RAJA MUHAMMAD SABIR, J.--- This petition is directed against the composite judgment and decree dated 9.9.1999 passed by Civil Judge 1st Class, Islamabad, whereby, he rejected petitioner's application under Sections 15 and 16 of the Arbitration Act, 1940 and accepted the application of respondent No. 1 filed under Sections 17/41 of the Act ibid.
2. The brief facts, relevant for the disposal of this petition are that in pursuance of offer for sale of 90 percent shares of respondent No. 3/Ravi Engineering Ltd. Made by the Privatisation Commission of Pakistan/petitioner, bid of respondent No. 1 i.e. M/s. Petrosin Products (Pvt.) Limited at the rate of Rs.17.87 per share was accepted and the schedule of payment was agreed as under:-
(a) 40 percent of the total sale price to be paid before the date of sale agreement.
(b) 60 percent of the balance price was to be paid in three equal yearly instalments or 6 equal half yearly instalments with mark-up at the rate of 16% per anum.
3. Respondent No. 1 moved an application for making the award dated 30.5.1998 as rule of the Court pleading that the arbitrator while deciding the dispute in accordance with reference and after hearing the parties had delivered the award which may be made rule of the Court. It was further contended that the arbitrator had suggested for appointment of a new auditor to establish the retirement benefits, therefore, an auditor firm be asked to complete this job.
4. The petitioner filed a petition under Sections 15 and 16 of the Arbitration Act Dr remitting/modifying the award for a fresh decision on the following grounds:-
(a) That the Award fails to decide the case as a whole, for in clause VI of the Award, the matter of retirement benefits has been left undecided and accordingly requires the same to be re-referred to Auditors.
(h) That the evaluation of the Privatisation Commission on Auditor's Report was final and binding on the buyer under Clause 11(c) of the Agreement dated 21.12.1995 and should have been so decided.
(c) In respect of retirement benefits, the Award concluded that the said benefits were not worked out appropriately by the Joint Auditors and has required some. Other auditor to do it. According to the legal norms, once the Joint Auditor's report was found to be deficient in respect of one segment of the exercise, it should have been set aside as a whole.
(d) Patently the movement in the not worth of stocks (work in progress) allowed in the Award is the difference of work in progress as on 30.6.1994 and 1.6.1996 which amounts to Rs.2.938 million.. This movement is further reduced to Rs.1.098 million due to writing down of Rs.1.84 million disallowed by the Award in this class of cost. The movement of Rs.1.098 million being in excess of the actual movement, constitutes an error patent on the face of the record.
(e) In note No. 8 of the Joint Audit Report, another amount of Rs.2,009,752/- had been reported under head Retirement Benefit. These provisions are not substantiated with detailed explanation.
This aspect of the report has not been considered in the Award.
(f) As per note 9 of the Joint Audit Report, the provision of gratuity stood, reported at Rs.2.5 million on 30.6.1994 which was increased to Rs.8.22 million as on 30.6.1995 by the previous Auditors. The difference of Rs.5.72 million was charged as an exceptional item to Profit and Loss Account on the basis of it being understated. The Auditors should have carried out independent verification of the genuineness of the expenses and were not supposed to base their findings on the basis of amounts reported. Simply relying on the previous report renders the report made, not as having been made by the Joint Auditors. This aspect has not been considered in the Award."
5. Learned Civil Judge accepted the application of respondent No. 1 and made the award dated 30.5.1998 as rule of the Court and rejected petitioner's application under Sections 15 and 16 of the Arbitration Act, 1940 through the impugned composite judgment, against which the petitioner has instituted, the instant revision petition.
6. Learned counsel for respondent No. 1, at the very outset, raised an objection on 31.7.2000 that impugned order is appealable, therefore, the instant revision is not maintainable against the dismissal of the application under Sections 15/16 of the Arbitration Act and referred sub-clause (vi) of Section 39 of the Arbitration Act and cited numerous judgments on this point.
