Award in this case was originally filed by the umpire on 5th April, 1976 which was _egistered as Suit No.335 of 1976. However, by order, dated 18-4-1982 the award was sent back to the umpire for giving his reasons in support of the award. The reasons have since been recorded and forwarded by the Umpire and the award and the reasons have been registered as Suit No. 541 of 1982. This order, therefore, will govern the disposal of both the Suits Nos. 335/76 and 541/82 ' Only defendant has filed objection to the award while plaintiff has supported it. The confirmation of award is opposed by the defendant on several grounds but at the hearing, the learned counsel for the defendant, urged only the following objections:-
(i) That the appointment of a second umpire by the two arbitrators, namely, Nasir Wahab in the case was illegal and contrary to the bye-laws of Karachi Cotton Association.
(ii) That the umpire has awarded damages with reference to a contract which came to an end and thereafter parties entered into a fresh contract in respect of the same subject-matter.
(iii) That the breach of the contract if any took place on 19-7-1974 whereas the umpire has awarded damages on the basis of an alleged resale on 14-4-1975 and as such the error is apparent on the face of the award.
(iv) That the umpire committed misconduct in failing to determine the date of breach of the contract which was an essential point in the case.
(v) That the damages are awarded by the umpire on the basis of a photostat copy of certificate which was accepted in evidence by the arbitrators on 28-1-1976 behind the back of the defendant which amounted to misconduct on the part of umpire.
(vi) That the arbitrators acted illegally in awarding interest from 1-10-1974 which is an error apparent on the face of award.
' I have heard the learned counsel for the parties at length on the above objection and after hearing them I am of the view that the award cannot be maintained. My reasons are as follows:- ' The admitted position in the case is that the two contracts for purchase of cotton bales were entered into between the parties on 3rd and 4th September, 1975 respectively. The first contract related to the sale of 361 bales of ACRGD quality of cotton and 260 bales of AESGD of cotton while the second contract related to 3356 cotton bales of LSSRG quality. The photo copies of these contracts were produced before the Arbitrators as Exhs. P/1 and P/2. The condition of the above contracts was that the weighment of the goods was to commence immediately and cotton was to be removed from the sellers' place after making full payment latest by 15th October, 1973. It is an admitted position that out of the total contracted quantity of 3977 bales of cotton only 3717 bales were weighed within the period mentioned in the contract while 260 bales could not be weighed and were settled at par Out of these 3717 bales of cotton no delivery at all was taken by the defendant upto 15-10-1973. However, under a subsequent arrangement arrived at between the parties; the defendant took delivery of only 2000 bales upto 19th July, 1974 and thereafter delivery of remaining 1717 bales was not taken. The case of the plaintiff is that after expiry of the period mentioned in the contract, dated 3-9-1973 and 4-9-1973 the time a s extended from time to time at the request of the defendant who failed to lift the entire quantity of contracted bales. The defendant on the other hand contends that the plaintiff failed to deliver the quantity contracted by plaintiff and alternatively it is urged that the original contracts, dated 3-9-1973 and 4-9-1973 were substitute by a new contract under which the defendant took delivery of 2000 bales upto 19-7-1974.
In this background I will now consider the objection raised by the defendant in the same order as they were urged before me.
1. The first contention of the defendant in the case is that the cppointment of umpire Nasir Wahab was contrary to the provision of the Bye-laws of Karachi Cotton Association Limited, and therefore, the award is a nullity in the eye of law. It is an admitted position that after dispute had arisen between the parties the plaintiff appointed Dr. Azhar Hussain, as its arbitrator and called upon the defendant to appoint its arbitrator in the dispute. Upon failure of defendant to nominate its arbitrator, the plaintiff nominated one Abdul Rehman as the arbitrator of defendant in accordance with the Bye-laws of K.C.A. These two arbitrators appointed Mr. Nasirul Hasan as the Umpire. It appears that after notices were issued by the above named two arbitrators to the parties in the case, the defendant nominated Shah Shamimul Haq as its arbitrator which was not opposed by the plaintiff, and said Shah Shamimul Haq accordingly replaced Abdul Rehman. The two arbitrators namely Dr. Azhar Hussain and Shah Shamimul Haq then appointed a new umpire Nasir Wahab. The contention of the learned counsel for the defendant is that the appointment of Nasir Wahab, as the Umpire in this case was contrary to the provision of Bye-laws No. 39 (i)(j). It is contended that the two arbitrator Dr. Azhar and Abdul Rehman having appointed Nasirul Hasan as Umpire in the case, the arbitrators could not substitute another Umpire in his place as the power of substitution lay only with the Board thereafter and not with the arbitrators. The learned counsel for the plaintiff on the other hand contended that the provision of Bye-laws No. 39 (i)(j) are not applicable in the present case, as upon substitution of arbitrator Shah Shamimul Haq in place of Abdul Rehman the new arbitrator could appoint an Umpire afresh.
