer & Co. (2), as to the meaning of the expression 'entering up on the reference' and the last named decision also for the proposition that the Court should not exercise its discretion in favour of the party who is guilty of negligence. So far as the meaning of the expression 'entering upon the reference' is concerned, I have taken the same view as is expressed in the two cases cited by learned Assistant Advocate-General.
21. ' As regard the question of negligence the defendants have not, in the counter affidavit filed on their behalf, stated how the plaintiff was guilty of negligence and was not prosecuting his case with due diligence while it is clearly asserted in paragraph 3 of the affidavit filed in support of the application under section 28 of the Arbitration Act, that the learned arbitrator held about 17 hearings promptly and diligently at which the plaintiff had completed his evidence and submissions without asking for even a single adjournment but the defendants had very often sought adjournment which {{FOOT NOTE}}
(I) PLD 1955 Sind 268 (2) PLD 1964 Kar. 3 {{FOOT NOTE}} ' caused delay. Therefore, it cannot be said that there was negligence on the part of the plaintiff. It may further be observed that where the parties have taken part in the arbitration proceedings without any objection beyond the statutory period Court has normally exercised its discretion in favour of extending the time. I may here refer to the following passage from the judgment of Karam Ellahi Chauhan, J. (now a Judge of Supreme Court) in Ghulam Mohyuddin v. Federation of Pakistan which appears at page 209 of the report, and which is relied on by Mr. Samiuddin Sami "In view of the above weight of authorities we hold that the award cannot become invalid in the instant case due to the mere fact that it was not given within for months the reason being that the appellant did not raise this objection at the proper time and rather acquiesced in the continuance of the Arbitration proceedings, led evidence and took the chance of a favourable decision and when the decision has gone against him he cannot be allowed to say that the arbitration proceedings extended beyond the time limit implied in the Arbitration agreement. If the terms of an agreement can be changed by the parties by their mutual consent (as for example by writing) then it is obvious that the terms about time matter could also be changed with their consent implied from their conduct. In the instant case the consent of the appellant in continuation of these proceedings is obvious because he raised no objection with regard to it at any stage of the case before the arbitrator and it is the finding of the learned appellate Court as well."
22. I am therefore, of the opinion that this is a fit case in which time should be extended. 1 therefore, allow the application and accordingly extend the time and in consequence thereof overrule the objection as to the limitation.
23. ' This brings me the third ground taken by Mr. Sarfraz Ahmed.
24. ' It is submitted by the learned Assistant Advocate-General that there is an error of law apparent on the fact of the award inasmuch as the learned arbitrator has stated in the award that no notice was given to the contractor that he was falling behind in time schedule which is factually not correct. Even otherwise, he submitted that no notice was required in law to be given to the plaintiff before cancellation of the contract. He further submitted that the statement in the award that "all the delay was caused by non-supply of drawings and plan of work and disturbance beyond the control of the claimant", is also an erroneous finding.
25. ' It is not disputed by the learned Assistant Advocate-General that under section 30 of the Arbitration Act Court can look into only those errors which were errors of law and are apparent on the face of the award or any documents incorporated in the award. Erroneous findings of facts or erroneous reasoning would not bring the case within the purview of error of law apparent on the face of award for an error of law means some legal proposition and which is the basis of the award and which you can then say is erroneous.
26. ' If any authority is needed reference may be had to Champsey Bhara Company v. The Jivraj Ballo Spinning and Weaving Co. Ltd. (1) wherein at p. 69 of the report it was held : "An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator {{FOOT NOTE}}
(1) AIR 1923 P C 66 {{FOOT NOTE}} ' stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous."
27. ' Reference may also be had to Alopi Parashad & Sons Ltd. v. Union of India (1).
28. ' I may also refer to a decision of Division Bench of this Court in the Province of West Pakistan v.
