' On 17-11-1971 M/s. Valika Woollen Mills Limited were awarded a contract by Directorate of Purchase
(Army) for the Supply of 78,370 blankets. Per Clause 38 of "General Terms Governing Contracts.'
(Form D, Page 35), any dispute arising between the parties was to be referred to the Secretary, Ministry of Defence and his decision was to be final. A dispute having arisen between the parties due to the failure of the suppliers to supply the blankets within the stipulated time and also'due to the insistence of the suppliers for the enhancement of per unit price of the blankets, the suppliers M/s. Valika Woollen Mills approached the Secretary under the aboyementioned Arbitration Clause vide their petition dated 1st June 1980. The contract-price per unit of blanket was Rs,32 and delivery time was July 1972 which was extended from time to time and the last extended period was upto 30th December, 1980. The suppliers requested for increase of the price on the following grounds:--- - "(a) Price of raw material rose up considerably high and this was informed to the authorities concerned, vide our letter No,W/DP(A)802, dated 4-9-1972 (photo copy enclosed).
(b) Government decision to devalue Pakistan currency by 130% which affected cost of production.
(c) Increase in wages of all workers from August, 1973, vide Government of Pakistan Ordinance No,XXII of 1973 dated 17-9-1973.
(d) Increase in wages of workers from June, 1974 as Special Dearness Allowance, as per order of Government.
(e) Increase in wages of all workers as per Amendment Act, 1975 total Rs,110 per month per worker.
(1) Education Cess Amendment Act, 1973 Rs,100 per worker.
(g) Old Age Benefit (Amendment) Act, 1976 with effect from July 1976, - 5% wages per month.
(h) Social Security Scheme.
(i) Besides the above, wages also increased in annual benefit as per Agreement with the Labour Union.
(j) Increase in Electricity and Sui gas charges. (k) Increase in Insurance Premium. Increase in Bank Rate of Interest.
(m) Flood Relief Surcharge @ 25%.
(n) Adverse Economic effect due to Devaluation of Pak. currency and other Economic measures taken by the Ex-Government, which affected the production of the plant, thus affecting the contract agreement, which falls under the Force Majure and supplier is not at all responsible, as it was beyond his control."
' The suppliers had raised their demand for increase of price as early as 1973-74. On 20-8-1975 a meeting was held in the Office of D.G.D.P. Rawalpindi and according to M/s. Valika Woollen Mills it was agreed that the price of entire quantity (already supplied and yet to be supplied) would be fixed at Rs,59.50 per blanket but this decision was not honoured. Thus the dispute could not be resolved and culminated in the Arbitration Petition of 1st June, 1980. Secretary, Ministry of Defence nominated Mr. M.A. Jabbar, a Joint Secretary of the Ministry to act as Arbitrator who awarded Rs,8,50,000 to the suppliers to compensate for the enhanced cost of production. The Award was filed in the Court on 15th December, 1982. Notices were issued to the parties and sometime in March, 1983 Ministry of Defence filed objections. When the objections came up for hearing before the Court on 25-2-1991, it was found that the Award was not a 'speaking award' and it was remitted back to the Arbitrator for recording reasons. Learned Arbitrator then recorded the reasons and returned the Award vide his letter dated 14th April 1991.
2. Connected Suit No,8 of 1983, arises out of Contract No,0711-0007- 46853/DP(A)/P-17 dated 5th January, 1971 for the supply of 6,400 blankets @ Rs,40 per piece with delivery period upto 29th February, 1972. The supply was, however, delayed and period of delivery was extended by the defendants/objectors (Director-General Defence Purchase Army) from time to time and was last extended upto 31-5-1977. The plaintiffs/suppliers (M/s. Valika Woollen Mills) requested for increase in the price on similar grounds as in Suit No, 614 of 1982 and the request having not been granted to their satisfaction arbitration proceedings were initiated vide petition dated 27-5-1980 and the same Mr. MA. Jabbar, Joint Secretary, Ministry of Defence was appointed as Arbitrator who awarded Rs,4,50,000 as ex gratia amount towards the escalation of price vide award dated 2-4- 1981. The award was likewise remitted under section 26-A of the Arbitration Act for recording reasons which were forwarded to this Court vide letter of Arbitrator dated 14th April 1991. The objections filed by the defendants/objectors are virtually the same as in Suit No,614 of 1982. This suit had also proceeded alongwith Suit No,614 of 1982 and both are being decided by this judgment.
3. Learned counsel of the parties have been heard.
4. The first argument of learned counsel of the defendant Government is that the reasons put forward by the learned Arbitrator are not good reasons and he 'relied on the judgments of Province of Punjab v. Sufi Habibullah 1982 SCM R 243 and Brooke Bond v. Conciliator PLD 1977 SC 237. In the first judgment, the facts were that the High Court had set aside the Award on the ground that it was laconic and totally silent 'as to the reasons thereof. The Supreme Court, therefore, upheld the decision of the High Court because it could not be shown to the Supreme Court that satisfactory reasons were given. The second judgment is in respect of an industrial dispute under the Industrial Relations Ordinance and it was made dear in the judgment that the appointment of the Arbitrator in that case had nothing to do with the Arbitration Act because the Arbitrator was appointed under the Industrial Relations Ordinance wherein the concept of the arbitration is quite different than its concept under the Arbitration Act. I do not understand why this judgment was quoted because it has no relevancy in the present context. It was a vague argument that the reasons were not "good".
