1. ' This is an Award dated 20th August 1970, passed by 'Mr. Aslim Abdullah Khan S. Q. A., C. S. P., the then Secretary, Election Commission of Pakistan in the dispute between Trading Corporation on the one part and Messrs Al-Ahsan Trading Company, Messrs Habib Hassan & Company, Messrs Haji Habib & Brothers, Messrs Pak Afro Enterprises, Messrs J. W. Towal & Company and Messrs K. H. Habib & Company on the other part.
2. ' Tlie facts leading to the making of the award so far as relevant for consideration of the objections to the same are : The parties had entered into an agreement dated 29th March, 1968 whereby the plaintiff agreed to sell to the defendants 120,000 tons of Basmati Rice for export at the rate of (20 per metric ton payable in foreign currency and on the further terms and conditions mentioned in the agreement.
3. ' Both the parties blamed each other for breach of the contract and pursuant to the arbitration clause contained in the contract referred the dispute to the sole arbitration of Mr. Aslam Abdullah Khan.
4. ' By the impugned award the arbitrator has held that the defendants committed breach of the contract and therefore, awarded damages t the plaintiffs in the sum of Rs, 10,02,125 rejecting the counterclaim of the defendants.
5. ' Now, both the parties have filed objections to this award. The defendants' objections are under section 30 of the Arbitration Act, 1940 and the plaintiff's objections are under sections 15, 30 and 33 of the Arbitration Act, 1940.
6. ' I have heard Mr. Sabihuddin Ahmed, learned counsel for the plaintiff and Mr. Khalid Anwar, learned counsel for the defendants.
7. ' On the previous date of hearing Mr. Khalid Anwar had offered to withdraw his objections to the award and accepted the award if the plaintiff would not press their objections. However, after I had partly heard the Advocates on the merits of the objections 1 adjourned the hearing to enable the learned counsel for the plaintiff to seek instructions on the offer made by Mr. Khalid Anwar. On that date Mr. Sabihuddin Ahmed had raised several objections to the award. However, today Mr. Sabihuddin Ahmed states that the plaintiffs are not prepared to accept the offer of the counsel for the defendants and that he would press only one objection viz. That the arbitrator should have awarded damages in respect of 29,070 tons of unlifted rice on the same basis on which he awarded damages in respect of 5000 tons of unlifted rice. Since now the learned counsel for the plaintiff has confined its objections to the award only to the above-mentioned ground Mr. Khalid Anwar states at the Bar that now he would not press the defendants objections at all. I accordingly proceed to examine the only objection which is now pressed by the learned counsel for the plaintiffs to the award.
8. ' The contention of the learned counsel is that there is an error of law apparent on the face of the award in that the arbitraior has awarded damages on 29070 tons at one rate and on 5000 tons at another rate and therefore, the award could be remitted to the learned Arbitrator for reconsideration to this extent. Alternatively, he submits that this is an obvious error which can be corrected and the award modified by awarding damages on the basis of damages awarded for 5,000 tons.
9. ' In order to appreciate the above contention it would be convenient and useful to reproduce in extenso paragraph 21 of the award which contains the reasoning for awarding damages at two different rates for 5000 tons and 29070 tons. The paragraph reads as follows :- "21. On behalf of the Trading Corporation of Pakistan Mr. Pirzada contended that the requirements of the law and the sale procedures followed by the Trading Corporation of Pakistan were fulfilled by the Trading Corporation in accepting the highest valid offer received and rejecting such offers as were conditional or incomplete. Since it was a re-sale and Messrs Towell's offer for L109-15-0 was the highest valid offer, which compared favourably with the then prevailing world market price of Basmati rice, the Trading Corporation of Pakistan had no alternative but to accept the offer. It will be seen from the schedule of rates (Exh. R. 29) that the highest offer was made by Messrs Indo- Commercial Corporation for 34,070 tons at 117-10-0 per ton. No bank guarantee was furnished and the tenderer wanted monopoly for export except to Socialist countries under barter and agreed to give performance guarantee on conclusion of the agreement. Mr. Abdul Mannan has stated in his evidence that he is the Managing Partner of Indo-Commercial Corporation, which made the offer of 117-10-0 per ton. The next offer was 34070 tons at 117-7-3 from Yawarali M. Nasser. No bank guarantee was furnished and the tenderer asked for monopoly for sale of rice in the traditional market during the tender period. The third offer was from Messrs A. G. Abdullah and Messrs K. H.