29. Gammons (Pakistan) Ltd. (2) wherein Dorab F. Patel, J. (now a Judge of Supreme Court of Pakistan) at p. 465 of the report observed :- "Now, the question being exclusively one of the appreciation of evidence on the questions of fact, we asked learned counsel how an erroneous finding on the question could possibly come within the mischief of section 30 of the Arbitration Act. Learned counsel's only reply was to refer us to the items for which the respondent was not prepared to accept liability."
30. ' His Lordship proceeding further at the same page observed :- "Even learned counsel did not know whether any evidence on -the question had been produced by the appellant; therefore the appellant is not in a position to make out even a prima :facie case for an error apparent on the face of the record. Another item challenged by Mr. Muhammad Sharif was the respondent's claim for the establishment of Labour Camps, food shops, petrol and oil depots and workshops. According to learned counsel, these expenses were a part of the expenses incurred for submitting the tender, or, were unnecessary expenses. First of all, the submission is contradictory, secondly, the point is of appreciation of evidence on questions of fact and technical questions at that, therefore, once again it cannot be said that, merely because the learned arbitrator had passed this claim, it amounted to legal misconduct within the meaning of section 30 of the Arbitration Act, and, the observations of the learned Single Judge that the dispute turned on questions of fact had reference to this part of the appellant's claim, and I respectfully agree with that view."
31. ' It is also settled rule of law and not disputed by the learned Assistant Advocate-General that it is not open to Court to consider evidence led by the parties before the arbitrator but not set out and discussed in the award. However, if any precedent is required reference may be had to Suleman Haji Muhammad & Co. v. State Bank of Pakistan (3). It was observed by Wahiduddin Ahmed, J. At p.
32. 87 of the report as follows :- "On consideration of the case-law on the subject it is very clear that the Court hearing the application for setting aside an Award cannot constitute itself into a Court of Appeal over the decision of an arbitrator and cannot make a sifting investigation of the entire proceedings before the arbitrator unless it is first shown that the award is bad on the face of it. 1 have already cited the view of their Lordships of the Privy Council that arbitrators are both Judges of law and facts-and in my view once the matter is found to be within the jurisdiction of the arbitrators, it is not permissible for Courts of law to find out whether their decision is right or wrong on the facts urged before them by travelling outside the award for finding out what evidence {{FOOT NOTE}}
(1) AIR 1960 SC 588 (2) PLD 1976 Kar. 458
(3) PLD 1960 Kar. 78 {{FOOT NOTE}} ' was led before them and whether their conclusions are based on sufficient evidence. I am fortified in my view by a decision of the Lahore High Court reported in J. Kaikobad v. F. Khambatta (AIR 1930 Lah. 280). In that case also it was urged that the finding of the arbitrator was based on insufficient evidence, but the Division Bench observed : "An arbitrator is fully justified in rejecting in part the case set up by either party and ascertaining the real facts according to his own view of the evidence. A counsel is not entitled to attack the findings of facts given by the arbitrator on the evidence led by the parties. Whether his conclusions are right or wrong is not a matter which is open for consideration by the trial Court or the Appellate Court on revision.
33. ' This view is in accord with the view taken by this Court in Messrs Overseas Cotton Company v.
34. Messrs S. M. Fazail & Company (PLD 1958 Kar. 27) approved on appeal by a Division Bench of this Court in PLD 1959 Kar.
320. I, therefore, do not find any force in the contention raised by the learned counsel for the defendants and hold that in law it is not open to this Court to consider the evidence led by the parties before the arbitrator not set out and discussed in the award."
35. ' Now, in the light of the above-cited authority, I would examine the third ground urged by the learned Assistant Advocate-General. The first submission as stated before, is that the finding that no notice was given to the contractor that he was falling behind in time schedule is incorrect.
36. ' Firstly, above finding is a finding of fact. Secondly, even if it is erroneous it cannot be examined in detail for the documents on which it is based have not been incorporated in the award.
37. ' It is, however, contended, by Mr. Syed Sarfraz Ahmed that the documents have been incorporated by the reference but there is no reference to any particular document in the Award. Assuming for the sake of arguments that it is permissible to look into the documents not set out in the award, I have examined these documents and they do not support the submission.
