1. ' This is an appeal by the Government of Sind under section 18 ( f ) of the Defence of Pakistan Ordinance, 1971, to challenge an award made by Mr. Justice (Retired) Kadir Nawaz Awan, who was appointed as an arbitrator under section 18 (b) of the said Ordinance in respect of compensation in connection with the requisition of Sind Fine Textile Mills, Shikarpur, ' The brief facts of the case are that, in October 1973. Sind Fine Textile Mills, located at Shikarpur, was requisitioned under the orders of the District Magistrate, Sukkur, under the provisions of section 19 of the Defence of Pakistan Ordinance. It may straightaway be pointed out that, although section 19 of the Defence of Pakistan Ordinance confers the power of acquisition and requisition of property on the Central Government, section 4 of the same Ordinance provides for a power of the Central Government to direct that any power, or, duty under the Rules may be exercised, or, discharged by any Provincial Government, or, by an Officer, or, authority subordinate to such Government. It appears that the Mill was requisitioned by the District Magistrate in exercise of such powers, which the Central Government has delegated. It is case of the appellant that the Mill was requisitioned, because public safety and prevailing labour unrest required the taking of such action. After the requisition, the Mill was actually put in the care of one Khair Muhammad Khatian as Controller for the purpose of running the Mill. The Mill was de-requisitioned in April 1974, and a notification to that effect was issued by the Cabinet Division of the Government of Pakistan on 13-4-1974. It seems that the owners of the Mill believed that damage had been caused, so that they did not take possession of the Mill, and wanted to have an inventory made in regard to the machinery etc. And the condition of the same, as also the stocks. The owners asked the Provincial Government as well as the federal Government for a joint survey of the Mill. However, the case, a has been set up before me by counsel appearing for the appellant, is, that the Government had not appointed any Surveyor. I will advert to his aspect of the matter in a latter part of the judgment. However, a joint survey was made by Mr. P. K. Shahani and Mr. Mooraj. A Survey Report was prepared by the two Surveyors on 24-5-1974. According to the Point Survey Report, the owners of the Mill were entitled to a compensation of Rs, 83.25 lakhs on account of the difference in the position of the Mill at the time of taking over and return. Besides this amount, the Sur eyors also came to the opinion that the owners of the Mill were entitled to a further sum of Rs, 14.82 lakhs on account of damage to fixed assets an depreciation by reason of rough handling. Such Survey Report was signed both the Surveyors.
2. ' It seems the owners of the Mill were station during the People's Party Govern August 1977, a letter was written by Mr Director of the Mill, stating that, on accused Haji Moula Bux Soomro, the Chairman of the Mill had been requisitioned. Such let by the learned Additional Advocate-Gener Anwar also referred to this letter for show that the action of requisition of the Mill malice on account of political differences Mr. Rahim Bux Soomro and Mr. Illahi Bux People's Party on the other. In this letter, t sought the following reliefs :- "Firstly, the Banks should be directed from 1972 up-to-date. A precede Messrs Synthetic Chemical Indust charges for the last five years on to were written off by Messrs United B Bank Limited. Able to obtain any competent. However, on the 9th of Iftikhar Soomro, the Managing t of political differences between he Mill, and the People's Party, has been placed on the record 1, who referred to it. Mr. Khalid jog, besides other facts, the fact as a mala fide act, actuated by between Haji Moula Bux Soomro, oomro on the one hand, and the ' Managing Director of the Mill o write off the interest charged for this exists in the case of ies Limited where the interest rowings of about Rs 3 crores Ltd. And Muslim Commercial.
3. ' Secondly, the Banks should be directed not to press for repayment and to sanction additional amounts at concessional rates of interest to allow the Mill to function.
4. ' Thirdly, Government Agencies such as WAPDA, Sind Social Security Institution. Education Cess etc. Should be directed not to press us for payments for the next two years.
5. ' Fourthly, compensation should be paid to us for the damages caused in accordance with the enclosed Survey Report."
6. Action was taken by the Secretary, Ministry of Industries, Government of Pakistan, who submitted a note to the Secretary-General-in-Chief (presumably Mr. Ghulam Ishaq Khan). By this note, certain directions of the Chief Martial Law Administrator were conveyed by the Secretary of Ministry of Industries. The relevant directions were in the following words :- "The CMLA directed the undersigned on 21st evening on telephone that :-
(1) the Sind Government be told to settle without delay the damages/ compensation claim (because of requisitioning and later de-requisition) of the above-mentioned mill. The mills claim is of the order of Rs, 83 lakhs.
(2) the Banks concerned be asked to waive interest on the mills borrowings on the analogy of existing precedents."
7. ' The matter came up before the Sind Government, and, on 22-12-1977, the Secretary of Industries Department submitted a note to the Martial Law Administrator, Zone 'C' (Sind) regarding payment of compensation to the management of the Mills, and such note reads as follows :- "The Secretary, Ministry of Industries, Government of Pakistan, has communicated to me today morning over telephone the following orders of the Chief Martial Law Administrator : ' The Sind Fine Textile Mill, Shikarpur, which is a public limited company was taken over by the Sind Government in October, 1973, and returned to the owners in April, 1974. Their case regarding payment of compensation of Rs, 83.25 lakhs which is reported to have been assessed by the Survey Team appointed with the approval of the ex-Chief Minister, Sind, may be settled by the Sind Government urgently under intimation to him."
8. ' Ultimately, on 6-4-1978, a summary was submitted by the Secretary of the Industries Department to the Chief Secretary, Sind Government. The last three paragraphs of the summary read as follows :- "7. From the foregoing following conclusions are made :
(1) The Enquiry Report of Martial Law Authorities reveals that the mill was taken over on political grounds and otherwise one of the recommendations of the Investigation Officer is that the Management may be granted some genuine financial compensation by Government to keep the mill functioning.
(2) The record of Home Department is silent about constitution of any Survey Team which assessed the amount of compensation to the tune of Rs, 83.25 lakh to be paid to the present management, against the damages to the Mill during the period it was requisitioned and operated by the Government.
(3) The Mill was requisitioned under D. P. R. And was subsequently de-requisitioned by the Cabinet Division, Government of Pakistan.
8. In view of the above, a decision is to be taken -
(i) whether the claim for payment of compensation is to be considered by the Provincial Government, or
(ii) the Federal Government will have to decide the claim in view of the fact that the process of taking over the mill was started on the basis of the note (copy attached) by the former Prime Minister.
9. It is proposed that before the papers are submitted to the Martial Law Administrator, the opinion of the Law Department may be obtained, whether the Provincial Government or the Federal Government may consider payment of the claim in view of the orders of the Chief Martial Law Administrator mentioned in para. 1 above."
