All these three petitions filed under section 5 of the Arbitration (Protocol and Convention) Act, 1937 are based on identical facts and common points of law. In all the petitions the petitioners are the same. I therefore propose to dispose them of by a single judgment.
2. J. M. 56 of 1976.-The petitioner, a company registered in Hong Kong entered into a contract.
Dated 31-10-1972 with the respondent, a company incorporated in Pakistan, for purchase of 1,200 bales of Cotton. The contract was subject to the Rules of Liverpool Cotton Association Ltd., hereinafter called the Association which inter alia provided that in the event of any /disputes arising out of this contract the same were to be submitted to the decision of the Association. It is averred that certain dispute .Arose between the parties and the petitioner referred the same to the Association who made an award on 13-I1-1973 requiring the respondent to pay Rs. 66,208.00 with interest at 10 % per annum and -- 440 towards fees and expenses of the Arbitration.
3. The respondents denied the claim and inter alia pleaded that the agreement was not signed by any authorised agent of the respondent, there was no arbitration agreement, the award is not valid and does not fulfil the requirements of law and the contract was against public policy. It was pleaded that the respondent shipped 600 bales to the petitioner but due to devaluation of currency and restrictions imposed by the State Bank 400 bales could not be shipped. The contract was therefore frustrated. The award is not stamped and is not enforcible under the provisions of Arbitration (Protocol and Convention) Act, 1937, hereinafter called the Act of 1937.
4. In J. M. 57 of 1976, petitioner is the same but the respondent is a different company. The petitioners entered into three contracts with the respondents bearing No. A. 2484, AC 5095, and AC 5096. The general terms and conditions of these contracts including the arbitration clause were the same as stated above. It is alleged that on respondents' breach the peti--tioner referred to dispute relating to first and second contracts to the said Association. After hearing the parties in respect of first contract an award was made on 7-6-1974 whereby the respondent was to pay U. S. I 40,874'62 with interest c' 10 % p. a. And -- 300'00 as Arbitration fee and expenses. In respect of the second contract the respondent filed appeal against the award. Under the appeal award the respondent wag to pay U. S. ; 2,06,237'91, with interest @ 10 % p.a. And --. 300'00 as Arbitration fee and expenses. The res--pondent filed objections and inter alia contended that the petition is barred by time and is bad for multifariousness and misjoinder of causes of action. The rest of the legal objections challenging the validity of the award are the same as stated in J. M. 56/1976.
5. In J. M. 74 of 1976, petitioner entered into two contracts with the respondent a local first for purchase of a total quantity of 700 bales of cotton on general terms and conditions including the arbitration clause as mentioned above. On respondent's breach the petitioner referred the dispute to the said Association who by its award dated 7-6-1974 required the respondent to pay U. S. 16 203,(05'00 with interest @10 % p. a. And a sum of --. 630'00 towards Arbitration fee and expenses.
The respondents filed objection which inter alia stated that due to restrictions imposed by the Government, devalu--ation of currency, flood and abnormal rise in cotton price the contract became impossible of performance and the contract had frustrated. It is averred that the respondent refused to submit to arbitration and the award was made ex parte. Besides this all other legal objections are identical to those raise in J. M. 56/ 1976 and it is pleaded that the award cannot be enforced under the provisions of the Act of 1937.
6. Mr. A. Rauf the learned counsel for the respondent in J. M. 56/76 has raised the following contentions :--
(i) That for purpose of entering into a final contract the respondents were required to obtain permission of the State. Bank of Pakistan to sell on the contracted price and as the same was declined, the contract had become impossible of performance.
(ii) That the award is not a foreign award within the meaning of section 2 of the Act of 1937.
(ii) That the arbitration tribunal has not decided the real dispute and has decided the case beyond the scope of reference.
(iv) The award is contrary to the provisions of Foreign Exchange Regula--tion Act, 1947.
(v) The arbitration failed to appoint any umpire and there is no evidence to show that the arbitrators had appointed any umpire.
(vi) There is no evidence to show that the applicants and respondents were members of the Liverpool Cotton Association Ltd.
7. Mr. Afzal Nabi, Advocate in J. M. 57/76 adopting the arguments of Mr. Rauf further contended as follows :-
(iv) Contracts Nos. 5095 and 5096 were not concluded contracts as per--mission of SBP was not granted.
