1. ' HAZIQUL KHAIRI, J.---Aggrieved by the judgment dated 17-10-1984 of the learned Single Judge of this Court in Suit No.35 of 1984, the appellant have filed this appeal under section 39(1) of the Arbitration Act, 1940 read with section 3 of the Law Reforms Ordinance, 1972.
2. ' The appellant's case is that by its letter of intent dated 25-3-1976 the appellant awarded to the respondent the work of construction of a bridge at the "Construction base" area of the appellant situated in Bin Qasim, Karachi on the terms and conditions as contained in the formal agreement dated 24-4-1976 and contract document forming part thereof. Subsequently, extra/additional work was awarded by the appellant to the respondent and therefore the initial period of completion of work within six months was extended finally till 15-6-1977 but the respondent failed to complete the work within this extended period which in fact was completed by him on or about 26-9-1977. It is averred that after considerable delay of over a year on or about 14-12-1978, the respondent submitted his final bill containing exaggerated and arbitrary claims and as such disputes arose between the parties. Thereafter, the respondent filed an application under section 20 of the Arbitration Act, 1940, in this Court which was registered as Suit No. 85 of 1981. In the said suit, Mr. Ali Ahmed Fazed, Advocate was appointed as sole arbitrator who made his award on 17-12-1983 and filed it under section 14 of Arbitration Act for confirmation and making it rule of the Court. It was registered as Suit No. 35 of 1984. The appellant have challenged the award on the following grounds: "(1) That the learned Arbitrator wrongly allowed a sum of Rs.25,000 as costs of proceedings to the plaintiff since both in the Reference and in the contract under which the Reference was made to the learned Arbitrator it is provided that the parties will bear their respective costs of arbitration.
(2) That the award of interest on the amount found due and payable by the learned Arbitrator from the date of award is illegal as interest on the above amount could only be awarded by the Court under section 29 of the Arbitration Act.
3. (3)That the admission of a sum of Rs.3,88,508.22 payable to plaintiff made in the written-statement of the defendant also included the sum of Rs.83,518.42 as the balance of the retention money payable to plaintiff but the learned Arbitrator under a misapprehension awarded separately to plaintiff the said sum of Rs.83,518.42 in addition to the sum of Rs.3,88,508.22 which amounted to awarding the sum of Rs.83,518.42 as balance of the retention money to the plaintiff twice.
4. (4)That the sum of Rs.16,350 in respect of R.C.C. Linings awarded by the learend Arbitrator is not covered under the contract and, was therefore, wrongly awarded.
5. (5)That the award of a sum of Rs.1,88,722.29 in respect of the Girder as an extra item is wholly without jurisdiction as this item of work was a BOQ item.
6. (6)That the learned Arbitrator illegally disallowed the claim of defendant for laboratory charges and costs of MS bar and cement amounting to Rs.18,350 and Rs.15,939 respectively.
7. (7)That the learned Arbitrator wrongly disallowed the sum of Rs.45,083 claimed by the defendant by way of liquidated damages; and (8)That in any case the claim of the plaintiff was barred by limitation and therefore the learned Arbitrator could not decree the same."
8. ' The said objections of the appellant were heard by the learned Single Judge of this Court and were disposed of by the impugned judgment whereby the learned Court rejected all the objections of the appellant except the one relating to the costs of Rs.25,000 awarded by the learned Arbitrator against the appellant. Learned counsel for the appellant raised before us their objections as appearing at numbers 2, 3 and 5 but did not press other objections, therefore, we will confine ourselves to those objections only.
9. ' It was urged by the learned counsel for the appellant that no interest was claimed by the respondent and, therefore, the learned Arbitrator acted beyond his jurisdiction in awarding interest.
