1. ' FAZAL ELAHI KHAN, J.---This is a regular first appeal by the defendants against the judgment and decree of Senior Civil Judge, Mardan dated 23:5-1988, whereby on the plaintiffs-respondents' application for making the award rule of the Court, a decree in the sum of Rs,3,08,962.63 with interest at the rate of 14 per cent per annum from the date of award till the actual payment, was passed in favour of the petitioner-respondent.
2. The admitted facts briefly stated are that M/s. Awami Construction Company, Par Hoti Mardan, a registered firm (hereinafter called the petitioner) entered into an agreement with the Governor of N.-W.F.P. For construction of quarters in the area of Industrial Workers Colony Mardan on 20-10-1979 on the terms and conditions enumerated in the agreement deed. Clause (ix) of the agreement form W.W.B. 7-A provided as follows:-- ,,(9) Arbitration clause.
2. ' Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design drawings and instructions hereinbefore mentioned and as to the quality of workmanship; or materials used on the work, or as to why other question, claim, right, matter or thing whatsoever, in any way arising out or relating to the contract designs, drawings specifications estimates, instructions, orders or the conditions or otherwise concerning the works, or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or condonement thereof shall be referred to a panel of three arbitrators, one to be appointed by the Contractor and the other to be appointed by the Board, and the third by the two appointed arbitrators in the manner provided in subsection (1) of section 10 of the Arbitration Act, 1940, and whose decision shall be binding on both parties. The obtaining of the award shall be the condition precedent for making any claim in a Court of law."
3. ' It appears that on the expiry of the contract on 24-6-1980 when the final bill was withheld and a dispute had arisen whereafter the contractor made an application for reference of the dispute to arbitration as provided for in the agreement Mr. Muhammad Azam Khan, Secretary Workers Welfare Board, Peshawar appointed Mr. Mukarram Shah, Executive Engineer, Small Industries Development Board, Peshawar as arbitrator to resolve issue/dispute in the matter. The arbitrator on his appointment vide his letter No,S.I.D.B./EE/Peshawar/197-98, dated 5-9-1979 asked M/s. Saleemur Rehman Awami Construction Company Par Hoti, Mardan as under:-- "Please refer to Secretary Industries, Commerce, Labour, Mineral Development and Transport Department, Government of N.-W.F.P., Peshawar letter No,AS/WB/44/79, dated 2-9-1979 on the subject noted above.
4. ' You are instructed to submit your claim to their office within seven days of the receipt of this letter for further necessary action."
5. ' Thereafter the parties entered into arbitration and in consequence thereof the arbitrator made an award dated 20-10-1979. M/s. Awami Construction Company then made an application before the Senior Civil Judge, Mardan in which it was alleged that respondent No,5 entered upon reference vide letter dated 5-9-1979 who has completed the proceedings and filed his award on 20-10-1979 to the effect that deduction of Rs,12,686.83 made by the Project Director was justified, however, the petitioner has been held entitled to the balance of Rs,2,34,810 which amount was ordered to be refunded to the petitioner (contractor) within a fortnight. The award was not objected to by the parties specially respondent No,3 i.e., the Secretary Industries as he ordered the Project Director for payment of the award amount vide letter dated 6-11-1979. That in spite of having contacted the respondent for clearance of the dues in terms of the award and on the failure of all his efforts in the application made on 18-2-1980 it was prayed that respondent No,5 be directed to file the original award in the Court, for making it rule of the Court and for grant of decree to the petitioner with 14 per cent interest as referred to above. Subsequently amended application was filed on 20-9-1982 in which the award amount was corrected to be Rs,3,10,055. Respondent No,1 namely Project Director Workers Welfare Board in its written statement raised several objections to the petition, however, his main objection was that the appointment of the arbitrator was not in accordance with the N.- W.F.P. Workers Welfare Board Rules, 1974, framed under Ordinance XXXVI of 1971, according to which the Board alone is competent to appoint an arbitratbr. That the appointment should have been made by the Chairman of the Board. It was further stated that the appointment of the arbitrator was also in violation of the Arbitration Clause of the agreement, as the reference was to be made to the panel of three arbitrators, one to be appointed by the Contrator, the other to be appointed by the Board and the third by the two appointed arbitrators in the manner provided in subsection (1) of section 10 of the Arbitration Act. Objection was also raised that the arbitrator misconducted himself by entering into arbitration in violation of the rules and terms of the agreement. The learned Senior Civil Judge framed as many as 16 issues of which the rest dealt with the factual aspect of the case while issues 5, 6 dealt with the objections raised by the respondent referred to above. After recording statement of the arbitrator namely Mukarram Shah and statements of Qazi Muhammad Salim, Section Officer Industries Department, Abdur Rehman, Project Director and Haji Anwar-urRehman on behalf of the petitioner and Saadat Mand Khan, then Project Director, Bahadur Khan, Labour Officer Workers Welfare Board, Peshawar on behalf of the respondents, the learned Senior Civil Judge elaborately dealt with the aforementioned issues in his judgment and order impugned in this appeal. It was found that the appointment of arbitrator was valid and binding on the parties and that the award in pursuance thereof cannot be said to be illegal. It was further held that the respondents failed to point out or to place any material on the record to show that the arbitrator has misconducted himself within the meaning of the relevant provision of the Arbitration Act. Reduction made by the Project Director in the final bill without assigning any reason and without hearing the petitioner was held to be illegal and without lawful authority hence on such finding the petition was accepted, award was made rule of the Court and the decree passed in favour of the petitioner as stated above on 23-5-1988. This judgment and order has been appealed against by the Project Director and 4 others under section 17 read with section 39 of the Arbitration Act, 1975, reiterating the said objection to the making of the award as rule of the Court which has been dealt with by the learned Senior Civil Judge. It has been further averred in the grounds of appeal that the learned Judge has committed serious illegality by awarding interest at the rate of 14 per cent from the date of the award.
