HAZIQUL KHAIRI, J.- -Justice (Retd.) Dr. I. Mehmood was appointed as Sole Arbitrator on 21-5-1989 in Suit No. 645 of 1987 by, this Court to adjudicate upon the disputes between the parties in the suit.
The plaintiffs, namely, M/s Travent Karachi submitted their statement of claim which was contested by defendant No.1, namely, Trading Corporation of Pakistan Limited. Other two defendants neither appeared before the learned Arbitrator nor participated in the arbitration proceedings. The controversy between the parties relates to the validity and enforcibility of the performance bond furnished by the claimant under clause 11 of Contract. It may, however, be stated here that prior to the execution of the performance bond by the plaintiffs, defendant No.1 invited tenders for the import of 525 metric tonnes of unsought copper ingots vide tender notice dated 22.1.1987. The principals of the plaintiffs, namely, US Pabst & Company CMBH of West Germany, defendant No.2 herein, requested the plaintiffs lo submit an offer on their behalf authorising them to participate, negotiate and sign contract on their behalf. Accordingly, the plaintiffs submitted the offer and defendant No.1 obtained confirmation thereof from defendant No.2 vide telex dated 17.2.1987. The acceptance of the offer was communicated by defendant No.1 to defendant No.2 vide telex dated 19.2.1987 with request to furnish performance bond strictly on their prescribed proforma within seven days as stipulated in the Contract. Defendant No.2 failed to furnish the bond within the stipulated time whereupon the plaintiffs were requested by defendant No.1 to furnish the bond.
Under these circumstances the plaintiffs requested defendant No.3 namely, M/s Muslim Commercial Bank to furnish the performance bond for an amount of Rs.6,59,843/- whereafter the contract was signed on 9.3.1987 by the plaintiffs on behalf of the German Supplier namely defendant No.2.
2. The goods under the Contract were never shipped by the defendant No, 2 as according to them L/C opened by the defendant No.1 was defective and in-operative and called for amendment. The L/C having expired, defendant No.1 tried to enforce the performance bond furnished by the plaintiffs on behalf of defendant No.2, whereupon the plaintiffs invoked the arbitration clause of the contract and moved an application under Section 20 of Arbitration Act, 1940 in this Court for filing the arbitration agreement and for a prohibitory injunction restraining the defendants No.1 and 3 from encashing the performance bond.
3. Now when the dispute was referred to the learned Arbitrator, he, on the basis of the pleadings of the parties, framed the following issues: "1. Whether the Claimant had a limited authority from the respondent , No.2 to sign the Contract Agreement on behalf of the respondent No.2 with no legal responsibilities thereunder. If so, what was its nature and effect?
2. Whether the Claimant acted on behalf of respondent No.2 gratuitously without any monetary consideration and involving no commission, and if so, its effect on the Performance Bond?
3. Whether the Claimant had furnished the Performance Bond inadvertently and erroneously under mistaken notice and in excess of authority and/or on the persuasion of respondent No.1 ? If so, whether respondent No.1 can enforce the Bond?
4. Whether the Performance Bond furnished by the Claimant is invalid and inoperative and not enforceable or eneashable for the benefit of respondent No.1 for the reasons stated in para 13 of the Statement of CLaim?
5. Whether there is no privity of contract between the Claimant and the respondent No.1?
6. Whether the respondent No.1 is entitled to encash the disputed Performance Bond?
7. Whether the Claimant is liable for the alleged loss and expenses suffered by the respondent No.1 as alleged in Annexure T to the Reply to the Statement of Claim? If so, to what extent?
8. Whether the respondent No.1 is liable to pay to the Claimant the expenses claimed in para 16(c) of the Statement of Claim?
9. To what relief the Parties are entitled to, if any ?"
4. The crux of the controversy was whether defendant No.1 could have enforced the performance bond furnished by the plaintiffs on behalf of their principals, namely, defendant Np.2 and whether the plaintiffs had substituted their liability in place of the plaintiffs in relation to defendant No.1.
5. The learned Arbitrator recorded the evidence of the parties arid came to the conclusion that the performance bond in dispute is void and unenforceable and is not eneashable and the security deposit/cover of security furnished by the plaintiffs be returned to them by the defendant No.3, namely, M/s Muslim Commercial Bank Limited without interest.
6. Defendant No.1 M/s Trading Corporation of Pakistan Limited filed their objections under sections 16,30 and 33 of the Arbitration Act challenging the award as invalid and illegal on the face of it with prayer to set it aside on a number of grounds. However, at the time of hearing learned counsel for defendant No.1 confined his arguments as to the validity and enforcibility of the performance bond under which the defendant No.1 claimed to be entitled to the amount thereunder.
7; It was contended by Mr. S. Hamid Hussain learned counsel for defendant No.1 that the performance bond itself discloses that it was directly between the plaintiff and the defendant No.1 for supply of 525 metric tonnes of Electrolyic Copper by the plaintiffs and there is no reference therein to defendant No.2, namely, M/s US Pabst & Company GMBH, West Germany. According to him, the performance bond was an independent contract whereunder the defendant No.1 was entitled to enforce unconditional guarantee given by the plaintiffs to the extent of their commitment in the sum of Rs.6,59,843/-. It was further argued that no contract could have been executed unless a performance bond was provided by the plaintiffs, which he did within the scope of his authority given by his principal. Reference was made by the learned counsel to section 188 of Contract Act which reads as follows: "188. Extent of agents authority. An agent having an authority to do an act has authority to do every lawful thing which i$ necessary in order to do such act. . An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business."
