On 10-1-1994 the Sole Arbitrator Mr. S.A. Nizami, Ex-Additional Secretary, Law Division, Islamabad, filed the Award in the Court. The defendants (the K.M.C.) has filed objections. Learned counsel of the parties have been heard.
2. On 6th July, 1989 the Karachi Metropolitan Corporation and Messrs Quality Builders entered into an agreement whereby the Corporation awarded contract to Messrs Quality Builders for the construction and maintenance of the fly over of Chowrangi No,2 Nazimabad, Karachi at a reduced cost of Rs,6,10,00,000 which was 10.27% below the rates quoted in the original tender, dated 19th February, 1989. The entire operation was to be completed within a period of 30 months from the date of the start. There was provision for extension of dead-line and in the case of unauthorized delays, the contractor was to pay Rs,10,000 per day or 10% of the cost of work. Copy of the agreement is at page 31 in Folder No,V. It is a very short document in itself and contains very little which were given in 15 separate categories of documents which were made part of the agreement vide clause (2) thereof which are listed below:--
(a) Form of Tender for Works and its Memorandum.
(b) Annexures "A" to "I" to the Form of Tender for Works.
(c) General Rules and Direction for the guidance of contractors.
(d) Special Rules and Directions for the guidance of contractors.
(e) General Conditions of Contract, with Schedule of materials to be supplied by the Corporation.
(f) Additional Terms and Conditions.
(g) Special Conditions of Contract.
(h) Pakistan P.W.D. contractor's labour regulations.
(i) Specifications and list of drawings.
(j) Bills of quantities.
(k) Drawings.
(l) Addendas/Amendments, duly issued by the Chief Engineer/Deputy Chief Engineer on behalf of the Corporation.
(m) The relevant correspondence, drawings and other documents as per clause 3.01.1(0) of the General Conditions of Contract, as far as specified in detail in the Annexure to this agreement of contract.
(n) Forwarding Letter No,QBL/KMC/FOB/413/134, dated 19-2-1989.
(o) Letter No,QBL/KMC/F0B/413/313, dated 15-5-1989.
2. According to the plaintiffs/contractors, they were given possession of the area of operation after a delay of 4-1/2 months and, thereafter, faced delays in the supply of adequate material, steel and cement and the area of operation also intermittently remained under due to law and order situation in the area and on top of this there were heavy rains during the contract period. The work commenced on 7-11-1989 but due to abovenoted factors and also because of subsequent changes in the design of the retaining walls and the difficulties in diverting traffic from the operational area. The period of construction was extended from time to time and the final extension was upto 30-6-1993. The work was eventually satisfactorily completed. Dispute, however, arose between the parties as to various claims of the contractor in respect of escalation of cost of material, stoppage of work for reasons beyond the control of the contractor (like curfew/striks), statutory increase in wages of labour and levy of sales-tax on construction material during the period of operation. The contractor put its claim before the K.M.C. but it did not accept them. Now clause No,7 of Letter No,QBL/KMC/FOB/413/313, dated 15th, May, 1989, which forms an integral part of the contract (vide item (o) in the preceding para) provided that "in case of any dispute the decision of the Mayor K.M.C. would be final and binding...." The contractor, therefore, approached the Mayor under this clause (7) who referred the dispute to Arbitration by Mr. Baqi Siddiqui, Managing Director of Karachi Water and Sewerage Board but the plaintiff could not muster up evidence in support of his claim as regards statutory increase in the salaries of employees and withdrew this claim with permission to put it up separately and this withdrawal was with the K.M.C.
Subsequently, the plaintiffs collected evidence in this regard and desired to approach the Mayor under the said clause (7) but by then local bodies were dissolved and there was no Mayor who was replaced by an Administrator and the plaintiffs approached the Administrator but he took no step whereupon the plaintiffs approached the Government of Sindh in the Local Government Department through theirLetter No,QBL/KMC/F0B/413/ 288, dated 15th October, 1992 and the Government vide their letter, dated 13th October, 1993 (after full one year) appointed Mr. S.A. Nizami as the Sole Arbitrator.
3. After taking into account the evidence adduced by the parties (mainly, by the plaintiffs) and after hearing their learned counsel, the Arbitration awarded the following claims of the plaintiffs:--
(1) Claim No,1 (Escalation in the cost of construction material); 39,85,047.
(2) Claim No,2 (Idling period 15-6-1989 to 31-10-1989 as delivery of possession of operational area was delayed by 4-1/2 months) 9,15,000.
(3) Claim No,3, (Overheads for extended period of contract for 31-5-1992 to 30-6-1993) 24,70,000.