Alternatively, it is contended that the defendant having participated in the proceedings till end without raising any objection as to competency of the Umpire, could not now be allowed to raise this objection. The contentions of learned counsel for the plaintiff are not without force. The relevant Bye-laws of Karachi Cotton Association on the subject are as follows:- "39.-I(a). Any dispute arising out of a ready transaction or out of a forward contract other than on the question of class and/or staple of the cotton tendered but including the construction of the official forward contract forms shall be referred to the arbitration of any two disinterested members from the Penal of Arbitrators referred to in Bye-law 39-I(b) one to be appointed by each party. If one of the parties to the contract fails to appoint an arbitrator, after having received fifteen clear days' notice from the other party to do so, the party who has appointed an arbitrator shall have power to appoint the second arbitrator, both of whom shall then proceed to deal with the question at issue. In case the two arbitrators are unable to agree the matter shall then referred to an Umpire, who shall be nominated by the two arbitrators from among the Panel of Arbitrators. In the event of two arbitrators being unable to agree as to the name of the umpire, the Board shall appoint an umpire from among the Panel of Arbitrators. The decision of the arbitrators or umpire shall be final and binding on the parties to the contract."
"39-I(f) The two arbitrators, when appointed, shall before proceeding with the dispute nominate and appoint an umpire from the Panel of Arbitrators to deal with the dispute, in case the two arbitrators are unable to agree. In case of disagree ment between the two arbitrators regarding the umpire, the Board shall appoint an umpire from the Penal."
"39-I(j) In the event of the umpire appointed by the arbitrators or by the Board, in terms of Bye-law 39(f) resigning either before or after taking up the reference on account of any reasons whatsoever, the board will appoint another umpire in his place from the Panel referred to in Bye- law 39(b) and the said appointment shall be as effectual as though it had been originally made by the arbitrators or by the Board as the case may be in terms of the Bye-law 39(b)."
' A reading of above bye-laws will show that after a dispute has arisen between the parties the dispute could be referred to the arbitration of any two disinterest members from the panel of arbitration maintained by the Association. Each party has right to appoint one arbitrator and in case one of the parties fails to appoint the arbitrator after having received 15 clear days notice from the other party the party who has appointed an arbitrator shall have power to appoint second arbitrator and the arbitrators so appointed shall proceed to deal with the case. The two arbitrators so appointed shall nominate an umpire from among the panel of the arbitrators before proceeding with the dispute. In the present case it is an admitted position that the plaintiff first appointed its arbitrator Dr. Azhar Hussain in the dispute and then called upon the defendant to nominate its arbitrator. The defendant failed to nominate its arbitrator whereupon plaintiff appointed one Abdul Rehman as the arbitrator on behalf of defendant. These two arbitrators appointed Nasirul Hassan as the umpire in the case. However, when these two arbitrators entered upon the reference and issued notices to the parties, the defendant appointed Shah Shamimul Haq as its arbitrator in place of Abdul Rehman which was accepted by the plaintiff. The two arbitra tors, namely Azhar Hussain and Shah Shamimul Haq then appointed Nasir Wahab as the umpire in the case. It is, therefore, quite clear that the appointment of Nasir Wahab as the umpire in the case was for all practical purposes the first appointment by the new arbitrator and was not in the nature of supplying any vacancy. A reading of Bye-laws No. 39(1) (f) makes it quite clear that the arbitrators when appointed shall, before proceeding with the dispute nominate and appoint an Umpire from the penal of arbitrators. In my opinion, therefore, upon reconstitution of Board of Arbitrators as a result of appointment of Shah Shamimul Haq as the Arbitrator by the defendant, the two arbitrators could nominate a new Umpire, and provisions of Bye-laws No. 39(i)(j) did not come in their way as neither it was a second appointment of Umpire by the same arbitrators nor it was an appointment to fill in the vacancy of umpire caused by his resignation. Apart from it, the defendant having failed to object to the appointment of Umpire and having appeared before the Umpire, led evidence before him and contested the case till end cannot now be allowed to raise objection as to the validity of the appointment of Umpire. It cannot be ignored that the appointment of Nasir Wahab as the Umpire was fully shared by the arbitrator appointed by the defendant. I, therefore, find no substance in the 1st objection of defendant and overrule the same.
