' This is an appeal from an order of the Senior Civil Judges, Lahore dated 10-10-1978, dismissing the appellant's application filed under section 30 of the Arbitration Act, for setting aside an award dated 27-5-1978 given by the arbitrators in a dispute which had arisen between the parties. By the same order or judgment, the award was made a rule Of the Court.
2. The dispute between the parties had arisen out of a road building contract which the appellant Government had made with its approved contractor the respondent herein. The Highway Department, Road Maintenance Division, Gujrat, invited tenders in the year 1970 from its approved contractors, for widening the G. T. Road from miles 91 to 96. The respondent's tender was accepted by the Department, and a formal contract bearing No, 65 of the year 1970-71 was executed on 2-11- 1972. The contract documents specified the rates for the various items of work that had to be performed, as also their quantities. It was also agreed that the Government could increase these quantities, and pay for the additional work at the agreed rates. Thereafter the concerned department substantially increased the work that the respondent was required to do. ' It required the contractor to make road wider than the contractual width. The respondent's case is that he had also to realign the road according to a fresh design, which resulted in a change in the location of work at some places, necessitating the cutting of hilly areas and filling in ditches. According to him, not only were the quantities of items mentioned in the contract documents increased, but that the nature and scope of much of work was also changed. The additional work which had been assigned necessitated the use of more advanced skills, as well as heavy mechanical equipment.
The extra widening of the road also involved a longer lead for carting earth-filling. On the basis of these assertions the contractor demanded higher rates for certain items. When the work was finally measured up and the final bill was prepared, disputes pertaining to measurement of quantities also arose. The contractor lodged a claim with the department on 20-10-1973, which was rejected.
Since there was an arbitration clause in the contract, the contractor applied to the Senior Civil Judge under section 20 of the Arbitration Act for the appointment of an arbitrator. These proceedings terminated in the High Court, where during the pendency of Civil Revision No, 606 of 1975. The parties mutually agreed to the appointment of two arbitrators namely Mr. Mohammad Shafiq, Director Highway Department, Government of the Punjab, and Mr. Mohammad lqbal Qureshi, Superintending Engineer, Highway Circle, Government of the Punjab. Both were accordingly appointed as arbitrators by the High Court.
3. The respondent submitted a statement of claim before the arbitrators, in which he had mentioned a large number of disputed items and had explained his claim in respect of each. The Department filed a written statement, the substance of which was that according to the contract the quantities of items mentioned therein were only tentative, and could be varied by the Department, and as such, the contractor was not entitled to be paid at the rates claimed by him. It was admitted that the contractor had represented to the Department while executing the work that for certain items he was entitled to be paid at higher rates, but it was asserted that he had been informed that he could be paid not more than at the agreed rates. It was also asserted that although the contractor had made a claim of Rs, 64 lacs, the total cost of the project worked out to be Rs, 18.58 lacs, and that after what he had already been paid, nothing was due to him.
4. The arbitrators ultimately gave their award dated 27-5-1978, awarding a sum of Rs, 9,80,012 to the respondent as his dues from the Government, and also directing the Government to hand over a road roller to the respondent against an adjustment of Rs, 55,000 in the amount awarded. The award is not written out in the form of a judgment. It merely reproduces the various items of claim seriatum, and against each item, the amount awarded, if any, is mentioned. Against this award the Government filed an objection petition dated 19-6-1978 before the Senior Civil Judge, Lahore, which was dismissed by the impugned order. The learned Senior Civil Judge observed to the effect that an award could not be set aside except on the grounds mentioned in section 30 of the Arbitration Act, such as of misconduct but none of the allegations made in the objection petition indicated that misconduct was being ascribed to the arbitrators and that the only allegation that seemed to have been made by the appellant was that the arbitrators had not appreciated evidence properly and had come to wrong conclusions. The Court went on to observe that a Civil Court could not sit in appeal over an award to correct erroneous findings of fact or of law, and that the perusal of objections showed that the arbitrators had neither misconducted themselves nor the proceedings.
The Court also expressed the view that arbitrators were not bound by technical rules of the code of Civil Procedure or of the Evidence Act, and were not bound to give reasons for their award. For its conclusions the Court also relied on Mohammad Saghir Bhatti & Sons v. The Federation of Pakistan and another.
