1. ' By this petition/objections filed under section 30 of the Arbitration Act, the plaintiffs have challenged the validity of the award made on 16th July, 1973, by the Sole Arbitrator.
2. ' By an award made on 16th July, 1973, the Sole Arbitrator (Mr. M. A. Haq) held the plaintiffs liable in the following terms: "The Applicant is, finally, held liable to pay off to the POFs the stitching charges, amounting to Rs, 1,53,790 for 11,830 garments for the services rendered, as expressly provided under clause 8 of the Appendix to the Contract, within four months of this order, whereafter interest at the Bank rate should begin to accrue on the outstanding amount. With this payment, there will be no more liability left on anyone under the Contract in respect of the dispute in this Arbitration."
2. The brief facts are that the plaintiffs on 3rd February,1964 entered into contract with the defendants for supply of winter suits for export to Saudi Arabia. The contract was governed by Form DP-35 which also contained Arbitration clause 38 for settlement of disputes between the parties by referring the same to the Secretary of the Ministry of D fence who was to act as the Sole Arbitrator.
3. ' Disputes having arisen between the parties under the contract, the plaintiffs invoked the Arbitration clause on 22nd February, 1969. Reference was therefore made to the Secretary, Ministry of Defence. As the Sole Arbitrator for adjudication.
4. ' Mr. Azam Ali the then Additional Secretary in the said Ministry issued notices to the parties. In the meantime he was attached to the Administration side of the Ministry and as such Mr. M. A. Haq, Additional Secretary of the said Ministry who was appointed to the production side of the same Ministry, acting as the Sole Arbitrator issued the notices to the parties fixing 28th July, 1972 for hearing. On this date at the request of the plaintiffs the case was adjourned to 30th August,1972.
5. Several dates thereafter were fixed before the Arbitrator. It is not necessary to reproduce all the dates when the case was fixed before the Arbitrator between 30th August,1972 to 23rd December,1972, but it would suffice to say that on each date the plaintiffs took adjournment for one reason or the other, except on two occasions when the Arbitrator changed the dates as he could not attend the meetings on these dates due to reasons of his being busy in important Government work.
6. ' On 23rd December,1972 however when the case was fixed before the Arbitrator, the plaintiffs against made a request that the case be adjourned to be fixed after February, 1973.
3. The learned Sole Arbitrator accordingly fixed the case on 17th May,1973 for hearing.
7. ' On this date all the parties concerned, including the plaintiffs appeared before Mr. M. A. Haq, the Sole Arbitrator. The learned Arbitrator pointed out to the parties that he was Additional Secretary of Ministry of Defence and under the original terms of the contract (DP-35) the Secretary of the Ministry was to be the Sole Arbitrator. He therefore inquired whether the parties were willing to accept him as the Sole Arbitrator.
8. ' It may be mentioned here that on 15th January,1970 by notification No, 1325/1/DGMP & P (PC)/112/D-8/70 issued by Government of Pakistan, Ministry of Defence, Clause 38 of the Form DP- 35 was amended whereby as to qualification of. Arbitrator it was provided that: "the Secretary Ministry of Defence shall include Additional Secretary, Joint Secretary, Ministry of Defence."
9. ' This amendment was prospective and as such Mr. M: A. Haq, who was then Additional Secretary brought this fact to the notice of the parties and asked them if they agree to accept him as the Sole Arbitrator.
10. ' All the parties including the plaintiff thereupon agreed in writing that the dispute be referred to Mr. M. A. Haq whom they accepted as the Sole Arbitrator.
11. ' The said agreement is signed by the plaintiffs. It is also signed by the Director of Defence Purchases as well as by POF, Wah Cantt. The said agreement is reproduced hereinbelow in extenso as Mr. Hasan A.Shaikh, the learned counsel has challenged the award made pursuant thereto.
12. ' In the matter of arbitration between M/s. Valika Woollen Mills Co. Ltd.--Applicant versus DP (Army), Karachi--Respondents POF, Wah.
13. ' Contract No, 17150/DGDP/P-11(SA), dated 3rd February,1964.
14. ' Whereas a Contract bearing No,17150/DGDP/P-11 (SA), dated 3rd February, 1964 was entered into in writing between M/s. Valika Woollen Mills Co., Ltd., Karachi and the President of Pakistan, through DGDP, Karachi, for the supply of Winter Suits to Royal Saudi Arabian Army, Dammam, by 30th October,1964 at the rates and in accordance with the terms and conditions given therein.
