' This is a proceeding under section 14(2) of the Arbitration Act, 1940 (hereinafter referred to as the Act, 1940) read with Rule 282 of the Sindh Chief Court Rules (O.S.) for making Award dated 19-5- 1995, passed by the umpire, Justice (Retired) Zakiuddin Paul, Rule of the Court. Earlier the two arbitrators, Sheikh Abdul Rauf, for the plaintiff, and Justice (Retired) Dorab Patel, for the defendant, gave dissenting awards which resulted in reference to the umpire.
2. The plaintiff is a company incorporated under Pakistani law while the defendant is a company established under the Australian Law. In the years 1984 and 1986, the plaintiffs imported a quarter million tons of tin plates from the defendant as a result of two contracts executed on 3-12-1985 and 21-4-1986, respectively. There arose a dispute pertaining to the specifications and weight of the tin- plates which ended in the proceedings before the two arbitrators as mentioned above. Both the parties filed claim and counter-claim before the arbitrators and led their evidence. Following seven issues were framed by the Court:--
(1) What formula if any was agreed between the parties for the purpose of calculating the weight of the goods and which of the parties correctly applied the formula? What is the effect? .
(2) Was the supply of tin-plates in conformity with both the contracts. If so, were the claims rightfully rejected by the respondents?
(3) What was the agreement between the parties as to post-shipment inspection of goods, and was the post-shipment inspection made in accordance thereto? In either case, what is the effect?
(4) Did the respondents fulfil all their obligations on both the contracts? If so, are the claimants entitled to the sum of Rs,1,00,12,410 or any part thereof?
(5) Whether the claimants unlawfully or unjustifiably encashed the Performance Bonds? If so, are the respondents entitled to receive damages from the claimants as set out in the counter-claim?
(6) Whether any cause of action has accrued to the claimants?
(7) What should the decree be?
3. The first award was pronounced by Justice (Retd.) Dorab F. Patel who, according to Mr. Abid T.
Japanwala, who is opposing this award dismissed the claim of the plaintiff as well as defendant.
The other arbitrator Mr. Sheikh Abdul Rauf, as appears from his reasoning, concurred with Justice Dorab Patel to the extent of granting Rs,40,92,245 as compensation for the short supply made by the defendant. In respect of other issues, except for the additional compensation of Rs,5,00,000 Mr. Sheikh Abdul Rauf has agreed with Justice (Retd.) Dorab Patel. The matter was referred to the umpire, Justice (Retd.) Zakiuddin Paul who agreed with the award of Mr. Sheikh Abdul Rauf. In both the reasonings of Mr. Sheikh Abdul Rauf as well as Mr. Zakiuddin Paul, reference was made to the findings of Justice (Retd.) Dorab Patel that since he has awarded the aforesaid amount his findng to such extent was correct. Subsequently the second arbitrator and the umpire have based their findings on the same. It is this finding which has been vehemently attacked by Mr. Abid T.
Japanwala. It will be advantageous if para. 55 of the reasoning of the award as given by Justice (Retd.) Dorab F. Patel is reproduced:-- "55. The plaintiff has claimed a sum of Rs,40,92,245 and to prove it, it examined Mr. Munawar to whose evidence I have referred earlier and he produced documentary evidence in support of its claim. The documentary evidence supports the claim and the witness was hardly cross-examined about it. He was also not cross-examined on the suggestion that the market price of tin plate at the date of the alleged breaches of contract by the defendant was lower than the purchase price paid by the plaintiff to the defendant. Therefore, on the assumption that the plaintiff was short supplied as alleged and that this amounted to a breach of contract on the defendant's part, I would decree the plaintiff's claim in the sum of Rs,40,92,245 with interest at 10% from the date of this award."
(Emphasis added by me).
4. I have heard Mr. Syed Samiuddin Sami, Advocate for plaintiff who has supported the award. I have also heard Mr. Abid T. Japanwala, who has objected to making the award a rule of the Court on different grounds. His first attack is that the findings of the learned arbitrator for the plaintiff and, therefore, of the umpire is based on erroneous view that Justice (Retd.) Dorab F. Patel has accepted the claim of the plaintiff up to the amount of Rs,40,92,245. He has put much emphasis on the words "assumption" and "would" used by Justice (Retd.) Dorab F. Patel in para. 55 as reproduced above. According to Mr. Abid T. Japanwala, the contents of para. 55 are to be read with the findings of the said arbitrator in respect of two other issues. He has referred to Mr. Dorab Patel's finding on Issues Nos.6 and 7 which says that there was no cause of action whatever accrued to the plaintiff. In respect of Issue No,7 which pertains to the amount of decree, it was maintained: "For the reasons which I have given, the plaintiff's claim is dismissed. The only question which remains for consideration is that of costs in this arbitration and I leave the parties to bear their own costs".