9. ' Finally, on 2-5-1978, a summary was prepared for the Martial Law Administrator, Sind, by the Chief Secretary of the Province, and a decision was recorded by the Martial Law Administrator to the effect that the Federal Government may be requested to determine the compensation in accordance with the mechanism given in section 18 (1) (b) of the Defence of Pakistan Ordinance, 1971. It was also stated that Finance Department may be requested thereafter to make payment of compensation as determined by the Federal Government on behalf of the Provincial Government.
10. By such an order of the Martial Law Administrator, the case was referred for arbitration. Mr. Justice (Retired) Kadir Nawaz Awan was appointed as the sole arbitrator.
11. ' A claim for compensation was submitted by the Mills. In the said claim, the following particulars were mentioned :-
(1) A sum of Rs, 14,82,000.00 on account of losses due to the damages to fixed assets and abnormal depreciation due to rough handling of the machinery.
(2) A sum of Rs, 83.25 lakhs on account of reduction in current assets, increase in current liabilities, increase in long term liabilities and normal depreciation. In paragraph 9 of the claim, the facts, which have caused such losses, were enumerated as follows : "(a) Losses/damages caused to the equipment.
(b) Delays in replacing damaged machinery due to reasons beyond the control of the claimants.
(c) Deterioration in equipment leading to loss of production and loss of quality.
(d) Losses due to loss of reputation arising out of poor quality yarn exported/sold in the local market during the period of requisitioning.
(e) Losses due to unsuitable/inefficient and excessive labour engaged by the Government appointed management of the Mill.
12. ( f ) Other losses."
13. ' A sum of Rs, 42 lakhs was claimed for loss of profits and a sum of Rs, 10 lakhs was claimed as damages due to loss of reputation in the local market. Other losses were also assessed at Rs, 10 lakhs. A total claim of Rs, 160.07 lakhs was submitted, and interest was claimed at the rate of 14 per cent.
14. ' A reply was submitted by the appellant. The fact of requisitioning and de-requisitioning was admitted. It was denied that any joint survey was agreed to, or, conducted after the requisitioning.
15. It was denied that any fixed assets were damaged on account of rough handling during the time the Mill was run by the Government. The Report of the Surveyors was stated to be not binding. The claim to loss of profits was refuted. Additional plea was taken that the damages, if any, were a consequence of labour unrest that prevailed before the Government took over the Mill, and that the Mill was returned to the owners in the same condition in which it was taken over. It was also averred that the reference to arbitrator was limited to the physical damages caused to the Mill, if any, and other items of claim, or, damage were beyond the scope of arbitration proceedings.
16. ' On the pleadings before the arbitrator, evidence was led by both the parties. On behalf of the Government, the following witnesses were examined :-
(1) Mr. Prem Shahani, Surveyor.
(2) Mr. Muhammad Amir Khan Assistant Director, Labour.
(3) Mr. Khair Muhammad Khatian, Government appointed Controller of the Mill.
(4) Mr. Abdul Wahab, Deputy Commissioner, who requisitioned the Mill.
(5) Mr. Abdul Jabbar Khan, Technical Officer, Pakistan Central Cotton Committee, Government of Pakistan.
17. On behalf of the respondents, the following witnesses were examined :
(1) Mr. Amir Abbasi, Managing Director, Sind Fine Textile Mills.
(2) Mr. Afsar Mooraj, Joint Surveyor with Mr. P. K. Shahani.
(3) Mr. Ibrahim Lahorewala, a Chartered Accountant, auditing accounts of the respondent/Mill.
(4) Mr. Khalil-ur-Rehman, Textile Consultant.
(5) Mr. Nayyar Masud, Textile Engineer.
(6) Mr. Illahi Bux Soomro, Director of the respondent/Mill.
18. ' Mr. Justice (Retired) Kadir Nawaz Awan by his decision, dated 18-4-1979, awarded a total sum of Rs, 1,40,07,000 to the respondents. He ordered that payment be made on, or, before 31-5-1979, and, in default, the appellant would also pay interest at the rate of ten per cent. (per annum).
19. ' Aggrieved by the award of the arbitrator, the present appeal has been filed. I have heard Mr. A.
20. Sattar G. Sheikh, Additional Advocate-General, in support of the appeal, and Mr. Khalid Anwar in support of the award.
21. ' Before proceeding to determine the questions involved in this case, I think it necessary to state the law relating to proceedings of this nature.
22. ' The Defence of Pakistan Ordinance was promulgated on 29th November 1971 in the wake of Indo- Pakistan War. As it is, the Ordinance envisages very wide powers to the Government, and such powers even extend to requisitioning, or, acquisition of immovable property, industrial, or commercial undertaking, or, any interest in such undertaking. Subsection (2) of section 3 confers and provides for a power to requisition any property, movable, or immovable, and such power includes taking possession thereof, and the issue of any orders in respect thereof. Reference may be made to clause (xxxii), appearing in subsection (2) of section 3. Jn any case, no contention has been raised before me to the effect that the power to requisition the property in this case does not exist. However, to put the record straight, reference may also be made to subsections (4) and (5) of section 3 of the Defence of Pakistan Ordinance, which provide for the Central Government making an order, or, rule to requisitioning of property. The relevant rule, in this context, is rule 121, sub-rule (1) whereof reads as follows :- "121. Requisitioning of property.-(1) If in the opinion of the Central Government it is necessary or expedient so to do for ensuring the security, the public safety or interest, or the Defence of Pakistan, or for securing the maintenance of public order or the efficient conduct of military operations or prosecution of war, or for maintaining supplies and services essential to the life of the community, it may by order in writing requisition any property, movable or immovable, and may make such further orders as appear to it to be necessary or expedient in connection with the requisitioning : ' Provided that no property used for the purpose of religious worship and no such property as is referred to in rule 111 or in rule 117 shall be requisitioned under this rule."
23. ' Although the above rule envisages that the power to requisition property vests in the Central Government, yet subsection (4) of section 3 provides that the power could be exercised even by the Provincial Government, or, by any officers or authority subordinate to such Government.
24. Subsection (5) of section 3 envisages full powers to the Provincial Government in such behalf. For the sake of convenience, subsections (4) and (5) of section 3 of the Defence of Pakistan Ordinance are reproduced below :- "(4) The Central Government may by order direct that any power or duty which by rules under subsection (1) is conferred or imposed upon the Central Government shall in such circumstances and under such conditions, if any, as may be specified in the direction be exercised or discharged-
(a) by any officer or authority subordinate to the Central Government, or
(b) by any Provincial Government or by any officer or authority subordinate to such Government, or
(c) by any other authority.
(5) A Provincial Government may by order direct that any power or duty which by rules made under subsection (1) is conferred or imposed upon it or which has been directed under subsection
(4) to be exercised or discharged by it, shall, in such circumstances and under such conditions, if any, as may be specified in the direction, be exercised or discharged by any officer or authority, not being an officer or authority subordinate to the Central Government."
