1. ' The award given by the sole arbitrator in the matter between Interform Design Associates (Pvt)
2. Limited and Bahria Foundation dated 27-9-1989 has been impugned both by the plaintiffs and the defendants.
3. ' The facts, briefly stated, are that by an agreement dated 11-11-1981 (Ex.C/3) executed between the Pakistan Navy Benevolent Association and M/s. Infer form Design Associates (Pvt.) Limited, hereinafter referred to as "the plaintiff', the latter were appointed consultants by the former for their proposed project, now named as "Bahria Complex". The relevant clauses of the agreement were as follows:- "1. The Consultants shall provide the following services with regard to the planning and execution of this abovesaid project till its completion:
(a) Preliminary sketches, models and perspective.
(b) Final sketches for approval of PNBA.
(c) Submissions of drawing for approval from KPT/K.D.A/Cantonment Board.
(d) Architectural working drawings.
(e) Working structural drawings.
(f) Electrical, mechanical and air-conditioning drawings.
(g) Contract documents, BOOs and specifications for Civil and E/M works.
(h) Details supervision, including verification of contractors bills and quantities.
(2) The Employer shall pay for the services provided by the Consultants as details at 1(a) to 1(h) above, a Consultancy fee of 6% of the total cost of the building in a manner and to an extent as given in the paragraphs next following. The total cost of the building shall be the cost as mentioned in paragraph 7 of this agreement.
(3) The Consultancy fee shall be paid by the Employer to the Consultants and the percentage of the fee given below shall be based on an estimated cost of Rs,250 per sq.Ft for the purpose of running payment only as agreed to by the Employer and the Consultants. The Consultancy fee shall be paid according to the following schedule:-
(a) On signing of the Contract....0.5%
(b) On submission of drawings for approval by the Employer....1.5%
(c) On submission of Architectural Structural, Electrical and Mechanical and Air-Conditioning drawings for approval by KMC/KDA/KPT/Cantonment Board 1.5%
(d) On submission of contract documents and bill of quantities.....
4. 0.5%
(e) During Supervision Stage. (The Consultants fee shall be divided into four periods and 0.25% to be paid at the end of each period 1%
(f) On completion of the project...... 1% (The difference between the total contracted cost of the project and the estimated cost shall also be adjusted at this stage of payment).
(4) The Consultants shall appoint a suitable qualified representative of sufficient experience for the day to day supervision of the said project who shall be posted full time at the site of works. The said representative shall be provided subordinate staff if and when felt necessary by the Consultants or if so required by the Employer in writing for the effective and proper discharge of his duties. The Employer shall pay to the Consultants the pay and allowances for the above staff in case their services are required beyond three months period of the construction time given in the contract agreement between the Contractor and the Employer."
5. ' Consequently on 22-2-1984 during the continuance of the project a second agreement (Ex.C/40) was signed between the parties. Para. 3 of this agreement, sub-clauses (c), (d) and (f) provided as follows:- "(c) The last instalment of 0.25% of the fixed cost of Rs,37.5 million of civil works towards professional fee regarding detailed supervision thereof shall be paid to the consultant on 4-8-1984.
6. While the balance professional fee of 1% of the said fixed cost shall be paid to the consultant on completion of civil works.
(d) The consultant shall be paid the agreed professional fee of 4% had to terminate their services.
7. The defendants consequently prayed for the following reliefs:- "(1) For refund of Rs,4,03,414 as excess amount received by the Consultants from employers.
(2) Rs,36,442 as reimbursement for remedial work carried out by employers.
(3) Cost (Rs, 1,64,880) of staff of employers who worked on assessment of Contractors Bills.
(4) Fees for work supervised by employers.
(5) To hand over documents including all drawings and obtain completion certificate.
(6) Refund of all over payments to be ascertained established by evidence.
(7) 1% liquidated damages.
(8) Costs."