Learned counsel for the petitioner, in order to meet this objection, submitted a miscellaneous application i.e. C.M. No. 1332-C/2000 on 1.8.2000 for permission to convert the instant revision into appeal and relied upon Muhammad Hanif Vs. Muhammad and others (PLD 1990 Supreme Court 859) and Abdul Aziz and others Vs. Sheikh Abdur Rehman and others (PLD 1984 Supreme Court 164) on the point of conversion of revision into appeal and vice versa.
7. Out of the referred citations, the most relevant and detailed judgment on the point of conversion of revision into appeal and vice versa is (PLD 1984 Supreme Court 164). If the deficiency of the Court-fee and bar of limitation is not involved, it would be only a formality for treating a revision as an appeal. In the present case, both these objections have not been raised by the learned counsel for the petitioner, C.M. No. 1332-C/2000 for conversion of revision into appeal is allowed and the instant revision petition is treated as an appeal.
8. Since learned counsel for the appellant and contesting respondents are in attendance, therefore, the appeal is taken-up as notice case.
9. On merits, learned counsel for the appellant, relying upon sub-clause (2) of the objection petition filed in the Trial Court under Sections 15/16 of the Arbitration Act (Annexure-C), contended that the evaluation of the Privatisation Commission on Auditor's Report was final and binding on the buyer under clause 11(C) of the agreement dated 21.12.1995, should have been so decided; that the-award was incomplete and inexecutable; that the objection raised by the appellant were erroneously rejected by the Trial Court; that the evaluation made by the auditor reducing the not worth of respondent No. 3 is not based on sound material; and that the arbitrator has erroneously relied upon the evaluation report by M/s. A.F. Ferguson. Learned counsel for the appellant lastly argued that the impugned judgment be set aside and the matter be re-referred to the arbitrator for fresh award.
10. Learned counsel for respondent No. 2 submits that he had been unnecessarily dragged into litigation without any relief being sought against him; that the bank only furnished the guarantee which had already elapsed; and that being not a necessary party, respondent No. 2 be deleted.
Learned counsel for the appellant as well as learned counsel for respondent No. 1 have no objection to deletion of name of respondent No. 2 from array of the respondents.
11. The bank guarantees furnished by respondent No. 2/Hong Kong Shanghai Banking Corporation, Islamabad having already lapsed, its name is accordingly deleted from the array of the respondents.
12. Respondent No. 3 neither contested the proceedings in the lower Court nor is a necessary party in the instant appeal. Inspite of notice, none has turned up on its behalf, therefore, respondent No. 3 is proceeded against ex parte.
13. Learned counsel for respondent No. 1 vehemently contested the appeal. He argued that respondent No. 1 fulfilled the terms of sale-agreement dated 21.12.1995; that 40 percent of the sale- price amounting to Rs.64,000,00/- was paid by July, 1995 through bank drafts; that for remaining 60 percent gross sale-price amounting to Rs.96,000,00/- a bank guarantee No. 9501-024, dated 19.7.1995 was furnished issued by M/s. Hong Kong Shanghai Banking Corporation Limited in the sum of Rs.1,26,72,000/- which included Rs.30,72,000/- mark-up on the outstanding amount; that while referring clause 11(C) of the agreement dated 21.12.1995, he argued that numerous letters were written to the appellant for determination of the value in accordance with the aforesaid clause but the same remained unanswered and instead, the appellant started demanding further payment from respondent No. 1; that according to audit report of M/s. A.F. Ferguson dated 25.7.1996, the appellant was required to refund money to respondent No. 1 which is undisputed liability of the appellant and was bound to adjust the same and discharge its contractual obligations; that the learned Trial Court, after going through the award submitted by the arbitrator, rightly made the same as rule of the Court; and that the appellant has been avoiding to finalize the evaluation. Of the price, determined by the auditor authorized by the consent of the parties. He supported the impugned judgment.