(4) Claim No,4 (statutory increase in the wages of labour sanctioned by Government of Sindh)
25,00,000.
(4-A) Claim No,4-A. (Statutory increase in the wages of labour sanctioned by Federal Government)
47,54,000.
(5) Claim No,5. (on account of sales-tax levied on construction material during operational period)
Not allowed at yet incurred. 1,46,24,318.
4. The defendants have filed objections of which the main thrust is on the denial of the existence of any arbitration clause in the agreement or any separate arbitration agreement. It is also alleged that learned Arbitrator had misconducted himself. It was claimed that the plaintiffs could not lead any evidence about "intermittent supply of water" but yet the Arbitrator allowed it to do so. The defendants also challenged the findings of the Arbitrator holding them responsible for the delays in the completion of the project. Exception was also taken on the conduct of the learned Arbitrator in placing reliance on the unreported judgments of High Courts and Supreme Court. According to them the Award is also bad for being vague.
5. The plaintiffs have filed counter-affidavit of their Managing Director Syed Masoodul Hasan Zaidi.
According to Mr. Zaidi, the objections were barred by time. As to arbitration clause in the contract, it was stated that letter at Serial No,6 in the contract contained arbitration clause. Besides, it was stated that the defendants had fully participated in the arbitration proceedings and, therefore, were estopped from pleading that there was no arbitration agreement. Other averments in the objections were also controverted. The defendants have filed a formal affidavit-in-rejoinder affirming the averments in the objections.
6. Learned counsel for the parties have been heard and record perused.
6-A. In view of the objection raised by the defendants that there was no arbitration clause in the agreement and the very reference to arbitration was, therefore, void and illegal and in the light of the pleadings of the parties and in view of section 30 of the Arbitration Act, the following issues arise for the determination of the Court:--
(1) Whether there was any arbitration agreement between the parties and the arbitrator was validly appointed or not?
(2) Whether the arbitrator has misconducted himself or the proceedings?
(3) Whether the award has been improperly procured or is otherwise invalid?
7. My findings on the above issues are as follows:-- Issue No,1
8. A perusal of the record shows that the claim of the defendants that there was no valid arbitration clause in the contract, and therefore, the very reference of the dispute to the Arbitration is void and illegal, is a thought and force (sic), The agreement executed by the parties, which is the basis of their relationship and which was executed in 6th July, 1989, is, as I have already noted in the preceding lines, a very short and brief agreement. However, clause (2) thereof contains a list of 15 documents listed from (a) to (o) and all these documents have been made an integral part of the agreement. The last document in this list, listed at Serial No,(o) is Letter No,QBL/KMC/FOB/413/313, dated 15-5-1989 from the plaintiffs and addressed to Mr. Farooq Chaudhry, Member, Fly-over Contract Negotiating Committee, Project Manager (East) K.P.T. Karachi. Para. 7 of this letter, amongst other things, also provides that "in case of any dispute, the decision of the Mayor, K.M.C., would be final and binding we will not go to any Court of law". Thus, there was an arbitration clause (or arbitration agreement) between the parties whereby the Mayor of K.M.C. was made the Sole Arbitrator. A dispute between the parties having earlier cropped up, the plaintiffs approached the Mayor who, instead of himself acting as an Arbitrator, appointed Mr. Baqi Siddiqui, Managing Director of the Karachi Water and Sewerage Board as the Arbitrator and when the plaintiffs again wanted a decision on their extra claim in view of the increased cost of labour, they again desired to approach the Mayor but could not do so as the Local Bodies stood abolished by then and the Mayor was replaced by the Administrator but even the Administrator did not take any action in the matter, even though the plaintiffs had approached him under the above referred arbitration clause, whereupon the plaintiffs moved the Additional Chief Secretary, Local Government, Government of Sindh, Karachi who was the Controlling Authority of the Local Bodies and sent him letter, dated 15th October, 1992, asking him to act on behalf of the Mayor and appoint an arbitrator to adjudicate the dispute between the parties arising out of escalation in the wages of labour and construction materials. The Additional Chief Secretary seems to have taken almost a year in acting upon this letter and it was 13th October, 1993 that Section Officer VI of the Local Government Department vide his Letter No,SO(VI)-6-123/93, dated 13-10-1993 conveyed the decision of the Additional Chief Secretary to the Administrator K.M.C. in respect of the appointment of Mr. S.A.