15. ' And whereas in accordance with one of the terms of the said contract, the suits were to be fabricated in POF Wah by 30th September,1964 on behalf of M/s. Valika Woollen Mills Co., who were to provide the material mentioned therein by 30th June,1964, and M/s. Valika were to pay to POF Board Wah Rs,13 per suit as stitching charges, and further M/s. Valika Woollen Mills Co., Limited were "to get a Bonus Vr. To be issued by the State Bank of Pakistan on the value of the store supplied at the rates and in accordance with the rules as enforced by the Ministry of Commerce of Pakistan on the date of the export of the stores."
16. ' And whereas M/s. Valika Woollen Mills Co., Limited contended that the POF failed to complete the fabrication of the suits within the stipulated period upto 30th September, 1964, with the result that their supply of the suits to the consignee was delayed and they got Bonus Vr. At 10% less than the rate which were enforced at the time of their entering into contract, the loss amounting to Rs,1,71,064 out of which the Firm adjusted a sum of Rs,1,53,790 against the stitching charges due by them to the POF Wah and claimed the remaining sum of Rs,17,274 from the POF Wah or the DGDP.
17. ' And whereas according to the DP(Army) there was no condition in the Contract providing for any specific rate of Bonus admissible to the firm and therefore no compensation could be allowed to the firm for reduction in the Bonus Vr.Rates.
18. ' And whereas according to POF Board Wah, they were not a party or a signatory to the Contract in question and that they had clearly pointed out to the DGDP expressing their inability to fabricate the garments by the 30th September,1964, which date, according to them, was fixed arbitrarily without their consent, and that M/s. Valika completed the delivery of cloth to PDF Board 10 days later than the date given in the Contract, and that the liability of the firm to make payment of the stitching charges to the POF Board at the rate of Rs,13 per suit was expressly provided in the Contract, and that the claims and damages etc., worked out by M/s. Valikas were, therefore, inadmissible and irrecoverable particularly as no notice was given to them at the time of acceptance of the delayed delivery by the goods, and that M/s. Valikas should pay the .Withheld amount of Rs, 1,53,790 to them with interest and the Firm's claim be dismissed with costs.
19. ' And whereas disputes in respect of the above-mentioned Contract having thus arisen between the parties, the same were referred to me for arbitration under clause 38 of DP-35 attached to the said Agreement.
20. ' It is hereby agreed by all the three parties referred to above that the said dispute be referred to Mr. M. A. Haq, SQA, CSP Additional Secretary (DP), Ministry of Defence for arbitration who is fully acceptable to us to act as Arbitrator, and that all the three parties shall be estopped from questioning the fact of the Agreement that the said officer, Mr. M. A. Haq, SQA, CSP, shall act as Arbitrator in the above-mentioned case.
21. ' This Agreement referred to Arbitration is hereby signed by the three parties as under: "(Sd.)
22. M/s.Valika Woollen Mills Go., Ltd.
23. (Sd.)
24. Director of Defence Purchase.
25. (Sd.)
26. P.O.F. Wah Cantt."
27. Dated:17th May,1973.
4. Mr. M. A. Haq, in view of the aforesaid agreement made in writing between the parties on 17th May,1973, accepting him as the Sole Arbitrator, proceeded with the case. The parties appeared before him and led evidence and after hearing them, he made his award on 16th July, 1973.
5. The award was filed by the Arbitrator in this Court on 14th November,1973 pursuant to the provisions of section 14(2) and section 17 of the Arbitration Act, 1940, whereupon it was registered as Suit No,469 of 1973.
28. Notices of filing of the award in the Court were issued to the parties warning them that the Court would proceed to pass judgment according to the Award unless an application was duly made under section 15, 16 or 30 as the case may be, of the Arbitration Act,1940.
29. The above notice was served upon the plaintiffs on 16th January,1974. They filed their objections under section 30 of the Arbitration Act on 4th April,1974..
5. (i) These objections ought to have been filed by the plaintiffs within 30 days of the date of service of the notice of filing of the award on them, as required by Article 158 of the Limitation Act. The plaintiffs being conscious of this legal bar to the maintainability of their application/objections filed under section 30 of the Arbitration Act, in para. 3 thereof prayed for extension of the time under section 5 of the Limitation Act.