8. It was argued by Mr. Hamid Hussain, learned counsel for the defendant that the. Plaintiff voluntarily took upon themselves the liability under the performance bond, as such, the plaintiff cannot be permitted to set up an inconsistent plea, the effect of which is to relieve him from his apparent liability to the. Defendant. Besides the liability undertaken by the plaintiff was in confirmity With their power to "negotiate and complete the sale" for which reason they were asked to execute the contract on behalf of the defendant No.2 and to take such steps as were necessary in that regard. Reference was made to K.Appa Rao Vs. Gopalddss and another, A.I.R.(33) 1946 Madras 42 in which if was held: "When an agent is authorised to negotiate and complete a sale for a specified price within a particular time, it gives him an authority to enter into a contract for sale whether it be for immovable or movable property."
9. Mr. Mohammad Naseem counsel for plaintiff on the other hand maintained that a Court while considering the objections on the award does not act as a Court of appeal and if the award is supported by evidence, the findings of the arbitrator cannot be disturbed or interfered with, In support of his contention learned counsel placed reliance on my judgment reported in M/s Maqbool Associates Ltd. Vs: M/s Sindh Sugar Corporation Limited* (1990 C.L.C.55) in which it was inter alia held that 'The Court not sitting in appeal, cannot encroach upon the jurisdiction of the Arbitrator, go behind the award or reopen the whole case."
10. In Province of Sindh Vs: Waseem Constrction Co., 1991 CLC 66, a Division Bench of this Court also held as under:- "Thus the award cannot be challenged on the ground that there was no evidence on record. It may be pointed out while considering objections on .The award the Court does not act as a Court of appeal. If on the fae 6f the award the finding not appear to be supported by any evidence the Court can interfere but if there is residence which can support the conclusion then the award made by the arbitrator cannot be interfered."
11. Further reliance was placed on the Province of Sindh and 4 others Vs" Wasa Construction Co., 1990 C.L.C.66. It was further -urged that the learned arbitrator appraised the ocular and documentary evidence of the parties and considered the relevant applicable, so as to determine the liability of the plaintiff, if any, as agents of the German Supplier in relation to the defendants. Reference was made to the following observations made by the learned Arbitrator: - "There is no doubt that the letter of Authority dated 5-2-1987 given to claimant does not mention the furnishing of the security deposit and the Performance Bond. The Authority of the claimant was expressly limited to "negotiate, participate and sign contract on our behalf." Such Authority cannot impliedly be extended to include responsibility for the due and satisfactory performance of the terms and conditions of the contract by the Claimants, who are Agents and have been designated, as such In the Contract. The claimants have been wrongly designated as "Sellers" in the Performance Bond, It also wrongly states that the supply of the contract goods was to be made by the Claimants. It also wrongly states that the Claimants were responsible for the due and satisfactory performance of the Contract in all respects' and to fulfil the terms and conditions thereof On the contrary, the various telexes exchanged between the T.C.P. Dealt directly with the German Suppliers with regard to, for example, the amendment of the L/C, the appointment of the Inspection Agents, arrival of PNSC ships at Port of, leading, extension of shipping period, etc. (vide Telexes C-5 to C-10 to affidavit of Mohammad Faruq)"
12. In support he placed reliance Ghulam Abbas Vs: Trustees of the part of Karachi (PLD 1987 S.C.
393) F.J. Rambarts Pakistan Limited Vs: Pakistan Steel Mills Corporation (1987 CLC 2198). M/s Sainjee Cargo Services Vs: M/s Cargo Movers and others (1989 CLC 2229) and State of Orissa Vs: Dandasi Sahu (1989 M LD 404). In the last mentioned case, the Supreme Court of India held that when an Arbitrator commits a mistake either in' law of in fact in determining the matters referred to him, where such mistake does not appear on the face of the award and the documents appended to or incorporated so as to form part of it, the award will neither be remitted nor set aside. In the present case, the learned Arbitrator was not bound to confine his findings to the contents of performance bond but was also required to look into the entire evidence brought before him, ocular or documentary in order to ascertain the true relationship between the German Suppliers vis-a-vis the plaintiff and the defendant and to determine if the plaintiff owed any liability towards the defendant. These aspects of the case were fully taken care of by the learned Arbitrator and examined with reference to the related law. The award has set out reasons in sufficient details and the learned Arbitrator has considered the legal position as contemplated under Section 26-A of the Arbitration Act and after taking into consideration the overall factual and legal position he has given valid reasons for holding that the defendant No. 1 could not have enforced or encashed the performance bond furnished by the plaintiff. I accordingly do not find any merit in the objections raised by the defendant. Resultantly the award is made rule of the Court. The parties shall bear their own costs.