An attempt was made to achieve a consensus but it failed and consequently the arbitrators as well as the Umpire gave separate awards recording their findings. The respondent No. 1, filed an application before the learned trial Court for making the award of the Umpire a rule of the Court.
The respondent No.1 filed objections. The learned trial Court framed the following issues:-- "(1) Whether the awards given by the Umpire and Mr. K. N. Dwivedi are without jurisdiction and illegal? OPR WASA.
(2) Whether the Umpire and arbitrators have misconducted themselves and the proceedings? OP Parties.
(3) Whether the objection petition of TEI is time barred? OPR WASA.
(4) Whether the award given by Mr. Mazhar Munir is illegal and without jurisdiction? OPA TEL
(5) Whether the objections submitted by WASA are barred by time? OPA.
(6) Relief. "
Evidence was recorded. Thereafter the learned trial Court proceeded to set aside the award of the Umpire. This F.A.O. Was admitted to regular hearing on 21-10-1989. The case was being adjourned from time to time. Ultimately vide order, dated 22-12-2000 the parties directed to file written arguments. The matter came up before me on 11-1-2001 when the learned counsel present for the parties submitted that they had already filed the written arguments and would not like to add anything to the same. The case was accordingly reserved for judgment.
2. I have gone through the records of the learned trial Court which are available and also the written submissions made by the learned counsel for the parties.
3. Learned counsel for the appellant has submitted that the learned trial Court has acted in a manner violative of the provisions of section 30 of the Arbitration Act, 1940, while proceedings to set aside the award; that the award has been misread by the learned Trial Court; that the observation in the impugned order that the Umpire had sought to influence the arbitrators is not borne out from the record; that no ground has been made out by the respondent No. l for setting aside of the award of the Umpire; that the award of interest was legal and could not have held to be unlawful by the learned trial Court; that the learned trial Court had failed to apply mind to the file of the case while observing that the claim of respondent No.1 had not been attended to properly.
4. Learned counsel for -the respondent No. l on the other hand has contended that the Umpire having held that the respondent No. l was competent to terminate the contract, compensation could not have been warded to the appellant; that in the circumstances of the present case it could not be possible to execute the award given on the basis of clause F-7.2 o the contract; that the Umpire could not have awarded interest.
5. Before I proceed to consider the respective submissions of the learned counsel I deem it appropriate to state that in the present case the arbitration agreement between the parties is contained in clause F-1.3 of the contract. Following are the main features of the said arbitration agreement:--
(i) One arbitrator each was to be appointed by the parties to the contract. In case of a disagreement between the arbitrators they were required to appoint an Umpire and upon further disagreement on the appointment of an Umpire both or either of the arbitrators were to apply to the Court of Arbitration of the International Chamber of Commerce Paris for the appointment of an Umpire by the said Court of Arbitration whose order was to be final in regard to the appointment applied for.
(ii) Upon the appointment of the Umpire the arbitrators and the Umpire were to meet and the dispute was to be finally settled under the Rules of Reconciliation and Arbitration of the International Chamber o: Commerce.
(iii) The decision was to be by the majority vote of the arbitrators and the Umpire and was to be final.
6. The said arbitration agreement does give an impression that the matter was to be governed by and settled under the Rules of Reconciliation and Arbitration of the international Chamber of Commerce. Now under Article 19 of the said Rules where three arbitrators have been appointed the award is to be given by majority decision but if there be no majority the award is to be made by the Chairman of the Arbitrary Tribunal. To my mind in a present case since there was no consensus and also no award by majority it will be the award of Umpire that will decide the disputes between the parties to this extent. I, therefore, and myself in agreement with the armed trial Court that in the present, case it the award of the Umpire which decides the controversy between th parties.
7. I have examined the impugned order of the learned trial Court. I find hat the reasons given by the learned trial Court for setting aside the award of the Umpire are contained in paras 9 and 10 thereof, These are:----
(a) The Umpire having held that the respondent No.1 was justified in cancelling the agreement could not have awed damages to the appellant. According to the learned trial Court the award is a contradiction in terms.
(b) There is no reference to any evidence for award of damages to respondent No .l.
(c) The Umpire had no jurisdiction to grant interest to the respondent No.1.
