1. This order will dispose of Suits Nos. 453 of 1977 and 454 of 1977 filed by Messrs Fazal Textile Mills Ltd.
2. Against Messrs Sattar Cotton Ginning Factory Ltd. And Messrs Aslam Cotton & Pressing Factory Ltd.
3. Respectively for confirmation of two awards made by the arbitrators against the defen--dants.
4. Common questions of law and fact are raised in both these suits. The award in Suit No. 453/77 is dated 21-3-1977 while in Suit No. 454 of 1977 it is dated 29-3-1977. In Suit No. 453 of 1977 the claim before the arbitrators related to non-supply of 700 bales of N. T. S. Cotton by defendant, resulting in the alleged consequential damages of Rs.3,44,080 to plaintiff. In Suit No. 454 of 1977 the claim is based on the allegations that defendant failed to supply 400 bales of N. T. S. Cotton which caused loss to the plaintiff to the tune of Rs.1,93,660. In both the awards, the damages are awarded to the plaintiff on the basis of difference between the market price and the contract price of cotton bales.
5. The arbitration proceedings in both -he suits took place under the Bye-laws of Karachi Cotton Association (K. C. A.) of which the parties are members. It is an admitted position that the dispute arose between the parties before coming into force of the Cotton Ginning Control and Development ordinance, 1976, which came into effect on 17-7-1976. 'The award is resistedby the defendants in both suits on several grounds.
6. I have beard Mr. Khalid M. Ishaque and Mr. Haider Mota, the learned counsel for-- the plaintiff and the defendants respectively in the two suits. It is common ground that under the contract entered into between the parties for purchase of cotton bales, the delivery period was October/December, 1975. It is however alleged by the plaintiff in both the suits that as the defendants did not abide by the time schedule mentioned in the contract for supply of cotton bales they first made oral demands to the defendants and on their failure to comply, served on them written notices in May, 1976. The defendants on the other hand claim that the prices of cotton were going down between November, 1975 and February, and therefore, the plaintiff did not lift the balance quantity of cotton bales and it was only after the prices started showing upward trend, that in May, 1976 the plaintiff came forward to claim delivery of balance quantity of the cotton bales. In this background of controversy the plaintiff by its letter dated 16-6-1976 acting in pursuance of Bye-law No. 39-1 of K. C.
7. A., nominated one Mr. Nasirul Hassan, as their arbitrator and called upon the defendants to nominate their arbitrator in the dispute. The defendants in both the suits in response to the above letter of plaintiff took the stand that they never entered into any agreement of arbitration with the plaintiff but simultaneously by their letters dated 28-6-1976, without prejudice to the above contention, appointed Mr. Mirza Sher Muhammad Moghul as their arbitrator in the dispute. It appears that before the arbitrators could act in the matter, the defendant's factorie3 were taken over by the Federal Government on 17th of July, 1976 upon promulga--tion of Ordinance XXVI of 1976. On 26-7-1976, the plaintiff in response to a public notice dated 17-7-1976 issued by the Cotton Trading Corporation (C. T. C.) which in the meantime succeeded to the Management of the defendants' factories, informed the Chairman, C. T. C. About their claim against the defendants and also apprised him of the pending arbitration proceedings in the matter. The arbitrator appointed by the defendants, it appears, did not act in the matter whereupon the plaintiff's arbitrator by letter dated 6-8-1976 called upon the plaintiff to appoint another arbitrator in place of Mr. Moghul who had since refused to act. A copy of this letter was endorsed to C. T. C. On 9-8-1976 the plaintiff also wrote to C. T. C. Requesting them to appoint an arbitrator in place of Mr. Moghul and it was further stated that in case the C. T. C. Failed to appoint the arbitrator within 15 days of the receipt of letter the arbitrator appointed by the plaintiff shall act as the sole arbitrator in the dispute. I may incidentally mention here that the Ordinance No. XXVI of 1976 was in the meantime made an act of Parliament on 4-9-1976 (Act LIX of 1976). It appears that the C. T. C. Did not respond to the letter of the plaintiff whereupon the plaintiff proceeded to appoint one Mr. Nasir Wahab as the second arbitrator in place of Mr. Moghul by letter dated 9-9-1976 and a copy of this letter was endorsed to Secretary, C. T. C. Mr. Nasir Wahab appointed by the plaintiff in place of Mr. Moghul also did not act whereupon by letter dated 21-10-1976, the plaintiff appointed Mr. Shah Shamim-ul- Haq in place of Mr. Nasir Wahab as the arbitrator. The two arbitrators namely Messrs Nasirul Hassan and Shah Shamimul Haq so appointed entered upon the reference and by letter dated 29- l0-1976 called upon the plaintiff and the Secretary of C. T. C. To appear before them on 6-11-1976.
