' This application, filed under section 5 of the Arbitration (Protocol and Convention) Act, 1937 (hereinafter referred to as "the Act") seeks to enforce a foreign award. The award has been given by the Arbitrators in London under the Grain and Feed Trade Association Rules (hereinafter referred to as "the GAFTA Rules-") by which the parties are now governed by virtue of an arbitration agreement dated 10th April, 1979, entered between them.
2. The facts of the case, briefly stated, are that the petitioners and the respondents entered into a contract for supply of 3,50,000 Kilos of PAKISTAN TOASTED GUAR PROTEIN EXTRACT (GUARMEAL)- TRYPSIN INHIBITOR NEGATIVE by the respondents. According to the agreement, the shipping period mutually agreed between the parties was between 16th July, and 31st August, 1979.
3. The respondents were unable to honour their commitment within the stipulated time and therefore, the date for shipment of the goods was extended to September/October, 1979 by mutual consent of the parties.
4. However, the respondents could supply only 85 tons of the contracted goods and failed to supply the remaining 265 tons thereof, notwithstanding the extension granted to them for the purpose by the petitioners from time to time.
5. Thereafter, the respondents sought further extension of time from the petitioners but the petitioners vide their telex dated 27-2-1980 informed the respondents through the former's agent in Pakistan, M/s Hassan Ali & Co., Karachi that the matter was being referred to the arbitrator.
6. The respondents finally admitted their inability to supply the balance goods in terms of the said agreement and the matter was consequently referred by the petitioners to arbitration in terms of the said agreement between the parties.
7. The petitioners through their letter, dated 3rd March, 1980, addressed to the respondents, offered $ 185 per metric ton as settlement price and requested the respondents to name their arbitrator.
However, the respondents instead of naming their arbitrator requested for further extension of time for supplying the goods which was not accepted by the petitioners. The respondents also sent a letter to Mr. A.P. Beaton, one of the arbitrators appointed by the petitioners, explaining their position.
8. Consequently, the arbitrators vide their Award dated 31-7-1980, awarded $11,880 to the petitioners together with interest at 13 per cent per annum payable from 1st March, 1980 upto the date of the award and expenses amounting to L-359. Objections thereto on 1-3-1983 and on the basis of the pleadings of the parties the following issues were framed by the Court on 11-11-1986:
(1) Whether the award has been made in conformity with the law governing the arbitration procedure, i,e,, the GAFTA Rules?
(2) Whether in view of the absence of the reasons in the award or any documents attached to the award the same is hit by clause (c) of subsection (1) of the section 7 as well as by clause (c) of subsection (1) of section 8 of the Arbitration Act, 1937 and hence liable to be set aside and unenforceable?
(3) Whether the reference to the Arbitration was contrary to the agreement between the parties as the reference was barred by time?
(4) Whether the award deals with all the questions referred?
(5) Whether the amount in the award is supported by any evidence and is not arbitrary with reference to para. 22 of the objections.
(6) Whether the award has been improperly procured as specified in paras 19, 20, 21 & 22 of the objections?
(7) Whether the petitioners' application is not in accordance with law?
(8) Whether the award is not enforceable in Pakistan ?"
10. It may be pointed out that the learned counsel for the petitioners raised objections to the framing of the issues 3 to 8 proposed by the learned counsel for the respondent, contending that the same were beyond the scope of the Act but the objection was overruled with the observation that the objection once again could be raised subsequently before the Court.
11. Before me Mr. Tariq A. Hussain learned counsel for the respondents has raised the following contentions;
(1) that the arbitration was barred by limitation;
(2) that the damages awarded by the Arbitrator were based on "Settlement Price" which was not in consonance with clause 23 of the aforesaid agreement between the parties;
(3) that the award is vitiated for want of giving reasons therein, and
(4) that the award has not been duly stamped in accordance with the provisions of the Stamp Act and is therefore, subject to the disabilities as enumerated in section 35 of the Stamp Act."
12. As far as first contention of Mr. Tariq is concerned, reference has been made by him to Rule 2: 2(iii) of the GAFTA Rules. This rule while read alongwith Rule 2:1 provides that: "2:1--A party claiming arbitration shall notify the other party of the claim within the time limits stipulated in this Rule.
2:2 Technical--
(a) For Goods Sold: (i)
(ii) .
(iii) on any other terms: not later than 90 consecutive days after the last day of contractual delivery period."