(ii) I propose to dispose of this part of the player in the first instance.
30. ' It would be noted at the outset that apart from making a prayer for condonation of delay in para. 3 of the application filed .Under section 30 of the Arbitration Act the plaintiffs have not made out any cause muchless sufficient cause whatsoever to justify their failure to file the objections within the time provided by law. It is well-settled law that a person who seeks condonation of delay under section 5 of Limitation Act must explain delay of each day and should further establish that the delay had been caused by reasons beyond the control of the party. The plaintiffs were served with the notice of filing of the award on 16th January,1974, filed the application under section 30 of the Arbitration Act on 4th April,1974 which is hopeless by barred by time.
(iii) There is yet another fatal objection, to the entertainment of the plea for condonation of delay under section 5 of Limitation Act. Mr. Aziz Munshi the learned Dy. Attorney-General rightly submitted that section 5 of Limitation Act is not applicable to applications which are required the be filed within 30 days under Article 158 of Limitation Act. Mr. Hasan A. Sheikh, learned Advocate for the plaintiffs concedes to this legal position.
31. ' Accordingly the prayer for condonation of delay under section 5 of the Limitation Act is rejected.
6. Mr. Hasan A.Sheikh, the learned counsel for the plaintiffs then submitted that the award cannot be made rule of the Court on the following grounds: "1. The award is barred by time.
32. 2.The award is in favour of a stranger and thus, void and liable to be set aside suo motu by the Court.
33. 3.The agreement made on 17th May, 1973 is not an agreement within the meaning of Form DP-35 and as such the award is liable to be set aside."
7. Re:Point No, 1.
34. ' The learned counsel submitted that he has taken the objection in ground No,1 that the award is barred by time. However no particulars are given as to how the award made by the` Arbitrator is barred by time. It would be seen from discussions above that on 17th May, 1973 the parties entered into an agreement whereby they agreed in writing to the appointment of Mr. M. A. Haq as the Sole Arbitrator and further agreed that the disputes be referred to him for Arbitration and that he was fully acceptable to them to act as Arbitrator and that all the three parties shall be estopped from questioning the fact of the agreement that the said officer Mr. M. A. Haq shall act as Arbitrator in their said case.
35. After the aforesaid agreement made on 17th May,1973 to which the plaintiffs are parties, the parties including the plaintiffs appeared before the learned Sole Arbitrator and participated in the proceedings without raising any objection and submitted to his jurisdiction. The plaintiffs took chance of a favourable decision from the said Arbitrator. The learned Sole. Arbitrator after hearing the parties made the award on 16th July, 1973.
36. ' In view of the fact that agreement was made by the parties on 17th May, 1973, pursuant to which the award was made on 16th July 1973 within a period of 2 Months, the same cannot be challenged as barred by time.
7. Re: Point No,2.
37. ' The learned counsel for plaintiffs submitted that the award is in favour of a stranger i,e, POF and as such the same is void. In support of this contention the learned counsel relied upon the cases reported as P L 0 1959 Kar. 497, PLD 1970 Lah.398 and PLD 1970 Lah.
38. 840.
39. ' The learned counsel further submitted that where the contract itself is denied the Arbitrator shall have no jurisdiction to make an award. He referred to cases reported as: (1942) I A E R 337; AIR 1952 V P 25; AIR 1958 Punjab 340; AIR 1949 Boni. 343; AIR 1949 Cal.
40. 245."
41. The above objections, that the award touches interest of POF or that with POF there is no contract or that the contract is disputed and thus the award could not be made, are devoid of any force.
42. POF (Pakistan Ordnance Factory) Wah Cantt, is wholly owned by and is a department of the Government of Pakistan. It cannot in any sense be described as J Stranger to the contract.
