Objections have been filed by M/s. Pakistan Rubber & Tyre Co. Against the award dated the 10th of February 1966 of the sole arbitrator appointed by the respondents-defendants Pakistan through the Director-General, Investment Promotion and Supplies in the Ministry of Industries, Government of Pakistan. The dispute arose between M/s. Pakistan Rubber & Tyre Co. On the one hard and the Government of Pakistan on the other in respect of a contract for the supply of 15 ambulance cars by the Company to the Government of Pakistan. Tenders were invited by the Government for the supply of these cars on 3rd December 1962. Advance accep--tance of the tender by M/s. Pakistan Rubber and Tyre Co. Was made on 9th February 1963, and the final acceptance on 15th February 1963. On 12th April 1963, the Government of Pakistan made extensive changes in the designs which the Pakistan Rubber & Tyre Co. Did its best to incorporate in the ambulance cars to be assembled abroad in Japan. On 4th December 1963, the Government of Pakistan informed M/s. Pakistan Rubber & Tyre Co., after arrival of the 15 ambulance cars here in Pakistan that they had been examined and were not according to the specifications and unless the four defects pointed out were rectified or the vehicles replaced, they could not be accepted. On 2nd March 1964, Government. Of Pakistan called upon M/s. Pakistan Rubber & Tyre Co. To remove the defects within 15 days failing which the order would be cancelled and vehicles purchased from elsewhere at their risk and cost. The contention of M/s. Pakistan Rubber & Tyre Co. Was that the rejection .Was mala fide as the goods were according to the specification and design, that they had supplied a similar vehicle to the District Health Officer, Gujrat, which had been inspected according to specification by the same Inspecting Authority. Ultimately the dispute was referred by the Government to the sole arbitrator on 25th October--1965. The plaintiffs' claim before the arbitrator was for damages for loss of business, maintenance and storage of the vehicles, agency commission and a declaration that Government were not entitled to demand the return of the price of 15 Ambulance cars in foreign exchange or bonus vouchers. The amount, if payable, was to be paid in foreign currency. The claim of the Government of Pakistan was 9 % interest on the principal amount involved, the principal sum in foreign exchange or in bonus vouchers, or the amount against the bonus vouchers in Pakistan currency at the current buying rate. The arbitrator in his award has stated that there were three points for reference before him and detailed them as follows:-
(a) Replacement of rejected 15 numbers Ambulance cars with acceptable 15 numbers Ambulance cars according to the contracted specification.
(b) Return of the price of 15 numbers Ambulance cars in foreign exchange or in the form of Bonus Voucher.
(c) Damages for breach of contract.
His findings on these were that M/s. Pakistan Rubber & Tyre Co. Were liable to replace the rejected ambulance cars with the same number of acceptable ambulance cars according to the final contracted specification agreed to by them and that if they fail to do so or if the Pakistan Government did not require the Ambulance cars the alternative point (b) of reference came into play and on which he ordered that M/s. Pakistan Rubber & Tyre Co. Should return the price of 15 Ambulance cars taken by them from the Government of Pakistan in foreign exchange. He further observed: "In case it is not possible for them to return the amount in foreign exchange they should arrange to return the same to the Government in the form of Bonus Vouchers of the value. The amount of sterling comes to --11,117-19-3."
On point (c) he allowed the Government of Pakistan damages at six per cent. Per annum from the date of having paid the amount in Sterling to M/s. Pakistan Rubber & Tyre Co. And/or to their principals till the date of realization of the whole amount. The main objections to the award were two-fold; (1) that the arbitrator had misconducted himself in refusing to summon documents and witnesses sought to be examined by M/s. Pakistan Rubber & Tyre Co. And (2) that the goods in question not having been imported against bonus vouchers the arbitrator should not have ordered payment in bonus vouchers but could only do so in the currency of this country and that therefore, he could not order that M/s. Pakistan Rubber & Tyre Co. Should arrange for purchase of bonus vouchers equivalent to the value of the rejected goods.
2. There is not much force in the first objection against the award as the record of the proceedings submitted by the arbitra--tor clearly shows that all the necessary documents relating to the contract and the tender leading up to the dispute of reference to the arbitrator were produced, even those specially requested for by M/s. Pakistan Rubber & Tyre Co. Who appeared before the arbitrator. There is on the record an application dated 28th December 1965, made on behalf of M/s. Pakistan Rubber & Tyre Co. Giving a list of some additional documents that the Pakistan Government should be directed to produce them. Since this application was not pressed by the counsel for the Company as indicated by the endorsement of the counsel of the same date, the first objection is, therefore, of no avail.
3. The second objection which has been very vehemently pressed is that the amount involved being in foreign exchange it was not possible for M/s. Pakistan Rubber & Tyre Co. To obtain foreign exchange except with the requisite permission of the relevant authorities and that the arbitrator should have awarded damages of the Sterling involved in its equivalent in the Pakistan currency and at the official and not market rate for it is contended that the bonus vouchers rate is the market rate.