Mr. Abid T. Japanwala has placed reliance on the following cases:--
(i) Province of Sindh and 4 others v. Waseem Construction Co. 1991 CLC 66,
(ii) M. Aslam Amin v. Muhammad Ali Khan and another 1995 CLC 1795;
(iii) Brooke Bond (Pakistan) Ltd. v. Conciliator appointed by Government of Sindh and 6 others PLD 1977 SC 237.
5. Mr. Syed Samiuddin Sami has supported the award by saying that the defendant has not raised the instant questions before the umpire and now he is estopped from raising these questions before this Court. It was further argued that the scope of this Court while hearing an award is limited and that this Court does not act as a Court of Appeal. He further argued that the learned umpire was competent to judge and interpret para.55 of Justice (Retd.) Dorab F. Patel's reasoning for award which was accordingly undertaken by him and that it cannot be challenged in the instant proceedings. It was further argued that an arbitrator or an umpire, as the case may be, is not required to give reasoning in detail. He has placed reliance on the following cases:--
(i) Messrs Haji Hasham Haji Ahmed and Brothers v. Messrs Trading Corporation of Pakistan Ltd., Karachi PLD 1977 Kar. 480;
(ii) Suraj Mal-Chandan Mal v. Fateh Chand Jaimal Rai AIR 1930 Lah. 230;
(iii) Suleman Haji Muhammad & Co. v. State Bank of Pakistan PLD 1960 Kar. 78;
(iv) The Premier Insurance Co. (Pakistan) Ltd., Karachi v. Ejaz Ahmed Khawaja and 3 others 1981 CLC 311;
(v) Kohinoor Chemical Co. Ltd., Karachi v. Government of Sindh and another PLD 1976 Kar. 548;
(vi) Messrs Pakistan Builders Co., Karachi v. Pakistan PLD 1961 Kar. 365;
(vii) Manzoor Hussain and others v. Wali Muhammad and another PLD 1962 Kar. 877; (viii)Trading Corporation of Pakistan Ltd., Karachi v. Messrs Aslam Saeed & Co. And 3 others PLD 1973 Kar. 65; and
(ix) WAPDA and another v. Messrs Khanzada Muhammad Abdul Haque Khan Khattak & Co. NLR 1990 SCJ 183.
6. Except for the case of WAPDA and another (ibid), all the cases are prior to the year 1981 when section 26-A was introduced in the Act 1940, through Arbitration(Amendment) Ordinance, 1981 which reads as follows:-- "26-A. Award to set out reasons.--(1) The arbitrators or umpire shall state in the award the reasons for the award in sufficient detail to enable the Court to consider any question of law arising out of the award.
(2) Where the award does not state the reasons in sufficient detail, the Court shall remit the award to the arbitrators or umpire and fix the time within which the arbitrator or umpire shall submit the award together with the reasons in sufficient detail: ' Provided that any time so fixed may be extended by subsequent order of the Court.
(3) An award remitted under subsection (2) shall become void on the failure of the arbitrator or umpire to submit it in accordance with the direction of the Court."
7. In order to ascertain the real intention of Justice (Retd.) Dorab Patel in reference to his views expressed in para. 55 of his reasoning, it will be necessary to consider his findings on the other issues. He has dealt with Issue No,1 in para.49. According to his finding, clause 1 of the contract imposes limitation and the contract permits the thickness of the tin plates to be less than the thickness ordered by the plaintiff by not more than 10% and that the defendant had more or less to ensure that the weight of the tonnage supplied was not less than the tonnage ordered by more than 2%. In para.5, it was stated by him, "In view of my finding on the first issue and in view of the evidence produced by the parties, I answer both these questions in the affirmative". The effect of answering Issue No,2 in affirmative is that it was held by Justice (Retd.) Dorab F. Patel that the supply of tin plates by the defendant was in conformity with both the contracts and that the claim of the plaintiff was rightfully rejected by the respondents.