For that matter, anything which one does not like may not be 'good' from one's point of view but this is no 'good reason' to say that the thing is not good. Both the judgments appear to be beside the point.
5. The second argument of learned counsel of the defendants was that escalation can be granted only by the President of Pakistan and by nobody else and the. Arbitrator had no power to do so and I was referred to Ministry or Defence Memo No,1355/14/DGDP/PC5/11/89/71/DP-4, dated 12th February 1976 (pagC 99 of the file). Some escalation of price per blanket was granted by the Government to the petitioners and the Memo began with "I am directed to convey the sanction of the President to the grant of ex gratia escalation........". This argument is not correct. All such acts done by the various Departments and Ministries of the Government are done in the name of the President. It may be noted that the petitioners had preferred an appeal to the respondents (Director General, Defence Purchase in the Ministry of Defence) for the escalation of the price and the defendants vide their letter No,1355/14/DGDP/PC5 dated 8-10-1974 (Page 81 of the file) had asked the petitioner to furnish documentary proof in support of the appeal. They had not advised thc petitioner that they were not competent to hear the appeal and the petitioner should approach the President. The argument is devoid of any merit.
6. We have, however, with the help of learned counsel of the parties, gone through the original Award filed in the Court on 20-12-1982 and reasons submitted thercfor on 4th April 1991, the Arbitration petition dated 1-6-1980 submitted by the petitioner, the written statement of Director- General Purchase (Army) dated 10-2-1982 the original agreement between the parties and the various documents on the file.
7. It may be noted that the contention of the petitioners in their Arbitration petition of 1st June, 1980 is that on 20-8-1975 a meeting was held in the office of the D.G.D.P. Rawalpindi consisting of: (1)AK Malik Joint Secretary (M/Defence).
(2)Brig. Muhammad Anwar Khan D.P.(C).
(3)Mr. Siddiqi Financial Advisor (4)Wing-Commander A. Wahab KhanDGDP Office (5)Saifuddin Valika Chief Executive Director, Valika Woollen Mills Ltd.
(6)Mr. Rizvi Representatives of Valika Woollen Mills Limited to consider the demand of escalation and it decided to enhance the price to Rs,59.50 per blanket for the entire lot but when the letter of confirmation was issued on 12th February 1976 it was found that this escalation was given effect only to the remaining supplies made after 1st October, 1975 and the rate of escalation on the earlier supplies was at a much lower rate as per following schedule.
The escalated price (1)On 4,000 blankets supplied from of 10 December, 1971 to 31 December, 1971at original price Rs.32 (No escalation)
(2)On 4,940 blankets supplied from 1st January 1972 to 30th June, 1973Rs.35.50 (3)On 7,756 blankets supplied from1st July, 1973 to 31st December,1973.Rs.53.31th st (4)On 6,1.60 blankets supplied from 1st January 1974 to 30 September, 1975.Rs.55.33 (5)On remaining blankets supplied after 1st October, 1975 Rs.59.50 ' Thus, according to the petitioners, this letter amounted to breach of the decision taken on 20-8- 1975. However, the respondents in their written-statement filed before the Arbitrator did not at all refer to this alleged breach of the decision arrived at on 20-8-1975. It is also the case of the petitioners that during the currency of the agreement, the DGDP placed five emergency orders for the supply of 32,060 blankets with the assurance that this quantity would be counted towards the quantity stipulated in the agreement but this was not done and this breach of promise grossly adversely reacted on the production schedule of the petitioners.
8. The Arbitrator has awarded Rs,8,50,000 to the petitioners towards escalation. of the price of the blankets as against a claim of Rs,67,62,969.25 made by the petitioner in his arbitration petition.
9. Learned counsel of the respondents referred to a letter dated 11th March, 1978 addressed to them from the petitioner in which they had undertaken to supply the blankets "-without any increase in price" and he argued that in view of this undertaking the petitioner was not entitled to any escalation. This point was considered by the Arbitrator and he rejected the contention of, the respondents on the ground that the subsequent devaluation of the currency and the various economic measures taken by the Government had so adversely affected the price structure that the escalation had become necessary and the necessity was so obvious that even the respondents had to concede it and grant escalation as per their memorandum of 12th February, 1976. We find no reason to disagree with this view. The necessity of escalation cannot be questioned.
10. Learned counsel of the objector put great emphasis on the point that even the plaintiff M/s. Valika Woollen Mills Ltd., did not claim escalation of prite as a matter of right' but only on ex gratia basis and, therefore, whatever escalation was granted by the objector was enough and learned Arbitrator could not grant anything towards escalation. If this were so, what for the dispute had gone to the Arbitrator? Besides, this point was not raised in the written-statement filed by them before learned Arbitrator. I am of the view that the ex gratia nature of the demand notwithstanding, it was nevertheless the source of dispute which could be, and was in fact, referred to Arbitration and the only thing to be seen is as to whether the Award is liable to be set aside for any of the reasons provided under section 30 of the Arbitration Act.