5. Before this Court, the first contention of the appellant's learned counsel is that in the award the arbitrators have neither discussed the respective cases of the parties, nor the evidence that had been brought on record, and as such, they had not adjudicated upon the dispute within the accepted concept of law, and had, therefore acted arbitrarily and whimsically in givin the award, which constituted misconduct. In substance the argument is tha failure of arbitrators to give reasons for their award constitutes misconduct. This question was considered by the Supreme Court in Mohammad Saghir Bhatti & Sons v. The Federation of Pakistan and another. Their Lordships of the Supreme Court have observed that they had not been shown any provision of law, or decision of any Court that an arbitrator was bound to state reasons for his award. The award is that case was not set aside, although the trial Court had specifically called upon the arbitrator to give reasons for his award and he had not done so. In view of this authority, there is no scope for1 the view that by not giving reasons the arbitrators had misconducted themselves or the proceedings.
6. It is, next, contended on behalf of the appellant that before the Department the respondent had lodged a claim for only Rs, 6,86,422.88, but before the arbitrators, he had lodged a claim for Rs, 64 lacs, and that the award in excess of Rs, 6,86,422.88, constituted "a mistake patent on record". After going through the objection petition, filed by the appellant, I find that this objection had not been taken before the trial Court. The respondents' representation to the Department in which he had allegedly made a claim of Rs, 6,86,422.88 is also not available on the trial Court's file. It is not asserted on behalf of the appellant that the said representation had been produced before the Senior Civil Judge. It is, therefore, obvious that the appellant had no intention of agitating this matter before the Court. It is true that if the amount awarded did actually exceed the amount claimed by the contractor in the Department representation, then it was a matter for enquiry as to why it was so. There has, however, never been any allegation by the appellant that on this account the award could either be regarded as having been improperly procured, or the arbitrators could be regarded as having misconducted themselves or the proceedings. There is, therefore, no question of setting aside the award under section 30. Even now what has been alleged is that the award suffers from a mistake patent on the face of it, a ground which is available under section 16 for remitting the award to the arbitrators for a re-consideration. On the faze of the award, however, no such mistake, as is alleged, seems to be apparent. It is also not the appellant's case that the arbitrators' authority to decide did not extend beyond what was claimed by the respondent in his departmental representation. It is also pertinent to note that no allegation against the person of any of the two arbitrators had been made, both of whom happen to be important officers of the appellant.. The inference must, therefore, be that the award must have been made after due consideration of facts and in good faith. The appellant's contention is, therefore, without any force.
7. It is, next, contended that the decision in the award with regard to handing over of the road roller to the respondent being contrary to contract, was "a mistake patent on the record". The respondent's case was that a road roller had been sold to him by the Department at cost price i,e, Rs, 55,000, which amount was to be deducted from his running bills, and a large part of the amount was actually deducted, but later on as there was a phenomenal rise in prices, the Department instead of recovering the balance amount, laid claims to the road roller itself and deducted from the bills its rental. The arbitrators have awarded that the road roller be given to the respondent against an adjustment of Rs, 55,000 from the awarded amount. The contention that the decision of this item is contrary to the contract is erroneous, because, paragraph 38 of the "Additional Grounds" of the contract, which is reproduced below, is in conformity with the decision : "(38) All contractors for road works costing more than rupees ten lakhs shall be required to arrange at least one diesel road roller, in perfect working condition at the site before commencement of work. In the event of non-fulfilment of this condition the Department will be at liberty to arrange one diesel road roller and recover the cost from the payment due to the contractor at the rate to be determined by the Engineer-in-Chief. No claim whatsoever of the contractor on this account shall be entertained."
' There is, therefore, no force in this contention either.
8. It is, next contended that the arbitrators had failed to send their record and documents with the award to the trial Court, which prevented the appellant from pointing out the mistakes apparent on the face of the record, and as such, the trial Court had acted illegally in dismissing the objection petition. However, I find that no such objection had been raised on behalf of the appellant before the trial Court. Had it been done, the Court would certainly have sent for the record. Under section 14(2) of the Arbitration Act, any of the parties also could have required the arbitrators to cause the deposition and documents to be filed in Court. Since none of the parties felt the necessity of the record being produced for purposes of adjudication on the objection petition, it cannot be said that the Court committed any error in disposing it of without sending for the record.