' There is no controversy on the point that the period of limitation for making reference to the arbitration is to be governed by Rule 2:2(a) (iii) of the GAFTA Rules. However, according to Mr. Naeem-ur-Rehman, the period (If limitation of ninety days is to be computed from 27-2-1980 when the petitioners through their agents Hassan Ali & Co., informed the respondents that they were in default, but according to Mr. Tariq the crucial date was the 31st October, 1979, which was the extended date mutually agreed between the parties and whereafter the respondents failed to fulfil their obligations under the contrast. Both the learned counsel have referred to the copies of correspondence exchanged between the parties. Mr. Tariq Hussain has also invited my attention to clause 8 of the aforesaid agreement, according to which "the contract period of delivery shall, if desired by the Buyers, be extended by an additional period of 30 consecutive days provided that Buyers-give notice in accordance with the Notices Clause..." In this respect he has referred to a letter, dated 23 October, 1979, addressed by Hassan Ali & Co., to the defendants (Annexure 3) indicating that the date of shipment had been mutually extended by the parties to September/October, 1979. Consequently, according to him the period of ninety days was to be reckoned from the 1st November, 1979, and therefore, reference to arbitration in February, 1980 was time-barred.
13. Mr. Naim-ur-Rehman, on the other hand, has invited my attention to the respondent's letter, dated 22nd December, 1979 (Annex: V), wherein they wrote to the petitioners that "In the meantime, we confirm that we supply you the balance quantity of the contract as soon as mechanically possible". This letter was followed by another letter of the respondents, dated 3rd March, 1980 (Annex. VI) whereby the respondents had once again pleaded with the petitioners for extension of time. However, copy of the telex, dated 27-2-1980 (Annex: VII), addressed by the petitioners to their representative in Pakistan M/s. Hassan Ali Karachi reference to which was made earlier, shows that it was on the petitioners put an end to the contract by holding the respondents in default claiming arbitration. This, according to Mr. Naeem-ur-Rehman, is further supported by the petitioners' letter, dated 1-3-1980 (Annex. X) wherein they wrote: "We were still agreeable to further extensions when you proved unable to ship by end of November." The letter further went on: "unfortunately, however, we cannot go on indefinitely and having given you overall extension amounting to 5 months... But regret that we cannot continue to do so and must maintain our course of action by holding you in default." Consequently, according to Mr. Naeem-ur-Rehman, the period of limitation was to be computed from 27-2-1980 and in that case the reference made to the arbitrators was within time.
14. Although, as pointed out above, clause 8 of the agreement clearly indicates that the period of delivery, if desired by the Buyers, could be extended by an additional period of 30 consecutive days but the correspondence referred to above further indicates that a deviation therefrom was made by the parties by mutual consent. It appears that the contract was still kept alive until 27-2.1980 on which date M/s. Hassati Ali & Co. Were informed that the matter was referred by the petitioners to arbitration. This is clearly indicated by the letter of the petitioners, dated 3rd March, 1980 (Annex: IX).
Although the correspondence between the parties does not exactly indicate the date on which an end was put to the contract by the petitioners but reference of the matter to arbitration on or before 22nd February, 1980 was well within ninety days and as such it was not time-barred. The first contention of Mr. Tariq Hussain has, therefore, no force.
15. The next contention raised by Mr. Tariq Hussain is that damages have been awarded by the Arbitrators without taking into consideration clause 23 of the agreement. Clause 23 provides: " In the event of default by sellers entitling Buyers to damages, such damages shall be based upon the actual or estimated value of the goods on date of default, to be fixed by arbitration unless mutually agreed...."
' It may be pointed out that the arbitrators have awarded damages on the basis of difference found between the contract price of U.S. $140 and the settlement price of U.S.$1.85 per metric ton for 264 metric tons together with interest at 13% per annum from the 1st March, 1980 to the date of the award. Consequently, the award, according to Mr. Tariq Hussain, is not in consonance with clause 23 of the agreement as there was no settlement arrived at between the parties.
16. Mr. Naeem-ur-Rehman, argued that this ground cannot be urged before this Court in the present proceedings as the scope of scrutiny in case of foreign awards is limited to the grounds referred to in section 7 of the Arbitration (Protocol & Convention) Act, 1937. The said section for convenience of reference may be reproduced as follows: "(7) Conditions for enforcement of foreign awards.--(1) In order that a foreign award may be enforceable under this Act it must have---
(a) been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed,
(b) been made by the tribunal provided for in the agreement or constituted in manner agreed upon by the parties,
(c) been made in conformity with the law governing the arbitration procedure.