10. Habib and Co., for 5,000 tons at 117 per ton. Two bank guarantees for Rs, 3,20,000 each were furnished and the tenderers wanted monopoly for export of Basmati rice to Kuwait during the tender period. The next offer was that of Messrs W. J. Towell & Co. Agencies of Kuwait for 34,070 tons at 109-15-0 with a bank guarantee of Rs, 43,10,000. As regards the objection of the Trading Corporation of Pakistan that the highest tenders were incomplete and conditional, it may be stated that the monopoly of export to the traditional market which was asked for by the tenderers was in any case being given by the Trading Corporation of Pakistan as it had been done in the previous contract. As regards the Bank Guarantee the Trading Corporation of Pakistan could have negotiated to secure the necessary bank guarantees after the contract was finalised. The Trading Corporation of Pakistan did not expect to secure a higher price than 109-15-0 through negotiations with the parties because of a fall in the rice market. This is a corroboration of the stand of the respondents that the world market price for Basmati rice in December/January had fallen sharply below 120 per ton, which was the reason for their inability to sell at that price. The Trading Corporation of Pakistan could have secured a higher price by selling the defaulted quantity in smaller quantities to more purchasers than one as tenders for a minimum quantity of 5,000 tons could be submitted. They could have prevented loss to themselves and to the respondents by negotiating a price comparable to the offers mentioned above. The respondents claimed that performance of the original contract became difficult on account of (a) the decline in the demand for Basmati rice in the world market, (b) the rigid schedule prescribed for shipments ; and (c) the quantity involved in the contract. The Trading Corporation of Pakistan appears to have been cognizant of these factors at the time of resale of the defaulted quantity of 34,070 tons."
11. ' In his evidence Mr. Abdul Mannan has stated that the highest valid tender received in the original contract was for 120,000 tons at 115-7-3 per ton. This was the only complete tender in all respects and was submitted by respondents 1 to 4. The tender submitted by Towell and Co. For 120,000 tons was for 112-10-0.
12. "It is also in Mr. Abdul Mannan's evidence that the world price of Thai rice fell by about 15 per ton (the price of Basmati rice is usually 10-0-0 above Thai rice). From the letter (Exh. R. V) it will be seen that the price of Thai rice fell from 114 in March, 1968 to about 100 in September, 1968 and in October it was quoted at 92 per ton. The trend of the rice market, therefore, was towards a steep fall in prices. In these circumstance, at the resale, the tenders of A. C. Abdullah and K. H. Habib for 117, Messrs Indo-Commercial Corporation for 117-10-0 and Messrs Yawarali M. Nassar for 117-7-3 in January, 1969 should be considered reasonable offers. The offers of Towell and Company at 109- 15-0 was substantially lower. The Trading Corporation of Pakistan in order to protect Government's financial interests was bound to make all possible efforts to secure a price which was comparable to the contracted price and could be favourably compared with the tenders which were received at the time of original contract, which varied from 112 (Towell and Company) to 120 per ton (which was the ultimately negotiated price).
13. "For the reasons discussed above, I am of the view that the provisions of the Explanation to section 73 of the Contract Act are attracted in this case and the damages should be assessed not on the basis of the resale price but on the basis of the highest tender received on resale. The tender of Messrs A. G. Abdullah and K. H. Habib at 117 per ton was complete in all respects. The difference in price of 5000 tons of rice should, therefore, be calculated at 3 per ton. The tender of Messrs Indo- Commercial Corporation at 117-10-0 should be made the basis for calculating the difference in price in respect of 29,070 tons. The difference is calculated below : On 5000 tons at 3 per 5,000 x 3= 15,000 On 29070 tons at 2/10 per ton- 29070 x 2.5- 72,675 Total ... 87,675 i. e. Rs, 10,02,125.25 ' Mr. Pirzada has conceded that this difference in price cannot be converted into Pakistan rupees at the bonus voucher rates, but only the official rate of exchange in a claim for damages like the present one as decided by the High Court of West Paicistan in a recent case. As regards the claim in respect of interest on the above amount, it has not been pressed by Mr. Pirzada, Regarding storage and shutout charges no evidence was led by the Trading Corporation of Pakistan to prove their claim in respect of these items. These charges therefore are disallowed." .
14. ' It will be seen from the above-quoted paragraph from the award that for the quantity of 5,000 tons of rice the learned Arbitrator has awarded damages on the basis of difference in price tendered by Messrs A. G. Abdullah and Messrs K. H. Habib, which was 117 per ton and the contracted price. And in respect of the quantity of 29070 tons on the basis of difference in the price offered by Messrs Indo-Commercial Corporation which was 117-10 and the contracted price.
15. ' It is submitted by Mr. Sabihuddin Ahmad that the price offered by A. G. Abdullah and K. H. Habib for 5,000 tons was the proper price because the offer fulfilled the terms and conditions of the tender, while the offer of Messrs Indo-Commercial Corporation did not fulfil the terms and conditions of the tender. He referred to the finding of the arbitrator that the tender of Messrs A. G. Abdullah and Messrs K. H. Habib was complete in all respect and while that of Messrs Ind0-Commercial Corporation did not meet the requirements of the tender. It is argued on the other hand, by Mr. Khalid Anwar that the arbitrator should have awarded damages even for 5,000 tons on the basis of offer of Messrs Indo-Commercial Corporation for their offer was for the entire ' unlifted quantity of rice of 34,070 tons. He submitted that the only objection to the tend er of Messrs Indo-Commercial Corporation was that it was not backed by the Bank Guarantees as required by the terms of the tender and he further submitted that in the offer made by the said firm it was clearly stated that they would furnish the bank guarantee if the contract was awarded to them and in. This connection the learned counsel referred to the finding of the sole arbitrator where he states "as regards the bank guarantee the Trading Corporation could have negotiated the necessary bank guarantee after the contract was finalized".