9. It is next submitted on behalf of the appellant that the award is based on no evidence. The appellant, however, had failed to raise this question in his grounds of appeal as well as its objection petition filed before the trial Court. In the grounds it is stated that the award does not purport to be on any evidence, but this is stated in the context that no reasons are given in the award. As for the objection petition, learned counsel submitted that it had not been drafted very artistically but it does convey in substance the objection that the award is based on no evidence.
' I have examined this objection petition, dated 29-6-1978. Its opening paragraph is as follows :- "That the learned arbitration during the arbitration proceedings misconducted himself and the arbitration proceedings as follows :- ' Thereafter four sheets containing departmental comments on various items of the award are attached in original. In the end is added the prayer clause that the award should not be made a rule of the Court, because, it was illegal. The departmental comments do not raise questions such as could be raised under section 30 or 33 of the Arbitration Act. The award of the arbitrators on various items has been challenged as being incorrect, but it is nowhere asserted that it is based on no evidence. The arbitrators' assessment of material may be erroneous, or a party may not understand how a result is reached, but such an objection cannot be construed to mean that there is no basis for the award. The appellant did not even attempt to produce any evidence to show that there was no material before the arbitrators on which the award could be given. In these circumstances, there is no scope for raising this ground at this stage.
10. Learned counsel for the appellant has finally contended that the award of interest by the arbitrators was without jurisdiction, because, the dispute pertaining to interest could not have been referred to arbitration, there being no provision for it in the agreement. The Government had not raised this point in its grounds of appeal, but it later on applied for taking an additional ground. Its application was allowed subject to all just exceptions. Mr. S. M. Zafar, who has appeared for the respondent has opposed the amendment application. He submits that the appellant not having raised any objection pertaining to interest in the objection petition before the trial Court, it would not gain by now raising this ground. He has relied on Union Insurance Company of Pakistan Ltd. v.
Hafiz Muhammad Siddiq to submit that an objection to an award not raised before the trial Court should not be allowed to be taken in appeal for the first time. In my view the authority does not help the respondent. In this case it had been contended while challenging an award, that the agreement for arbitration been made on an unstamped paper was invalid, and that the appellant was entitled to challenge the validity of the agreement although he did not plead the objection in his grounds for setting aside the award. Their Lordships of the Supreme Court ruled that "such an agreement is not invalid", but refrained from deciding the other question, although with the following observation : "I must not be understood as having approved of the proposition that an appellant can challenge an award in an appeal on a ground not raised in the application for setting aside the award."
' The question which has been raised in the newly-added ground, however, is different. The ground has not been raised with a view to have the award set aside, but it has been raised to have the award modified under the provisions of section 16 of the Arbitration Act, which is reproduced below :- .
"Section 15. Power of Court to modify award.-The Court may by order modify or correct as award-
(a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred ; or td) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision ;2
(c) where the award contains a clerical mistake or an error arising from an accidental slip or omission."
This power to amend or modify an award was exercised by the Supreme Court in Messrs A. Z.
Company v. Messrs Maula Bahhsh Mohammad Bashir. In that case one of the grounds that had been taken in the objection petition was that the arbitrator had awarded interest without lawful authority, which constituted error on the face of the record, and it was prayed that for this reason the award be set aside. Their Lordships of the Supreme Court observed that "in order to consider whether there is error of law on the face of the award the Court has to decide whether the question of interest was material in the decision of the matter, which had been referred to arbitration or arose incidentally. If the reference was of the former class then the case would fall within the general rule and the entire award would be set aside. If, however, the award of interest was merely consequential and hence a surplusage, then it would not vitiate the award." Finding that in that case the award of interest was a mere surplusage and that the offending portion was separable from the rest of the award, the Court modified the award by striking off the portion relating to interest, with the observation that section 15 of the Arbitration Act empowers the Court to modify or correct an award, where part of it is upon a matter not referred to arbitration and such part can be separated from the other part, and does not affect the decision of the matter referred. It is important to note that the objector in that case had not prayed for amending the award. The Supreme Court exercised the power under section 15, without there being any prayer for the exercise of the power. I, therefore, allow the appellant to raise the newly-added ground and to pray for a relief which the Court could have granted suo motu, as was done by the Supreme Court in the above referred case.