10. Our attention was drawn to memo of claim contained in the award wherein the respondent has claimed loss of profit at the rate of 20% on the amount found due and payable by the appellant but nowhere the respondent had claimed interest as such. It was argued that the learned Arbitrator as well as the learned Single Judge grossly erred in law in treating loss of profit as interest with the result that there is an error on the face of the award. Reference was made to the concluding paragraph of the claim made by the respondent before the arbitrator which is as under:-- "Your honour will be pleased to investigate into the claims of the plaintiff/claimant formalised in his final bill aforesaid and disputes between the parties after calling upon the parties to produce all relevant documents and taking all evidence which may be necessary or which the parties may like to adduce and pass an Award in favour of the plaintiff/claimant and against the defendant for the net payable amount under the said final bill and/or such amount which your honour may deem fit and proper in the circumstances of the case alongwith loss of profit at 20% on the amount found due and payable by the defendant with effect from the date it was so payable to the plaintiff."
11. ' Learned Single Judge while dealing with this objection had observed that "although the plaintiff in their claim before the Arbitrator has not used the word `interest' specifically but a fair reading of their claim will show that what was described by them as profit was nothing but the interest.
12. Without, however, going into the controversy as to whether ordinarily the arbitrator was competent or not to award interest on the amount found due and payable by one party to the other, the learned Judge had held that where the parties refer to the arbitrator the question of payment of interest on the sum claimed, the Arbitrator has the authority to make direction for payment of interest in his award. At the same time, the learned Judge further held that the question of payment of interest was raised by the appellant before the arbitrator who found a specific amount due payable by them to the respondent.
5. It was next urged by Mr. Kamal Mansoor Alain, learned counsel for the appellant that there is an error on the face of award, firstly as there was no dispute between the parties as to payment of future interest and secondly there is no finding by the learned Arbitrator as to the date when the alleged loss of profit at the rate of 20% was found payable by the appellant. Lastly it was contended that the arbitrator transgressed his powers inasmuch as he had .No jurisdiction to grant interest from the date of the award. Reference then was made to section 29 of the Arbitration Act wherein future interest can only be awarded by a Court whereas under section 34, C.P.C., past interest i.e. Interest prior to the filing of the suit, pendente lite interest as well as future interest i.e. Interest from the date of the decree also falls under the exclusive domain of the Court. It will be advantageous to reproduce section 29 of Arbitration Act and section 34, C.P.C. As under:-- "29. Interest on awards.---Where and in so far as an award is for the payment of money the Court may in the decree order interest, from the date of the decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree."
34. Interest.---(1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of involute the suit, with further interest at such rate as the Court deems reasonable on the aggregate sum so adjudged, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit.
(2) Where such a decree is silent with respect to the payment of further interest on such aggregate sum as aforesaid from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and separate suit therefore, shall not lie."
13. ' Learned counsel had not been able to refer to any authoritative text or any Court decision supporting his initial objection that the alleged loss of profit was not in fact interest but Mr. Iqbal Kazi, learned counsel for the respondent was able to lay hands to case-law disapproving the said contention. He referred to Income-tax Commissioner v. Sham Lal, AIR 1963 Punjab 411 in which it was observed:-- "The words 'interest' and 'compensation' are sometimes used interchangeably and on other occasions they have distinct connotation. `Interest' in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, 'interest' is understood to mean the amount which one has contracted to pay for use of borrowed money. `Interest' in this sense may be placed broadly in three categories. The first kind is interest fixed by the parties to the bargain or contract, that is `interest' ex factor or ex contractu.
14. The second kind of "interest" is conventional interest, determined by the accepted usage, prevalent in a trade or a mercantile community. This is also called ex-more. In the third category may be placed the legal interest allowed by law or where the Court is empowered by the statute to grant interest generally or at a fixed rate, that is ex lege. In the instant case, four per cent. Rate of interest is ex lege as it is allowed under section 34 of the Land Acquisition Act."