14. I have heard learned counsel for the appellant and contesting respondent No. 1 at length. The case has a chequered history. The appellant in accordance with privatisation policy of the Government of Pakistan invited open bids for sale of 90% shares (900,000 shares) of face value of Rs.10/ each, from the general public for the outright sale of State owned enterprise, namely, Ravi Engineering Limited. Respondent No. 1 submitted bid for the said share, offering Rs.17.78 per share of the face value of Rs.10/- per share, based on Ravi Engineering Limited balance sheet as on 30.6.1994. Its bid was accepted, 40 percent of the price was paid and an agreement for payment of remaining amount was executed and the bank guarantee was also furnished. Clause 11 of the sale- agreement provides as under:- 11.(a) The Seller shall appoint an Auditor from its approved panel of Auditors (with consent of Buyer) to determine the change in the Net Worth of the company between the following dates:
(1) Pate of financial statement provided to the Buyer as part of the Information Memoranda, at the time of bidding (Audited accounts as on June 30, 1994).
(b). Date of transfer of the company as defined in Clause 4 above.
(h) Whenever required, the Buyer will make available to the Auditors the complete records and books of accounts of the company as well as access to all relevant information to enable them to perform their task unhindered, including physical verification.
(c) The Audit will be conducted in accordance with the terms set out in the Annex enclosed herewith, and the Auditors' report shall be submitted to the Privatisation Commission whose evaluation will be final and binding on the Buyer.
(d) The movement in the Net Worth so determined by the Auditors, reflecting a change in the company's value (on a historical cost basis), shall be deemed to have taken effect at the date of transfer, for purpose of settlement.
Should the movement in the Net Worth be under five percent, it will be ignored by both the parties; however should it exceed five percent, then the whole of the movement will form part of a settlement.
(e)(i) If the movement in the Net Worth is negative and in favour of the Buyer, the 60% payable by him shall stand altered to the extent of the movement and the subsequent payments of both principal and mark-up shall stand proportionately reduced.
The Bank Guarantees too may be reduced to the extent so determined.
(ii) If the change is positive, the Buyer is bound to pay the whole amount within 90 days of notification (without mark-up). However, the Commission may at its sole discretion allow the Buyer extension in the 90 days period, with mark-up.
(f) The movement/variance determined by the Auditors shall have effect only to the extent of the shares purchased by the Buyer.
(g) For those negative equity companies where PC/Government has specifically undertaken to absorb liabilities, the Auditors shall exclude from their computation of change in Net Worth those specific debts which will be picked up by the Government/PC.
(h) The auditors fee will be paid by the Privatisation Commission."
Respondent No. 1 took over the project on 7.1.1996. The parties agreed for appointment of M/s. A.F.
Ferguson, 'a firm of Chartered Accountants, from the existing panel of Privatisation Commission as the Auditors to determine the change in the not worth of respondent No. 3 between 30.6.1994 and 6.1.1996. According to final report submitted by the auditor on 25.7.1996, respondent No. 3's not worth between. The afore-referred period had decreased to Rs.20.646 million. This report was required to be evaluated and finalized by the appellant. Although the sale agreement did not specify the time within which the Privatisation Commission was required to evaluate the report yet it was obligatory for the appellant to perform its contractual liability within a reasonable time. After determination of negative change in the not worth of respondent No. 3 by the auditors, respondent No. 1 was held not liable to pay anything but was entitled to refunds and for this purpose, the appellant was requested through letters dated 19.8.1996, 12.9.1996, 31.10.1996, 25.11.1996 and 8.12.1996 calling upon it to fulfil its contractual obligation, evaluate and settle the audit report dated 25.7.1996. The appellant instead of evaluation, demanded further payment from respondent No. 1, who in turn claimed refund on the strength of the audit report of M/s. A.F. Ferguson dated 25.7.1996 from the gross total price. The appellant attempted to encash the bank guarantee, whereupon, respondent No. 1 instituted proceedings under Section 20 of the Arbitration Act and also submitted an application under Section 41 of the Act supra for restraining the appellant from encashing the bank guarantee. An application for interim relief was also moved which was dismissed by the Trial Court, however, said relief was granted to him by this Court. Resultantly, the bank guarantee was not encashed meanwhile and the same has lapsed by now. Under clause 3 of the agreement, learned Civil Judge, vide order dated 25.9.1997, referred the dispute between the parties for arbitration and the Secretary Finance, Government of Pakistan was appointed as the sole arbitrator.