(d) become final in the country in which it was made,
(e) been in respect of a matter which may lawfully be referred to arbitration under the law of Pakistan, and the enforcement thereof must not be contrary to the public policy or the law of Pakistan.
(2) A foreign award shall not be enforceable under this Act, if the Court dealing with the case is satisfied that---
(a) the award has been annulled in the country in which it was made, or
(b) the party against whom it is sought to enforce the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case, or was under some legal incapacity and was not properly represented, or
(c) the award does not deal with all questions referred or contains decisions on matters beyond the scope of that agreement for arbitration: ' Provided that if the award does not deal with all questions referred, the Court may, if it thinks fit, either postpone the enforcement of the award or order its enforcement subject to the giving of such security by the person seeking to enforce it as the Court may think fit.
(3) If a party seeking to resist the enforcement of a foreign award proves that there is any ground other than the non-existence of the conditions specified in clauses (a), (b) and (c) of subsection (1), or the existence of the conditions specified in Clauses (b) and (c) of subsection (2), entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse to enforce the award or adjourn the hearing until after the expiration of such period as appears to the Court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by the competent tribunal."
' The question as to the scope of section 7 was examined by Ajmal Mian, J. (as he then was) in Nan Fung Textiles Ltd., Hong Kong v. H. Pir Muhammad Shamasuddin PLD 1979 Kar. 762 and it was observed that: "(b) it may be noticed that subsection (1) of above-quoted section 7 provides that a foreign award may be enforceable if made in pursuance of an agreement for arbitration which was valid under the law by which it was governed and has been made by a tribunal provided in the agreement or constituted in the manner agreed upon by the parties, in conformity with the law governing the arbitration procedure in respect of a matter which may lawfully be referred to arbitration under the law of Pakistan and that the award had become final in the country in which it was made. Whereas subsection (2) of section 7 provides the following three grounds rendering a foreign award unenforceable:--
(a) that the award has been annulled in the country in which it was made,
(b) the party against whom it is sought to be enforced was not given notice of the arbitration proceedings in sufficient time or was under some legal incapacity,
(c) the award does not deal with all the questions referred to or contains decision on matters beyond the scope of the agreement for arbitration.
(c) It may be pertinent to refer to section 30 of the Arbitration Act, 1940 which provides the grounds upon which an award given in Pakistan can be set aside. The aforesaid section 30 reads as follows: "Section 30: An award shall not be set aside except on one or more of the following grounds, namely:-
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35;
(c) that an award has been improperly procured or is otherwise invalid."
' It may be observed that the grounds upon which a Pakistani award can be set aside are mostly different from the grounds of attack to a foreign award mentioned in section 7 of the Act inasmuch as under section 30 of the Arbitration Act a Pakistani award can be set aside on the grounds that an arbitrator or an umpire has misconducted himself or that the award has been improperly procured or is otherwise invalid, whereas these grounds do not find place in section 7 of the Act.
Similarly another ground for setting aside an award mentioned in section 30 namely, that an award has been made after the issue of an order by the Court superseding the arbitration or after the arbitration proceedings have become invalid under section 35 of the Arbitration Act, does not find place in section 7 of the Act.
17. Mr. Tariq Hussain, on the other hand, has invited my attention to the following cases. In S. Mohd.
Nairn Mohd. Alam v. Rouraffic and Far Eastern Ltd. AIR 1960 Cal. 146, while dealing with a similar contention raised on behalf of the respondents, Bose, J., who delivered the judgment observed as follows:-- "It has been argued before us that the expression "arbitration procedure" in d.(c) of subsection (1) of section 7 of the Arbitration (Protocol and Convention) Act, 1937 should be limited only to the procedure by statutory enactment and it has no reference to procedure which has its basis on the principles of natural justice. I am unable to accede to this contention. Apart from the law which is codified in Statutes, principles of equity and justice have always guided the Court in the matter of administration of justice, in all civilized countries of the world. That the law laid down by judicial decisions is as much a part of the law of the land as the law embodied in Statutes, is a fact recognised in all authoritative works of jurisprudence and the argument that an award made in violation of the first principle of justice or in disregard of the fundamentals of fairplay is a good enforceable award, does not merit any consideration at all.
(42) In our view the Awards made by the Umpire are not in with the law governing the arbitration procedure and are not herefore enforceable in this Country under the provisions of the (Protocol and Convention) Act, 1937."
' The question before the Court in the above case was, whether the away given by the arbitrators without affording equal opportunity of hearing to both the parties could be enforceable under the Arbitration (Protocol and Convention) Act, 1937.
