' This appeal is directed against order dated 4-2-1989 of the Civil Judge 1st Class, Lahore, rejecting the objection petition of the appellant and making award dated 10-3-1984 of Mr. Inam ul Haq Khan, Umpire in favour of the respondent as rule of the Court.
2. Necessary facts of the case are that the appellant was Chairman of firm/company namely Unicord Marketing, P.O. Box 1375, Dubai, United Arab Emirates and on Ist of November, 1980 executed a Memo. Of Understanding whereby a new division of the aforementioned company was created introducing respondent No, 1 Mr. Muhammad Ali Khan as an Executive Director, to carry on the business of purchase and sale of Industrial Plants and Machinery subject to the terms and condition stipulated in the Memo. Of Understanding which is reproduced hereunder:-- "UNICORD MARKETING P.O. Box 1375, DUBAI United Arab Emirates Date November 1, 1980: ' Memo. Of Understanding
1. Unicord Marketing, P.O. Box 1375, Dubai, with M. Aslam Amin as its Proprietor is at present carrying on contract business. It has been decided to create a new Division of this company to carry on the business of purchase and sale of Industrial Plants and Machinery.
2. Mr. Muhammad All Khan has been taken as an Executive Director to carry on the business of the new Division.
3. The existing facilities (like office, telephone, telex etc.) of Unicord Marketing or such other companies over which M. Aslam Amin has a control located in U.K., Dubai or in any other place in the World where business demands the setting up of the office of the new Division may be used by the new Division for its business. For Bank facilities separate and independent arrangements will be made. The new Division will be debited with only such proportional cost of such running expenses as may be agreed by the Proprietor and the Executive Director.
4. M. Aslam Amin will be the Proprietor and Mr. Muhammad All Khan will be the Executive Director of this Division of the Company. M. Aslam Amin will provide the necessary Bank finances and Bank facilities, the expenses of such financing like Bank charges and interests etc. Will be borne by the Division. Account will be opened for this purpose, i,e, for meeting the current expenses which will be operated by the Executive Director.
5. Accounts will be kept under the supervision of the Executive Director and shall be made up periodically. All the expenses of the business shall be debited to these accounts and all the income will be credited. In case of no profits, the expenses will be shared equally.
6. Neither the Chairman nor the Executive Director, shall, for the time being, draw any salary.
However reasonable drawings may be made which will be adjusted against the share of profit.
7. That after meeting all the business expenses including the financial charges and Bank Interests, the balance of the profits shall be divided equally between M. Aslam Amin and Mr. Muhammad All Khan.
8. This arrangement will continue for mutual benefit by mutual consent backed by the word of honour of both the parties. This will be binding on the heirs and assignees of the signatories in the event of their death.
' In witness whereof the parties have signed this Memo. Of Understanding.
Karachi Ist November, 1980 (Sd.)
M. Aslam Amin (Chairman)
(Sd.)
Muhammad Ali Khan (Executive Director)."
3. It appears that differences arose between the parties as to the business and they decided to refer the matter to Arbitration and consequently Hafiz Aziz Ahmad was nominated Arbitrator by the appellant and Iftikhar Ahmad Dar, Advocate, by the respondent. There was disagreement between the two arbitrators and they referred the matter to respondent No,2 Mr. Inam u1-Haq Khan as an Umpire who made an award dated 10-3-1984 in favour of the respondent who filed the same alongwith the documents before the Civil Court and the same became rule of the Court on 4-2- 1989 rejecting the objections of the appellant,
4. At one'time the appellant filed an application before the trial Court for the authentication of all the documents filed by the respondent but this was rejected by order dated 22-5-1985 holding that "I find that the authentication of documents is not essential because this Court is not supposed to rely on documents because function of this Court is not that of Court of Appeal against the award and the documents relied by the Arbitrator need not be relied as evidence in this Court while proceeding under section 14 read with section 17. In such circumstances, I find that there is no need for the authentication of documents. For my these findings, I hold that this application has no force; hence I dismiss it.
' The appellant then filed an application for summoning the Umpire and this request was allowed vide order dated 14-10-1986.