8. Mr. Jan Muhammad Dawood, Advocate for respondent in J. M. 74/ 1976 while adopting the arguments of the aforestated counsel in so far they are applicable to his case, further contended that in view -of section 3 of Ordinance XV of 1981, as the award is not a speaking award and no reasons have been given it should be remitted or alternatively the Court should refuse to enforce it as it is against public policy. All the learned counsel for the respondents have adopted this contention and separately addressed on this point. This objection could not be taken in the objections filed by the respon--dents but considering the nature of objection which is based purely on legal grounds requiring no evidence, I have allowed it to be raised at the time of argument.
9. In all the awards reasons have not been stated. The learned counsel therefore contended that they cannot be enforced. The reference is obviously to the provisions of Arbitration (Amendment)
Ordinance, 1981 (Order XV of 1981) whereby in Arbitration Act, 1940 a new section 26-A has been inserted. This section makes it obligatory upon the umpire and arbitrators to state in the award the reasons for the award in sufficient details to enable the Court to consider any question of law arising out of the award. In case of non-compliance the Court shall remit the award. In this regard the Court has no option and no discretion has been conferred upon the Court. The Ordinance has however taken care of the pending proceedings in relation toy the award and under section 3 has provided that where the award does or does not in sufficient detail state the reason for the award the Court ma, remit the award with direction to state reasons in sufficient detail. There is a marked difference in section 26-A of the Arbitration Act and section 3 of the Ordinance. In section 3 a discretion has been conferred upon the Court to remit or not to remit. In proper cases where proceedings relating to the award are pending and the award does or does not in sufficient detail.
State the reason, the Court may refuse to remit the award. It is therefore not mandatory in all pending cases to remit the award.
10. The learned counsel for the respondents while pressing this objection seem to have completely ignored that the provisions of Ordinance XV of 1981 are not applicable to Arbitration (Protocol and Convention) Act, 1937. If this was the intention of the Legislature then similar provisions would have been inserted in the Act of 1937. It is well settled that the provisions o Arbitration Act, 1940 do not apply to "foreign award" as defined by section 2 of the Act of 1937 which is covered by the provisions of the said Act Mr. Jan Muhammad Dawood referred to sections 46 and 47 of the Arbitration Act and contended that the provisions of Arbitration Act apply to every arbitration under any other enactment and to all Arbitrations and to all' proceedings. The provisions of sections 46 and 47 as contended by the learned counsel cannot be of such wide connotation to cover all Arbitrations and all proceedings. Section 46 refers to statutory arbitration and makes the pro-- visions of any other enactment or any rules made thereunder to prevail over Arbitration Act if inconsistent with the latter. Section 47 is subject to the provisions of section 46 and all arbitration proceedings except those -Which are excluded by this section, are to be governed by Arbitration Act will not apply to such arbitration proceedings which are governed by any other law which is inconsistent with the Arbitration Act. All such Arbitration awards which are governed by the Act of 1937 will be excluded from the operation of Arbitration Act, 1940. Reference may be made to Pfaff & Co. v. Sartaj Engineer Co. Ltd. PLD 1970 LSh. 184, where it was held that all arbitration proceedings, except those excluded by section 47 are to be governed by Arbitration Act, 1940. It was observed that "one of the exceptions is save in so far as is otherwise provided by any law for the time being in force'. The Arbitration (Protocol and Convention) Act, 1937 is one such law. The Arbitration Act, 1940 far from prohibiting an arbitration covered by the Act of 1937, recognises it by force of section 47". A foreign award as defined by section 2 of the Act of 1937 will be enforcible under this Act and not under the Arbitration, Act, 1940. In view of this discussion a "foreign award" cannot be challengedi under section 26-A of the Arbitration Act nor section 3 of Ordinance XV of1981 can be pressed in service for remitting a foreign award which is subject-1 matter of a pending proceeding under the, provisions of the Act of 1937.