18. The next case referred to by Mr. Tariq Hussain in the same connection is reported as Societa Anonmina Lucchesse Olii E. Vini Lucca v. Gorakhram Gokalchand AIR 1964 Mad.
532. In this case the award given by the foreign arbitrators was held to be: "vitiated, by the vital defect that it was strictly speaking ex parte; in itself, it contained no hint whatever of the basis on which the very considerable damages awarded were arrived at when the contracts themselves had contained intrinsic terms as to the manner of ascertainment of damages in case of breach by either party."
19. In the third case referred to by Mr. Tariq Hussain, reported as Messrs Se Se Oil v. Messrs Gorakhram Gokalchand 1960 BLR 113, once again the scope of section 7 of the Act of 1937 was under examination by the High Court of Bombay and it was observed as follows: "It is contended on behalf of the defendants that the phrase "the law as contained in subsection (c)" includes the rules of procedure agreed to between the parties. It is accordingly rightly contended that when the Appeal Committee made its award in respect of a time-barred appeal or cross-objections made orally by the plaintiff before them the law and procedure as contained in rule 4 of arbitraiion were prevalent in England all awards tainted with misconduct of an arbitrator are liable to be set aside. It is also clear that in England all quasi-judicial tribunals must conform to the rules of natural justice and violation of rules of natural justice results into legal misconduct of an arbitrator. The law of England accordingly is that whereever there is violation of rules of natural justice the resulting decision is not in conformity with the law governing the procedure. As I have already made a finding in this case that there was no due notice of the claim of the plaintiffs for excess damages given to the defendants, there was clear violation of rules of natural justice in this case. The award made by the Appeal Committee was accordingly not made in conformity with the law governing the arbitration procedure."
20. Mr. Naim-ur-Rehman has however invited my attention to the case of L. Oppenheim and Company v. Hajee Mehomed Haneef Saheb AIR 1922 PC 120, in which the dispute arising between the parties to the contract, was referred to arbitration. The appellant appointed his arbitrator and gave notice to the respondent to appoint his arbitrator. It was stated that if no arbitrator was appointed by the respondent, the arbitrator appointed by the appellant would be the sole arbitrator. The arbitrator appointed by the appellant gave his award having read the contract and the correspondence. The suit was brought in Madras High Court on the award. The respondent pleaded that he had no notice from the arbitrator who had acted irregularly and it was held by their Lordships as follows:-- "The contract of the 23rd October, 1913, was made and was to be performed in England; and this arbitration clause provided for an arbitration which was to take place in London and in accordance with English Law and procedure. Under that law, by which both parties agreed to be sound, any objection to an award on the ground of misconduct or irregularity on the part of the arbitrator must be taken by motion to set aside or remit the award, and, if not so taken cannot be pleaded in answer to an action on the award. In the present case no such motion was made within the time limited by Order 64, Rule 14 of the Rules of the Supreme Court, England or at all, and accordingly the award became as fully binding on both parties as if it had been incorporated in the contract. No doubt any defence going to the root of the award---for instance, that the arbitrator had no jurisdiction or that the matter was tainted with fraud---could have been pleaded in the suit; but a defence on the ground of irregularity not appearing on the face of the award was excluded by the law by which both parties had agreed to be bound."
21. It may be pointed out that in the present case it was open to one of the parties to the award to attack the same under the law applicable in the foreign country relating to arbitrations. Both the parties had agreed for arbitration under the GAFTA Rules and there is no controversy on the point that they were governed by the English Law of Arbitration in this regard. It was always open to the respondent to impugn the award under the English Law in England on the grounds now being urged before this Court. However, it did not choose to do so. The scope of section 7 of the Act of 1937 appears to be restricted to the grounds referred to therein as reproduced above. Both the learned counsel have contended that the relevant clause applicable in this respect would be clause (c) of section 7(1) of the said Act. This clam* shows that "Foreign Award" is enforceable if it has "been made in conformity with the law governing the arbitration procedure". Although an argument has been advanced that the award made without reference to clause 23 of the agreement was not in conformity with the law governing the arbitration procedure, but, such a broad proposition can hardly be accepted. The Legislature in its wisdom appears to have restricted the scope of section 7 of the Act of 1937 only to the grounds referred to therein and such liberal construction of clause (c) as suggested by Mr. Tariq Hussain cannot be possible without doing violence to the language used by the Legislature in the said clause. The argument advanced by Mr. Tariq Hussain has no reference either to the law governing the arbitration procedure or the general principles of justice, and hence the same cannot be accepted.