8. On 6-11-1976, only plaintiff appeared before the arbitrators and filed the claim. The case was then adjourned to 4-2-1977. On 4-2-1977 also only plaintiff's representative appeared before the arbitrators and no appearance was made on behalf of C. T. C. The two arbitrators examined the original documents produced before them by the representative of plaintiff and the case was closed. From the record of proceedings before the arbitrators it appears that later on 16-2-1977 one Hamid Hassan of C. T. C. Appeared before one of the arbitrators and contended that no award could be given against the corporation. It is stated in the diary recorded on 16-2-1976 by the arbitrators that all documents and papers relating to the two cases were banded over to said Mr. Hamid Hassan, who promised to later call on the arbitrators. On 16-3-1977, the said Hamid Hassan once against the arbitrators and repeated his stand that no action can be taken or award can be given against C. T. C. The two arbitrators thereafter conferred between themselves and gave the two awards on 21-3-1976 and 29-3-1976 respectively which are impugned in these proceedings.
9. The learned counsel for the defendants in both the suits has raised the following contentions before me : -
(1) That the awards given by the arbitrators are against the principles of natural justice as no notice was given to the defendants, who are a separate legal entity and were entitled to independent notices.
(2) That the awards given against Cotton Trading Corporation suffer from the same defect and.
10. Infirmity as the Cotton Trading Corporation was never joined as a party in the proceedings before the arbitrators nor a copy of the claim filed by the plaintiff before the arbitrators was sent to C. T. C.
(3) That an error of law is apparent on the face of award as the award was made in breach of section 17(2) of Act LIX of 1976.
(4) That the award is void as it was given beyond the time limit prescribed under the Bye-law of Karachi Cotton Association as well as under Arbitration Act.
(5) That the appointment of the arbitrator Nasir Wahab in place of Mr. Moghul was not covered under the provisions of Bye-Law 39-1 of the Karachi Cotton Association and in any case the later appointment of Mr. Shah Shamimul Haq as an arbitrator in place of Nasir Wahab was neither authorised under Bye-Law 39-1 of K. C. A. Nor under the provisions of Arbitration Act. It is also contended that the appoint--ment of Shah Shamimul Haq made by the plaintiff was also defective for the reason it was made without serving any notice on C. T. C. To appoint an arbitrator in place of Nasir Wahab.
(6) That the arbitrator acted with jurisdiction in awarding interest on the amount decreed in the award.
11. I will first deal with contention No. 4 raised by the learned counsel for the defendants in the two suits as I feel that the present suit can be disposed of on this contention alone. It is urged by Mr. Hyder Mota, the learned counsel for the defendants that Bye-law 39-1 (2) (g) of K. C. A. Provides for giving an award by the arbitrators within one month of their entering upon the reference. In the present case the arbitrators admittedly issued the first notice to the parties for appearance on 29- 10-1976 and in response thereto the plaintiff filed its claim before the arbitrators on 6-11-1976.
12. Accordingly the arbitrators entered upon the reference when they issued the notices to plaintiff for appearance or in any case on 6-11-1.976 when the plaintiff filed their claim before the arbitrators.