25. ' The District Magistrate, Sukkur, passed an order on 23-10-1973, after he received a Report from the Assistant Director (Labour) and the Assistant Commissioner and Sub-Divisional Magistrate, Shikarpur, stating that the Mill in question had been closed, so that the production of yarn was suffering, and the workmen were not getting their wages. On such ground, an opinion was recorded that it was necessary and expedient for ensuring public safety and interest of Pakistan and also for maintaining the, supplies of yarn, which is essential to the life of the community, that the Mill in question should be requisitioned. Mr.-Khatian was appointed Controller, and he was given the following powers :-
(1) The powers and functions of the Board of Directors under the Companies Act.
(2) All powers and functions exercised by the owner/owners of the Mill.
(3) The Controller was asked to take over the Mill with all the movable and immovable property, including building, open ground, machinery, furniture, fittings, vehicles, raw-material, finished goods, godowns, offices, stores, stocks and shares and cash in banks, and, in short, all other assets.
26. The accounts of the Mill in the banks were frozen.
27. ' It was also ordered that wages and arrears of wages to the labourers shall be paid even by taking overdrafts from banks on behalf of the said Mill. It would indicate that the taking over was complete and total. In fact, there is no dispute on that point.
28. ' The other provisions that are relevant in this context are embodied in section 18 of the Ordinance.
29. This section deals with the payment of compensation to the person whose industrial undertaking, or, interest in such undertaking is taken possession of. Subsection (1) of section 18 reads as follows :- "18. Compensation to be paid in accordance with certain principles for compulsory acquisition of immovable property, etc.-(1) Where under section 19 or by or under any rule made under this Ordinance any immovable property, or a commercial or industrial undertaking or any interest in such undertaking is compulsorily acquired or taken possession of for a public purpose, there shall be paid compensation, the amount of which shall be determined in the manner, and in accordance with the principles, hereinafter set out, that is to say-
(a) where an amount of compensation can be fixed by agreement, it shall be paid in accordance with such agreement ;
(b) where no such agreement can be reached, the Central Government shall appoint as arbitrator a person who has been, or is qualified for appointment as a Judge of a High Court ;
(c) the Central Government may, in any particular case, nominate a person having expert knowledge as to the nature of the property acquired, to assist the arbitrator, and where such nomination is made, the person to be compensated may also nominate an assessor for the said purpose ;
(d) at the commencement of the proceedings before the arbitrator, the Central Government and the person to be compensated shall state what in their respective opinions is a fair amount of compensation ;
(e) the arbitrator is making his award shall have regard to-
(i) the provisions of section 23 of the Land Acquisition Act, 1894 (I of 1894), so far as the same can be made applicable ; and
(ii) whether the acquisition is of a permanent or temporary character : ' Provided that where any property requisitioned under any rule made under this Ordinance is subsequently acquired under section 19 or any such rule, the arbitrator in any proceedings in connection with such acquisition shall, for the purposes of the provisions of the said section 23, take into consideration the market value of the property at the date of its requisition as aforesaid and not at the date of the subsequent acquisition ;
(f) an appeal shall lie to the High Court against any award of an arbitrator except in cases where the amount thereof does not exceed an amount prescribed in this behalf by rule made by the Central Government ;
(g) save as provided in this section and in any rules made thereunder, nothing in any law for the time being in force shall apply to arbitrations under this section."
30. ' Again, rule 121 (4) contemplates the payment of compensation that the Central Government may determine. It would seem that such compensation could be determined by agreement, but, in case such an agreement cannot be reached, then an arbitrator has to be appointed, and only such a person could be appointed, who has been, or is qualified for appointment as a Judge of a High Court. Clause (f) of section 18 (1) provides for an appeal to the High Court against the award of an arbitrator, and, in this case, the appeal has been filed under that provision.
31. Since the decision of an arbitrator is styled as an award, my attention has been engaged to the question of scope of interference by this Court with the award of the arbitrator. The point has engaged my attention solely for the reason, whether this Court, in dealing with appeals under section 18 (1) (f) of the Ordinance, is bound by such limitations as are prescribed in the Arbitration Act, when an award is challenged before the Civil Court. In ,my view, no such limitations exist, for the decision of the arbitrator, in spite of being styled as an award, is subject to an appeal before the High Court, and, since I am hearing an appeal, jurisdiction is such as is conferred on all appellate Courts which, I may clarify would extend to examining all the questions of law and fact. In fact, Mr. A. Sattar G. Shaikh has pointed out that this Court, in dealing with the appeals of this nature, is not disabled from substituting its own findings and decisions on matters of fact as well. I am in full agreement with him.
32. ' There is another aspect of the case, which may be dealt with before I proceed to examine the merits of the award. On 1-6-1982, Mr. A. Sattar G. Shaikh made a request for adjournment, and for calling of the record from the arbitrator. It was pointed out to him that he should have placed the record before the Court, or, in any case, made a request before the learned Judge, who admitted this appeal to regular hearing. Mr. A. Sattar G. Shaikh stated that such a request was made in the memo. Of appeal, but no order had been passed. The position, however, was that, in the meantime, Mr. Justice (Retired) Kadir Nawaz Awan had died. What is more that it is not known where the record is, and I was informed by the advocates that even the Begum Sahiba of Mr. Justice (Retired)
33. Kadir Nawaz Awan was dead, and his only son was in the United States, so that the record could not be made available. However, on 2-6-1982, Mr. A. Sattar G. Shaikh made a statement that he had been able to obtain some documents, which he would like to place on record. He was permitted to place the same on record, and, on the same date, I had passed an order, allowing both the parties to produce all the documents on which they seek to rely. In fact, the entire record, which is relevant to the determination of the issues in this case, has been placed on record, and both the parties have referred to it. The step was in the nature of reconstitution of the record. I must state that no advocate made any grievance in regard to non-availability of the record. In fact, all the depositions, pleadings, and documents are now available.
34. ' At this stage, it will be profitable to consider the evidence that was recorded by the arbitrator. The main piece of evidence in this case is furnished by the Survey Report jointly made by Mr. P. K.
35. Shahani and Messrs Mahboob Mooraj & Co. Mr. P. K. Shahani has stated that, in the middle of March 1974, viz, after the return of the Mill, he was contacted by the Additional Secretary of Cabinet Division of the Federal Government, and asked if he would be prepared to carry out a survey in the interior of Sind. This witness was then informed and told that Messrs Mahboob Mooraj & Co. Had been nominated by the Fine Textile Mills as joint surveyor with Mr. P. K. Shahani. A survey of the Mill as well as the accounts was carried out. I must state that this witness has not been cross- examined at all.
36. ' Mr. Afsar Mooraj on behalf of Messrs Mahboob Mooraj & Co., the joint surveyor, was also examined by the claimant, and, in cross-examination, he was only asked two questions, the answers to which were as follows :- "As far as I can remember over one week was taken to complete the survey. 1 he joint surveyor was Mr. P. K. Shahani and as far as I remember he was appointed by the Government."