22. The next contention of Mr. Tariq Hussain is that since no reasons were given by the arbitrator in support of the award, the same has been vitiated. Reference in this respect has been made to Rule 7:7 of the GAFTA Rules which provides as follows: "7:7---If reasons for the award are not evident from the wording of the award then the arbitrator(s) shall issue separate document containing in writing reasons for the award, which said reasons shall not form part of the award nor be referred to in the award and shall be stated to be issued for information only and on the basis that the contents of the document containing the reasons will not be used or referred to in any proceedings in the Courts of the United Kingdom."
No doubt, according to the above Rule, the arbitrators are obliged to state reasons for the award, but the same, according to the Rule, "shall not form part of the award and.... Will not be used or referred to in any proceedings in the Courts of the United Kingdom". However, no further provision has been made in the GAFTA Rules in regard to the consequences which may follow in case of noncompliance with the above Rule. Such provisions are generally directory and non-compliance therewith cannot render any action taken thereunder as invalid. Nothing can be spelt out from Rule 7:7 that it is mandatory or non-compliance therewith would vitiate an award.
23. The last objection raised by Mr. Tariq Hussain is that the award is unstamped and consequently the same is inadmissible in evidence. Reference has been made in this respect to Article 12 in the First Schedule to the Stamp Act, which makes an award subject to the charging of Stamp Duty in terms of section 3 of the said Act. The question raised by Mr. Tariq Hussain has been dealt with earlier by this Court in two different judgments. In Nan Fung Textiles Ltd. v. Sadiq Traders Ltd. PLD 1982 Kar. 619, Saleem Akhtar, J., while dealing with a similar issue has held: "The case cited from the Indian jurisdiction supports the respondents' is contention while in PLD 1971 Lah. 522 it was held that unstampted " arbitration agreement is not enforceable and cannot be acted upon. In the Indian case it was held that stamp duty is payable on foreign awards. According to the laws prevalent in Pakistan and India distinction ha been made between an award made within the country which is subject to Arbitration Act, 1940 and a "foreign award" which is governed by the Act of 1937. These two instruments though of the same genesis are completely different from each other having their special characteristics, particularly a "foreign award" to which a specific meaning has been given in terms of international convention. Article 12 of Stamp Act which provides for stamp duty speaks of "award" and not "foreign award". It, therefore, can safely be presumed that it is applicable to "Awards" which are not "Foreign Awards". It is a well-settled principle of interpretation, of fiscal statutes that if there are two possible interpretations, one which is favourable to the subject should be accepted. In my opinion Article 12 does not cover a foreign award. For the aforesaid reasons with respect I regret that I am unable to agree with the view expressed in AIR 1962 Punj.
167. In my view "Foreign Awards" as in the present petitions, are not chargeable with stamp duty."
24. However, in Messrs Jugotekstil Impex Ltd. v. Messrs Shams Textile Mills Ltd. 1986 CLC 79, Hyder Ali Pirzada, J., has taken a contrary view. It has been held by him that: "I have advantage of reading the above decision of my learned brother Saleem Akhtar, J., an eminent Judge of this Court and with respect I regret to say that I have not been able to persuade myself to agree with it that the awards do not require to be stamped in accordance with the provisions of the Stamp Act before it is filed and made a rule of the Court. With great repect I am not inclined to follow this view. The relevant words of clause (c) are "relates to any property situate, or to any matter or thing or to be done in Pakistan" and the instrument does not relate to a matter or thing to be done in Pakistan, that is, this award is brought in Pakistan and an effort is made to make it a rule of the Court so that the amount specified therein is realized from the respondent, who is in Pakistan, will it not be an instrument about which it could be said that it relates to a matter or a thing to be done. The relevant clause says that it is sufficient if the instrument relates to anything done or to be done in Pakistan."
25. If the view taken in 1986 CLC 879 is to be followed then admittedly since a part of the contract was to be performed by the respondents in Pakistan, the award would be chargeable with stamp duty as is required by section 3 of the Stamp Act. However, with utmost respect, I am inclined to agree with the view taken by Saleem Akhtar, J., that the word "Foreign Award" which has been separately defined in the Act of 1937 is not the same as "Award" referred to in Article 12 in the First Schedule to the Stamp Act. Since there is no law making a "Foreign Award" chargeable to stamp duty in Pakistan, the last contention of Mr. I Tariq Hussain must also fail. No other issue has been pressed by him.
26. In the result, the objections filed by the respondents are dismissed and the award is made rule of the Court.