8. In respect of third issue, it was held that the plaintiff's failure to give notice affects the evidenciary value of the survey and its right to hold the survey. As a result of this finding, it was held that it is not possible to rely on such survey report. Issue No,4 was discussed in para.52 to 59, which was considered by the other arbitrator and umpire, granting partial relief to the plaintiff by Mr. Justice (Retd.) Dorab Patel.
9. Mr. Sheikh Abdul Rauf's finding on Issue No,1 is to the extent that there was an agreed specification between the parties which was not followed by the respondents. In respect of Issue No,2, it was held by Mr. Sheikh Abdul Rauf that the respondent did not fully conform to the requirements of the contract and thereby did not provide specified tonnage of tin plates of actual physical weight. He also upheld the survey report and declared the same to have been made according to the rules sand established practice. However, while dealing with Issue No,4, he relied upon para.55 of the reasoning of award by Justice Retired Dorab F. Patel and made the following observations thereby deciding the entire claim of the parties. The relevant portion of the findings of Mr. Sheikh Abdul Rauf reads as follows:-- "... ... ...Mr. Justice (Retd.) Dorab Patel has dealt with this question at some length. Discussing the various components of the plaintiff's claims of Rs,1,00,12,410, for the reason given, he has rejected all claims except the one on account of short supply of 338.301 M/tons of tin sheets amounting to Rs,40,92,245 (para.55 of his award refers). I agree with him. Further I am also of the view that the plaintiff should be adequately compensated for the denial to them of the use of this large amount of money all this while. As it is not easy to precisely work it out, I would put it at Rs,5 lacs--roughly Rs,one lac a year.
' As regards the fifth issue, I share the finding of Mr. Justice (Retd.) Dorab Patel and endorse the rejection of respondent's claim.
32. In line with my findings on issues one and two, my answer to the sixth issue is in the affirmative.
33. As per the amount of decree, the seventh issue, it should be Rs,45,92,245 (Rs,40,92,245 plus Rs,5,00,000) as indicated earlier while disposing of the fourth issue.
34. On the point of costs, I hold that each party should bear their own expenses."
10. The learned umpire, for majority reasons, agreed with Mr. Sheikh Abdul Rauf and he too while considering grant of relief to the plaintiff referred to the observations of Justice (Retd.) Dorab Patel made in para.55 and gave his finding decreeing the claim of the plaintiff to the above extent with the following observations:-- .. ...In para.55 of Mr. Justice (Retd.) Dorab Patel's Award, the genuineness or otherwise of this claim has been discussed in detail. It has been rightly found that Mr. Munawar, one of the witnesses produced by the plaintiff, had produced documentary evidence to prove this claim. Strangely enough, the aforesaid witness was not cross-examined on various points arising from his statement. So much so, the witness was not even questioned about the market price of tin plates at the date of the alleged breach of the contract by the defendant which was allegedly lower than the purchase price paid by the plaintiff to the defendant. In view of that the learned Arbitrator has rightly drawn the presumption that plaintiff was short supplied as alleged by it and as such this amounted to a breach of the contract on the defendant's part. Mr. Justice (Retd.) Dorab Patel has, therefore, passed a decree in favour of the plaintiff for a sum of Rs,40,92,245 with interest at 10% from the date of his award. Sh. Abdur Rauf, learned Arbitrator for the plaintiff, in para.30 of his award has concurred with that finding in clear terms. However, he has further added that the plaintiff should be adequately compensated for the denial of such a large amount to him all this time. As such, he has found that amount of Rs,5,00,000 (Five lacs) is sufficient amount for compensation purpose. The learned Arbitrator for the plaintiff has, therefore, passed decree for Rs,45,92,245 inclusive of the amount of compensation with ten per cent. Interest from the date of the award.
' I have carefully gone through the awards of both the learned Arbitrators, discussing in detail, all the relevant points arising in this case. I agree with the finding of both the learned Arbitrators that on account of breach of the contract on the part of the defendant for short supply of 338.301 metric tons of tin sheets, amount of Rs,40,92,245 is the adequate amount to be decreed in favour of the plaintiff. There is no doubt that the plaintiff was deprived of this large amount of money all this period and for that reason he has been compensated by the Arbitrator for the plaintiff, Sh. Abdur Rauf, for Rs,5,00,000. I agree with this finding.
' The result is that decree for amount of Rs,45,92,245 with interest at the rate of 10% from the date of the award is passed in favour of plaintiff.
' Both the parties will bear their own costs... .... ...."