43. Furthermore a perusal of the agreement made on 17th May, 1973 would clearly show that the said agreement has been signed not only by the plaintiffs and by the Director of Defence and Purchases but also on behalf of POF, Wah Cantt. In view of these facts neither POF can be described as a stranger nor can it be said that there was no contract between the parties or that the contract is in dispute. Mr. M. A. Haq was accepted in writing to be the Sole Arbitrator by the plaintiffs to decide the disputes referred to him, and all the parties to the said agreement expressly agreed that they shall be estopped from questioning the agreement or appointment of Mr. M. A. Haq as the Sole Arbitrator. The plaintiffs have also not disputed the contract on the basis of which they filed their claim making the Government and POF parties to arbitration proceedings. The plaintiffs as stated above, participated in the arbitration proceedings and submitted to this jurisdiction without any protest or objection and took a chance of getting a favourable award in respect of claim made by them before the said arbitrator. They are therefore estopped from raising any objection that the award touches interest of a stranger or that the existence of the contract itself was in dispute. The cases cited by the learned counsel are not relevant. I accordingly find no force in these objections which are therefore rejected.
9. Re: Point No: 3.
44. ' The contention of the learned counsel for the plaintiffs is that the agreement in writing made on 17th May,1973 is not an agreement in conformity with the arbitration clause contained in Form DP- 35 and as such the Arbitrator has no jurisdiction to adjudicate upon the dispute arising out of the contract between the parties which was governed by the terms and conditions contained in DP-35.
45. I am afraid, this argument of the learned. Counsel cannot be accepted as the plaintiffs had not only voluntarily made the agreement dated 17th May, 1973 to refer the disputes for adjudication by Mr. M. A. Haq, who was accepted as the Sole Arbitrator but they had further agreed that they shall be estopped from questioning the fact of the agreement or the appointment of Mr. M. A. Haq as the Sole Arbitrator in the said case. Furthermore as stated above the plaintiffs had participated in the proceedings with full knowledge of the Arbitration clause contained in DP-35, raised their own claim and took a chance for getting an award in their own favour. At no stage the plaintiffs had raised any objection when Mr. M. A. Haq, the Sole Arbitrator started holding the enquiry pursuant to the aforesaid agreement. In these circumstances the plaintiffs must be deemed to have conceded and agreed to abide by the award to be given by the Sole Arbitrator (Mr. M. A. Haq), whose appointment was agreed upon and accepted by the parties. The plaintiffs after award has been made, cannot be allowed to take an objection to the agreement dated 17th May,1973 or to the award made pursuant thereto by the Sole Arbitrator. If any authority is needed in support of the above conclusion reference may be made to the case of Muhammad Saghir Bhatti v. Federation of Pakistan PLD 1958 SC 221. While rejecting the plea raised that the appointment of the Arbitrator who gave the award was not legal as no permission was obtained from the Court under section 5 of Arbitration Act for this appointment, the Hon'ble Supreme Court held:- "The argument was that after the first arbitrator was appointed Quarter Master-General had no power to make without the permission of the Court, another appointment; but the appellant did not raise this objection at the time the third arbitrator started holding the enquiry. In the circumstances the appellant must be deemed to have agreed to the appointment of Mr. Muirhead as the Arbitrator."
46. ' Reference may also be made here to the case of Development Construction Corp. Ltd. v. West Pakistan P.W.D. PLD 1971 Kar. 292 where a learned Single Judge of this Court, relied upon a Division Bench Judgment in the case of Habib Sons v. Virak b Co. PLD 1957 Kar. 245 and discussed the principle of law as follows:- "In these circumstances the petitioners are deemed to have waived their objection; if any, to the jurisdiction of the arbitrator appointed by the Provincial P.W.D. To deal with the matter and any irregularity in his appointment is cured by the acquiescence of the petitioners and their submission to his jurisdiction. As observed by a Division Bench of this Court in the case of Habib & Sons v. Virak & Co.
47. "There is vast difference between want of jurisdiction and irregular exercise or assumption of jurisdiction. 'Irregular exercise of assumption or jurisdiction may be waived."
48. ' Dealing further with the concept of waiver, their Lordships observed:- "The cases on waiver proceed on the principle that if the party concerned knows of the defect in the appointment of an arbitrator in the proceedings and nevertheless goes on with the reference before the arbitrator he cannot be allowed to raise any objection at the trial as he must be taken to have waived the irregularity."
49. ' Even more apposite is the observation contained at page 383 of Russel on Arbitration: "If the parties to the reference either agree beforehand to the method of appointment, or afterwards acquiesced in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in proceedings with full knowledge of relevant facts will amount to such acquiesence." The attitude of the Court in such cases should be as held by the Madras High Court in AIR (?) Mad.129: "A Court would be unwilling to assist a party who with full knowledge of the circumstances, allows an arbitration to proceed and takes part in it and then seeks to evade it later on by raising a number of objections which have never occurred to him before."