37. ' A faint argument has been raised before me that Mr. P. K. Shahani had not been appointed by the Government. It is difficult to assimilate such argument, because I have not been able to persuade myself to believe that this surveyor, who is a professional surveyor, would gratuitously proceed to Shikarpur in order to survey the Mill, which process must have consumed several days. In fact, a detailed document, running into several pages, was prepared by the surveyors, in which full condition of the assets of the Mill, including its financial condition, were taken note of. To say the least, the authenticity and correctness of this Report has not been challenged at all.
38. ' The Survey Report indicates that, after the take-over, the maintenance of the mill was given to a person not qualified as a textile technician, so that adjustment could not be made in the Blow Room, the machines were not run properly and the Carding Engineer were producing lower quality webs. On account of such reason, the quality of yarn produced was poor, which did not attract customers. It is also stated that in a standard textile mill of this size, as we have in this case, usually 900 employees are required, but instead the management employed 1,400 employees. In regard to the condition of machinery, it was stated that the yarn, being fluffy, got stuck to the front rollers, and, for the removal of such fluffy yarn, a special knife had to be used, but, in this case, screw drivers, or, .Heavy cutting knives were used, so that the rollers were badly damaged and had numerous cuts and dents, which need to be replaced. It is also stated in the joint Survey Report that the Mills, during the take-over period, manufactured yarn to the extent of 40 lakhs pounds, but the same was of very inferior quality, which attracted no buyers, because it was "absolutely unsuitable yarn, week and fluffy". Besides the loss, even the good will of the Mill was spoiled. In regard to depreciation of machinery, the surveyors came to the unanimous opinion, and the normal depreciation was Rs, 14.44 lakhs, and depreciation due to rough handling Rs, 3.62 lakhs. To these figures was added a further loss of Rs, 11.19 lakhs on account of damage caused to the fixed assets in the Mills. In fact, the surveyors have appended a schedule marked "E" in the Report, and have detailed all the parts that had been damaged on account of rough handling, or, mishandling. The surveyors also examined the statements of account. They took note of the assets and liabilities of the Mill on the date of taking over and on the date of handing over. On the date of taking over, the assets were Rs, 71.18 lakhs and at the time of handing over the same were reduced to Rs, 70.31 lakhs.
39. This appears to be negligible. But in regard to the liabilities, the surveyors prepared a sort of table, showing five items of liabilities, namely, bank overdrafts, creditors, accrued expenses, unclaimed dividend and taxation provision. The figure in regard to bank overdraft, unclaimed dividend and taxation provision did not undergo a change during the period the Mill was managed by the Government, but the amount payable to the creditors at the time of take over was Rs, 1.30 lakhs, and the same rose to Rs, 11.72 lakhs, while the accrued expenses, which were Rs, 5.17 lakhs at the time of take over, had shot up to Rs, 51.64 lakhs at the time of handing over. These two items showed an increase of Rs, 56.81 lakhs. There was no cash for payment at the time of handing over, and the Mills are now burdened with this liability. The other major items, which the surveyors took place of, was in regard to long term loans. A table has been prepared, showing the difference in the figure of liabilities on account of such loans. It seems that, while the Mills were run by the Government, overdue instalments and interest had accrued, and this accounts for a further liability of Rs, 11.13 lakhs, which has to be cleared by the Mills. The cash in hand at the time of handing over was a mere sum of Rs, 22,327. It seems that, at the time of taking over the Mill, a sum of Rs, 1.79 lakhs (approximately was in the banks, and at the time of handing over, this amount had increased to Rs, 2.30 lakhs (approximately). But, during that period, the amounts of the creditors lying with the Mills had increased by about Rs, 12,000, and amounts payable for the goods supplied had increased from Rs, 91,000 (approximately) to Rs, 11.08 lakhs. This shortfall was aggregated in the Report, and it was found that the liabilities of the Mill had increased by Rs, 10.34 lakhs during the period that the Mill had been taken over by the Government. During that period, the accrued expenses, which had become a liability, had also increased by Rs, 46.46 lakhs. The long term loans and overdraft instalments had also increased by about Rs, 1 lakh. The total current liabilities, according to the Survey Report, had risen from Rs, 70 lakhs to Rs, 126 lakhs, the long term loans had arisen from Rs, 190 lakhs to Rs, 201 lakhs. The statement of initial assets and liabilities would indicate that, during the period of take over, the financial position of the Mill had deteriorated to the extent of Rs, 83.25 lakhs. At the time of arguments before me, the learned Additional Advocate-General did not state a word to challenge the correctness of the statement. In regard to the Survey Report, nothing was brought in evidence to show that the figure, or, computation was wrong, or, faulty. On the other hand, an argument has been advanced before me on the basis of the fact that the year 1973 was a boom period in cotton and yarn trade, and, in that context, Mr. Khalil-ur-Rehman, a Textile Consultant, was examined on behalf of the Mills, and he had stated that, from October 1973 to April 1974, the period was one of boom for the textile industry, because the prices in the international market had arisen, and profits were higher. It seems this witness knew that the Mill was equipped with machinery manufactured by Toyoda of Japan and San Gorio and Marzoli of Italy, and, on such basis, this witness stated that the plant equipped with such machinery should produce profits ranging from Rs, 35 lakhs to Rs, 50 lakhs.
40. ' Having dealt with the point in regard to depreciation and increase in liabilities of the Mill, I would shortly deal with the remaining evidence, Mr. Muhammad Amir Khan, the Assistant Director of Labour in Sukkur had spoken about some labour union trouble that had taken place in July 1973, viz, before take over. He has stated that there was power breakdown, and therefore the Labour Court had been moved by the management to permit a lay-off. The other witness was Mr. Khair Muhammad Khatian, who had been appointed as the Controller of the Mills in question. He stated that the Mill in question was a new Mill, and, during the first six years, it had accumulated losses of Rs, 20 lakhs, or, so. He also detailed the dues that were payable by the Mill to the IDBP, Customs, Income-tax Department, and on account of unpaid wages. He stated that the machinery was in bad condition, although he admitted that he had found 5043 bales of cotton lying in the godown.
