' The present proceedings arise out of petition of for filing the award dated 2-1-1995 passed by Justice (Retd) Agha Ali Hyder and for being made rule of the Court in terms of section 14 of the Arbitration Act, 1940, and Rule 282 of the Sindh Chief Court Rules (OS). The plaintiff has filed objections under Sections 30 and 33 of the Arbitration Act seeing its modification. The circumstances, leading to the present proceedings, as stated in the Award, are that the defendant had awarded the work of construction of Unit No,3 of its Cotton Mills at Landhi to the plaintiff on 10- 9-1981 with the agreed stipulation that the work would be executed and the building be handed over within six months i,e, by 23-3-1982. Instead, the work was completed in December, 1983. On 20th May, 1984, the plaintiff had submitted its 10th and final bill in the sum of Rs,1,796,139 for payment to the defendant. According to the terms settled between the parties, the bill submitted by the plaintiff had to be scrutinized by M/s Akbar Associates Limited, the Consultants, and in such event had to be paid in fifteen days. In case of delay in scrutiny of the bill, the payments had to be made within 30 days from submission of the bill. The defendants failed to meet their obligations and instead set up a belated counterclaim on 20-10-1984 in the sum of Rs,11,200,236. On 18-12-1984, M/s Akbar Associates Limited had certified the work done by the plaintiff and after deduction of value for various items supplied to it in accordance with the contract and further deductions on account of cash payment and income tax, recommended payment of Rs,553,840.00. The defendant still did not make payment of the certificate amount. This was followed by unresponded request for arbitration and appointment of Sole Arbitrator by this Court under section 20 of the Arbitration Act. The plaintiff preferred claim before the learned Arbitrator on 11-5-1988 for Rs,4,063,321 with interest / compensation at the rate of 2% per month from 21-4-1988. In its claim, the plaintiff had claimed compensation for delay of 21 months attributable to the defendants. The reasons for delay in completion of the work alleged by the plaintiff, as noted in the Award, are as under: "(1) The site was not cleared of waste material by the defendants, due to which the lay out could not be done;
(2) Proper power connection was not provided, and as a result thereof the fabrication work was not possible;
(3) The first construction drawing was released to the defendants on 21-11-1981.
(4) The lay out of the build was revised on 7-12-1981; rendering the work earlier executed completely useless.
(5) There was no air-conditioning consultant for long, so even the foundation work was substantially delayed.
(6) Major hold-ups occurred in service Bay areas, as air-conditioning and plant desingns were not available.
(7) There were delays in the supply of materials and also in the payments of bills.
(8) The Chinese machinery erectors had made a number of additions and modifications, during the installation of the machinery.
2. The defendant, in its reply, had denied the allegations and preferred counter-claim with the allegation that despite having been extended all the facilities, the plaintiff who was unable to execute the contract effectively, mainly, due to cash flow problems and failure to mobilize in time.
The delay in clearance of site for about two months was, however, admitted. The other reasons for delay were disputed and it was alleged that the plaintiff was provided the necessary drawings and was paid regularly. The plaintiff, according to the defendant, was repeatedly called upon to complete the work; and the various structural defects were pointed out which, too, were not removed in breach of the contract compelling the defendant to carry out the repair work, itself.
3. Both the parties led evidence and examined one witness, each. On the basis of evidence, the learned Arbitrator has given the Award holding that the plaintiff was entitled to overhead expenses at the rate of 5% of the contract amount for a period of three months besides the verified amount recommended for payment by the Consultants and a sum of Rs, 50,000 by way of costs. The counter-claim set up by the defendant has been ejected in its entirety.
4. During hearing, the learned counsel for the plaintiff has confined the objections to claim for overhead expenses at the rate of 5% of the contract amount for 21 months instead of three months and has further sought interest on the sum found payable from the date when the final bill, submitted on 20th May 1984, had become payable. It may be noted that the defendant has not objected to the Award and Mr. Asghar Naseem Farooqi has conceded to its being filed and made, rule of the court, indeed.
5. As regards the period of delay, the learned counsel for the plaintiff has taken me through the Award to contend that the delay in completion of the work was solely attributable to the defendant.
According to Mr. Dastagir, the witnes of defendant had acknowledged, during his evidence, the causes of delay it completion of work. The following observations, contained in the Award according to Mr. Dastagir, make it clear that the delay in completion of the project was caused by the defendant, itself, and for such reason the denial o claim for overhead expenses was not justified.
' "It was the responsibility of the defendants to clear the construction site on their own. Their witness Fakih admits, that 'its removal was not included in the b.o.o. 'It was to be done by the defendants themselves and that it was cleared by them on the 22nd of November."
' 'The indisputable fact, however, that emerges, is that is on the showing of the defendants themselves till the 22nd of November, the work could not simply be commenced.'
' According to Azhar Ali the construction drawing relating to the foundation were given on 21-11-1981 and even the foundation work was revised on 8-12-1981 to the extent that the lay out work had to be started all over again. Fakih admits these changes, but only three times after 30-11-1981. Some of the changes, however were major. He also admits changes in the lay out.