38. ' The learned Assistant Advocate-General in this connection, referred to the letter dated 25-3-1974, which is addressed to the plaintiff and states that "you were requested vide this Office letter No, A C I I/73/74/House/ SMC/4188 dated 13-3-1974 to accelerate the progress of work and to bring it upto the programme appended to clause 2 of your contract agreement, but you have failed to do so and as such you have rendered yourself liable to action. Under the powers delegated to the Executive Engineer vide clause 3 of your contract agreement, your contract agreement is hereby rescinded under clause 3(a) by forfeiting the amount of whole security deposit to Government."
39. ' I find that the letter dated 13-3-1974 which is mentioned in the letter under consideration is not available in the documents filed by the arbitrator and was not placed before the arbitrator as admitted by the learned Assistant Advocate-General. Therefore, it is not known what does this letter contain.
40. ' Sarfraz Ahmed then referred to the letter dated 4-4-1974, which is addressed to the Plaintiff and reads as follows :- "Dear Sir, ' In view of the extenuating circumstances explained in your Letter No, nil dated 28th and 29-3-1974, the undersigned is pleased to give you a time upto 15-5-1974, to complete the entire work in supersession of this Office Letter No, AC/II/73-74/House/SMC/4349 dated 25-3-1974."
41. ' This letter again does not refer to the point in issue. Then the learned Assistant Advocate-General referred to the letter dated 16-4-1974. I may reproduce the body of this letter in extenso "It is now ten days that you have been asked to continue/start the work in full swing in the above- referred letter. Neither have you resumed the work with the expected effort nor have you cared to remove the defects of woodwork (i,e, replacement of the door choukhats being not of stipulated deodar wood) or of the C. C. Floors. The work in fact now has been totally abandoned by you (by even removing your Chowkidar from site) without any intimation.
42. ' You are requested to please resume work immediately and rectify the defects pointed above within three days of receipt of this. In case you fail to rectify the defects by removing the wood work and the defective floor within the aforesaid time, action as provided under the agreement signed by you will be taken.
43. ' This should please be treated as the last notice."
44. ' This letter was written after the cancellation of the contract by the letter dated 25-3-1974. It will be seen that this letter also does not state that the Contractor was falling behind in time schedule as originally provided in the contract.
45. ' Then Mr. Sarfraz Ahmed referred to the letter dated 29-4-1974. But by this letter the contract itself was again determined even though time unilaterally extended upto 15th of May, 1974 has not expired.
46. Therefore, even if it was permissible to look into these letters, the submission does not find support from them. In any case, mere error or erroneous conclusion or inference drawn from facts would not brio the error within the purview of error of law apparent on the face of the award.
47. ' However, learned Assistant Advocate-General submitted that disputed facts before the arbitrator can be gone into by the Court while considering objections under section 30 of the Arbitration Act.
48. But I am not aware of any decision which lays down this rule, Syed Sarfraz Ahmed has however, referred to a decision of my learned brother Ajmal Mian, J. In Government of Pakistan, Ministry of Industries v. Messrs National Agencies, Karachi (1), and pointed out to the following sentence : "This disputed questions of fact are to be decided on the basis of some evidence and that the same cannot be adjudicated upon on assumptions." {{FOOT NOTE}}
(1) PLD 1978 Kar. 827 {{FOOT NOTE}} ' The observation relates to the -duty of an arbitrator that he has to base his award on some evidence and not on assumption. In the present case the arbitrator had before him a large number of documents and the documents on the basis of which the finding is being challenged as erroneous were already before him. It cannot be said on what documents the arbitrator has based his award. In any case an award cannot be set aside on an erroneous finding of fact as already stated.
49. ' Now, I would take up the second submission.
50. ' It is submitted by Syed Sarfraz Ahmed that the notice in any case was not necessary before the cancellation. Even if I accept the proposition as correct at best, it would be a wrong reasoning on the part of the arbitrator and that by itself would not afford a ground for setting aside the award.