Nizami as the Sole Arbitrator. In fact, letter of the Section Officer is addressed to Mr. S.A. Nizami with copy to the Administrator of K.M.C. In the face of clause (7) in Letter No,QBL/KMC/F0B/413/313, dated 15-5-1989 (at serial No,(o) in the agreement) which is an integral part of the agreement and in view of this Letter No,S.0.(V1)6-123/93, dated 13-10-1993, I find no force in the contention of the defendants that there was no arbitration clause in the agreement between the parties or that the arbitrator, was illegally appointed. As per para.7 of letter at serial No,(o) in the agreement, the Mayor was to act as the Sole Arbitrator in the absence of the Mayor and due to the refusal of his successor-in-office (the Administrator), action was taken by the Additional Chief Secretary under section 53 of the Local Government Ordinance, 1979 as the Controlling Authority of the Local Bodies and he exercised the powers of the Mayor under para.7 of the said letter. Under the circumstances, the Arbitrator was validly appointed. There is no force in the contention of the learneu counsel for the defendants that the Municipal Corporation was not bound by the appointment of Arbitrator by the Additional Chief Secretary and that the Municipal Corporation was coerced by the Government into agreeing to the reference of the dispute to the arbitration, and therefore, its participation in the arbitration proceedings is of no consequence. Even if there had not been any arbitration clause in the agreement, although in fact there is one as narrated above, the willing participation by the defendant in the arbitration proceedings clearly shows that they had agreed to the reference of the dispute to the arbitration of Mr. S.A. Nizami.
9. Learned counsel for the defendants has relied upon a number of judgments which either are not relevant in the present context or do not support his arguments. R.N. Ganekar & Co. v. Hindustan Wires Limited AIR 1974 SC 303 the observation is that an arbitration agreement is of two types; either it is , exclusively an agreement about referring the dispute to the arbitration or an arbitration clause is incorporated in the main agreement and in the latter case an application under section 33 of the Arbitration Act is concerned only with such clause and not with the whole agreement. I do not see in what manner this judgment is relevant to the present case Algal Kishore v. Mrs. Goolbai Harmusji AIR 1955 SC 812 observes that an arbitration agreement need not be signed by the parties and it is valid if its meanings are clear and unambiguous. In the present case, the agreement, dated 6th July, 1989 is signed by both the parties and this judgment has no relevancy. The third judgment is Shri Patanral and another v. Rawalpindi Theaters AIR 1970 Delhi 19 in which the principle of law laid down is that third persons, who are not parties to the arbitration agreement and are not claiming under such parties, are not bound by such agreement and are not entitled to enforce it either. Now, in the present case, there is no third party. In Firm Harmusji and Daruwala v. District Local Board, Karachi AIR 1934 Sindh 200 it is observed that arbitration clause must be clear; so it is in the present case; clause (7) of letter at serial No, (o) in the agreement cannot be said to be vague; it provides that "in case of any dispute the decision of the Mayor K.M.C. would be final and binding". What more clarity was required? Reference of dispute to the arbitration was not unilateral either; it was on the basis of bilateral agreement and, therefore, the dictum laid down in Union of India (Bombay) v. Hari Krishan Joshi and others AIR 1972 Punjab and Haryana 207, that "unilateral reference to arbitration is invalid" is of no consolation to the defendants. In Khardah Company Limited v. Raymon & Co. AIR 1962 SC 1810, Alliance Mills v. Madan Copal AIR 1982 Cal. 282, Messrs Ganga Ram Ratan Lal and Messrs Simplex Mills Co. Limited AIR 1982 Bom. 72 it is observed that an arbitration agreement (or an arbitration clause in an over all agreement) is a condition precedent for the arbitrator to proceed with the arbitration. Now, who denies this principle of law? It is nobody's case that a dispute can be referred to arbitration without there being an arbitration agreement (or an arbitration clause in the main agreement) between the parties. All these three judgments have therefore, no relevancy in the present case. For the same reason Firm Naraindas Balakram v. Bhagwan Dad Kader Nath AIR (38) 1951 All. 860 is also not relevant in which an award was given by the arbitrator although the dispute was referred to him under an invalid reference but the lower Court had made it rule of the Court and the judgment of the lower Court was set aside.
Besides, there was an oral agreement between a member and non-member of an association binding themselves to abide by the rules and bye-laws of the association (including the rule relating to the submission of the disputes to arbitration and it was held that the agreement was void as it was not a written agreement in terms of section 2 of the Arbitration Act. Here, there is no oral agreement of any sort between the parties and this judgment has no relevancy.
