' This suit is founded on arbitration award dated 24-1-1992 made by the sole Arbitrator Mr. Justice (Retd.) Muhammad Zahoorul Haq appointed by this Court in Judicial Miscellaneous Application No,28/1988 by order dated 30th April, 1989.
2. Facts leading to the dispute between the parties are that under an agreement dated 14th January, 1980, plaintiffs entered into an agreement with the defendant Rice Export Corporation Pakistan Limited whereby the plaintiffs agreed to purchase 50,000 metric tons of Basmati rice for export at a price of U.S.$710 per metric ton. The period of contract was between 1st March, 1980 to 30th September, 1980. The plaintiffs alleged that the defendants took undue advantage of the information confidentially communicated to them and sold rice to Government Trading Corporation of Iran and it became impossible to sell rice to the said corporation of Iran. It was alleged that there was an implied term of contract that the RECP would not cut the price but they acted mala fide by undercutting the claimants. Plaintiffs induced Government Trading Corporation of Iran to purchase rice at U.S.$ 752.50 per metric ton in June, 1980 but again the defendants destroyed the said sale. Plaintiffs also made arrangement for transportation of rice by carriers in September, 1980 but the Persian Gulf situation deteriorated, therefore, the contract was frustrated by force majeure clause, thus the defendants committed breach of contract and are not entitled to withhold the security deposit of Rs,87,72,405 in trust with them or any part thereof as they did not suffer any loss and rater made profits.
3. On the other hand defendants maintained that the plaintiffs because of their inexperience were able to export only 3,775 metric tons of Basmati rice by 30-6-1990 against the quantity of 20,000 metric tons which they were required to export by this time. Breach of contract was denied with an assertion that Iran-Iraq War was irrelevant as the contract was coming to an end in September, 1980. It was denied that force majeure clause was attracted in the circumstances as shipment of rice to Persian Gulf countries except Iran and Iraq continued uninterrupted. Defendants claimed to have suffered loss of Rs,68,65,970 in respect of short shipped 16,225 metric tons out of 20,000 metric tons of Basmati rice which was to be exported on 30-6-1990, on account of interest and storage charges and further claimed Rs,70,01,626 as interest, storage charges and losses in resale on account of short shipment of 27,000 tons out of balance of 30,000 metric tons which was to be shipped between 30-6-1980 to 30-9-1980. Thus total claim of the defendants on account of loss etc. Comes to Rs,1,38,67,596.
4. On the pleadings of the parties, learned Arbitrator settled the following issues:--
(i) Whether the claimants conveyed any information regarding sale to Iran in confidence to the respondent? If so, whether the respondents took any undue advantage of this ?
(ii) Whether there was an implied commitment on the respondents that they would not take steps which would render performance of the contract commercially or otherwise impossible?
(iii) Whether the respondents effectively frustrated the efforts of the claimants to sell rice to Iran for the second time in or about June, 1980?
(iv) Whether the geo-political situation in the Persian Gulf and Iran-Iraq conflict frustrated the contract and/or was covered by the force majeure clause?
(v) Which party committed breach of contract? With what effect?
(vi) Whether the respondents were entitled to forfeit the security deposit?
(vii) Whether the claimants are entitled to compensation/damages in the amount claimed by them and/or any part thereof?
(viii) Whether the respondents are entitled to claim damages of Rs,1,38,67,596.00?
(ix) What should the award be?
5. On the conclusion of the arbitration proceedings and assessment of material evidence adduced before him, learned Arbitrator held that the plaintiffs failed to prove that they had conveyed any information regarding sale of rice in confidence to the defendants or that the latter took undue advantage thereof. On Issue No, 2, he took the view that there was no implied commitment by the defendants that they would not take steps which would render performance of the contract commercially or otherwise impossible. He answered Issue No,3 against the plaintiffs by observing that even otherwise the defendants were always at liberty to sell its rice to anyone at any price and it had the liberty to compete with its own purchasers. On Issue No,4, learned Arbitrator held that force majeure clause was neither involved nor attracted in the circumstances. With regard to Issue No, 5 he held that the plaintiffs committed breach of contract and were liable to pay damages to the defendants. With regard to forfeiture of security deposit, learned Arbitrator held that under clause 5 of the agreement, defendants were entitled to forfeit the same or part thereof in accordance with Clauses 7 and 8 of the agreement. He dismissed the claim of the plaintiffs and awarded storage charges and losses from 16-8-1980 amounting to Rs,10,16,000 to the defendants in addition to Rs,10,00,000 on account of damages on resale of the unlifted Basmati rice and allowed appropriation of Rs,20,16,000 as against security deposit with them with a direction to return the balance of Rs,67,56,405 to the plaintiffs.