10. In view of the above discussion, the application/objection under section 30 of the Arbitration Act, filed by the plaintiffs, is dismissed. No cause has been made out to set aside the award. I therefore pronounce judgment according to the award and upon judgment so pronounced a decree shall follow. The award shall be made rule of the Court.
50. ' The plaintiffs shall also bear the costs of the suit and be liable to pay interest from the date of the decree at the rate of 10% per annum till payment.
51. AWARD ' Whereas the Petitioner/Arbitrator aforesaid has filed an award dated 16th July,1973 made by him in pursuance of a reference by the aforesaid plaintiff and the defendants and the notices of the filing of the Award having been served upon the plaintiffs and the defendants and the plaintiff having filed objections to the said award.
52. And the case coming on this 12th day of April, 1981 for hearing of objection to the award before Mr.Justice K. A. Ghani in the presence of Mr. Hassan A. Shaikh Advocate, for the plaintiff and Mr. Aziz Munshi Dy. Attorney-General for the defendants; it is hereby ordered that the objection 4 filed by the plaintiff is dismissed and the award is made rule of the Court and the suit is decreed in terms of the award as under:- "(1) That in the rate of clause 17 of appendix to the Contract, which inexhorable sets out the basis of entitlement of the applicant under this contract and the final decision of the Ministry of Commerce that the special dispensation allowed for export by 30th October,1964 will not be extended for export after that date, the applicant had not legal or contractual entitlement for 40% Bonus.
(2) That though fabrication by the POF "shall be completed by 30th September, 1964" under clause 7 (a) the Appendix to the Contract, clause 17 left the Bonus entitlement of the applicant to be determined entirely according to Government's policy on the date of the export. No express liability was stipulated under the contract to accrue on the POF or the respondent for 40% Bonus entitlement to the applicant because of non-completion of fabrication by 30th September,1964.
(3) POF had no formal privity to the contract. It is not understood as to why did the applicant not insist on 4th February,1964 that they be also made a formal party to it by the respondent themselves or entered into a separate contract with them. Nor was the POF a prior consent obtained to the date of completion of the fabrication by them under clause 7 (d) of the Appendix to the contract in July,1964. The applicant should have reasonably known that the POF was as such a juristic person as the respondent. Further, even when the POF expressed their dire inability in July,1964 to complete the fabrication by 30th September,1964, because of their limited capacity and two big contracts already at their hand, no positive steps were taken by the applicant to meet the export deadline of 30th October,1964 by finding alternatives. The POF cannot, in the circumstances, be held liable in any way to make up the hypothetical difference in the actual Bonus entitlement of the applicant as on the date of export and if the export had taken place by 30th October,1964. Similarly, as the plaintiff could not be held liable to make any additional payment to the defendant or the POF, had the Bonus entitlement on this item been increased by the Government on export after 30th October,1964.
(4) That the garments were accepted by the plaintiff from the POF without any notice of actual or possible claim for damages or loss. Section 55 (3) of the Contract Act is also found to protect the POF from being liable to make any payment to the plaintiff on account of their estimated loss in Bonus entitlement, had the export taken place by 30th October,1964.
(5) That the plaintiff is, finally, held liable to pay off to the POFs the stitching charges, amounting to Rs,1,53,790 for 11,830 garments for the services rendered, as expressly provided under clause 8 of the Appendix to the Contract, within four months of this order, whereafter interest at the Bank rate should begin to accrue on the outstanding amount. With this payment, there will be no more liability left on anyone under the contract in respect of the dispute in this arbitration.
(6) That the arbitration fees fixed as Rs,750 to be paid in equal shares by both the parties, and fix Rs,50 as costs of typing and other office work to be paid by the plaintiff's Firm to Mr.Mohammad Sadiq PS to Additional Secretary, Ministry of Defence, Pak Sectt. No,11, Rawalpindi. All other costs of reference, etc. Will be borne by the parties themselves. It is hereby further ordered that the plaintiff shall also pay the costs of the suit to the defendants as taxed and shown below, and pay interest on the amounts mentioned above from the date of the decree viz. 12th April, 1981, at 10% per annum till payment.