10.In this regard a further objection of the learned counsel for the defendants is that vide letter, dated 13-10-1993 the arbitrator was required to give his decision within one month whereas he gave his decision on 23rd November, 1993, that is to say, after a delay of 10 days there was no order extending the period and on this ground also the award was void and illegal. I find no force in this argument either. As held in the judgment reported as WAPDA and another v. Khanzada Muhammad Abdul Haq Khan PLD 1990 SC 359, if parties to arbitration waive the prescribed period by consent and continue to submit themselves to the jurisdiction of the arbitrator, then it cannot be said that the arbitrator acted without jurisdiction merely because the decision was not given within time. This judgment applies to the present case with full force as the defendant had not taken any objection to the continuance of the arbitration proceedings beyond the period of one month.
11. I would, therefore, decide the issue in the affirmative.
Issue No,2
12. The objections filed by the defendants do not contain even one single instance of any misconduct on the part of the Arbitrator. A perusal of the record and proceedings before the learned Arbitrator shows that learned Arbitrator had very judiciously proceeded with the task assigned to him and both the parties were provided adequate opportunity to put up their case before him. The allegation that the learned Arbitrator had misconducted himself or the proceedings is without any basis. The issue is decided accordingly.
Issue No,3
13. Learned counsel for the defendants did not say anything on this issue except that the Arbitrator had not been properly appointed and that some of the items on which he had adjudicated had not been referred to him. Validity, or otherwise of the appointment of the arbitrator has already been dealt with under Issue No,1 and nothing needs be said again =in that regard. As for adjudication by the arbitrator on some of the points which were not referred to him, learned counsel did not refer to any specific item.. A perusal of the letter, dated 13-10-1993 from the Local Government. Department to the arbitrator, a copy of which was endorsed to the defendants, shows that it refers to "Failuie of K.M.C. to fulfil their contractual obligation in respect of fly-over Bridge at Nazimabad Karachi, Arbitration Award". This is the "subject" of the said letter and in the letter the approval of the Additional Chief Secretary to the nomination of Mr. S.A. Nizami as Arbitrator was conveyed to the Arbitrator as well as to the K.M.C. in the following words "Secretary, Local Government in exercise of powers under section 53 of Sindh Local Government Ordinance, 1979 has desired that Mr. S.A.
Nizami may kindly act as an arbitrator in the matter..." It is, thus, clear that the Arbitrator was not nominated to adjudicate upon any specific point. He was nominated to adjudicate "in the matter" and the "matter" was the "subject" of the letter reproduced above. Thus, the arbitrator was nominated to adjudicate upon all the disputes pending between the parties in respect of the contract pertaining to the construction of the flyover. The objection of learned counsel of the defendants is, therefore, without any merit.
14.A perusal of paras. Nos.21 to 31 of the objections filed by the defendant's shows that the defendant wants this Court to sit in judgment over the merits of the Award. This cannot be done.
This Court, while hearing objections under section 33 of the Arbitration Act, does not sit as a Court of appeal and has no jurisdiction to interfere with the Award, on merits, if otherwise it is in accordance with law and, prima facie, sustainable. This Court may not agree with the arbitration on any point but it cannot impose its judgment over the judgment of arbitrator save for the reasons given, and circumstances stipulated, C under sections 15 and 30 of the Act. Only a question of law can be agitated under section 30. Basis of assessment of damages is a question of fact. Mere wrong basis of assessm ent of damages cannot be made a ground to .attack the award.
This Court may take a different view on the basis of evidence on record but it may still not interfere with the Award. There is a plethora of judgments in support of this view but some of them are Province of Sindh v. Waseem Construction Company 1991 CLC 66, Messrs Ibad & Co. v. Province of Sindh PLD 1980 Kar. 207, S.M. Fazil & Co. v. Messrs Overseas Cotton Company PLD 1959 Kar. 320 and Messrs Alpina Construction Co. v. University of Karachi 1990 M LD 1764. As such the defendants cannot be suffered to raise these objections.
15. Learned counsel for the defendants also could not show that the Award had been "improperly procured".
16. This issue is, therefore, decided in the negative.
17. Learned counsel for the defendants very rightly did not say anything on the merits of the award as this Court is not a Court of appeal and, therefore, cannot go into the merits of the various items of award. Only in cases where the findings of an arbitrator are perverse on the face of the record or not based on any evidence whatsoever could this Court set aside the award after holding that the arbitrator had misconducted himself or the proceedings. This is not the case here, As stated earlier, the only real argument of the learned counsel of the defendant was that the very reference of the dispute to the Arbitration was void and illegal and since this argument has been repelled under Issue No, 1, it follows that the award must be upheld. The award is accordingly accepted and made rule of the Court. Award made Rule of Court.