13. The impugned award in Suit No. 453 of 1977 was given by the arbitrators on 21-3-1976 while in Suit No. 454 of 1977 it was delivered on 29-3-1977. The awards admittedly were given beyond the time allowed under Bye-law No. 39.1 (g) of K. C A. It is alternatively argued by the learned counsel for tae defendants that if it be assumed that the proceedings were governed under the Arbitration Act, even then the time allowed to the arbitrators for giving award under the Act is four months from the date of entering upon the reference while awards in both the suits were given beyond four months. It was accordingly contended by the learned counsel for the defendants that the awards are liable to be set aside on this ground alone. The learned counsel also submitted that Bye---Law 39-1 '(h) of K. C. A. Further provides that if the arbitrators have allowed the time to expire without making an award, the umpire appointed by the Arbitrators shall forthwith enter upon the reference in lieu of the arbitrators. It is not disputed before me by the learned counsel for the plaintiff that before entering upon the reference, the umpire was appointed by the arbitrators in both the cases.
14. It is also not disputed before me that the arbitrators or the plaintiff did not make any application to the Court for extension of time after the period allowed for making the award had expired. It is however, contended by Mr. Khalid Ishaque, the learned counsel for the plaintiff that during the course of proceedings before the arbitrators, a, representative of Cotton Trading Corporation, appeared on 16-2-1.976 and then on 18-3-1976, and therefore, according to learned counsel, it should be inferred that C. T. C. Had acquiesced and consented to the proceedings being continued in spite of expiry of time and as such the time stood enlarged by consent, by the conduct of parties up to the date, the award was given. In support of his contention the learned counsel referred me to the case Shafique Ahmed v. A. Sattar, Suit No. 211 /t5 decided by me on 7-10-1980. The facts of the above case relied by the learned counsel are quite distinguishable and have no application in the present case In the above case decided by me both the parties continued appearing before the arbitrators and took part in the proceedings inspite of expiry of the time. Not only this, but by an endorsement made on the back of the original reference to the arbitrators, both parties in that case agreed that the time for giving award is extended upto the date of award. It was in these circumstances I repelled the contention of plaintiff in that case that the award was void having been given beyond the time. In the present case it is abundantly clear from the proceedings before the arbitrators that on ib-2-1976 when Hamid Hassan the representative of C. T. C. Appeared before the arbitrators, he contended that no award could be given against C. T. C. Again on 18-3-1976 when he once again saw the arbitrators he repeated the stand of C. T. C. Before the arbitrators that neither any action could be taken nor any award could be given against the Corporation. On the face of this stand by the representative of C. T. C., I fail to see how the argument of learned counsel that defendant acquiesced or consented to the enlargement of time and continuation of proceeding in spite of expiry of the time could be sustained. Faced with this difficulty, the learned counsel for the plaintiff made an oral request that time may now be extended by the Court. It is contended by the learned counsel that on merits the defence raised by the other side in the cases is that the prices of the cotton started going down from November, 1975 to February, 1976 and it was for this reason that the plaintiff did not lift the contracted quantity of cotton. The learned counsel went on to assert that if it can now be demonstrated reasonably on the material produced before the Court that the plea raised by the defendants was riot correct and that in fact no fall, in prices of cotton was registered during that period then according to learned counsel no prejudice will be caused to the defendants if time is now extended upto the date of award. I may state on the very outset that such a course is not open to be followed before the Court which is hearing objections to an award. The Court hearing an objection to an award cannot look into any new material which was not produced before the arbitrators. It is admitted by Mr. Khalid Ishaque that the materials which I am now asked to look into by the learned counsel was not before the arbitrators. It cannot be disputed that in cases of contract for sale of goods, time is normally considered to be the essence of the contract.1 The delivery, period of cotton in both cases was mentioned in the contract as October-November, 1975. It is also on record that the first written demand was made by the plaintiff' much after expiry of the period of delivery, in May, 1976. In these circumstances there is no justification at this stage, to extend the time under section 28 of the Arbitration Act as orally prayed by Mr. Khalid Ishaque. I accordingly reject the oral prayer of the learned counsel for extension of time.