8. ' The allegations and the counter-claim made by the defendants were, however, denied by the plaintiffs in their written reply submitted before the arbitrator. On the respective pleadings of the parties, the following consent issues were framed by the learned arbitrator:- "(1) Whether the allegations by the Claimants of harassment, maltreatment and non-cooperation by the various officials of the Respondents are true and justified in the facts and circumstances of the varous dealings during the course of performance by the claimant under the Agreement and thereafter?
(2) Whether the Claimants are entitled to the various sums or any part thereof claimed in their statement of claim.?
(3) Whether the Respondents are entitled to claim various amounts of money as detailed in paras.
(a) to (g) of the statement of counter claim?
(4) Whether there has been excess payments to the claimants?
(5) Whether the works have been properly performed by the Claimants and if so, its effects?
9. The learned arbitrator on the basis of the evidence adduced by both the parties gave his award, the operative parts of which reads as follows:- "On the claims made as above, my award is as follows:- Re: (i) The Claimants/Consultants are awarded Rs,12,54,416 which the respondents/employers shall pay to the former (i,e Claimants/Consultants).
10. Re:(ii) The Claimants/Consultants have already been granted relief under item No,(i) above, which included fee for delayed period. No separate amount therefore is allowed as claimed under this item. Moreover after termination of contract followed by stoppage of work earlier by the Consultants, there was no justification for incurring alleged cost. Further sufficient proof has not been produced in support of the alleged cost incurred. This claim is therefore disallowed. Re:(iii) No proof has been produced to substantiate the claim which is accordingly rejected. Re:(iv) No interest is allowed. If however payment is not made forthwith the Claimants may seek remedy from the Hon'ble Court if so advised.
11. RE: COUNTERCLAIM ' As regards the Counterclaim the Claimants/Consultants are directed to hand over all such drawings and documents which are in their possession relating the project, to the Employer.
12. ' The counter-claim as to other relief claimed in view of the findings given above is disallowed. No cost is allowed to any of the parties in the circumstances. FEES OF THE ARBITRATION.
13. ' The arbitrator has been paid Rs,30,000 (Rs,15,000 by each party). In view of the heavy record and long-drawn proceedings which commenced on 16-4-1987 and concluded today (27-9-1989) by making of the award, the arbitrator claims an additional sum of Rs,10,000 towards his fee. This amount`shall be paid by the parties in equal shares.
14. ' However, in the first instance this amount (Rs,10,000) shall be paid by the Claimants/Consultants whom the Employers shall reimburse by remitting Rs,5,000 to them.
15. ' The Consultants in addition shall also pay Rs,150 as stamp charges and Misc. Expenses."
16. ' I have heard Mr. Bilal Ahmed Khawaja. Learned counsel for the plaintiffs and Mr. Mohammad Sharif, learned counsel for the defendants. The following contentions have been raised by Mr. Mohammad Sharif:-
(1) That Bahria Foundation was not a party to the agreement, therefore, reference to the arbitration was null and void:
(2) That the arbitrator was named in the agreement itself, consequently, reference to any other arbitrator was void;
(3) That Bahria Foundation being notified as a charitable endowment under the Charitable Endowments Act, the same, according to section 3 of the said Act, can sue or be sued only through the Treasurer to the charitable endowments. Consequently, the entire proceedings before the arbitrator were null and void;
(4) That the arbitrator fixed his own fee and recovered the same from the plaintiffs, in whose favour the award has been made. This, therefore, constitutes misconduct on the part of the arbitrator, and
(5) The award suffers from an error of law as the arbitrator has failed to take into consideration the evidence adduced on behalf of the defendants.
17. ' Mr. Bilal Ahmed khawaja, on the other hand, has fully supported the award except on a minor issue, viz. That the arbitrator after finding that the delay in the completion of the works was attributable to the defendants, has failed to grant additional fee at the rate of 1.5 times the professional fee as was agreed to be paid under the. Agreement.