41. He also stated that 12600 spindles of the new size were working. In cross-examination, he admitted that he had no qualification in textile engineering, and, during the working, no spinning Master had been employed. He also stated that the Mill did not work until the beginning of November 1973, because the floor had been damaged, although he stated that he could not name any of the machinery parts, which may be missing. He admitted that he had written a letter on 28th November 1973, stating that 1400 persons were working in the Mill, but he said that actually the number was 900. When asked whether he could state the number of workers that would be required for a Mill of 13000 spindles, he was unable to make a definite reply, though he stated that a Mill having 25000 spindles would need 900 employees. He, however, admitted that, in the months of March and April, about 20000 spindles were working. To a question, he even replied that he operated the Mill at a loss for the period of requisitioning, and the reason, which he assigned, was that the market prices were low. He admitted that, before requisitioning of the Mill, 70 per cent. Of the yarn used to be exported, but, during the period of requisitioning, less than 10 per cent was exported, and even this quantity was rejected by the foreign buyers. He stated that, during the labour dispute, no damage had been caused to the Mill. In regard to low production, he explained that he could not give the exact figure, because he did not have a cost accountant, and secondly only 70 to 80 per cent. Spindles were operated, and thirdly, from the middle of December 1973, WAPDA had ordered the closure of the Mill from 5.00 p.m. To 10-00 p.m. However, there was no evidence on that point. To a suggestion that 5043 bales of cotton, if properly turned, would bring a profit of Rs, 30 lakhs, the reply was that he could not say so. The other witness examined on behalf of the Government was Mr. Abdul Wahab, Deputy Commissioner, who had requisitioned the Mill. He has hardly anything to state in regard to the working, or, losses to the Mill, but he has been cross- examined at length on the point that the action of requisitioning the Mill was mala fide. From WAPDA about the shut down of electricity supply, so that the Mills ' On behalf of the claimant, the first witness was Mr. Amir Abbasi, the Manager of the Mills. He stated that, in July 1973, a notice was received were closed. In regard to the condition of the Mill, before the take-over and after the return, he stated that at the time the Mill was returned in April 1974, "there was a difference of heaven and earth in the quality and condition of the machinery". He stated that almost 2/3rd were not workable. He stated that the labour required for working the Mill was about 500 persons, but, at the time of de-requisitioning, the labour force was 1400. He denied that any damage to the machinery had taken place, due to labour unrest. The other witness examined by the claimant was Mr. Ibrahim Lahore Lahorewala, a Chartered Accountant, who had checked up the accounts and found that as between 1973 and April 1974, there had been an overall deficit of Rs, 83,26,1,00. Mr. Khalil-ur-Rehman, a Textile Consultant, was examined by the claimant, who, besides stating that the period between October 1973 and April 1974 was a boom period for textile industry, has also stated that, during this period, a Mill of this type should produce profits between Rs, 35 lakhs and Rs, 50 lakhs. He stated that the labour force for a Mill of this nature, if full 25000 spindles were working, would be between 800 to 1000. He went on to state that even overhauling the equipment would consume one year. Mr. Nayyar Masood stated that an inventory was prepared in his presence at the time of handing over., and, at that time, Mr. Jillani Malik, a textile engineer, and Mr. Mooraj, a surveyor, were present. Mr. Illahi Bux Soomro, one of the Directors of the Mill, had stated that the joint survey was carried out under the instructions of the Government, and Mr. P. K.
42. Shahani was the representative of the Government. He stated that at the time of return of the Mill, the Japanese plant was completely damaged and not operational, whereas the Italian plant was severely damaged, and it was operating, but not satisfactorily. He stated that prior to the takeover, they were able to export over 90 per cent of their product. He stated that he had to restore the damaged machinery to normal use, and that consumed a lot of time. He denied that any damage was caused to the Mill during labour unrest. He, however, admitted that, before the take-over, the electric supply had been disconnected by WAPDA.
43. The last question that deserves consideration is the quantum of compensation. Under section 18 of the Defence of Pakistan Ordinance, compensation is payable if any industrial undertaking is taken possession of for a public purpose. Although the title words in section 18 specifically refer only to acquisition of immovable property, but the use of the word "etc." immediately after the words "compulsory acquisition of immovable property", would seem to indicate that compensation is payable even if an industrial undertaking is taken possession of. In the instant case, the appellant had appointed an arbitrator, and has not challenged his jurisdiction. In these circumstances, it is reasonable to assume that compensation is payable not merely in case of acquisition of immovable property, but also in cases where any industrial undertaking is taken possession of, be it by way, which may be termed acquisition, or, requisition, or, any other manner. On the other hand, is would be correct to state that, in fact, the Government had acquired the Mills in October 1973, and the return of the Mill will not affect the liability to pay compensation. The proceedings before the arbitrator were, therefore, valid and within the frame work of the law.
44. ' Clause (c) of subsection (1) of section 18 of the Defence of Pakistan Ordinance lays down two principles in the assessm ent of compensation. The first principle is that the arbitrator shall have regard to the general provisions of section 23 of the Land Acquisition Act for the purpose of making the award, and the second principle is that be must take note of the fact, whether the acquisition is of a permanent nature, or, temporary character. Section 23 of the Lan Acquisition Act enumerates all such matters, which have to be considered by a Court in determining the amount of compensation. The first clause of the said section makes a reference to compensation being awarded in the same measures as the market value of the land at the time of taking over.
45. Although the other clauses in subsection (1) of section 23 may also be remotely, or obliquely imported for consideration in the present case, but, for the purposes of the present case, I am of the view that the correct criterion for assessing compensation should be determination of actual loss, or, damage to the property in question to which may be added the approximate amount, which the property might have yielded to owners as income. In this case, the property was returned, and therefore the proper manner of assessment should be by way of finding the difference as between the value of the property at the time of taking over and at the time of return to the owners. To such amount, may be added the profits that the Government have acquired, and, if there be a dispute in computation of such figure, then so much may be awarded as loss of profit to the owner as might appear reasonable. The underlying principle in cases of this kind, where compensation is to be paid for use, or, occupation of the property, is to compute the loss that may have accrued to the owner, and add to it the probable figure, which might represent the profits, which he might have made. If it was a case of permanent acquisition, the matter would have been simpler, because, in that case, the compensation would have to be awarded in consonance with the value of the property, and its potentials for use, but, in the present case, where the property, which was taken over, was returned, the enquiry should centre round the fact as to how much loss has the owner suffered on account of his being deprived of the property, and such loss shall be by was of compensation to him for any damage to the property, and also for the probable income, which he might have made, had he not been deprived of the possession of the property.
46. The respondents have claimed the following amounts as compensation :- {{TABLE}} Rs.
(1) Compensation on account of losses due to damage 14,82 lakhs to fixed assets and abnormal depreciation.
47. (2)Loss on account of reduction in the current assets 73.81 lakhs and increase in the liabilites and normal depreciation.
(3) Loss on account of loss of profits. 31 lakhs.
48. Total ... 119.63 lakhs. {{TABLE}} ' The learned arbitrator has allowed compensation on the first thcre items out of the five items enumerated above.. The last two items have been rejected.