' Fakih admits that the drawings were intermittently revised, twice after 30-11-1981 and the change in the Service Bay Area might have bees continued upto 1983. This he admits to be a major change.
Even some of the changes in the drawings according to him as mentioned earlier were major.
There were also some changes in the foundation, on the bidding of the Chinese Engineers.
' Fakih also admits that the work of laying the slabs over the trenches was held up because the defendants could not complete the laying of the necessary cables in the trenches.
' There were also additions to the original plan. The fact that addition had been made is not denied."
' The above factors appear to have been considered by the learned Arbitrator be on the basis of the record the learned Arbitrator found "There was nothing show, that after December 1981, they had to stop their work for one reason another". The learned Arbitrator has further found as follows: ' "Nor, looking to the record of the case, can it be said that the plaintiffs the resources at their disposal to meet the challenge of what the themselves call an adequate but tight schedule. Time and again, the were asking for cash support to satisfy the demands of their workers."
' Now, the learned counsel for the plaintiff has not been able to show that the above quoted finding of the learned Arbitrator is perverse or based on no evidence. It is settled that the scope of scrutiny undertaken by the Court, before which Award is submitted under section 14 of the Arbitration Act, is limited and marked difference exists between the jurisdiction exercised by an Appellate Forum on the Court considering objections under sections 30 and 33 of the Arbitration Act. Such principle, re- stated in the case of Ghulam Abbas v. Trustees of Port of Karachi (PLD 1987 SC 393), cannot be better illustrated than reproducing the same:-- ' "We find force in this submission as there appears no error on the face of the award in view of the positive findings by the Arbitrator that the contractor had executed this item of work which finding was based on the evidence produced before the arbitrator. The Court could not go behind the ward and indeed no evidence has been pointed out for sustaining the conclusion that the contractor had opportunity of anticipating leakages from the dredger pipe, which hardly be a basis for upsetting an award given by an arbitrator."
' The findings recorded by the learned Arbitrator cannot be disturbed on the basis of submission that a different conclusion was possible. What is required to be shown as a valid objection to Award is that the Award is passed on no evidence or is glaringly contrary to the evidence led by the parties. It is significant to note that except for revision of drawings, all the remaining reasons for delay, urged on behalf of the plaintiff, pertained to the pre mobilization period which cannot be stretched to a period beyond three months. Although changes in the drawings, even if major, could have delayed completion of work, in the present case, the finding that the plaintiff had continued its work after December 1981 and did not have to suspend the same, disentitles the plaintiff to Award of any overhead expenses for the delay beyond 23-3-1982. I am mindful of the fact that slowing down the pace of work on account of modification of drawings or the alterations proposed by the Chinese Machinery erectors, could have resulted in the ultimate delay in completion of work.
The plaintiff, however, as found by the learned Arbitrator, did not have sufficient resources at their disposal to proceed by the tight schedule agreed between the parties and the issue stands evenly decided by denying the counter claim preferred by the defendant.
6. For the above reasons, I do not feel inclined to modify the Award and increase the period for which overhead expenses have been awarded to the plaintiff.
7. Reverting to the claim for interest, the learned counsel for the plaintiff has urged that the defendant had failed to make payment of the amount claimed through final bill submitted on 20th May, 1984. The entire amount of bill ought to have been paid within 30 days in case the Consultant had failed to verify the bill. According to Mr. Dastagir, the Consultant was appointed by the defendant and the plaintiff cannot be made to suffer for the delayed scrutiny and certification by it for payment of the bill amount. In any case, according to the learned counsel for the plaintiff, the consultant had certified the amount, payable to the plaintiff, as Rs,553,840 on 18-12-1984 and.The verified amount ought to have been cleared-up within 15 days therefrom. Both the learned counsel representing the parties have heavily relied on above-referred case of Ghulam Abbas v. Trustees of Port of Karachi (supra) in relation to award of interest by the Arbitrator. According to the learned counsel for the plaintiff, section 29 of the Arbitration Act does not create any embargo upon the power of the Arbitrator to award interest and the finding of a Division Bench of this Court to the effect that an arbitrator should not have allowed interest was dis approved by the Hon'ble Supreme Court with the following observations: "16. As far as the other ground that prevailed with the learned Judges of the Division Bench it may be stated that in holding that the matter of interest should have been left for the Court the learned Judges overlooked and misconceived the real import of section 29 of the Arbitration Act which is a provision whereby power has been conferred on the Court to order payment of interest, while making the award the rule of the Court, if the same is for payment of money and this interest covers the post-decree period on the principal sum in the award. By its own terms, therefore, this section does not contemplate or create any embargo on the power of the Arbitrator to award interest in adjudicating upon the reference before him. This was, therefore, not a sound basis for the Court to disallow interest on the ground that the Arbitrator should not have decided this question."