18. ' Turning now to the preliminary objections raised by Mr. Muhammad Sharif, the learned counsel has first pointed out that Bahria Foundation, the defendants were not a party to any of the three agreements, referred to by me earlier in this judgment. Consequently, reference to arbitration was null and void as there was no arbitration agreement between the plaintiffs and the defendants. It is true that all the three agreements were executed between Pakistan Navy Benevolent Association and the plaintiffs and Bahria Foundation being a separate entity, still co-existing with the former, was not a party to the arbitration agreement. However, Mr. Bilal Ahmed Khawaja has invited my attention to Ex.C/71 which is a letter dated 20-5-1986, addressed by Lt.-Cdr. Pakistan Navy on behalf of Bahria Foundation to the Managing Director of the plaintiffs informing them that all the disputes between the plaintiffs and the defendants would be resolved in acordance with clause 19 of the arbitration agreement executed by the plaintiffs with Pakistan Navy Benevolent Association.
19. This position appears to have been accepted by the defendants as no objection appears to have been raised by them after receiving the letter (Ex.0 71) from the defendants. It is, therefore, clear that the agreement earlier executed between Pakistan Navy Benevolent Association and the plaintiffs, was subsequently adopted by the plaintiffs and the defendants with all its relevant clauses. This position is further confirmed by Exs. C/80 and C/81 (see Exs.C/80 and C/81). It is also pertinent to point out here that the defendants fully participated in the proceedings before the arbitrator thereafter. No doubt, the defenregrdingdants did raise. An objection in their pleadings before the learned arbitrator his jurisdiction in the matter but the objection appears to have been duly considered and disposed of by him. In any case, for the reasons stated by me earlier, I do not find any force in the objection raised by Mr. Mohammad Sharif. The acceptance of the letter (Ex.C/71) by the plaintiffs was sufficient indication that the suggestion made therein had the approval of the plaintiffs.
20. ' The next contention of Mr. Mohammad Sharif is that the arbitrator had already been named in the agreement between the parties and, therefore, reference to a different arbitrator was not warranted under the law. Clauses (19) of the agreement provided that unless otherwise agreed by the parties, the C.N.S. (Chief of the Naval Staff) shall be the sole arbitrator for the purpose of arbitration. In this respect reference may be made to the judgment of a learned Single Judge of this Court in Suit No,885/1986, which shows that both the parties had given their consent to appointment of Mr. Justice (Retd.) KA. Ghani as a sole arbitrator in the case. No doubt, according to the arbitration clause in the agreement, in case the parties fail to concur in the appointment of an arbitrator, the C.N.S. Was to act as the sole arbitrator but in view of the consent given by both the parties, a different arbitrator was appointed by the Court. After giving their consent the defendants cannot be permitted to turn back and raise the said objection. Consequently, the contention is untenable.
21. ' Turning now to the third contention of Mr. Mohammad Sharif, the contention is that Bahria Foundation, being a charitable endowment, it can sue or be sued only through the Treasurer of the charitable endowments. This argument appears to be completely misconceived. In support of his argument, Mr. Sharif has made reference to section 3 (2) of the Charitable Endownments Act, 1890, which, no doubt, provides that the treasurer appointed under section 3 (1) of the said Act may sue or be sued in his corporate name but the said condition, as section 3 (2) itself suggests, shall be applicable only" for the purpose of taking, holding or transferring movable or immovable properties under the authority of this Act" (meaning thereby the said Act). Since the proceedings in the present case have no connection with taking, holding or transferring any movable or C immovable property, the provisions of section 3 (2) are not applicable to the present proceedings. The objection, therefore, is devoid of any force.