15. ' In the instant case the respondent has claimed "loss of profit" and not "compensation" at the rate of 20% on the amount found due and payable by the defendant w.e.f. The date it was payable to the plaintiff but for all intents and purposes in the context, the terms "loss of profit" and "interest" are also interchangeable and no other interpretation can be admitted with precision. Indeed it cannot be ruled out that on many occasions they may have distinct connotations attached to them. We are inclined to agree with the views expressed by the learned Judges in AIR 1963 Punjab 411 which apply in full force in the present case as well. We also find ourselves in full agreement with the observation made by the learned Single Judge of this Court that "a fair reading of it will show that what was described by respondent as "loss of profit" was nothing but interest".
16. ' Iqbal Kazi, learned counsel for the respondent in order to repel the contention raised by the appellant's counsel. In Easter and North East Frontier Railway Cooperative Bank Limited v. B. Guha and Company, AIR 1986 Calcutta 146 the Court held that an arbitrator has power to award interest from the date of award to the date 'of decree. There is, however, nothing in the judgment to show the basis on which the arbitrator could have granted the same.
17. ' In Chandris v. Isbrandtsen-Moller Co. Inc. (1951 Vol. I King's Bench Division 240) it was held that the power of an arbitrator to award interest was derived from the submission to him, which impliedly gave him power to decide "all matters in difference" according to the existing law of contract, exercising every right and discretionary remedy given to a Court of law. Further, an arbitrator would award interest in cases in which by statute, a jury was given power to do so.
18. ' In Union of India v. Bungo Steel Furniture (Pvt.) Ltd. AIR 1963 Calcutta 70 it was held that there is nothing in section 29 of the Arbitration Act which takes away the power of an Umpire to direct payment of interest from the date of award up to date of decree to be passed by the Court. Here it is not clear whether the question of interest was referred to him by the arbitrators or not.
19. ' In Union of India and others v. D.P. Wadia and Sons AIR 1977 Bombay 10, it was held that the arbitrator has competence to award interest provided the claim for such interest is passed either on the agreement between the parties or substantive provision of law or upon an equitable principle.
20. ' It may be stated here that counsel for both the parties have placed reliance on A.Z. Company v. S. Moula Bux Muhammad Bashir PLD 1965 Supreme Court 505 and Ghulam Abbas v. Trustees of Port Qasim PLD 1987 Supreme Court 393 and had come out with their own interpretation to support their case. In both these cases it was held that the arbitrator has no jurisdiction to allow interest for the period prior to the date of award unless it is a term of reference. However, with regard to grant of future interest, it will be useful to reproduce a passage from Ghulam Abbas v. Trustees of Port Qasim PLD 1987 Supreme Court 393 as follows:-- "22. As far as the grant of interest from the date of the award until the payment of the principal sum it may be observed that the Arbitrator can under no circumstances award interest for the period beyond the passing of the decree by the Court on the award for the simple reason that the statutory provisions contained in section 29 of the Arbitration Act take over and it is the Court within whose discretion lies the power to order interest from the date of the decree at such rate as the Court deemed reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree. From this it necessarily follows that future interest with effect from the date of the decree could not legally be awarded by the Arbitrator. However, the facts are that the award was made the rule of the Court by the learned Single Judge with the result that the part of the award granting interest beyond the date of the decree until payment was also 4ncorporated in the decree passed by the Court. As held in Sheikh Mahboob Alam v. Sheikh Mumtaz Ahmed PLD 1956 Lahore 276, although, the Court could set aside this part of the award, it was open to it to exercise its own power under section 29 of the Arbitration Act and grant interest. Therefore, in making this portion of the award a part of the decree the Court must be deemed to have adopted it in the exercise of its own power under section 29. However, in his statement of claim the appellant had claimed interest only upto 3rd October, 1973. The issues were framed by the learned Arbitrator on the pleadings of the parties, and therefore, interest beyond 3rd October, 1973, was not the subject-matter of reference for adjudication before the Arbitrator. The Arbitrator, therefore, exceeded his authority, in any case, to have awarded future interest for the period between the date of the award and the date of the decree on any basis. The reference was also earlier made to the case of Union of India and another v. M/s. D.P. Wadia and Sons AIR 1977 Bombay 10, in which the award of interest was upheld on the ground that no reasons were assigned by the Arbitrator. We are unable to agree with that view of the law and also feel that the facts in the present case are different. The award on the face of it refers to the statement of the claim in which the contractor claimed interest by way of damages and it is on that basis that the decision of the Arbitrator apparently proceeds. As we have held that the Arbitrator in the facts of the present case could not according to law grant interest as claimed, there would be an error of law apparent on the face of the record. The mere fact that pleadings were filed before the Arbitrator and issues were then settled on the pleadings of the parties incorporating the question of interest does not necessarily give rise to the inference that the parties agreed to refer specifically the question of grant of interest as a question of law for the decision of the Arbitrator, so as to preclude any party to the arbitration from challenging the award on the ground of error of law on the face of the award."