(d) The Umpire has given instructions and outlines to the arbitrators which was beyond his jurisdiction which amounted to prejudice the findings of the arbitrators.
8. I have gone through the award of the Umpire in the light of the reasoning of the learned trial Court. I find that the learned trial Court has certainly misread the award of the Umpire while holding that the Umpire has found that the respondent No. I was justified in "cancelling" the agreement which was not performed by the appellant in stipulated time and even in extended period.
9. The relevant observation of the Umpire is in para 15.1 of his award which is reproduced hereunder:-- "I am of the opinion that WASA was entitled to terminate the contract. The words "Upon receipt of written notice of LDA/WASA's intent to suspend or terminate the contract, the Contractor shall forthwith cease all operations" does not provide for two stages (a) intent to terminate (b) termination. Notice of intent to terminate is termination of the contract. The consequences of such termination are set out in F-7. 1 and F-7.2."
By no stretch of imagination can the said findings be read as done by the learned trial Court. What the Umpire has stated is that the respondent No. l could have terminated the contract in terms of clause F-7.1 of the contract between the parties and he has further stated that in case of such termination the appellant was to be paid for in terms of clause F-7.2. The Umpire accordingly in paras 15.2 and 15.3 of the award proceeded to observe as follows:-- "15.2. Default of the Contractor is not necessary for termination under clause F-7. The words "In general, the same causes cited hereinafter under section F-11.1 Forfeiture, will be considered to constitute sufficient reasons for termination or suspension of the contract" does not limit the causes for which termination can be made. This is the better view as in such contracts it is not unusual to have a clause for termination and compensation. It is not termination for a fundamental breach, repudiation or non-performance of the contract. In that case damages and not compensation is the consequence.
Here compensation to TEI is provided if WASA terminates under clause F-7.
15.3. I am of the opinion that as the termination has been made under clause F-7 the payments and due under clause F.7.1 "in the event of termination or suspension by LDA/WASA the Contractor shall be entitled to reimbursement at a mutually agreed rate for any actual reasonable and necessary expenses caused by such suspension or termination" and under clauses F-7.2 (b) and
(c) to TEL "
On the basis of the said findings the Umpire proceeded to award the amounts mentioned in para 16.1 of the award to the appellant.
10. Overall impact of the said observation of the Umpire in the award is that the termination of the contract in question was held to be effective under clause F-7.1 of the contract and not the cancellation or rescision of the contract for default of the respondent No. l and since the termination was held to be effected under the said clause of the contract, the Umpire found the respondent No. l entitled to be compensated in, terms of clause F-7.2 of the contract. The Umpire has also observed in para. 17.4(a) and (b) of the award as follows:-- "I am of the opinion that
(a) there was no default apart from delay, at a very late stage on the part of TEI to entitle WASA to terminate or repudiate the contract apart from the right of WASA to terminate the contract under clause F-7 which in fact was done.
(b) That WASA did not terminate (repudiate) the contract for a breach (fundamental) by TEI, although they alleged that this was the reason for termination."
11. I have also not been able to find anything derogatory to the said findings of the Umpire on record.
12. However, I find myself in agreement with the learned counsel for the respondent in his submissions that the award made by the Umpire contained in para 16.1 read with para 16.3 of the award would be inexecutable. Clause F-7.2 provides for payment of the following to the appellant by the respondent No.1 in case of termination thereof by the respondent No. l under clause F-7.1:--- .
"(a) All items delivered prior to the date of termination at the rates and prices provided in the contract.
(b) The cost of materials reasonably ordered for the works which shall have been delivered to the Contractor or of which the Contractor is legally liable to accept delivery (such materials becoming the property of LDA/WASA upon such payment being made to the Contractor. The cost to be paid shall be the actual monies expended by the Contractor.
(c) A sum to be certified by the Engineer being the amount of any expenditure reasonably incurred .By the Contractor in the expectation of completing the whole of the deliveries of materials, insofar as such expenditure shall not have been covered by the payment in subparagraph b. Above."