5. Respondent No,2 Umpire made a statement on 3-11-1987 deposing that he did not receive any specific reference of the dispute, that he did not record the statement of the parties, that the matter related to the accounts and that he issued a questionaire in response to which all the record was produced by the respondent while The appellant did not respond, that the appellant was issued a registered letter to 'appear before him on 16th February but he absented himself on this date andinstead entered appearance on 19th and 20th February and promised thproduce the relevant record but failed to do that and that the directions to the appellant were orally issued, that finally he issued a questionaire on 29-2-1984 and that the award is based considering the record of the Arbitratorsand also the reply of the respondent in pursuance of the questionare. It is also deposed by him that he had cancelled both the awards by the Arbitrators. Further stated that the award is made in view of the Memorandum of Understanding dated 1-11-1980. In response to a suggestion he stated that he could pronounce the award without rendition of accounts. He was cross-examined by the parties. The questionnaire dated 29-2-1984 by respondent/Umpire is as hereunder:-- From Mr. Inam-ul-Haq, Umpire.
Arbitration in case of Mr. Muhammad All Khan, v. Mr. Muhammad Aslam Amin.
To Mr. Muhammad All Khan. Dear Sir, ' In order to arrive at a correct conclusions regarding the above case, I will be obliged if I am given replies to the following queries:--
(1) Para. 4 of the "Memorandum of Understanding" clearly provides that "Mr. Aslam Amin will provide the necessary Bank finance and Bank facilities, the expenses of such financing like Bank charges and interests etc. Will be borne by the Division."
' In view of the above clause why huge investments have been made by you,
(2) Why the business has been continued as Mr. M. Aslam Amin did not provide finances except the alleged Rs,1,75,000.
(3) The original bank documents in respect of L.C. Nos. 842, 1180, 841 may please be provided for examination.
(4) Please render me the details of expenses incurred by you while promoting car business in London.
5. There is a document available with me which shows that there is an amount of U.S. $ 36, 803. 81 credited in London Bank. I would like to know precise constitution of that account. Whether Mr. Muhammad Aslam Amin is a signatory in that account alongwith your good self?
(6) I would like to know the circumstances for opening of a bank account and L.Cs account in a name other than that of Unicord Marketing in Pakistan. If at all the name of the Unicord Marketing was not to be used in Pakistan, whether the name of the other company as used holds written consent of Mr. Muhammad Aslam Amin in order to establish that the business was continuing with his blessings.
(7) I would be obliged if I am provided with material evidence in respect your claim in profits regarding the cars exported by Mr. Muhammad Aslam Amin to Nigeria in business promoted by you.
(8) I may be illuminated as how this 'Memorandum of Understanding' becomes a partnership deed in the eyes of law. The 'Memorandum of Understanding' is nothing but a relationship of Principal and a working agent to share profits, if any.
(9) Did the 'Memo. Of Understanding' authorises you to enter into an agreement on behalf of Unicord Marketing with the manufacturer of Auto Rickshaws Mr. Bill Gennings and C.K. Spangler.
(10) Is there any consent available of the financier to meet the liabilities accruing in Pakistan.
(11) That the "Memo. Of Understanding" states that the business would continue for mutual benefit.
As the business is a failure, how Mr. Muhammad Aslam Amin is benefited in the presence of heavy losses.
(12)Was the bank ever disclosed about the true constitution of the business, if so, please obtain a verified copy from the bank.
(13)As all the business has been done in another name than that of Unicord Marketing. How does the "Memorandum of Understanding" is operateable in this arbitration.
(Sd.)
Inam-ul-Haq Khan,J Umpire"
Date 29-2-1984.
6. The award by the respondent/Umpire, admittedly is in respect of two items, Car business and Auto rickshaw. During the course of arguments the respondent himself, in presence of his learned counsel, elaborated that M/s. Leventis Overseas Ltd., London exported 500 Mercedes Benz Passenger Cars from London, Holland and Hamburg to M/s. Tanje Technical and Trading Company Limited, Nigeria and all this export was made due to his efforts and on account of this the appellant received huge commission and that respondent was entitled to receive half of this. It is on this account that the Umpire has awarded (U.S.) $ 1,77,014, (U.S. $ One Hundred Seventy Seven Thousand Fourteen only). This part of the award is as follOwes:-- "CAR BUSINESS ' The Car business is admitted by both the parties. However, Mr. M. Aslam Amin contends that the business.Done by him with Nigeria has nothing to do with the Joint Venture. The contention is not accepted as the Car Export Business to Nigeria was admittedly initiated by Mr. Muhammad Ali Khan.