49. ' I proceed to consider each one of the items separately. The first claim is in regard to abnormal depreciation, which was caused on account of misuse, or, mishandling of the machinery in question. The claim is mainly based on the Report of the surveyors, and such Report is sought to be corroborated by oral evidence that was examined. The reply of the appellant, to that extent, was that Mr. P. K. Shahani of Messrs Shahani & Co. Did not represent the Government of Sind in the joint survey. It was further stated that, in fact, it was not even in the knowledge of the Sind Government that any survey had taken place. In an earlier part of this judgment, reference has been made to this aspect of the case, and I have stated that it is very difficult to believe that Mr. P. K. Shahani would, on his own, go to the Mills and start survey proceedings. This surveyor, in his evidence, has stated that an Additional Secretary of the Cabinet Division had asked him to carry out the survey. In fact, the order of handing over the premises to the owners of the Mill has also been signed by an Additional Secretary, and therefore the statement of Mr. P. K. Shahani appears to be correct. Some papers, which have been placed before me by the learned Additional Advocate-General, would seem to indicate that the Government of Pakistan was fully aware of the survey, and therefore it is not possible to hold that Mr. P. K. Shahani had not been appointed. In the summary that was submitted to the Martial Law Administrator of Zone 'C' by the Chief Secretary on 17-5-1978, it is clearly stated that the Chief Martial Law Administrator and the Secretary, Ministry of Industries were aware of an assessm ent made by the survey team, which had been appointed with the approval of the former Chief Minister of Sind. Such a statement coming from highly responsible persons as the Chief Martial Law Administrator and the Secretary, Ministry of Industries can hardly be open to doubt. I am left in no manner of doubt whatsoever that Mr. P. K. Shahani, the surveyor, acted on behalf of the Government of Sind for the purpose of making the survey.
50. ' Both the surveyors, namely, Mr. P. K. Shahani and Mr. Mooraj had appeared before the arbitrator.
51. There has been no cross-examination whatsoever of these two surveyors. What is more that nothing was pointed out by the Additional Advocate-General which might go to indicate that this Survey Report is not a correct portrayal of the state of affairs in the Mill at the time of return of the Mill to the owners. At page 9 of the Survey Report, under the topics, "consequences of 22nd October 1973" and "present condition of the machinery", the surveyors have stated in details the actual damage to the machinery, and the reasons therefor. In fact, the surveyors have gone to the extent of stating that, owing to rough handling of the Mill's machinery, the value has been reduced to two per cent. Of its replacement cost. Again, at page 13 of the said Report, under the title of "damage caused", it has been stated by the surveyors that the machines had been very badly damaged, and the Mill will have to purchase spare parts, which have been detailed in Schedule `E' io the Survey Report. It is stated that, at the time of return of the Mill, only 10000 out of 25000 spindles could be started, and that too after repairs and interchanging of parts. The surveyors have, at page 11 of the Report, clearly stated that the depreciation would account for a loss of Rs, 3.62 lakhs, and the replacement of the parts, enumerated in Schedule `E' to the Report, would cost Rs, 11.2 lakhs. The depreciation and damage has, therefore, been worked out and claimed at Rs, 14.82 lakhs. No serious effort had been made by the appellant at the time of proceedings before the arbitrator to challenge the Report of the surveyors on that aspect of the case. Besides the Report of the surveyors, reference may also be made to the evidence of Mr. Khair Muhammad Khatian, who had been appointed the Controller of the Mill. He has stated that the Mill had been closed on account of electricity having been cut off. He has also stated that there was some damage to the floor.
52. However, these two matters have hardly any bearing on the damage to the machinery, or, depreciation. From the tenor of the evidence of Mr. Khair Muhammad Khattian, it would appear as if the machinery was unfit for use, but that would seem to be absolutely incorrect, because no less than 5043 bales of cotton were in the Mill, and obviously this raw material had been obtained for production of yarn, and, if the machinery was not working, there was hardly any point in purchase of cotton. He was, however, admitted that the Mill actually started working on 3-11-1973, viz, within about ten days of the take-over. This would show that the Mill was in complete working order at the time of take over A few spindles may be out of commission, but that is a normal feature in textile mills. Mr. Khattian having said that the Mill was actually started on 3-11-1973, has again taken a somersault, and stated that it took about two, or three months to instal the back process machinery after repairs. This statement has to be discarded in view of what is said by him earlier.
53. On a reading of the evidence, one is constrained to notice that people having no qualification in relation to textile engineering, or, running of textile mills were associated with this Mill after the taking over. Even a Spinning Master had not been appointed, although Mr. Khatian stated that, for all the six months that the Mill was with the Government, they were in the process of appointing a Spinning Master. Mr. Khatian also stated, in his evidence, that, at the time of taking over, the frames had been removed, but he was shown some photographs, which showed that the frames were intact. He was unable to name any of the parts, which were missing. It is significant to take notice of a fact, which has emerged in the evidence of Mr. Khatian, and the said sentence may be reproduced. It reads as follows :- "It is within my knowledge that, before requisitioning, about 70 per cent. Of the yarn used to be exported, and, during the period of requisitioning, less than 10 per cent. Was exported."
54. ' The above statement would clearly show that the Mill was perfectly a working and healthy unit before the take-over, and, either for reason of mismanagement, or, lack of technical knowledge, or, gross carelessness, the Mill was not run as a healthy industrial unit. A faint attempt was made by the learned Additional Advocate-General to show that the Mill had been damaged by workmen, but, even to that extent, Mr. Khatian has admitted that to the best of his belief, the Mill had not been damaged by labourers.
55. ' In juxtaposition the evidence of Mr. Amir Abbasi, the Manager of the Mill, has given a clear position in regard to the functioning of the Mills. He has stated that the Mill had been closed, but that was because WAPDA had cut down the electric supply. He has stated that, when the Mill was returned, there was "a difference of heaven and earth" in the quality and condition of the machinery, and that almost 2/3rd of the machinery was not workable. In the same context, Mr. Illahi Bux Soomro has stated that damage had been caused, while the Mill had been taken over, and that they wanted to have the condition of the machines and stocks assessed properly before taking possession of the Mill. He has also stated that damage had been caused to the Mill, and the same had been surveyed. I am of the view that compensation of Rs, 14.82 lakhs awarded on account of damage and depreciation was proper.
56. ' The next item, that needs to be considered, is the increase in the liabilities and decrease in the assets of the Mill during the period of take over. This point has been considered by the surveyors on the basis of documents and account books tendered before them. Mr. A. Sattar G. Shaikh stated that, in that regard, the documents had not been placed before the Court, and therefore nothing could be awarded to the respondents on such ground. I pointed out to the learned Additional Advocate-General that the proceedings before me were in the nature of an appeal, and there was nothing to indicate that, before the arbitrator, any question was raised with respect to the correctness of the figures stated by the surveyors. It cannot be overlooked that the Survey Report was before the Arbitrator, and the appellants had full access to it. The appellants have been allowed full and complete opportunity of producing evidence, and cross-examination of the witnesses of the respondents. Indeed some of the witnesses had been cross-examined by them at length, and the cross-examination was relatable to the Survey Report. The appellant did not make any grievance before the Arbitrator in regard to the correctness of the entries in the accounting statements, which have been detailed in Schedule 'F' to the Survey Report.