3. We have heard the learned counsel for the parties and have gone through the entire evidence but find no merits in this appeal. As far as the impugned award of the arbitrator is concerned the objection to the appointment of arbitrator and his award has also got no force. It is sufficient to state that the Secretary Industries vide his office order No,AS/WWB/80, dated 24-6-1980, on the expiry of the contract and the arrival of substitute for Mr. Saadat Mand Khan Project Director N.- W.F.P. Workers Welfare Board, empowered Qazi Muhammad Salim, Assistant Secretary to take over the charge of his office to look after the routine and general nature cases except technical matters during the interim period. After making of the award the following letter was addressed which is material for the objection raised before us by the learned counsel for the appellant:- Confidential IMMEDIATE. No, AS/WWB/79, ' Government of N.-W.F.P., Industries, Commerce, Mineral Development, Labour and Transport Department.
6. Dated, Peshawar 23-12-1979.
7. To Mr. Saadat Mand Khan, Project Director, Workers Welfare Board N.-W.F.P., Defence Colony, Labour.
8. Subject: ARBITRATION AWARD OF CONSTRUCTION OF 200 OUARTERS IN LABOUR HOUSING COLONY AT MARDAN ' I am directed to refer to your memo No, 209/PD/WWB., dated 22-11-1979 on the above subject and to state that the comments made by you have been considered. Since the Government had appointed an Arbitrator with your consent at this stage there is no other remedy but to accept the award. In view of the order passed by this Department in accepting the award, the contracting Firm has now legal rights to have the claim.
9. ' In case the contractor goes to Court you would have to substantiate that the award has been procured by unlawful means by the contracting Firm and otherwise invalid as required under the provisions of Arbitration Act, 1940. If not the entire cost ( legal charges, TA DA in attending Court and any amount accrued as interest over the amount involved etc.) will have to be borne by the person/s responsible for not pointing out the right position at the time of issue of appointing order by this Department and during subsequent stage of Arbitration proceedings.
10. ' You are therefore once ?Gain requested to implement the award as far as possible and at an early date to prevent any unpleasant situation at a later stage. Sd/- ( Q.M.Salim )
11. Assistant Secretary.
12. It undoubtedly is, therefore, evident that it was at the instance of the appellant that the sole Arbitrator was appointed which appointment was not challenged by the respondents. The arbitrator entered into arbitration with the consent of the parties and after consideration of the entire evidence found the amount due and payable to the contractor. There is also evidence on the record that the Government did not challenge the award rather directions were issued that the awarded amount be paid to the contractor as is evident from the letter copy Ex.P.W.2/3 which is reproduced below:-- ' Government of N.-W.F.P. Industries, Commerce, Mineral Development, Labour and Transport Department. Dated, Peshawar 6-11-1979.
13. OFFICE ORDER: Consequent on the appointment of Mr. Mukarram Shah, Executive Engineer Small Industries Development Board, Peshawar as Arbitrator over the dispute between Project Director, Workers Welfare Board, N.-W.F.P. On one side and M/s. Awami Construction Company Par Hoti, Mardan N.- W.F.P. On the other side vide this Department Order of even No, dated 2-9-1979 the Arbitrator referred to hereinalter has submitted his award dated 30-10-1979 a copy of which is enclosed at Annexure to this order and which should be implemented by the Project Director Workers Welfare Board on the following broad lines: Para 3 of the award.
14. ' The amount of the penalty imposed should be refunded.
15. Para 4 of the award.Of the total amount of Rs,39,646.16 the amount of the following items should be paid:
(1) Rs,4,450 As rent of quarters.
(3) Rs,1,421 Cost of Steel. It is already adjusted.
(4) Rs,294 For Whitewashing.
(5) Rs, 21,415.16 Remud plastering of Roofs.
16. ' As regards item No,2 of Rs,12,066 shown as deducted for extra cost of Cement in this para it is a disputed item and is to be re-calculated by competent authority keeping in view extra work carried out by the Company and wastage involved. The amount should be held up and be paid to the Company later on after re-calculation.
17. Para 5 of the award.
18. Some extra work has been done by the firm which has been verified by the arbitrator at site and should be paid accordingly.
19. Para 6 of the award.
20. ' The total claim of Rs,12.666.83 representing 5 items stand totally rejected.
21. ' Regarding rest of the claims representing amount which was curtailed by reduction in the measurements books, reduction in scheduled rates and defective work etc. Those may be refunded as allowed in the award. Sd/- (Muhammad Aman Khan), Secretary, Industries.
22. There is force in the arguments of the learned counsel for the respondents that no objection petition was filed to challenge the award as required under section 30 of the Arbitration Act and mere filing of written statement in reply to the application cannot in any manner dispense with the requirement of law. In support of the view reliance can be placed on 1988 SCMR 723, 1970 SCMR 402, 1983 SCMR 703. With regard to the interest awarded we find force in the contention of the learned counsel for the appellant and to that extent interference with the judgment and decree of the learned trial Judge is required. Accordingly the appeal is partially accepted, the judgment and decree of the trial Court to the extent of interest at the rate of 14 per cent is modified and the Awami Construction Company Par Hoti, Mardan is held entitled to the interest at the rate of 8 per cent per annum from the date of decree till payment of the amount decreed in favour of the plaintiff-respondent. As both the parties have partially succeeded, therefore, they are to bear their own costs.