' In view of the fact that both the parties could not lead fresh .Evidence on the question of quantum of Car Export, I see no alternative but to confirm the award given by Mr. Iftikhar Ahmed Dar in this matter.
' According (U.S.) $ 1.77.014 (U.S. $ One Hundred Seventy Seven Thousand Fourteen only) are payable by Mr. M. Aslam Amin to Mr. Muhammad All Khan.
Interest at 16% is allowed to this award after 30 days from today."
7. The other item in respect of which the award has been granted is the Auto Rickshaw Business.
The case of the respondent is that he imported 39 units of this item in Pakistan and had paid the entire amount of goods and that he was entitled to half of the principal investment to the extent of Rs,1,172,202 minus a sum of Rs,1,75,000 paid to him by the appellant. At the same time he admitted that he opened the L.C. After paying the entire amount and received the goods and that the sale proceeds thereof was lying with him and that the appellant can at any time ask for the adjustment of the sale proceeds. The Umpire has made the award in respect of Auto Rickshaw Business in the following manner:-- "I hold Mr. Aslam Amin responsible for making good the total investment of the Joint Venture in this regard.
' I fix the quantum at Rs,11,72,202 (129,633 + 142,569) (Rupees Eleven Lacs Seventy Two Thousand Two Hundred and Two only). The amount payable by M. Aslam Amin to Mr. Muhammad All Khan is as follows:- {{TABLE}} Total Investment in Auto Rickshaw Business: 11,72,202 Less: Paid for opening of L.C.
175.000 000 Rs,9, 97,202 Add. Interest @ 16% P.A. With effect from 2 70 352 1-7-1982 to 10-3-1984.
Rs,12,67, 554 ' This amount should be paid immediately. Thereafter the stocks as imported vide L.Cs. Nos. 841 and 842 being the property of Joint Venture should be dealt with accordingly, and any profit and loss arising thereon should be divided equally by the parties in accordance with their agreement."
' The aforementioned two items are the subject-matter of dispute between the parties.
8. This was a part heard case on many hearings and the learned counsel for the parties consumed the maximum time to advance their respective pleas. Ch. Khurshid. Ahmad learned counsel for respondent has prepared a paper book compiling the entire record of the lower Court for ready references and this needs appreciation.
9. Learned counsel for the appellant has questioned the award on the grounds that the Umpire has misconducted himself or the proceedings, that there is errors patent on the face of it, that the matter was referred to the Joint Arbitrators who after having disagreed, the Umpire could not have taken up the matter, that the only option for the Arbitrators was to return the reference and finally that the respondent has nothing to do with the two items of the business in respect of which the award is given and finally there is no evidence on the basis of which the award has been given.
Reliance is placed on (1) M/s. Awan Industries Ltd. v. The Executive Engineer, Lined Channel Division and another (1992 SCMR 65), (2) M/s. Combined Enterprises v. Water and Power Development Authority Lahore (PLD 1988 SC 39), (3) Muhammad Yasin v. Sh. Hanif Ahmad and 4 others (1993 SCMR 437), (4) Ch. Muhammad Saleem v. Muhammad Akram and others (PLD 1971 SC 516), (5)
Abdul Rauf v. Mst. Hafizan Mohsin Ata etc. (1986 SCMR 1893), (6) Government of Pakistan Ministry of Industries v. M/s. National Agencies, Karachi (PLD 1978 Karachi 827).