22. ' The next objection of Mr. Sharif is that the arbitrator by fixing his own remuneration and charging the same from the plaintiffs is guilty of misconduct. The award shows that the learned arbitrator claimed as additional sum of Rs,10,000 towards his fee "in view of the heavy record and long-run proceedings". This amount was 'to be shared equally by the parties. However, the arbitrator directed that initially the entire amount of Rs,10,000 shall be paid by the plaintiffs which shall be reimbursed subsequently by the defendants. The misconduct, according to Mr. Mohammad Sharif, lies in charging of this additional amount from one party only. Reliance in this respect has been placed by the learned counsel on A.I.R. 1975 Delhi 215. In this case it was held: " There is nothing illegal in the arbitration of umpire demanding fees before award provided, they are reasonable and not extravagant and are demanded from both parties equitable within the knowledge of both the parties and it would not be illegal if on failure of one of the parties to make the payment he either stays the proceedings or directs the other party to pay the whole amount pending the decision of the dispute by arbitration and the arbitrator or umpire would also be justified in waiting till the making of the award and then have the matter of fees determined by Court under Section 14 (2) or Section 38. He can be charged with misconduct if he accepts money on any account from one of the parties without the knowledge of the other party or if the amount of fees demanded before award is exorbitant or the manner of demand is exceptional or prejudicial. To avoid such a charge the best course for the arbitrator or umpire is to make a record about his fees and the reasons therefor, if any, in the record of proceedings itself within the knowledge of both the parties and if he does not do so he will be involved in defending himself against the allegations of misconduct, if made."
23. This contention of Mr. Mohammad Sharif again is misconceived. Neither the additional sum of Rs,10,000 demanded by the arbitrator appears to be exorbitant or unreasonable nor the same has been demanded in any manner which can justify the charge of misconduct against him. The amount charged, as is evident from the award itself, was to be shared by both the parties equally and merely because the plaintiffs were directed to pay the entire amount first and then wait for reimbursement by the defendants cannot render the award void and liable to be set aside for misconduct. The contention, therefore, cannot be accepted.
24. ' The last contention of Mr. Mohammad Sharif has been that the award suffers from an error of law which is apparent on the face thereof as the learned arbitrator has given his award after taking into consideration only the plaintiffs' evidence and the evidence of the defendants has been completely overlooked. As has been pointed out earlier, the main question before the arbitrator was whether the delay allegedly caused in completion of Bahria Complex was attributable to the defendants. In case the question was decided by the arbitrator in the affirmative that would make the plaintiffs entitled to compensation for the period of delay at the rate of 1.5 times the professional fee on "pro rata basis" in terms of the relevant agreement. 'The arbitrator on the basis of the 'evidence respectively adduced by both the parties, first of all attributed the delay to the non-completion of air-conditioning and electrical works. In this respect the following observations made by the learned arbitrator may be reproduced as follows:- "It was the obligation of the Employers to take necessary steps in that direction sufficiently and promptly to enable the contractor to fulfil his obligations so as to enable him to carry out his obligations regarding civil works expeditiously to be completed within the agreed period. Reliance has been rightly placed by the Claimants on the fact that though report on AC system was submitted but inspite of several meetings formal approval of the direct fired absorption system was given by the Employers on 4-8-1982 whereafter work was started on the detailed designs/constructions drawings for the AC and Electrical which work continued upto January, 1983.
25. However during the period this work was in progress after about 13 months issue was raised as to credentials of the Claimants when work substantially had been completed on the detailed designing and preparation of construction work. Some of the developments which took place as pointed out by the Claimants be noted here: 5-1-1983. Claimants confirmed that they had shown the designs and drawings for the AC works to the Managing Director of the Employers.
26. 16-1-1983. Another presentation was made before Managing Director of Employers by AC Consultants.
27. 14-3-1983. A compelete set of drawings was supplied to the Employers.
28. 15-3-1983. There was again meeting with the Managing Director of the Employers in which meeting the AC Consultants were also present.
29. 16-3-1983. Claimants submitted tendering procedure for Electrical and AC works to the Employers.