11. It is, next, contended on behalf of the department that the arbitrators in this case did have the authority to award interest, because, the appellant had made delays in paying what was due to the respondent and that interest could be awarded by way of damages. A reference in this behalf is made to clause 39 of the "Additional Conditions" of the Contract, which is the arbitration clause. It lays down that the "disputes which may be referred for arbitration shall be limited to :
(i) any question difference or objection whatsoever which shall arise in any way connected with or arising out of the contract, or/and
(ii) the meaning of the operation of any part of the contract, or/and
(iii) the rights, duties or liabilities of either party, or/and
(iv) whether the contract should be terminated or has been rightly terminated and as regards the rights and obligations of the parties as the result of such termination."
' It is submitted that the respondent's case falls within the ambit of sub-clauses (i) and (ii), which cover almost any dispute that may arise between the parties. This, however, does not seem to be the intention of clause 39 which lays down that "disputes which may be referred for arbitration shall be limited to" what is contained in the four sub-clauses. My interpretation of clause 39 is that only such disputes can be referred to arbitration as arise out of or are connected with the contract. The arbitration clause does not give the arbitrators the authority to impose punishments or penalties on a party, unless the penalty is contemplated in the terns of the contract itself. 1 have not been shown any clause of the contract prescribing a penalty for late payment of unascertained amounts to the contractor in the shape of penal interest.
12. Learned counsel for the respondents submits that if any amount be due to a party and it is not paid, then the party in default is liable to compensate the other party by paying interest. In this connection he has relied on Sh. Mahboob Alm v. Sh. Mumta: Ahmad. This was a case in which one of the parties had sued the other for dissolution of partnership and rendition of accounts. The arbitrator had awarded interest against the accounting party because, it had not maintained proper accounts, and there was no other way of arriving at the probable profits made by the firm.3 4 Interest was, therefore, merely taken as a measure of profits which the arbitrator had been charged to calculate. This case, therefore, is not an authority for the proposition that an arbitrator, after calculating the amount due to a party under a contract, can also award interest on the amount that had remained unascertained and unpaid.
13. Learned counsel for the respondents has also relied on Union of India v. Bungo Steel Furniture Ltd. to submit that an arbitrator has the authority to award interest from the date of the award to the date of decree. This question, however, does not arise in the present case, where interest is calculated and awarded for a period prior to the award.
14. Reliance is also placed on Chandras v. Isbrandtson Moller Co. Ltd, in which it was held by the Court of appeal that it was an implied term of the submission that the Arbitrator should decide the dispute according to the existing law of contract which included the provisions of the Law Reforms (Miscellaneous Provisional Act, 1934, section 3(1) of which gives a Court the power to award interest on debt or damages, and, therefore, the arbitrator had the power to award interest. It is obvious that this decision is based on the provisions of the Law Reforms (Miscellaneous Provisions) Act, 1931, whereas there is no such corresponding law in Pakistan. The question, whether interest could be awarded in the absence of there being a contract between the parties or in the absence of a legal provision, was elaborately considered in Messrs A. Z. Company v. Messrs Maula Bakhsh Mohammad Bashir. It was held that : "---so far as the grant of interest by way of damages is concerned, there is not much divergence of judicial opinion. Hence in the light of the aforesaid decisions I am of opinion that generally in the absence of an express or implied contract to pay interest or usage of trade, interest cannot be allowed on damages for breach of contract."
' It has also been observed in the same case that : "Section 1 of the Contract Act does not in cases where interest was not already payable by law permit interest where the sum claimed is not a sum certain. It only allows interest apart from contract in cases where a sum certain is due and a notice has been given that interest will be charged."
' There is, therefore, no warrant for the view that the arbitrators could award any interest in this case.
15. It is, next, contended that grant of interest by the arbitrators was unobjectionable in view of the provisions of section 29 of the Arbitration Act, which empowers a Court to award interest. In this connection reliance is placed on Mohboob Alam v. Sh. Mumtaz Ahmed. In that case it was held that from the trial Court's refusal to set aside the interest portion of an award it must be presumed that the Court had itself granted interest under section 29. This contention is without any force, because, that case as well as section 29 deal with interest after the date of the decree.
16. In view of the above discussion, I would modify the award by striking off that portion of it which deals with interest amounting to Rs, 1,50,408 and affirm the order of the Court below with the above modification. There shall be no order as to costs. . Award modified. PLD 1958 SC 221 PLD 1978 SC 279 PLD 1965 SC 505 PLD 1960 Lab. 601 AIR 1963 Cal. 70 (1950) 2 A E 8618 PLD 1965 Lah. 276 5 6 7 1 2 3 4 5 6 7