21. ' To sum up it will thus be seen in the abovementioned quotation that our Supreme Court has held:- -
(i) Future interest with effect from the date of the decree cannot legally be awarded by the Arbitrator, which falls within the jurisdiction of the Court in exercise of powers conferred under section 29 of Arbitration Act.
(ii) Interest beyond 3rd October, 1973 was not the subject-matter of reference for arbitration before the arbitrator, therefore, the arbitrator has exceeded his authority to have awarded future interest for the period between the date of award to the date of decree on any basis.
(iii) The fact that no reasons were assigned by the arbitrator cannot be held as a ground for upholding award of interest.
(iv) The Contractor has claimed interest by way of damages which the arbitrator could not grant in view of the facts of the case and amounts to error on the face of record.
(v) The incorporation of question of interest on the basis of pleadings will not give rise to the inference that the parties have agreed to refer the question of interest to the arbitrator.
22. It is thus settled that our Supreme Court has expressly held that interest from the date of decree falls exclusively within the domain of the Court by virtue of section 29 of the Arbitration Act and could not be legally awarded by the arbitrator. Award of interest beyond 3rd October, 1973 was also considered as without jurisdiction for the reason that it was not the subject-matter of reference.
23. ' The question then boils down to consider whether an arbitrator is competent to award interest from the date of award to the date of decree. It was contended by Mr. Iqbal Kazi, learned counsel for the respondent that in A.Z. Company v. S. Moula Bux Muhammad Bashir PLD 1965 SC 505, future interest from the date of the award was granted by the arbitrator which was upheld by our Supreme Court. But in this case future interest from the date of award was confirmed and made rule of the Court as the by-law 162 of Karachi Cotton Association Limited had empowered the arbitrators to award interest from the date of award and, therefore, it was held that the arbitrators had acted within their power in granting future interest on damages awarded by them. No such power was given to the arbitrator in the present case. Our Supreme Court in Ghulam Abbas v.
24. Trustees of Port Qasim PLD 1987 SC 303 at 412 has observed that "interest beyond 3rd October, 1973 was not the subject-matter of reference before the arbitrator", therefore, the arbitrator has exceeded in his authority to have awarded future interest between the date of award to the date of decree on any basis. The subject-matter of reference in the present case also is what is borne out from the face of the award in which reference was made to other disputes but not relating to future interest. In other words the respondent has not claimed interest from the date of the award until he filed his statement of claim and, therefore, it cannot be said that prior to this, there was any difference or dispute between him and the appellant in respect thereof. We find ourselves in agreement with learned counsel for appellant that on the face of award there was no dispute between the parties as to payment of interest from the date of the award by the appellants which the respondent has claimed only upon presentation of their statement of claim. Here reference may also be made to the observation made by the Supreme Court of Pakistan in Ghulam Abbas v.
25. Trustees of Port Qasim PLD 1987 Supreme Court 303 that "the mere fact that pleadings were filed before the arbitrator and issues were then settled on the pleadings of the parties incorporating the question of interest does not necessarily give rise to the inference that the parties agreed to refer specifically the question of grant of interest". It may also be stated here that it is not a case where arbitration has taken place in a suit which gives implied power to the arbitrator to award interest, as a Court will do under section 34, C.P.C. Nor it is the case of the respondent that the parties had specifically agreed to refer this question to the arbitrator. Learned counsel for the respondent has failed to pinpoint any express provision of law under which an arbitrator is empowered to award interest from the date of award such as is available to a Court under section 29 of Arbitration Act.