11. Further section 3 of Ordinance XV of 1981 provides for remittance of award with direction to the umpire or arbitrator to state reasons within a time fixed by the Court and in case of non- compliance the award will become void. In case of "foreign award" the umpire and arbitrators are usually not subject to the jurisdiction of the Court and therefore unless empowered under law a Court cannot exercise extra-territorial jurisdiction and no direction as contemplated by section 3 of Ordinance XV of 1981 can be issued to such umpire or arbitrators. It was thus contended that enforce--ment of an award which does not state reason will be against public policy and cannot be enforced under section 7 of the Act of 1937. In Sultan Textile Mills War.) Ltd. v. Muhammad Yousuf Shamim PLD 1972 Kar. 226it was held that "the problem in respect of illegality at common law on the ground of public policy is the discovery of injuriousness to society". In AIR 1947 Sind 94, following observation was made :- "The general head of `Public Policy' covers a wide range of topics, such as, for example, trading with enemy in time of war, stifling prosecution, champerty and maintenance and various other matters."
12. The scope of "Public Policy" has been stated by Chitty on Contract (24th Ed.) in para. 904 as follows :- "Scope of Public Policy.-Objects which on grounds of public policy invalidate contracts may, for convenience, be generally classified into five groups first, objects which are illegal by common law or by legislation ; secondly, objects injurious to good Government either in the field of domestic or foreign affairs ; thirdly, objects which interfere with the proper working of the machinery of justice ; fourthly, objects injurious to family life ; and fifthly, objects economically against the public interest."
13. This statement is not exhaustive as certain cases may not fit clearly into any of these five categories. However the aforestated classifications cover almost all conceivable cases except such cases which may arise in peculiar circumstances because in the words of Danckwert L. J. In Nagle v. Feilden (1966) 2 Q B 633, "the law relating to public policy cannot remain immutable. It must change with the passage of time. The wind of change blows upon it." The learned counsel for the respondents have not been able to show how enforcement of the award will be hit by any of the tests laid down by the judgments and observations quoted above.
14. While determining whether the enforcement of a non-speaking foreign award will be against public policy it cannot be overlooked that the Legislature has recently amended Arbitration Act, 1940 which does not invali--date a non-speaking award unless it his been remitted by the Court and the arbitrators or umpire fail to resubmit it with reasons in sufficient detail. The fact remains that no such amendment has been made in the Act of 1937. A foreign award which does not state reasons cannot be termed to violate any provision of law governing its enforcement. Any non- compliance with the provision of Arbitration Act, 1940 will not invalidate a foreign award nor can it be set aside under the provisions of Arbitration Act. The validity of a foreign award as defined by section 2 of the Act of 1937 can be challenged on the grounds specified in section 7 of the Act of 1937. The learned counsel for the respondents contended that enforcement of award is against Public Police but did not address how Public Policy was involved. In my view the enforcement of the present awards is not against Public Policy.
15. Mr. Afzal Nabi the learned counsel for the respondent contended that the petition is barred by time. He has contended that the awards were made on 7-6-1974 and 10-7-1974 whereas the petition was filed on 1-6-1976. According to the learned counsel under Article 178 of the Limitation Act the application for filing the award should be filed within 90 days of making the award. Mr. Qamar Hassain the learned counsel for the petitioner has contended that Article 178 is not applicable and has referred to the case of Messrs France Corsi v. Gorakhram Gokalchand AIR 1960 Bern. 91Article 178 is applicable to award made under the provisions of Arbitration Act, 1940 and not under the Act of 1937. In the present case the petition has been filed under the Act of 1937 in respect of a foreign award to which Arbitration Act, 1940 is not applicable. Consequently Article 178 cannot be pressed in service.
16. The learned counsel contended that as the award is not stamped it cannot be enforced and reliance has been placed on AIR 1962 Punj. 167 and PLD 1971 Lab. 522. Article 12 of Stamp Act provides for stamp duty chargeable on Award and as the awards in all the petitions have not been stamped, according to the respondent they are not admissible under section 35 of the Stamp Act and are therefore not enforceable.
17. To fully appreciate this contention of the learned counsel for the respondents it is necessary to reproduce section 3 of the Stamp Act: "3. Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty thereof, respectively, that is to say-
(a) every instrument mentioned in that Schedule which not having been previously executed by any person, is executed in (Pakistan) on or after the first day of July 1899 ;
(b) every bill of exchange (payable otherwise than on demand) or pro--missory note drawn or made out of (Pakistan) on or after that day and accepted or paid, or presented for acceptance or payment, or endorsed, transferred or otherwise negotiated in (Pakistan) ; and
(c) every instrument (other than a bill of exchange, or promissory note) mentioned in that Schedule, which, not having been previously executed by any person, is executed out of (Pakistan) on or after that day, relates to any property situate, or to any matter or thing done or to be done, in (Pakistan) and is received in (Pakistan)."