4. It is by now well established in law that a debt in involving foreign exchange can only be repaid at the rate of exchanger prevalent in this country at the time when the debt became due. The terms of the contract provided that the contract was to be governed by the laws of Pakistan for the time being in force and in terms of condition No. 13 (5) (c) of the Contract the Pakistan Government were entitled if they rejected the stores to terminate the contract and recover the loss from the purchaser. There are several decisions of the Courts in England that an English Court cannot order such payment except in English currency for otherwise an order cannot be enforced by the ordinary writs of execution if an action is brought in England to recover a debt payable in foreign exchange and the amount must be based on the quantity of English Sterling, that would be required to purchase in England at the ruling rate of exchange the amount of foreign currency. On this basis it is urged that the alter--native suggested by the learned arbitrator acting as a decree is unexecutable and an error on the face of the record with the further contention that a bonus voucher is not a legal tender and not currency. Mayne on Damages in Foreign Exchange has observed that if the damages had to be assessed in foreign currency the same must be converted into English money for judgment there given could only be entered in the latter. In Mayor etc. Of the City of Auckland v. The Alliance Assurance Co. Ltd. ((1937) 167 1 C 337 (P C)) it was observed that "the mode of performance of a contract is to be governed by the law of the place of performance and it has the effect of introducing into the contract the law of currency or legal tender governing in the place of payment as a mode or method incidental to performance. Thus where there is a common unit of account, to which the same denomination applies, the debt expressed in the common unit of account must, in the absence of contrary evidence of actual intention be discharged by payment in the currency of the place of payment."
5. A similar principle was followed in Adelaide Electric Supply Company Ltd. v. Prudential Assurance Co. Ltd. ((1934) A C 122). In Muhammad Rafiquddin v. Federation of Pakistan (PLD 1950 Kar. 506) the Govern--ment of Pakistan had provided money for studies of the student in the United Kingdom and a bond was executed by the student and his surety providing that if the stedent refused to serve the Government after his studies he and his surety would refund money to the Government. It was held that on the refusal of the student to serve the Government the latter were entitled to refund of money at the rate of exchange prevalent at the time when the debt became due. In Khurshid Jamal v. Muhammad Asghar (PLD 1956 Sind 47) referring to a wife's suit for Rs. 10,000 dower against her husband who had married her in India on 29th February 1944, and divorced her on 22nd February 1948, it was held that the debt was repayable at the rate of exchange applicable on the date the debt became due. In D. I. Ferdinando v. Simon, Smith & Co. ((1920) 3 K B 409) the plaintiff's damages in respect of goods carried from U. K. To Italy to be delivered there were assessed at 190 Lira per Sterling and it was held that in arriving at the proper equivalent of the British currency for the purposes of assessing damages the rate of exchange prevalent at the date of breach should be adopted. Bankers, J. Observed in the course of the judgment that the rule of law to be applied is "that the plaintiff is entitled to have his damages assessed at the date of breach and the Court has only jurisdiction to award damages in the English money. The Judge must, therefore, express those damages in English money, and in order to do so he must take the rate of exchange prevailing at the date of breach."
He further went on to observe that the damages "must be expressed in English money or such order cannot be enforced by the ordinary writs of execution." ---an English Court cannot give judgment in foreign currency, there being no power to enforce such a judgment. Therefore the Court must translate into English currency the figure arrived at as the damages in foreign currency on the date of the breach.---
6. This principle was relied on in Madhavji Visrem Thacker v. Ramniklal Vadilal (AIR 1923 Born. 437).
In Ottoman Bank of Nicosia v. Ohanes Chakarian (AIR 1938 P C 26) it was held that "the currency in any particular country must be determined by the law of that country and that law is naturally in terms limited to defining what is legal tender in that country."
7. It seems to me therefore that there are substantial reasons for allowing the objections on behalf of M/s. Pakistan Rubber & Tyre Co., that the learned Arbitrator fell into a"' error in determining the mode of payment by the company by the purchase of bonus vouchers. Bonus vouchers were introduced as an "Expert Bonus Scheme" by the Government of Pakistan in the Ministry of Commerce published in the Gazette of Pakistan on 16th January 1959 as a scheme which would apply to all commodities and manufactured goods except those detailed in it with the stipulation that bonus could be earned only on shipments made on or after 15th January 1959, exporters of goods included in the Scheme being entitled to receive bonus entitlement vouchers on certain terms and condi--tions. The scheme by itself cannot be said to be an illegal scheme and in that context is governed by the observations of the Supreme Court in Manzoor Hussain v. Wall Muhammad (PLD 1965 SC 425) but it has been rightly contended that the bonus vouchers scheme is not currency in terms of section 2 (b) of the Foreign Exchange Regulation Act, 1947 (Act VII of 1947). In view there--fore of the law as laid down in the rulings previously referred to it is clear that the learned arbitrator fell into an error in directing that the equivalent in Sterling of --11,117-19-3 should be made good by M/s. Pakistan Rubber & Tyre Co. By the purchase of bonus vouchers of the same value. As already stated bonus vouchers are neither the currency nor legal tender of this country nor can they be termed the official rate of this country. I propose therefore to remand this matter to the arbitrator for an assessment on this aspect in the light of these observations. 8.
Although this point has not been urged, I also find that in spite of the terms of reference, it appears to have been taken for granted by the learned arbitrator that M/s. Pakistan Rubber & Tyre Co. Were responsible for the breach of the contract since a determination of point (a) of the points of reference can only be made if it has been held or accepted that M/s. Pakistan Rubber & Tyre Co.
Were responsible for the breach. This aspect also requires proper determination by the learned Arbitrator who should give a firm finding initially which of the parties was responsible for the breach of the contract and on what date and the rate of exchange on that date and what damages are awardable, if any, to which party in terms of Pakistan currency. I order accordingly. Each party to bear its own costs.