51. ' This brings me to the third submission that the conclusion of the arbitrator that all the delay was caused by not supplying the drawings and plan of work and by disturbance beyond the control of the plaintiff claimant is incorrect. Again, firstly, the finding is one of fact and even if it is erroneous it would not give rise to a ground for setting aside the award under section 30 of the Arbitration Act. It is, however, submitted by Syed Sarfraz Ahmed that no drawings were required to be given under the contract. But factually it is not correct for the General Rules and directions for the Guidance of Contractors provide in clause I inter alia as follows :- "Copies of the specifications, designs and drawings and estimated rates, scheduled rates and any other documents, required in connection with the work shall be signed by this Executive Engineer for the purpose of identification and shall also be open for inspection by contractors at the Office of the Executive Engineer during Office hours."
52. ' Clause 13 of the conditions of the contract provides :- "The contractor shall also conform exactly, fully and faithfully to the designs, drawings and instructions in writing relating to the work signed by the Engineer-in-Charge and lodged in his Office and to which the contractor shall be entitled to have access at such office or on the site of work for the purpose of inspection during office hours and the contractor shall, if he so requires, be entitled at his own expense to make or cause to be made copies of the specifications, and Of all such designs, drawings, and instructions as aforesaid."
53. ' In this connection learned Advocate for the plaintiff also referred to the letter of defendant 2 dated 29-12-1973, a copy whereof is annexed to the J. M. 80 of 76 as Annexed 'A' thereto which inter alia provides that the work should be executed strictly in accordance with the specifications and approved design/drawings. However, no reference can be made to this document does not appear to have been placed before the arbitrator.
54. ' Learned Assistant Advocate-General then submitted that the arbitrator has misinterpreted clauses 3(a) and 3(c) of the Contract inasmuch as that he had found that the cancellation of the contract was unilateral. These clauses read as follows :-
(a) to rescind the contract (of which rescission notice in writing to the contractor under the hand of the Executive Engineer shall be conclusive evidence) and in that case the security deposit of the contractor shall stand forfeited and be absolutely at the disposal of Government."
55. "(c) To measure up the work of the contractor and to take such part thereof as shall be unexecuted out of his hands, and to give it to another contractor to complete it in which case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor if the whole work had been executed by him (as to the amount of which excess expenses the certificates in writing of the Executive Engineer shall be final and conclusive) shall be borne and paid by the original contractor and shall be deducted from any money due to him by Government under the contract of otherwise or from him security deposit or the proceeds of sale thereof, or a sufficient part thereof."
56. ' This submission is also not of any substance for the arbitrator has not discussed these clauses as such but in answer to the second issue raised before him viz. Whether clauses 3(a) and 3(c) of the Contract were applicable in the instant case and with what result, he has stated that his finding was that they were applicable but there was no occasion or justification to do so.
57. ' This is again a finding of fact or conclusion from facts and is therefore, unexceptional in these proceedings.
58. ' Now, remains the last ground to be considered i,e, item No. 1 of the award which is Rs, 60,928 is based on no evidence. But, in my view, this ground is also not correct for the arbitrator had before him the statement of Claims of the plaintiff, affidavit of the Plaintiff and the documents filed before him. The defendant did not file any counter-affidavit but only filed comments to the statement of claim. The learned arbitrator heard both the parties. Further I cannot go into the sufficiency or insufficiency of evidence and it is not a case of total absence of evidence. Therefore, this objection also has no force and accordingly it is overruled.
59. ' However, I find that the arbitrator has awarded interest at the rate of 10% per annum on the amount due from 1-7-1974 till payment. But under section 21 he could award interest only upto the date of decree and not beyond that. Since this objection is apparent on the face of the award, the award requires to be modified to this extent. Accordingly, I confirm the award by dismissing the objections subject however, to the modification that interest will be payable at the rate of 6% per annum after the date of decree if the decretal amount is not paid to the plaintiff within six months which is also the time I give to the defendant under section 82 C. P. C. To pay the decretal amount.