6. He fixed his fee at Rs,2,00,000 and having received Rs,30,000 from the parties shared equally as the tentative fee fixed by the Court suggested that the balance amount of Rs,1,35,000 is payable by the plaintiffs and Rs,35,000 by the defendants subject to orders of this Court.
7. Pursuant to the notice issued by this Court, defendants filed a number of objections to the award to which a counter-affidavit was filed on behalf of the plaintiffs which was followed by a rejoinder.
8. At the hearing, learned counsel for the defendants with reference to clause 5 of the agreement, vehemently contended that the amount of security deposit for due performance of the contract with RECP was liable to forfeiture for breach of contract and the learned Arbitrator committed misconduct in law by not permitting forfeiture thereof despite a filing that the plaintiffs were not in breach of the contract. The contention is not well-founded and untenable at law. Clause 5 of the contract between the parties unequivocally postulates that the amount of security deposit shall be held by the sellers for due performance of this agreement by the buyers. It further provides that if not forfeited in terms of Clauses 7 and 8, the said amount shall be adjusted in the final invoice after retention of Rs,4,00,000 till final settlement of accounts. A glance at clauses 7 and 8 of the contract tends to indicate that the amount of security deposit may be forfeited by the sellers who shall have lien and charges thereupon including the option to appropriate the same towards the price or payment due to them under the contract. To my mind a close scrutiny of various clauses in the contract manifests the intention of the parties that the provision with regard to security deposit was essentially stipulated for due performance of the contract and in order to indemnify the sellers against the loss by reason of resale of the commodity in the event of breach of contract or failure to observe the covenants of the contract on the part of the buyers. Forfeiture of the security amount in the circumstances cannot be accepted as unconditional and absolute right of the defendants corporation in law and in my view by directing appropriation of the defendants claim against this amount, learned Arbitrator neither committed any error of law nor a misconduct within the purview of the term.
9. Learned counsel next referred to calculation of the damages/losses sustained by RECP on account of resale of Basmati rice owing to failure of the plaintiffs to export the same. Admittedly rice was agreed to be sold to the plaintiffs at the rate of U.S. $ 710 per metric ton on FOB basis for export. While the plaintiffs were able to export only 3775 metric tons of Basmati rice as against contracted quantity of 50,000 metric tons, balance quantity appears to have been exported by RECP on different dates at different rates. In this connection, learned counsel referred to the finding of the Arbitrator to the effect that the defendants sold 30,000 metric tons of Basmati rice to Iraq on 5-10-1980 at U.S. $ 710 per metric ton and they sold 10,000 metric tons to Kuwait at the rate of U.S. $ 740 per metric ton, therefore, there was no justification to allow them any loss and damages on resale. Learned counsel in this connection referred to documents Exh.D/25-A, D/26, D/27, D/28, D/29, D/37 and D/40 to point out that in calculating such amount, learned Arbitrator committed an error apparent on the face of record which requires to be modified and corrected by this Court.
There appears to be a considerable force in this submission of the learned counsel.
10. While the grounds for setting aside an award are illustrated in section 30 of the Arbitration Act, section 15 and 16 lay down the circumstances under which an award might be corrected and modified or remitted for re-consideration. Generally speaking, an arbitration award in substance ousts the jurisdiction of the Court except for the purposes of controlling the Arbitrators and preventing misconduct and for regulating the procedure after the award. So far as the hearing of the merits is concerned and the decision contained in the award, the Court has very little scope and jurisdiction.
Strictly speaking, the Court has no right to review or reappraise the evidence considered by the Arbitrator on merits and the spirit of law is to attach finality to a decree passed in accordance with the decision of the Arbitrator.