16. ' In my view the submissions of both the counsel are untenable because this Court is not sitting in appeal over the decision of the Arbitrator contained in the award. Under section 30 of the Arbitration Act, the Court cannot set aside an award except on one or more of the following grounds
(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 ;
(c) that an award has been improperly procured or is otherwise invalid.
17. ' In the present case it is submitted that the provisions of clause 'C' of section 30 of Arbitration Act are attracted as there is an error of law apparent on the face of the Award. Here the arbitrator has awarded damages on the basis of certain material before him and even if his award on the question of damages 'is erroneous it cannot be said that there is an error of law apparent on the face of the award which could furnish a ground for setting aside the same.
18. ' If any authority is needed reference may be had to Mohindar Singh v. Ramindhar Singh and another (1), West Pakistan v. Gammon's Pakistan Ltd., Karachi (2), Messrs Hussain Textile Mills Ltd. v.
19. Messrs Dada Sons Limited (3).
20. ' In the last named case Agha Ali Hyder, J. (as his Lordship then was) sitting with Dorab Patel, J.
21. (now Judge of the Supreme Court) observed at page 416, in paragraph 6 of the report as follows :- "6. As for the damages, Mr. Z. C. Valliani, learned counsel for the appellants made a grievance of the fact that the umpire had calculated damages on the basis of spot rate w. Le according to the contract, the same should have been assessed at the Satta rate of March 4 F. R. G.
62. However as observed by their Lordships of the Privy Council in Mohindar Singh v. Ramindhar Singh and another (AIR 1944 P C 83) if parties had chosen to submit their dispute to an arbitrator, they could not subsequently challenge his {{FOOT NOTE}}
(1) AIR 1944 P C 83 (2) PLD 1976 Kar. 458 (3) PLD 1973 Kar. 413 {{FOOT NOTE}} award simply on the ground that there was an error in the calculation of damages. A similar view was taken in Messrs Moosa Oomar & Co. Ltd., Karachi v. Messrs Haji E. Dossa, and Sons and another (PLD 1971 Kar. 899")..............
22. The learned counsel for the plaintiff has not challenged the award on any other grounds mentioned in section 30 save that it is invalid on the ground that there is an error of law apparent on the face of award. But award of damages at two different rates on the material before the B arbitrator, I may repeat, cannot be said to be an error of law. To attrac the provisions of section 30, clause (c) of the Arbitration Act, error of law means, on the face of the award some legal proposition which is the basis of the award and which is erroneous. See Champsey Bhara and Company v. The Jivraj Balloo Spinning and Weaving Company Ltd. (1) and Alopo Parshad & Sons Ltd. v. Union of India (2). I therefore, do not find any substance in the contention of the learned counsel for the plaintiffs and overrule it.
23. As regards the submission that the award can be modified or corrected by this Court I may point out that under section 15 of the Arbitration Act, the power of the Court is limited to obvious errors which can be corrected without affecting the decision of the arbitrator. Conscious award of the c damages at two different rates for the different quantities cannot, be said to be such an error.
24. Further, this is not an error which can be corrected without affecting the decision of the arbitrator.
25. Mr. Sabihuddin Ahmad in support of his contention has relied on the case viz. Jani Durlabh Shankarji and others v. Jani Lajja Shankarji and others (3).
26. ' In this case an issue whether a particular property was endowed property and whether it was partible or not was referred to the arbitrators for their determination. The arbitration decided that it was not endowed property but held that it should not be partitioned and must continue as endowed property. 1 t was held that the award contains an obvious error which the Court was competent to modify and correct under section 518 of the Code of Civil Procedure, 1882. No doubt where there is obvious error Court has power to modify the award or correct the error. In the cited case after the arbitrators had found that the property was not endowed property how could they say that the same must continue as endowed property. In the present case, I am of the view that there is no obvious error which could be corrected without affecting the decision of the arbitrators.
27. There the error was obvious.
28. ' The learned counsel for the plaintiff also relied on an unreported decision Mohammad Salina Butt v. Trading Corporation of Pakistan (Suit No, 281 of 1978). But in his case the arbitrations had awarded interest even beyond the date of the decree which they could not do under the provisions of section 29 of the Arbitration Act. On authority it was held that there was an error which could be corrected without affecting the decision of the arbitrator. Therefore, this case is also distinguishable.
29. ' For the aforesaid reasons I dismiss the objections filed by both the parties, leaving the parties to bear their own costs, and make the award the rule of the Court.
30. Objections dismissed. {{FOOT NOTE}}
(1) AIR 1923 P C 66 (2) AIR 1960 SC 588 {{FOOT NOTE}}
(3) 2 I C 858