10. Ch. Khurshid Ahmad, learned counsel for respondent has vehemently contended that the scope of review by this Court is limited and the award could only be set aside under sections 30 and 33 of the Arbitration Act and that no such ground exists in the present case and, therefore, the appeal is liable to be dismissed. Reliance is placed on (1) Ghulam Abbas v. Trustees of the Port of Karachi (PLD 1987 SC 393), (2) Interform Design Associates (Pvt.) Limited v. Baharia Foundation (1991 CLC 1023);-(3) M/s. Overseas Cotton Company v. M/s. S.M. Fuzail & Company (PLD 1958 Karachi 27), (4)
Sukh Lal v. Mamchand and another (AIR 1945 Lahore 34, (5) M/s. Overseas Cotton Company v. M/s. S. M. Fazail & Company (PLD 1954 Sindh 241), (6) N. Chellappan v. Secretary, Kerala State Electricity Board and another (AIR 1975- SC 230), (7) F.J. Rambarts (Pakistan Ltd. v. Pakistan Steel Mills Corporation (1987 CLC 2198), (8) B. Das & Company v. Broack Electric Supply and Development Corporation Limited (AIR 1928 Bombay 55 (1)), (9) Bhartu Kure Jat v. Firm Tara and Mohan Lal (AIR 1962 Punjab 173).
11. Referring to the case-law by the respondent it has been held in case No,1 supra that "an award is final as to both fact and law but there is a rule that an error of law, if it appears on the face of the award, is a ground for setting it aside which is an exception to the general rule as stated. There is a further rider to this rule namely, that if the parties have specifically referred a question of law to arbitration then the general rule would apply and the award will be beyond reproach even if such a question is decided erroneously,. Before going further it may also be stated that as a general principle the Arbitrator has always been considerea.To have implied authority to follow the ordinary rules of law. The intentional disregard of the law would, therefore, seems to be such a misconduct on the part of Arbitrator as would justify setting his award aside (Russell on Arbitration, 19 Edition, page 440)."
12. In Case No,2 it was held that "the Arbitrator is the sole Judge of the facts and this Court cannot assume powers of an appellate Court in respect of the award. When the Arbitrator has arrived at his conclusion after fully taking into consideration the evidence adduced by both the parties, this Court would not interfere with the findings arrived at by the Arbitrator merely on. The ground that it might have come to a different conclusion on the basis of the same evidence".
' In F.J. Rambarts (Pakistan) Ltd.'s case supra the Court held that the Court is not competent to set aside the award if on the basis of evidence on the record before the Arbitrator the Court may reach a different conclusion or conclusions in fact seems to be erroneous. It was further held, however, that the award can be set aside if it is not based on evidence at all. For the latter proposition reliance was placed on AIR 1931 Bombay 343, AIR 1937 Madras 405, PLD 1954 Baghdadul Jadeed 56, PLD 1964 Dacca 527, PLD 1967 Dacca 797, PLD 1974 Karachi 155, 1981 CLC 311, PLD 1960 Karachi 78, PLD 1980 Karachi 207, PLD 1973 Karachi 413, 1981 CLC 1667, 1984 CLC 155, 1982 CLC 1984 and 1982 CLC 2568. The other case-law referred to by the respondents need not be discussed in detail because the propositions contained therein are well settled.
13. In Brooke Bond (Pakistan) Ltd v. Conciliator etc. (PLD 1977 SC 237) it has been held that "the term misconduct used in connection with Arbitration does not necessarily imply anything in the nature of fraud or moral turpitude. In the judicial sense the misconduct of an Arbitrator means his failure to perform his essential duty, resulting in substantial miscarriage of justice between the parties.
According to Atkin, J. In Williams v. Willis (83 LJK B 1296) the words "misconducted the proceedings" means such a mishandling of arbitration as is likely to cause some substantial miscarriage of justice. In the American Jurisprudence, Vol. 3 on page 964-5 it is observed that awards which are valid on their faces may be set aside in equity for misconduct on the part of the arbitrators, and the extrinsic evidence is admissible to prove such misconduct. Conduct inconsistent with the duties imposed upon those selected as the arbitrators, either at the hearing, or in reaching their conclusions will frequently constitute misconduct as well impeach an award".
' It has been held in M/s. A.Z. Company v. M/s. S. Maula Bakhsh Muhammad Bashir (PLD 1965 SC 505) that when award is erroneous, the same be set aside. The proposition was that the Arbitrator had made the award in respect of interest which was not permissible.
14. All the case-law cited by both the parties need not be referred to but there is one settled proposition of law that if an award is not based on e evidence, the same is liable to be set aside. In my view of examination of the entire record I am of the view that this is a case of total lack of evidence and therefore, the award cannot be sustained.