' The learned counsel for the defendant has, on the other hand, referred to the following portion from the same judgment where the rule laid down in the case of M/s A.Z.Co v. M/s. Maula Bukhsh Mahammad Bashir (PLD 1965 SC 505) has been re-affirmed in the following terms: ' "Clearly, therefore, in the submission before the Arbitrator the question was whether the appellant was entitled to interest by way of compensation for breach of contract, in that the respondents who were required by the terms of the contract to make payment for the works executed did not do so at the stipulated time. It is not the case of the appellant that he was entitled to interest by the express or implied terms of the contact or on the basis of mercantile usage or any statutory provisions. In M/s. A.Z. Company v. M/s Maula Bukhash Muhammad Bashir (PLD 1965 SC 505), this Court has already ruled that generally in the absence of express or implied contract to pay interest, or of usage of trade, interest cannot be allowed on damages from breach of contract. The compensation for breach of contract qua the claims accepted by the Arbitrator as awarded could not, therefore, be subjected to a further liability to pay interest according to the dictum laid down in the aforesaid decision."
' Reference has also been made by Mr. Dastagir to the cases of F.J. Rambarts (Pakistan) v. Pakistan Steel Mills Corporation (1987 CLC 2198) an M/s Hafeez Construction Co, v. M/s Javedan Cement Ltd (1989 CLC 885) in support of the submission that an arbitrator can award interest. The stand taken by the two learned counsel does not present much difficulty in reconciling the legal position emanating from the above referred judgments. As a matter of fact, the statement of law, contained in the case of Ghulam Abbas (supra), is quite unambiguous an may be restated in the terms that the power of Arbitrator to allow interest on the amount found due and payable, which remains unpaid, is not put under any embargo or curtailment, but no interest can be allowed by an Arbitrator in relation to the amount awarded as damages or compensation for breach of contract.
Such distinction was noted by Saleem Akhtar, J., as he then was, in the case of F.J. Rambarts (supra).
8. The reason for the above is obvious. The amount of damages or compensation for breach of contract, whether awarded by a Court or by domestic forum of an Arbitrator cannot be claimed as due and outstanding unless determined on the basis of evidence. Until the determination, as above, it merely remains a claim. In relation to a claim, it is obvious that interest cannot be awarded in the absence of mutual agreement, mercantile usage, statutory provision and except in some cases on equitable grounds. Conversely, the liability to pay the amount found due and payable under contract is invariably referable to date when payment ought to have been made. In such cases, the party to whom payment is found due becomes entitled not interest for having been deprived of the value of its money.
9. Having humbly ventured in para. 8 above, statement of legal position regarding power of an arbitrator to award interest, it may be noted that the Court before which award is submitted under section 14 of the Arbitration Act, is undisputably empowered to grant interest in terms of section 29 of the Arbitration Act and section 34, C.P.C. In the present case, the learned Arbitrator has found that a sum of Rs,553,840 was the amount due and payable by the defendant to the plaintiff and such liability indeed, has been admitted by the defendant before this Court, as well. The said amount was found due and payable and the liability was so determined upon verification of the final bill, submitted by the plaintiff, when certificate, dated 18-12-1984 was issued by the Consultant.
The amount of final bill, admittedly, did include the cost of material like cement and steel, which were provided to plaintiff by the defendant and the income tax liabilities. The Consultant had further insisted for further deductions on account of the expenses incurred by the defendant in removal of certain defects in the construction. The deductions, proposed by the Consultant, were agreed by the plaintiff and, therefore, the learned Arbitrator has rightly found it not necessary to anima advert to the same. Thus, the amount claimed by the plaintiff to have remained unpaid was determined for the first time on 18-12-1984 when the consultant had issued certificate and recommended the payment. The learned Arbitrator has aptly referred to the statement of the plaintiff's witness that payment of the above sum of Rs,553,840 upon verification by the Consultant would have cleared the dispute. The amount certified by the Consultant, as already observed, had to be paid by the defendant within 15 days and could not be withheld on the alleged ground of counterclaim. Evidently, the counter-claim had been preferred on 20-10-1984 and was based mainly on the expenses incurred in removal of the alleged defects in the construction. Such aspect appears to have , properly, been considered by the consultant who had effected deduction in the final bill of plaintiff before granting certificate for payment of Rs,553,840. The said amount was, thus, payable by 2nd January 1985 and has remained unpaid; and the plaintiff, therefore, is entitled to interest/mark-up thereon. It is ordered accordingly. The plaintiff has claimed interest at the rate of 2% per month which comes to 24% per annum. Considering the rate of inflation, the claim for interest at the rate of 24% appears to be usurious.
10. In the circumstances, the Award is made rule of the Court with the modification/addition that the plaintiff is entitled to mark-up at the rate of 15% per annum on the sum of Rs,553,840 out of the amount awarded with effect from 3-1-1985 till its payment. The plaintiff shall also be entitled to mark-up in relation to the balance sum of Rs,118,485 from the date of decree till payment.
Award made rule of Court.