57. ' The pattern of approach by the surveyors in this regard is to take the figures of assets and liabilities as existed on 30-9-1973, viz, the date when the Mill was taken over by the Government, and compare such figure with the figures shown in the accounting books on 22-4-1974, viz, the date on which the Mill was returned by the Government. The increase, or, decrease in the figure fully portrays the increase or decrease, in the liabilities and assets. By computation, the figures have been worked out, and the surveyors found that the overall liability had, during this period, increased by Rs, 83.25 lakhs. The surveyors have divided the exercise in four parts. In the first part, they have calculated the reduction that has taken place in the current assets of the Mill during the time of take over. They came to the conclusion that the current assets, which were Rs, 71.18 lakhs on 30-9-1973, had reduced to Rs, 70.31 lakhs on 24-4-1974. There was thus a reduction to the extent of Rs, 87 lakhs. This reduction was on account of stores and spares and stock-in-trade, besides some other minor items. Under the next heading, the surveyors have considered the increase that had taken place in the liabilities of the Mill as between the two dates, viz. Of taking over and return.
58. Under that heading, the accounts disclosed that the Milt had to pay Rs, 1.38 lakhs to the creditors on 30-9-1973, and this liability of payment to the creditors rose to Rs, 11.72 lakhs by the time the Mill was returned. The amounts were in the nature of loans, which the Mill had to pay, and at Item No, 12, appearing at page 5 of Schedule 'F' to the Survey Report, the names of customers, who had advanced money to the Mill during the period of take over were mentioned, and likewise were mentioned the names of such persons, who had supplied goods to the What was outstanding by the Mill on the date of return, was surely the liability of the Mill, and had to be paid by the respondent. On 30-9-1973, the liability of the Mill was Rs, 1.38 lakhs, which had increased to Rs, 11.72 lakhs on 22-4-1974, viz, the date of return, so that the liabilities had, during the time of take over, increased by Rs, 10.34 lakhs. Under that topic, the surveyors have also considered the accrued expenses, viz, such amounts, which, as distinct from advances from the customers, or, payment for the goods supplied, are payable as expenses for running the Mill. Such accrued expenses stood at Rs, 5.17 lakhs at the time of taking over, and had swollen to Rs, 51.64 lakhs at the time of handing over. The major items, which have yielded this high liability figure, are payments which need to be made to the Central Excise and Land Customs, or, in the expense payable account. At the time of taking over, the respondent was liable to pay excise duty to the extent of Rs, 2.19 lakhs, and, at the time of return, this liability had increased to Rs, 35.78 lakhs viz, by over Rs, 33 lakhs. Even the expense payable account showed an increase from Rs, 2.72 lakhs to Rs, 14.91 lakhs. The accrued expenses, details of which are mentioned in para. 13, appearing at page 7 of Schedule 'F' to the Survey Report, show that these accrued expenses amounted to Rs, 46.46 lakhs in excess of such expenses as standing on 30-9-1973. Such expenses would clearly be a liability of the appellants.
59. ' The next item, in that regard, is on account of increase in long term loans. This item is dealt with in paragraph 14, appearing at page 7 of Schedule 'F' to the Survey Report. It seems that the main items, raising the liability on account of long term loans, were on account of overdue instalments not having been paid, and the interest that had accrued on secured loans. Bankers have been associated with the Survey Team, and, with their assistance, the amount was calculated, and it was found that, as between the date of taking over and return, the liability had increased by Rs, 11.13 lakhs.
60. ' The last item in that topic is in regard to decrease in fixed assets. The ultimate computation shown at page 8 of Schedule 'F' to the Survey Report, shows that, during take over, the depreciation had amounted to Rs, 14.44 lakhs. It seems that the learned arbitrator has taken a mistaken view in regard to this item. The decrease in the value of fixed assets has been awarded under the item of reduction in current assets. A sum of Rs, 14.44 lakhs has been awarded in that regard. The surveyors have put a note at the bottom of Schedule where they have stated that they have confined themselves to expression of their views in terms of para. 9 of the main Report and Schedule 'D'. Para. 9 of the main Report deals with the topic "present condition of machinery". This topic envisages depreciation due to rough handling and damage to fixed machinery. Such depreciation and damage has been awarded by the arbitrator, and a sum of Rs, 14.82 lakhs stands on that count. In an earlier part of this judgment, 1 have held that that was correct computation. The question, that now arises is, whether depreciation on the total machinery should be allowed once again. If depreciation and damage have been allowed at item I, the respondent would be entitled to depreciation on the entire machinery of the Mill, because he is to obtain a sum of Rs, 11.20 lakhs on account of damage to the fixed assets. These fixed assets have to be replaced, and therefore there is no question of depreciation. Elsewhere it is stated that only 1/3rd of the spindles were working at the time of return, and 2/3rd were out of order. In such circumstances, accumulated depreciation should be awarded only on the remaining 1/3rd of the spindles that were working. The arbitrator had awarded a sum of Rs, 14.44 lakhs on such count, and I will reduce the same to roughly 1/3rd of this amount. On this item, I will reduce the amount in the award from Rs, 14.44 lakhs to Rs, 5 lakhs.
61. ' I must state that the original documents were placed before the surveyors, and the Survey Report indicates that even bankers had appeared before the Survey Team. The account books of the mill were also available. No item was pointed out by the learned Additional Advocate-General as being open to doubt, or, suspicion. The award of Rs, 83.25 lakhs on account of reduction in the assets and increase in liabilities is modified to the extent that the respondents shall get Rs, 73.81 lakhs on this count.
62. ' The last item, for which compensation has been awarded, is in regard to loss of profits on account of the Mill being in possession of the Government. The Mill had claimed a sum of Rs, 42 lakhs as the loss of profits. In the written statement, such claim was denied, and it was averred that the Mill should be put to strict proof, and the Government reserved its right to rebut the same. The arbitrator has awarded the full amount of the claim.
63. ' Admittedly, the Mill was run by the Government, and, for this very obvious reason, the owners of the Mill are entitled to compensation. The sole question then is about the quantum.
64. ' Mr. A. Sattar G. Shaikh, the learned Additional Advocate-General, has contended before me that the evidence on the point was not specific, and therefore compensation should not be awarded.