2. The second objection raised by the defendant to the maintainability of the award is that the award relates to a contract which came to end and in its place a fresh contract was entered into between the parties. It is accordingly contended that the original contract having come to an end and a new contract having been substituted in its place, the old contracts could not from the basis of assessm ent of damages and as such the umpire fell in error in awarding damages on the basis of original contract between the parties. In support of his contention the learned counsel referred to the case of Ismail Brothers Karachi Limited v. S.M. Fazal Company Karachi PLD 1958 Kar.
158. The learned counsel for the plaintiff on the other hand contended that the original contract was kept alive by the parties and only time for its performance was extended. However, the plaintiff's witness Ziaul Hassan in his evidence before the arbitrators stated that the weighment of 3717 bales was completed on 15-10-1973 and only 260 bales could not be weighed within that period. He further stated that after weighment of 3717 bales no payment was received and, therefore, on 16-10-1973 a letter was written by the plaintiff to the defendant for payment and removal of the goods. No reply was received from the defendant and thereafter another letter, dated 16-11-1973 was addressed to defendant with reference to the meeting of representatives of parties and under a mutual arrangement 100 bales were delivered on 16-11-1973 against cheque of that date and another 100 bales were delivered on 24-11-1973 against cheque of 1-12-1973. This arrangement, however, failed. Thereafter, a fresh arrangement was arrived at between the parties under which delivery of 300 bales per week against post dated cheque was agreed. Under this arrangement 1800 bales were delivered to defendant upto 19-7-1974. Then request was made for delivery and payment but neither any delivery was taken by the defendant nor any payment was made. By letter, dated 16th January, 1975, the defendants were once again offered to take delivery but they declined to do so by their letter, dated 12th February, 1975. From the above evidence of plaintiff it is quite clear that the breach of original contracts, dated 3-9-1973 and 4-9-1973 took place on 15-10-1973 when weighment of 3717 bales was completed and the defendant failed to take delivery of the same and pay for it. This is also clear from the letter of plaintiff, dated 16-10- 1975 (P65) addressed to defendant complaining of the breach and threatening to recover carrying charges like Yard rent, Fire and Riot Insurance and interest and other expenses. The subsequent letter, dated 8-12-1973 addressed by the plaintiff to defendant shows that the defendant had agreed to lift 100 bales per day w.e.f. 16-11-1973 against full payment but upto 8-12-1973 only 200 bales were lifted by the defendant. The defendant wrote to plaintiff on 10-12-1973 with reference to plaintiff's letter dated 8-12-1973 alleging that under a mutual arrangement arrived on 7-12-1973 the defendant had agreed to lift 300 bales per week against the post dated cheques for the period of 7 days of each lot but this arrangement was not kept by the plaintiff and accordingly defendant threatened that if carrying charges from 10-12-1973, onwards are charged, they will reconsider the matter. It is, therefore, quite clear that as against the delivery period of 15-10-1973 contemplated in the original contracts the plaintiff first offered the defendant to take delivery of 100 bales per day w.e.f. 16-11-1973 and then agreed to the lifting of 300 bales per week from 8-12-1973 and against 100 per cent cash payment as provided in the original contracts, the plaintiff also agreed to part payment by post dated cheques for each lot of 300 bales. The above facts in the light of statement of plaintiff's witness Zainul Hassan that a new arrangement was arrived at under which 300 bales were to be delivered against post dated cheque for 7 days of each lot, clearly show that the original contract between the parties was substituted by a new arrangement and, therefore, the original contract could not form the basis of damages in the case. The Umpire, however, granted damages to the plaintiff on the basis of the original C contract which was no more alive for enforcement.