30. ' Request though made for early approval of the proposed system. Instead the approval earlier given on 4-8-1982 was withdrawn on 29-5-1983.
31. Interesting to further note is the fact that after the rejection of the proposed system again after meetings and discussion, the same AC system was again approved on 16-6-1983.
32. ' Yet even after this approval (which the Claimants describe as Second Approval the Employers required them to offer their work regarding design and detailed drawings of the proposed AC and Electrical systems for scrutiny by the Employers. I agree with the submission of the Counsel for Claimants that the procedure followed and the time taken and consumed by the Employers were totally out of place and resulted in delays in progress of the work. The delay on this score is clearly attributable to the Employers which conclusion finds support from the fact that in the meeting held on 19-2-1984 it was decided to call off the scrutiny and to proceed with the work.
33. ' Thereafter, it is pointed out that tenders for AC and Electrical works were floated which due to officers interested in some parties could not be finalised for almost 16-17 months.
34. ' Nothing convincing is shown by the Employers that in such delays the Consultants were in any manner liable. It is said that the Consultants had no previous experience of a project of such magnitude and that Employers had to scrutinise and be satisfied. This explanation is neither satisfactory nor justify the inordinate delay caused in finalising the approval of the system or awarding this job after such long period which necessarily led to delay in the completion of the project itself."
35. ' The next reason attributable for the delay was the non-supply of material such as cement, steel, sanitary tiles and fittings, aluminium joinery, etc. By the defendants in time. In this respect it has been observed by the learned arbitrator as follows:-- "Counsel for the Consultants also pointed out that the Employers who had taken themselves to supply materials such as cement, steel sanitary tiles and fittings, Aluminium joinery i,e. Doors and windows, glaxing (Glass) delayed supplies in time. Agreement for Aluminium Joinery was made by the Employers with Alcop on 15-6-1984 i,e. Less than a period of about two months prior to the date of completion of civil works. The time of 20 weeks granted for the supply of these items--joinery extended upto November 1984 i,e. More than three months after original date of completion of project. Delay also took place in supply of Aluminium doors and windows by the suppliers, delay in supplies is shown to be almost of one year on a 5 months, contract for which Employers are to be blamed as it was their responsibility to get the supplies within time.
36. ' Bath room tiles, it is stated by the Claimants, supplied were of different i,e. 4 X 8" as well as for different colours than agreed and and that also were much belated. On scrutiny of these titles by the Consultants/Claimants they were found to be of a sub-standard quality and not in accordance with the specifications mentioned in the supply Agreement.
37. ' Delay is also shown in finalising contract for supply of sanitary fittings while contract for supply of "Tinted Glass" was executed between the Employers and suppliers on 8-4-1984 i,e 4 days after the expiry of original period for completion of the project and that there again were delays in the supply of this item as well. In their letters written on the subject the Claimants pointed out that inordinate delays on the part of the suppliers would delay the completion of the project. Reference to the letter written on 2-2-1986 (Ex. C/202) in the series if necessary be made in which specifically the attention of the Employers was drawn."