15. The Umpire framed the questionnaire in the name of respondent Muhammad Ali and question No, 13 was as under:-- "As all the business has been done in another name than that of Unicord Marketing. How does the "Memorandum of Understanding" is operateable in this arbitration."
' Answer to this question by the respondent is as follows:-- "The business of Car export was done in the name of Unicord Marketing.
' The business of Auto Rickshaws was done in a Benami name by mutual consent, knowledge and finanical commitment of both the parties. Both of them are covered by the agreement of Ist November, 1980."
' From the reply reproduced above it is admitted by the respondent that the business of Auto Rickshaw was not conducted in the name of the company of which the appellant was the Chairman and where a new division was created introducing the respondent as Executive Director.
The respondent has placed on record details of the L.Cs. By which Auto Rickshaws were imported.
By L.Cs. Nos. 1180 and 842, 25 and 28 'Auto Rickshaws were imported while by L.C. No, 841 only 5 carton spare parts were imported. All these three items have been imported in the name of M/s Umar Commercial Enterprise, 11 Ahmad Mansion 49, the Mall Lahore and not in the name of the Unicord Marketing Company. The Umpire rejected the claim of the respondent in respect of L.C. No, 1180 observing "however so far as L.0 No, 1180 is concerned my finding is that Mr. Muhammad All Khan opened it on his own volition and Mr. Aslam Amin cannot be fixed with any responsibility in respect thereof'. The evidence produced by the respondent in respect of other two L.Cs. Nos. 841 and 842 was not different and the goods against these two L.Cs. Were imported in the same manner as were done against L.C. No, 1180 as observed above. This admission is also in para. 13 of the respondent's reply to the questionnaire that the business of Auto Rickshaw was [done in the Benami name. Not a single document has been produced to support this contention and the Umpire could not have gone beyond the evidence produced on the record by the respondent. In my view on the basis of the evidence produced by the respondent in respect of this item that the Auto Rickshaws were imported in the name of Umar Commercial Enterprise, no c reasonable or prudent person could have made the award against the appellant when the latter was agitating that he had nothing to do with this business item.
16. Admittedly, the respondent opened L.C. In the name of some other firm, got released the Auto Rickshaws and sold the same and the sale proceed thereof is with him and this is so admitted by the Umpire holding in his award dated 10-3-1984 that" the stocks as imported vide L.Cs. Nos. 841 and 842 being the property of the Joint Venture should be dealt with accordingly, and any profit and loss arising thereon should be divided equally by the parties in accordance with their agreement". Evidence produced by the respondent as to this item clearly demonstrate that the item of Auto Rickshaw was imported by him in the name of some other firm. There was therefore, no legal...Justification for the Umpire to award a sum of Rs,11,72,202 as half of the principal amount invested by the respondent nor any, interest could be awarded thereon. The Umpire acted in hot haste and mala fide manner in awarding the aforementioned amount in favour of the respondent and without dealing with or adjusting the sale proceeds which is still lying with the respondent.
However, since no responsibility can be fixed on the appellant as to this item it is not necessary to remit the case on this point.
17. The plea of the respondent that the goods were imported as Benami and with the knowledge of the appellant is again a matter which is not proved on the record on the basis of any evidence.
18. There is another aspect of the case. As to the import of Auto Rickshaw, respondent wrote a letter dated 30th August, 1982 (page 226 of the paper book) which is reproduced as under:-- "30-84982 Dear Aslam Amin, ' I have received phone calls from your Karachi Office for settlement of accounts. I would have preferred to settle all the accounts by personal discussion, but since you seem to be too much occupied, it is necessary to do so in writing.
' I left the account with Sardar Aslam in London. It must have reached you. However, I again send you a copy (enclosed). That fully accounts for O.Ds of Bank of Oman London (Sterling as well as Dollar A/c) which accounts according to Zafar Aslam were squared up when my power to operate these accounts was withdrawn without informing me.
' Out of my efforts two businesses emerged for Unicord Marketing namely:--
(1) Car Exports to Nigeria.
(2) Diesel Auto Rickshaw Apollo 786 developed in USA for which unicord was given world rights.