3. I will now take up objections 3 and 4 of the defendants together.
In the original agreement the date for performance is mentioned as 15-10-1973. According to evidence produced before the arbitrators the defendants took delivery of 2000 bales out of weighed over 3717 bales of cotton upto 19-7-1974 and thereafter no further delivery was taken by the defendant. If the original date of performance mentioned in the contracts dated 3/4-9-1973 are taken into consideration then the breach took place on 15-10-1973, when the defendant failed to lift the weighed over 3717 bales of cotton. However, according to the evidence of plaintiff produced before the arbitrators, there was another arrangement whereunder the defendant agreed to lift 300 bales per week and it is an admitted position that under this arrangement also upto 19-7-1974 the defendant took delivery of only 2000 bales of cotton and thereafter no further delivery was taken. Therefore, the breach of the second arrangement occurred on 19-4-1974. Both the learned counsel argued that the breach is governed in the present case under Bye-law No.113 of Karachi Cotton Association. The relevant portion of the Bye-law reads as under:- "Should the buyer refuse or neglect to take delivery the seller may after giving 48 hours' notice in writing to the buyer, weigh over the cotton at the risk and expense of the buyer, who shall then pay for it with interest at 8 per cent. per annum, subject to such changes in the rate of interest as may be made by Board from time to time, plus 48 paisa per bale for weighing charges or as may be fixed and announced by the Board from time to time and such further charge for fire insurance and rent as may from time to time be fixed by the Board, failing which, the seller after 48 hours shall have the power of resale on the account and at the risk of the buyer and shall within 24 hours of such resale given intimation thereof to the buyer."
' The above Bye-law clearly provides that in case the buyer refuses or neglects to take delivery, the seller may after giving 48 hours notice in writing to the buyer weigh over the cotton, at the risk and expense of the buyer who shall then pay for it with interest and charges as provided in the bye-law and if the buyer failed to pay the same, the seller, after expiry of 48 hours shall have the power of sale on the account and risk of the buyer and within 24 hours of such sale give intimation thereof to the buyer. In the present case, the original delivery period mentioned in the contracts dated 3/4-9- 1973 was 15th October 1973. It is an admitted position that 3717 bales were weighed over before that date but delivery thereof was not taken by defendant. In these circumstances, the plaintiff could under Bye-law No.113 resell the cotton at the risk and cost of the defendant and within 24 hours of such sale give intimation to the defendant. The plaintiff however, took no such step in the case and entered into a fresh arrangement with the defendant under which delivery of 300 bales per week was allowed to defendant against post dated cheques for 7 day's period. Under this arrangement the defendant took delivery of only 2000 bales upto 19-7-1974 and thereafter he did not take delivery of any further quantity of cotton bales. The breach of this subsequent arrangement, therefore, also took place on 19-7-1974, and the plaintiff could under bye law No.113 have the right of resale within 48 hours and send intimation thereof to the defendant within next 24 hours. This was also not done by the plaintiff and he waited and ultimately sold the cotton in April, 1975. The learned counsel for the plaintiff contends that there was no repudiation of contract by the defendant until February, 1975 and, therefore, resale of cotton in April, 1975 was correctly done. The argument of learned counsel is not correct. By letter dated 29-11-1974 which is on record and which is referred in the list of documents filed by the umpire alongwith the award, the defendant categorically denied their liability and therefore there was no justification for the plaintiff to have waited upto April, 1975 to resell the cotton. No evidence was produced before the arbitrators or the umpire to show the prevailing rate or the market rates of the cotton on the above dates. The resale is governed under Bye-law No.113 of K.C.A. and even if the damages were to be awarded on the basis of resale, the same should have taken place within 48 hours of the breach committed by the defendant. The resale having taken place after about one year and 7 months of the breach of original contracts and after about 11 months of the breach of the second arrangement the same could not form the basis for awarding damages in the case. The learned counsel for the defendant contends t that the Umpire also did not give any finding as to the date of breach. From reading of the award it is quite clear that the umpire has considered the date of breach as mentioned in the original contracts dated 3/4-9-1973. At page 3 of the award in paragraph 3 of the reasons, the umpire has stated that the plaintiff had informed the defendant that carrying charges from 16-10- 1973 will be charged on the goods. The fact that the umpire allowed carrying charges from 16-10- 1973 in the case goes to show that the date of breach was considered by the' umpire as 15-10-1973.