65. He pointed out from the evidence of Mr. Khair Muhammad Khatian that, at the time of take over, the financial position of the Mill did not appear to be satisfactory, and that this Mill, which had started in 1968, had, within six years of operation, accumulated losses to the extent of Rs, 20 lakhs. He had also stated that the price of yarn had crashed down in January 1974, because there was a little export in the international market. He had also stated that the price had fallen from Rs, 58.00 per bundle of 20 single counts to Rs, 48.00 per bundle, and the price of a bundle of 10 single counts had fallen from Rs, 52.00 to Rs, 42.00 during the months of February and March, 1974. This witness had also stated that, on the whole, it would be correct to say that, during the period of requisitioning, the Mill was working at a loss, because the market prices were on the low side. On the other hand, he had also stated that, before requisitioning, 70 per cent, of the yarn produced was exported, but, after the requisitioning, only 10 per cent. Was exported. This state of affairs has to be considered in juxtaposition with the fact that Mr. Khatian was not a qualified textile engineer, and even a Spinning Master had not been engaged, so that proper goods acceptable in the international market could not be produced. He has stated that the yarn sent by the Mill to the Brussels buyers was rejected on the basis of quality, and he went on to deny that the yarn produced during the period of requisition, was extremely poor, although he stated that it was of average quality. This witness has admitted that 70 to 80 per cent. Of the spindles were being operated from the middle of December. He was asked if the proper processing of 5043 bales of cotton (which were found in the Mill premises at the time of taking over) would have brought a profit of Rs, 30 lakhs, and he stated that he could not make any firmed statement. In that context, Mr. Amir Abbasi, the Manager of the Mill, had stated that, during the three years before the take over, most of the produce used to be exported, and each spindle used to produce good amount of yarn. Mr. Khalil-ur-Rehman, a textile consultant, was examined on behalf of the Mills. He claims to be a specialist in textile industry. He has stated, in his evidence, that the period from October 1973 to April 1974 was a boom year for the textile industry, because the price, during this period, was the highest, both locally as well as in the international market. He also stated that textile equipment installed in the Mill is considered to be the most reputable textile plant in Pakistan. He has stated that, for the period commencing October 1973 and ending April 1974, by his estimate on the basis of knowledge and experience a plant of the nature that was fitted in the Mill could produce profits ranging from Rs, 35 lakhs to Rs, 50 lakhs. This witness also stated that normally such a Mill should have a work force of 800 to 1000 labourers. Documents have also been placed on the record to show the export of cotton yarn from Pakistan for the years 1972 to 1979, and such documents substantially show that the export of yarn in 1973 and 1974 was substantially higher than the export in the remaining period. In that context, Mr. Illahi Bux Soomro, a Director of the Mill, stated that they had been exporting 90 per cent of the produce. In regard to the plant, it was stated that it was one of the best when purchased in 1970. He has also stated that the textile industry was having a boom period till the end of 1974.
66. ' It would seem that the version in regard to income from the Mill given by Mr. Khair Muhammad Khatian was that the Mill ran at a loss. As it is, there is ample material on the record to show that the Mill was run most uneconomically. A thousand workmen were sufficient to run 25000 spindles, but the Mill employed 1400 workmen when only 10000 spindles were working. The machinery was spoiled either by inexperienced workmen, or, by deliberate mischief. The quality of yarn produced was such as was rejected in the international market. There is no satisfactory explanation in regard to these factors, which may. Have reduced the profits of the Mill. But such factors came in existence only after the Mill was taken over by the Government. Besides, huge liabilities were incurred by the Mill, which became the liabilities of the Mill on handing over. These factors go to indicate that, if the Mill had made no profits, it is attributable to the inefficiency and carelessness of the management during the time of take over, But, as otherwise, the Mill had full potentials of providing profit, specially when a substantial proportion of the Mill yarn produced was exported. What is more that the period of take over was a boom period in textile industry, and this is established feature. Mr. Khair Muhammad Khatian has stated that, at the time of take over, the Mill was in financial difficulties. There is no substantial proof of such circumstance. But it must not be overlooked that the Mill had come in existence recently, and earlier there was expenditure for installation, and therefore the profit may have been lower. There is reliable evidence on the record that, after the take-over, only ten per cent. Produce was exported, and invoice of the Mills, that has been placed on the record, shows that, on 8-2-1974, 61,415 Lbs. (gross) of cotton yarn were exported, and had fetched a price of U. S. $ 58,437.15. This amount was received through the Habib Bank Ltd., and it represents the price only of 10 per cent, of the total produce of yarn. Mr. Khair Muhammad Khatian, has clearly stated, in his evidence, that, before requisitioning, 70 per cent. Of the yarn used to be exported, and, after requisitioning, less than 10 per cent. Was exported. Even if I believe that the total yarn exported by this single consignment was of 61,415 Lbs., then too, such export, representing only 10 percent of the total production, would exhibit that the total amount of yarn produced during this period was 10 times the yarn export viz. About 6,00,000 Lbs. The price of yarn in the international market is always lower than the price in the domestic market, because, in the international market, foreign exchange serves as an incentive to the exporters. Even if it is concluded that the remaining 90 per cent. Yarn, which was sold in the local market, also fetched the same price, then it is reasonable to assume that, during the period the Mill was run by the Government, the amount earned by sale of yarn locally would be roughly 9 times the amount earned by a single export. This single export earned about 58,000 U. S. Dollars, and therefore the remaining 90 per cent. Yarn sold in the domestic market should have earned roughly 9 times the amount earned by exports, which would roughly be .5,50,000 U. S. Dollars equivalent to about 55 lakhs of rupees. To this, may be added Rs, 6 lakhs earned by export of yarn. This would indicate that the total production of yarn, in spite of the factors, which have reduced production, was about Rs, 61 lakhs. This appears to be the factual position if I was to accept the word of Mr. Khatian, the witness for the Government, without demur. But it is also established case that, on account of inefficiency and mismanagement, the production had depleted. Admittedly, only 10000 out of 25000 spindles were working. It is, therefore, reasonable to assume that, if the Mill would have been worked efficiently, and, in accordance with the established principles for running this industry economically, the production should have been at least double, viz. Rs, 1,22,00,000. On that production, a net profit of 25 per cent. Could be considered to be reasonable. In my view, the loss of profit, which should be awarded to the Mill, is Rs, 31 lakhs. Mr. Khalil-ur-Rehman, the textile consultant, examined by the Mill before the arbitrator, had also estimated the profits to range between Rs, 35 lakhs and Rs, 50 lakhs. The arbitrator had awarded Rs, 42 lakhs on this count, but I reduce the amount on this item to Rs, 31 lakhs.
67. ' On the two remaining counts, nothing has been awarded to the Mills, and there is no cross- appeal, or, cross-objection.
68. ' In the result, my conclusions are as follows:- Rs, Rs.
(1) Compensation on account of losses due to damage 14,82 lakhs to fixed assets and abnormal depreciation.
69. (2)Loss on account of reduction in the current assets 73.81 lakhs and increase in the liabilites and normal depreciation.
(3) Loss on account of loss of profits. 31 lakhs.
70. Total ... 119.63 lakhs.
71. ' This amount shall also carry interest at the rate of ten per cent. As from 1-6-1979, which is in accordance with the rate awarded by the arbitrator. The total amount, with the interest, shall be deposited in Court within thirty days from today.