' Regarding car exports to Nigeria all the preliminary work was done by me. You were kept fully in picture whenever you could be contacted at Dubai or London. This work consisted of establishing contacts with suppliers of Datesun and Mercedeze Banz Cars in Holland, Germany, England and U.SA. At the same time contacts were established in Nigeria particularly A.M.S. Motors, 244 Agene Motor Road Challenge Mushin Lagos, Nigeria. I send you copies of some of the Telexes exchanged in this business.
' When I left for U.SA. For the Auto Rickshaw business you were informed. In my absence you took up the business in your hand. When I returned from U.S.A. You did not disclose to me how much business had been done. This was hardly fair. Please now send me the full accounts of the car business with Nigeria as this is joint with me. We have to share the profits and losses in accordance with our written agreement.
' As regards Auto Rickshaw business where you put in Rs,1,75,000 the accounts up to 30-6-1982 are ready. But since out of 39 units only 6 have been sold so far, therefore, it is too early to say what profit or loss with ultimately emerge. However, as you unilaterally decided not to contribute your share in the capital required beyond the initial Rs,1,75,000, I have financed the entire business out of my own resources. All the same you will get your due share of profit as soon as all the stocks are sold, provided you share the full burden of capital contribution as per our written agreement.
' In the meanwhile please let me have the account of our business as early as possible.
' With best regards Yours Sincerely, (Sd.)
(MUHAMMAD ALI KHAN)
' Mr. Aslam Amin Esq. C/o Unigrain Ltd. 112 High Holborn Land WCI, U.K."
' Operative part of the letter needs material consideration where it is stated that "I have financed the entire business out of my own resources. All the same you will get your due share of profit as soon as all the stocks are sold, provided you share the full burden of capital contribution as per our written agreement". From this it is amply demonstrated that if the appellant was not willing to share in this item it was the respondent wholly and solely responsible for the entire business transaction. Impugned award of the Umpire in respect of this item is not sustainable by law.
19. Then comes the item of car business which has been dealt with by the Umpire so arbitrarily and capriciously that it also smacks mala fide on his part. The award in respect of car business is reproduced above and there are no sufficient reasons to support the same for awarding a sum of (U.S.) $ 1,77,014 in favour of the respondent. It is in the statement of the Umpire that he had cancelled both the arbitration awards delivered by the Arbitrators. In view of this he could not rely upon the award of Mr. Iftikhar Ahmad Dar, Arbitrator nominated by the respondent. The bare reading of the award as to the car business would show that the Umpire did not take into consideration any material on the basis of which the award could be sustained.
20. The respondent at pages 188 sand 189 of the paper book produced two documents, one import licence and the other pro forma invoice showing that some Mercedes cars were exported by the firm Leventis Overseas Ltd., London in favour of Tanje Techncial and Trading Company. Not a single document or evidence has been produced to show that the appellant has received any commission on account of the sale of these cars nor any correspondence produced showing any effort on the part of the respondent that these were being exported for sale in favour of Unicord Marketing in Nigeria. If any commission had been received by the appellant, even then the respondent is under legal obligation to prove on the basis of evidence that all these cars were exported due to his efforts. The claim of the respondent on this account as well is preposterous. The cars have been allegedly exported to Nigerian firm from different places such as London, Holland and Hamburg as stated by the respondent during the course of arguments but not a single document has been shown that this was due to the efforts of the respondent. In order to receive any claim the respondent must have shown that he acted as an Executive Director on behalf of Unicord Marketing and made any efforts for the export of the cars to Nigeria, that the cars were received for sale by the appellant and that in pursuance thereof any commission was received by the appellant. The mere production of two documents, import licence and Pro Forma Invoice showing the export of Mercedes cars in favour of some other firm wholly unconnected with the Unicord Marketing or with the appellant does not give any right to the respondent to claim the amount in the award.
21. The question that there is no evidence on the record to sustain the award has been miserably or deliberately lost sight of by the Umpire and the trial Court has also committed the same legal mistake. I have already stated that all the record produced by the respondent in the form of paper book does not speak of one single document on the basis of which the award could be made by the Umpire in respect of the two items.
' For the reasons stated above this appeals is accepted, the award dated 10-3-1984 is set aside and also the impugned order of the trial Court dated 4-2-1989 by which the award was made rule of the Court. ' However, there is no order as to costs.