In these circumstances the award of damages by the arbitrators on the basis of a resale which took place in April, 1975 was wholly illegal and contrary to the Bye-law No.113 of the Karachi Cotton Association. The learned counsel for the plaintiff relied on the case of Moosa Umer v. Edossa & Sons PLD 1971 Kar. 899 to contend that the arbitrator was not bound to award damages on the basis of market rate prevailing on the date of breach and could award the same on the basis of resale.
From the facts as stated in that case it is quite clear that the resale in that case had taken place immediately after the date of breach while in the present case it took place long after the date of breach and as such this case is quite distinguishable.
4. The next objection of the learned counsel for the defendant is that the damages were awarded by the umpire on the basis of a photostat copy of the certificate which was admitted in evidence by the arbitrators on 28-1-1976 behind the back of the defendant. The learned counsel for the defendant in support of his contention referred to the diary of arbitator dated 28-1-1976 which reads as follows:- "28th January, 1976.
Mr. Zia and Mr.Arshad accompanied by their counsel Mr. Mansur Ahmed Khan appeared on behalf of Messrs Muhammad Amin and Muhammad Bashir and Mr. Aftab Ahmed is also produced as witness. He presents his certificate confirming the purchase.
Adjournment application from Khairpur Textile Mills is reached at 3 0' clock the case is adjourned for 6th February, 1976, being the final date of hearing.
Sd/- 23-1-1976."
'It is quite clear from the diary of the arbitrators dated 28-1-1976 that the defendant applied for adjournment on that date which was granted but at the same time the arbitrators accepted the certificate produced by the witness Aftab Ahmed without formally examining him and without affording opportunity of cross-examination to defendant. It is true that the arbitrators are not bound by the teachnical rule of procedure but they also cannot be permitted to act in violation of principles of natural justice. After going through the award, I find that the damages awarded by the umpire is based on the certificate produced by witness Aftab Ahmed with regard to resale. The acceptance of this document in evidence by the arbitrators behind the back of defendant has violated the principles of natural justice. I, therefore, hold that the arbitrators committed misconduct in accepting the certificate produced by witness Aftab Ahmed without examining him on 28th January, 1976 behind the back of the defendant's counsel and, therefore, award of damages on the basis of this documents of Umpire amounted to legal misconduct.
5. The learned counsel for the defendant contends that carrying charges amounting to Rs.6,15,092.29 were awarded by the Umpire without any evidence. The carrying charges were claimed by the plaintiff from 16-10-1973 which was allowed by the umpire. The umpire has referred to the documents appearing at pages 109, 110, 115, 119, 121, 125, 127, and 129 of the record as the supporting documents for the claim for carrying charges. The learned counsel for the defendant contends that the documents referred by the arbitrators are only debit notes which are not supported by relevant vouchers. These documents were produced by the plaintiff's witness alongwith his statement on oath and I find that the defendant did not put any question in cross- examination challenging the correctness of the statement made in these debit notes. Apart from it these charges were also mentioned in the letter of plaintiff dated 16-10-1973, 16-11-1973 and 8-12- 1973 and in fact the defendant in its letter dated 10-12-1973, stated that after 10-12-1973 no carrying ch rges will be paid by them. In these circumstances it cannot be said that the umpire awarded carrying charges without any evidence. I accordingly overrule this objection of the defendant.
6. The last objection of the learned counsel for the defendant relates to the a ward of interest by the umpire on the damages. In his award, the umpire has allowed interest @ 10% per annum from 1st October, 1974. The learned counsel for the plaintiff is unable to point out any relevant bye-law of the Association under which the arbitrators or the umpire could award interest from the date prior to the date of award. The law with regard to awarding of interest on damages is well-settled. The arbitrators or the Umpire in the absence of any specific reference on the question of interest on damages or any rule authorising them to award interest on damages from a date prior to the award can only award interest from the date of award. I accordingly agree with the contention of the learned counsel for the defendant that the arbitrators could not award interest from 1-10-1974.
' As a result of above discussion I set aside the award. The parties will however bear their respective costs in the circumstances of the case.
Award set aside.