Section 3 is the charging section which imposes an obligation to stamp the instruments specified therein. Thus instruments not mentioned in Schedule I are not subject to duty. Section 3 has classified the instruments chargeable with duty into three categories;
(2) Bills of Exchange (payable otherwise on demand) or promissory note made or drawn out. Of Pakistan, and accepted or paid or presented for acceptance or payment or endorsed or transferred or otherwise negotiated in Pakistan.
(3) Instruments mentioned in the Schedule executed outside Pakistan and relating to any property situate or to any matter or thing done or to be done in Pakistan and received in Pakistan.
An analysis of section 3 makes it clear that documents executed outside Pakistan are excluded unless covered by section 3 (a), (b) and (c). For the purposes of the present controversy section 3
(c) is relevant. Instrument executed out of Pakistan and not relating to any property or to any matte or thing done, or to be done in Pakistan are not chargeable with duty under the Act.
18. It is an admitted position that the awards in the present cases were made out of Pakistan. They do not relate to any property in Pakistan or anything done or to be done in Pakistan. The award merely decides the disputes between the parties under which the respondents have to pay the specified amount to the petitioner. There is nothing under the instrumentto be done in Pakistan. The respondent, after the award is made in relegated to the position of a debtor and according to general principle a debtor must find his creditor. The amount is therefore even otherwise not payable in Pakistan. The legal steps taken under the provisions of the Act of 1937 for enforcement of the award cannot be said to be covered by words "anything done or to be done in Pakistan." The classical example for such a situation would be of a power of attorney executed out of Pakistan in respect of acts, deeds and things done in Pakistan. Such an instrument though executed out of Pakistan will be chargeable with duty.
19. The case cited from the Indian Jurisdiction supports the respondents contention while in PLD 1971 Lah. 522 it was held that un-stamped arbitra--tion agreement is not enforceable and cannot be acted upon. In the Indian case it was held that stamp duty is payable on foreign awards.
According to the Laws prevalent in Pakistan and India distinction has been made between an award made within the country which is subject to Arbitration Act, 1940 and a "foreign award" which is governed by the Act of 1937. These two instruments though of the same genesis are completely different from each other having their special characteristics, particularly a "foreign award" to which a specific meaning has been given in terms of international convention. Article 12 of Stamp Act which provides for stamp duty speaks of "award" and not "Foreign Award". It, therefore, can, safely be presumed that it is applicable to "Awards" which are not "Foreign Awards". It is a well- settler principle of interpretation of fiscal statutes that if there are two possible interpretations, one which is favourable to the subject should be accepted. In my opinion Article 12 does not cover a foreign award. For the aforesaid reasons with respect I regret that 1 am unable to agree with the views ex-S pressed in A 1 R 1962 Punj.
167. In my view "Foreign Awards" as in the present petitions, are not chargeable with stamp duty.
20. Mr. Afzal Nabi the learned counsel for the respondent contended that the petition is bad for misjoinder of causes of action as it relates to the enforcement of two awards. No doubt there are two awards involved in Petition No. J. M. 57/74 but they are between the same parties and relate to identical subject-matters. This contention has no force.
21. The objections of the learned counsel for the parties which were pressed have been enumerated above. Except such contentions which have been discussed above all of them were raised in Nan Fung Textiles Ltd. v. H. Pir Muhammad Shamshuddin PLD 1979 Kar. 762, and have been thoroughly dealt with by my brother Ajmal Mian, J. While repeating the same contentions the learned counsel for the petitioners have neither referred to this case nor attempted to distinguish it or point out in what manner it is not applicable to the present cases. I entirely agree with the reasoning of Ajmal Mian, J. And dismiss the remaining objections. Mr. Rauf's objection No. (VI) is rejected for the reason recorded by Ajmal Mian, J. While dealing with objection No. V which was also raised before him.
In the result all the three petitions are allowed. I order that the awards be filed and I accordingly pronounce judgment in terms of the said awards but there will be no order as to costs.