26. With great respect, we are unable to agree with the views of the learned Judges of Calcutta High Court in Bhowanidas Ramgobind v. Harasukhdas Balkishandas, AIR 1924 Cal. 524 in which it was held by them that if the matter in dispute (interest after the date of award) went to trial, the Court would in ordinary course have allowed interest as has been allowed by the arbitrators. It is also fallacious to assume that an arbitrator has inherent jurisdiction to grant interest from the date of award till the time of decree. It will be useful to reproduce here the observation made by the learned Judges of Supreme Court of India in Thawardas v. Union of India reported in AIR 1955 Supreme Court 468 as under:-- "(31) It was suggested that at least interest from the date of 'suit' could be awarded on the analogy of section 34 of the Civil Procedure Code, 1908. But section 34 does not apply because an arbitrator is not a 'Court' within the meaning of the Code nor does the Code apply to arbitrators, and, but for section 34, even a Court would not have the power to give interest after the suit. This was, therefore, also rightly struck out from the award."
27. We accordingly, hold that the arbitrator had no jurisdiction to grant interest from the date of award till the date of decree but in view of the facts and circumstances of the case, we maintain grant of interest by the learned Single Judge from the date of the decree till the date of payment.
28. ' Next objection raised by the appellant was that the learned arbitrator under a misapprehension separately awarded to the respondent a sum of Rs.83,518.42 as the balance of the retention money which amount is also included in the sum of Rs.3,88,508.22 awarded by the Arbitrator. Thus, the retention money was 'twice awarded by the arbitrator and is liable to be set aside. Learned Judge while dealing with this objection has stated that this amount besides having been admitted before the learned Arbitrator as payable to the appellant is also not disputed in the evidence of the appellant or in the evidence of the respondent. The learned Single Judge had further referred to the pleadings of the parties and Exhs. D/50 and D/61 relied upon by the respondent No.1 and after going through the contents thereof came to the conclusion that the arbitrator did not act against the evidence on record in awarding the said sum of Rs.83,580 in addition to the admitted amount of Rs.3,88,508.22. We see no reason to interfere with the finding of the learned Single Judge as this objection was considered by him thoroughly and there is neither any misreading or non-reading of evidence as alleged. Lastly it was urged by the learned counsel for the appellant that the award of a sum of Rs.1,88,722.29 in respect of Girder as an extra item is wholly without jurisdiction as this item of work was a BOQ item. There is no dispute that this item was originally mentioned in the contract as BOQ item but in view of the variation in the contract the quantity of this item was substantially increased. Relying upon paragraphs 51-52 of Contract, the learned Arbitrator came to the conclusion that this item was got done by the engineers appointed by the defendant as an extra item. Admittedly the respondents demanded enhanced rate of Rs.2,335 per cubic metre which rate was not accepted by the engineer of the appellant who recommended payment at the rate of Rs.1,459.44 per cubic metre. Subsequently, the appellant's engineer by another letter dated 9-7- 1979 retracted from his recommended rate of Rs.1,459.44 per cubic metre. The learned arbitrator after appraising the evidence adduced before him and in view of Article 51 of the Contract, came to the conclusion that the fixation of the rate at Rs.1,459.44 per cubic metre was permissible under paragraph 52 of the Contract and with the acceptance of the same by the respondent it became conclusive and therefore, it could not be recalled. The learned Single Judge while going through the record before him held that it cannot be said that the learned arbitrator interpreted the clause in an arbitrary and perverse manner. We are not inclined to interfere with the finding of the learned Arbitrator and the learned Single Judge at this stage when very limited grounds are available to the appellant.
29. ' We accordingly, partially allow the appeal as above with no order as to costs.