11. It is an established position of law that an Arbitrator is the sole judge of facts and the Court while considering objections to the Award cannot assume power of an Appellate Court and cannot embark upon the exercise of appreciation of evidence and decision of facts as held in the case of 1991 CLC 1023 Interform Design Associates Limited v. Bahria Foundation and 1991 CLC 1966 Province of Sindh v. Waseem Construction Co.
12. It also appears to me that in cases in which the Government enters into a contract which contains an Arbitration Clause which, in turn, provides for the reference of the dispute to a sole arbitrator who must be a senior officer of the concerned department, like the arbitration clause between the parties in the present case, the Award of such arbitrator may, in all decency, be challenged by the contracting party other than the Government but not by the Government whose own senior officer has acted as Arbitrator and who is, without any doubt, amenable to disciplinary action under the Government Servants (Efficiency and Discipline) Rules,_1973 and who, while acting as an Arbitrator, is fully aware of the consequences of any misconduct on his part. The scales are thus heavily loaded against the private contracting party in such cases and, therefore,th when the Government itself raises such objections to an Award by such an Arbitrator, the stand taken by the Government looks rather deplorable if not outrightly outrageous. I may, in this context, refer to the judgment in the case of Lahore Development Authority v. M/s. Khalid Javed & Company 1983 SCM R 718 wherein it is so observed in its concluding paragraph:-- "In conclusion, we cannot refrain from observing that despite the declared policy of the Government for ensuring speedy and inexpensive justice we find, all too frequently, that even Government Departments and statutory bodies indulge in wasteful and unnecessary litigation. It is at their behest that in all contracts entered into by them a clause is inserted to the effect that any dispute, which may arise during the completion of the contract between the parties will be decided through arbitration rather than by the ordinary Courts. It is also usually stipulated that the Arbitrators, who may be nominated for this purpose, must be the responsible officers of the said Department. It is, therefore, a matter of some regret that when an award is given by the Arbitrators, who arc persons of their own choice and the award made is in a proceeding conducted in a forum desired by them but Which is not wholly in accord with their point of view the Department of Government concerned instead of accepting the said award with good grace rushes to the Court with frivolous objections to prevent it from becoming the Rule of the Court and when these objections are overruled resort is taken to filing appeal upon appeal right upto the Supreme Court which not only results in further financial loss to the Department and further delay in the settlement of the rightful claim of the private party but also in the unnecessary waste of the valuable time of Courts which could be spent far more usefully in attending to other more meritorious cases. It is high time that Government Departments should accept more gracefully the awards made by formus selected by themselves and manned by their own officers: They would be well advised if they took greater pains and more care than they are doing at present in preparing and prosecuting their cases before the Arbitrator rather than in subsequently expending their time, energy and efforts on fruitless objections and appeal against the awards made against them, for which they are mostly themselves to blame."
' Enough water has flown down the Ganges since the above observations were made by the Hon'ble Supreme Court but it is a matter of regret that there does not appear to be any visible change in the attitude of the Government Departments in this regard.
13. The entire arguments of learned counsel of the objectors boil down to saying that learned Arbitrator misconducted himself inasmuch as he awarded ex gratia enhancement without there being any evidence in its support. However, a perusal of the "Reasons" shows that learned Arbitrator has relied on Ministry of Finance Notification No,3(8)-E.P.I/73 dated 24th October, 1973 which authorises the contracting authorities to grant price escalation if it is considered to be in the interest of the Government and has acted upon it in the light of the fact that during this very period the Government had itself purchased fresh supplies from even this very party (the plaintiffs M/s. Valika Woollen Mills Ltd.) at prices as high at Rs,125 and Rs,135 per piece and had purchased the blankets from other sources at as high a price as Rs,145 per piece. As against this, it was pointed out by learned counsel of the plaintiff, that even after counting the amount awarded by learned Arbitrator, the price per piece only just comes to about Rs,61, per piece. Thus the enhancement of the price, even if ex gratia, is to the benefit of the Government. There is thus no force in the contention of the defendants/objectors that learned Arbitrator has misconducted either himself or the proceedings.
14. I have also gone through the judgments in the cases of M/s. Aslam Saeed & Co. v. M/s. Trading Corporation of Pakistan PLD 1985 SC 69 and Pakistan Ministry of Commerce v. M/s. Rizvi & Company PLD 1979 Kar. 250 which were cited by learned counsel of the defendants/objectors without showing how and in what respect these judgments were relevant. I do not find them in any way applicable to the present case.
15. I would, therefore, in view of what has been stated above, reject the objections and make the Award the Rule of the Court in both the suits.
16. The plaintiff is allowed interest @ 6% from the date of Award till the date of payment of the suit amount and shall also have his costs.
Objections to Award rejected.