11. In the case of Brooke Bond Ltd. (supra), a dispute arose on the award given by an arbitrator who, at the relevant time was Presidential Adviser of Public Affairs, Government of Pakistan appointed by consent of the parties in furtherance of section 31 of the Industrial Relations Ordinance, 1969. One of the grounds challenging the award was that the said arbitrator has committed misconduct. It was held by a Full. Bench of Hon'ble Supreme Court that the term misconduct used in connection with arbitration does not necessarily imply, anything in the nature of fraud or moral turpitude. Term 'misconduct' was defined by the Hon'ble Supreme Court as 'conduct inconsistent with the duties imposed upon those selected arbitrators either at the hearing or in reaching their conclusions....". In the case of Messrs Moosa Omar & Co. Lid., Karachi v. Messrs Haji E. Dossa and Sons PLD 1997 Kar.
899 at 905, it was held by a Division Bench of this Court that where an arbitrator had not awarded damages upon the settled principle, still the award cannot be challenged on the ground of legal misconduct. Therefore, it cannot be said that the arbitrator Sheikh Abdul Raoof and the Umpire have not applied their conscious mind and have simply proceeded on the findings of arbitrator Mr. Dorab F. Patel. Perusal of findings of these two persons indicate that in addition to the reference to para.55 of Justice (Retd.) Dorab F. Patel's reasons they have given their reasoning in addition.
Therefore, there appears no misconduct on the part of these two (arbitrator and umpire).
12. Indeed, if a contract has not been properly appreciated and considered by an arbitrator or by an umpire, it would amount to an error apparent on the face of award as held in the case of Waseem Construction Co. (supra). But, in the instant case, there is no such misreading or misinterpretation of the terms and conditions of the contract. It was argued by Mr. Samiuddin Sami that if the award given by Justice (Retd.) Dorab F. Patel is excluded, still there are, in field, the awards given by Sheikh Abdul Rauf and umpire Justice (Retd.) Zakiuddin Pal. I have gone through the reasonings of both the arbitrators and the umpire. Reference was made to para.55 of Mr. Justice (Retd.) Dorab Patel's reasoning. But in addition to that, the remaining arbitrator and umpire had given their reasoning for which Mr. Abid T. Japanwala was not able to point out any error apparent on the face of their awards.
13. It was not explained as to why the dispute was referred to the umpire when both the arbitrators have concurred on awarding darnages/compensation in favour of plaintiff. In the concluding portion of Justice (Retd.) Dorab Patel's award, he has declined to grant any relief to the plaintiff while Mr. Sheikh Abdul Rauf has granted relief to the extent mentioned hereinabove. From the conduct of the parties and by virtue of the fact that the matter was referred to the umpire, it is clear that both the arbitrators' awards were contrary. Mere reference to the contents of para.55 of Justice (Retd.) Dorab F. Patel's reasoning by the second arbitrator and the umpire is not such an error which warrants interference of this Court. Both Mr. Sheikh Abdul Rauf (arbitrator) and Justice (Retd.) Zakiuddin Paul (umpire) have given additional reasoning in support of their award.
Recently, a Full Bench of Hon'ble Supreme Court in the case of M/s. Joint Venture KG/Rist and 2 others v. Federation of Pakistan and another PLD 1996 SC 108 at 119, held inter alia, that the Court while examining the validity of an award does not act as Court of appeal and, therefore, a Court hearing the objection to the award cannot undertake reappraisal of evidence recorded by the arbitrator in order to discover the error or infirmity in the award. It was further held that the error or infirmity in the award which rendered it invalid, must appear on the face of the award and should be discoverable by reading the award itself. "Where reasons recorded by the arbitrator are challenged as perverse, the perversity in the reasoning is to be established with reference to the material considered by the arbitrator in the award".
14. As a result of the above discussion, I do not see any error or perversity on the face of the awards given by Mr. Sheikh Abdul Rauf and Justice (Reid.) Zakiuddin Paul. However, I do not see any lawful reason for granting an additional amount of Rs,5,00,000 (Rupees five lacs only) by Mr. Sheikh Abdul Rauf on the ground that the plaintiff should be adequately compensated for the denial to the plaintiff for the use of this large amount of money which was also endorsed by the umpire. Such relief was outside the scope of arbitration. The plaintiff has never claimed any extra amount as compensation for denial of this payment. Therefore, to that extent, the award is modified. The award is made Rule of the Court to the extent of Rs,40,92,245 with interest at 12% from the date of decree.