11, Where the parties by consent substitute a forum of their own choice, they are legally bound by its decision on question of fact and law, however erroneous they may be and the Court has ordinarily no power, to alter or vary the award. Under certain circumstances, however, the Court may modify, correct, remit or set aside an award. The power of the Court to modify or correct an award is limited by clauses (a), (b) and (c) of section 15 of the Arbitration Act. In the case in hand clause (b) is relevant and attracted to the facts of the case which reads as under:-- "15. Power of Court to modify award.--The Court may by order modify or correct an award--
(a) -----
(b) where the award is imperfect in form, or contains any obvious error which can be amended without effecting such decision: or
(c) ----- --
12. At the hearing although the defendants' counsel was of the view that in the event of incorrect assessm ent of damages by the Arbitrator, award may be remitted to him for reconsideration but after analysis of the material on record and the documents referred by the learned counsel and after having had the benefit of hearing counsel for the parties, I am of the view that the mistake in calculation of damages/losses suffered by the defendant corporation on resale of the unlifted quantity of rice being apparent on the face of record can be lawfully and justifiably taken into consideration by me for the reason that Arbitrator essentially has accepted the claim of the defendant with regard to the damages/losses suffered on account of breach of contract on the part of the plaintiffs. To my mind, consideration of the oral as well as documentary evidence on record adduced by the parties by this Court would not materially affect the decision made by the Arbitrator. This jurisdiction being vested in this Court by law need not be withheld, for technical reasons which would only give rise to multiplicity of litigation and further delay the resolution of the dispute between the parties for a considerable period of time which ought to be avoided as far as permissible under the law.
13. Adverting to the documents referred by the learned counsel, perusal of contract for export of 30,000 metric tons of Basmati rice to Iraq, Exh.D/25-A dated 5-10-1980 reveals that the defendant corporation contracted to export 30,000 metric tons of Basmati rice to Iraq at the rate of U.S. $ 740 per metric ton including cost and freight during the period from October to December, 1980. Such export of Basmati rice took place on different dates to Iraq vide Exhs.D/26 to D/29 while a reference to Uniform General Charter, Exh.D/40 tends to show that the defendant had to pay U.S. $ 38 per metric ton by way of cost and freight with the consequence that the cost of rice so exported actually received by the defendants would be at the rate of U.S. $ 702 per metric ton and as the agreed sale price with the plaintiffs was U.S. $ 710 per metric ton, they sustained a loss of U.S. $ 8 per metric ton and computed the loss for 30,000 metric tons they sustained the loss of U.S.$ 2,40,000 which inadvertently escaped the notice of learned Arbitrator who in good faith took it for granted that the unlifted rice by the plaintiffs, was exported by the defendant corporation at the rate of U.S.$ 710 per metric ton as agreed between the parties.
14. Likewise contract document Exh.D/37 dated 1-11-1980 reflects the export of 10,000 metric tons of rice to State of Qatar at the rate of U.S. $ 700 per metric ton on FOB basis whereas the agreed rate of sale to the plaintiff was U.S. $ 710 per metric ton. In this manner computing the loss at the rate of U.S.$ 10 per metric ton for export of 10,000 metric tons gross amount would work out at U.S.$ 1,00,000. The defendants are thus entitled to reimbursement of the damages/losses suffered by them for the breach of contract on the part of the plaintiff and calculating the loss at the exchange rate of Rs,9.8844 the rupee value for U.S.$ 3,40,000 would come to Rs,33,60,696.00. It may be observed that the aforesaid rate of exchange was prevalent on 30-1-1980 at which the amount of security deposit in terms of dollars was deposited with the defendants vide Ordinary Proceeds Certificate for exchange control purpose Exh.A/3A at page 81 of the evidence file. According to the aforesaid calculation, the defendants are entitled to appropriate this amount out of the security deposit available with them and the award is modified and corrected to this extent which will serve the ends of justice and be in consonance with the evidence on record.
15. As to the storage charges allowed by the Arbitrator I am not inclined to interfere with the discretion exercised by the Arbitrator and to modify the rate of storage charges from Rs,7 per metric ton to Rs,20 as suggested by the learned counsel with reference to the contract between the parties.
16. For the aforesaid facts and reasons, award in the aforesaid suit is accepted subject to above modification and made rule of the Court with a further direction that the fee of the Arbitrator shall be the first charge on the amount of security deposit available with the defendant corporation. In the circumstances, parties to bear their own costs.