38. ' The learned arbitrator also found the employer responsible for delay in respect of the installation of elevators and the relevant observations in this respect may again be reproduced as follows:- "As to the delays attributable to Employers in installation of elevators reliance is placed on the fact that contract for the supply and installation was made as late as on 5-6-1984. Delay in completion was obvious caused for reasons which could not be attributed to the Consultants. Reliance is placed on Ex.C/84, minutes of meeting held on 10-9-1986 Claimants have extensively referred to the letters written by them from time to time in support of their plea that the Employers are exclusively responsible for the delay in execution and completion of the project exclusively. The letters referred are Ex.C/13, dated 15-1-1983, Ex.C/16 dated 9-2-1983 Ex.C/20 dated 26-5-1983, Ex.C/43, Ex.C/103 dated 21-1-1984, Ex.C/104 dated 24-1-1984, Ex.C/163 dated 4-3-1984, Ex.C/168 dated 2-4-1985, Ex.C/169 dated 15-4-1985, Ex.C/170 dated 16-4-1985, Ex.C/171 dated 23-4-1985, Ex.C/173 dated 15-5-1985, Ex.C/184, dated 9-10-1985, Ex.C/188 dated 2-1-1985, Ex.C./191 dated 17-1-1985, Ex.C/197 dated 30-7-1985, Ex.C/198 dated 15-8-1985, Ex.C/199 dated 19-8-1985, Ex.C/202 dated 2-2- 1986, Ex.C/203, C/211 dated 18-7-1985, Ex.C/244 dated 13-6-1984, Ex.C/249 dated 28-7-1984, Ex. C/251 dated 6-8-1984, Ex.C/252 dated 16-8-1984, Ex.C/253 dated 31-10-1984, Ex.C/266 dated 20-7-1985 and Ex.C/271 dated 1-3-1983.
39. ' The case of the Employers is that the time fixed for completion of the project was unrealistic as during the period stipulated the project of such magnitude could not have been completed. This argument cannot absolve the parties from adhering to the agreed time limits as well as from the liabilities (to a reasonable extent, of course) which were provided in the manner agreed.
40. ' Other arguments were that the delay occurred as the Claimants/Consultants never handled such a big project and thus having no experience of a work of such magnitude led to delay for which blame would lie upon the Claimants. This argument is also of no avail as it is shown that Consultants had sufficient experience and upon Mr. Khawar Hussain. The head of the Claimant Company, no fault could be laid. Though no big project as that of Bahria Complex was earlier undertaken by the. Claimants but other projects have been shown as handled by them which established their credibility and ability to carry out the work on project in question.
41. ' It was then submitted that no chart projections for progress was prepared and further more upto 30-4-1983 Mr. Khawar Hussain was a full time employee of Pakistan Services Ltd. These objections in my opinion could hardly have any adverse effect on the question involved particularly when the cause leading to the delay already noted above show that such delays were due to cause attributable to the Employers to which no satisfactory explanation has been put on record. Some other arguments as lack of co-ordination, curfew in the city for some period, rejection of doors and windows were also advanced to justify delay but these do not absolve the Employers from the causes which are attributable to them exclusively resulting in the delay in completion of the project."
42. ' The above observations make it sufficiently clear that the learned arbitrator has fully taken into consideration the defence put forth by the defendants. That he did not agree with the contentions of the defendants, is altogether a different matter. It may be pointed out that the arbitrator is the sole judge of the facts and this Court cannot assume powers of an appellate Court in respect of the award, When the arbitrator has arrived at his conclusion after fully taking into consideration the evidence adduced by both the parties, this Court would not interfere with the findings arrived at by the arbitrator merely on the ground that it might have come to a different conclusion on the basis of the same evidence. I am, therefore, unable to agree even with this contention of Mr. Mohammad Sharif.
43. ' Turning now to the objection filed on behalf of the plaintiffs, the learned arbitrator has based his award in favour of the plaintiffs on the following findings:- 'Before concluding while arriving at the amounts to be awarded, it may be observed that none of the parties had led any satisfactory evidence to establish the actual damages suffared or costs incurred for the delay period except making general statements of incurring expenditure for delayed/extended period beyond 31-12-1984. I therefore take the figure "1.5 times the profession fee" to be paid "as compensation" as the maximum rate which could be allowed subject to determination of the rate where the amount claimed on the basis of "1.5 times" is found to be unreasonable and/or unconscionable."
44. ' It appears that the learned arbitrator has taken into consideration the provisions of section 74 of the Contract Act while awarding a reasonable amount in favour of the plaintiffs.
45. In the result, I find no reason to interfere with the award and objections filed by both the plaintiffs and the defendants are, therefore, dismissed and the F award is made rule of this Court.
46. Award made rule of Court.