There is no cavil that the Submersible Pumps which have been delivered by the appellant have been paid for in terms of the contract. Sub-clause (a) would, therefore, not be applicable. The claim made by the appellant at items Nos. l and 2 of para 16.1 of the award fall under sub-clause'
(b) of clause F-7.2. The said sub-clause (b) provides that the cost of the material is to be-paid to the appellant in terms thereof but further provision is that the same is to become the property of the respondent No. l upon such payment being made to the appellant. The case of the respondent No.1 was that after the termination of the contract the said Pumps were obtained from some other agency. Thus the award as given by the Umpire would not be executable in terms of clause F-7.2.
13. I also find that the Umpire in para 13.4 of his award has held the appellant to the schedule laid down therein and it is an admitted position that the requisite number of Pumps were not supplied as per the said schedule. '
14. The claim at items Nos.3, 4 and 5 in para 16.1 of the award appear to have been made under the said sub-clause (c) of clause F-7.2 of the contract. I find that the claim mentioned at item No.5 does not squarely fall within the said sub-clause (c). I further find that the claims mentioned at items Nos. 3 and 4 of para 16.1 of the award are covered by sub-clause (b) of para F-7.2 of the contract. The appellants were thus entitled to recover the amounts mentioned in items Nos.3 and 4 of para 16.1 of the award in terms of sub-clause (c) of clause F-7.2 of the contract.
15. So far as the Bank Guarantees are concerned, I find that since admittedly the Submersible Pumps had been supplied to and accepted by the respondent No. l there was no justification for encashing the Bank Guarantee in the sum of US $ 21,500 and nothing wrong can be found with the award of the Umpire on the said count. So far as the Bank Guarantee in the sum of US $ 44,000 in respect of the supply of said Pumps is concerned, the respondent No.1 will have to give an adjustment of the amount awarded against it i.e. US $ 21463.80 against the said amount.
16. This leaves the question of interest. The award would reveal that the Umpire has awarded interest at the rate of 20.5 % per annum with quarterly breaks commencing from 5-1-1981 till the date of award on the amounts of Bank Guarantees. For the claims awarded in para 16.1 of the award the interest has been granted at the rate of 20% from 30-10-1980 till payment. The Umpire has thus proceeded to award both interest ante-item; pendente lite and future interest. A perusal of the claims put in by the appellant would show that the interest has been claimed by way of damages on the reduction of the amounts of Bank Guarantees as also the amounts which are payable to the appellant as claimed by him. I agree with the learned trial Court that the Umpire was not possessed of jurisdiction to award the interest as claimed by the appellant. The learned trial Court has very correctly relied on the case of Messrs A.Z. Company v. Maula Bakhsh (PLD 1996 SC 505). The said judgment came up for discussion in a later case of Ghulam Abbas v. Trustees of the Port of Karachi (PLD 1987 SC 393). Their Lordships approved the rules laid down in the said case of Messrs A.Z, Company v. Maula Bakhsh which is to the effect that ante item interest could not be awarded by the arbitrators and so is the case with the interest for the period the matter remains pending before the arbitrators. The award of interest by the arbitrators after the date of award was justified on the principle contained in section 29 of the Arbitration Act, 1940.
17. I also find that the invalid portion of the Umpire's award as per discussion made above, is separable from the valid portion of the same. The award need not, therefore, be set aside and can be modified in terms of section 15 of the Arbitration Act, 1940.
18. I am not inclined to agree with the learned trial Court that the Umpire had sought to influence that arbitrators. On the other hand, I find that the Umpire in terms of the provisions of the arbitration agreement between the parties as also the provisions of the Rules of International Chamber of Commerce's Court of Arbitration had sought to achieve a, consensus and for that purpose the previews were exchanged. This cannot be termed as an attempt on the part of the Umpire to influence the arbitrators.
19. As a result of the above discussion I partly allow this F.A.O. The award of the Umpire is modified so as to say that para 22 of the award in the light of the present judgment shall be read as under:--
(a) For claim under annexure-A for (i) US $ 21,500 (ii) US $ 44.000 less US $ 21,463.80.
(b) For claim under annexure-B and C for US $ 79,083.
(c) For costs against WASA for US $ 9,000.
Note.--The cost have been reduced in proportion to the amount payable:
20. The parties to bear their own costs of this F.A.O.