15. In compliance with the order dated 25.9.1997, the arbitration proceedings were initiated on 9.12.1997 where 'it was agreed between the parties that the appellant shall finalize and settle the audit report of M/s. A.F. Ferguson dated 25.7.1996 by 15th January, 1998. The Arbitrator terminated the arbitration proceedings on the aforesaid undertaking on 9.12.1997. The relevant part of the Arbitration Award dated 9.12.1997 reads as under; "5. During the hearing, it was agreed by both the parties that the Privatisation Commission should complete the evaluation of the audit report of A.F. Ferguson by 15th January, 1998. Accordingly, these proceedings may be considered as having been terminated unless a further clause of action arise(s). Announced."
The appellant did not finalise the evaluation as agreed upon in terms of the order, dated 9.12.1997.
Respondent No. 1 wrote a letter to the Arbitrator on 19.1.1998 to treat the audit report dated 25.7.1996 as final in determining the change in the not worth of respondent No. 3 but it remained unanswered.
Compelled by the circumstances, respondent No. 1, on 24.1.1998, filed an application under Section 16 of the Arbitration Act, 1940 read with Section 151, CPC with a prayer to remit the matter between the parties to the arbitrator for re-consideration or alternatively to declare the Audit Report of M/s. A.F. Ferguson dated 25.7.1996 as evaluated and finalized.
Learned Trial Court,, keeping in view the inordinate delay on the part of the appellant to settle the audit report dated 25.7.1997 and in order to ensure compliance with the terms of the Arbitration Award dated 9.12.1997, vide order dated 30.3.1998 directed the Arbitrator to himself evaluate and finalize the aforesaid audit report. The relevant part of the order passed by the Trial Court on 30.3.1998 is as under:- "4. In the award, Arbitrator asked the Privatisation Commission to finalize and evaluate the report of M/s. A.F. Ferguson and award was sent to this Court with a direction to Privatisation Commission to finalize the same upto 15.1.1998, which has not been finalized uptill now. So, the award is hereby remitted to the arbitrator to himself finalize and evaluate the audit report of M/s. A.F. Fergson and submit the complete detailed and final award within two months from the date of this order.
Ahmad is hereby directed to send the award to the Arbitrator within one or two days. To come up for awaiting the detailed award on 1.6.1998."
16. In compliance with the aforesaid order, the Arbitrator entered upon reference and the technical evaluation of audit report of M/s. A.F. Ferguson dated 25.7.1996 was carried out., The sole arbitrator heard the parties and determined the award on 30.5.1996 and filed the same in the Court on 1.6.1996. The operative part of the Award afore-mentioned is as under:- "The negative change in the not worth, between the period of 30th June, 1994 and 6th January, 19.96 is, therefore, determined as Rs.10,538 million and the not worth of Ravi Engineering Limited as on 6th January, 1996 is fixed at Rs.3.196 million."
Respondent No. 1 submitted an application under Sections 17 and 41 of the Arbitration Act, 1940 in the Trial Court on 1.6.1998 praying that the arbitration award dated 30.5.1998 be made as rule of the Court and the judgment be announced in terms thereof. Conversely, the appellant filed an application under Sections 15 and 16 of the Act ibid on 30.6.1998 for setting aside the award and re- submission to the Arbitrator. Both the applications were adjudicated upon by the Trial Court and ultimately, through the impugned judgment, application of the appellant was dismissed and that of respondent No. 1 was allowed.
17. It is true that the Arbitrator has not given his final verdict in respect of retirement benefit but it has prescribed a specific mode to estimate this liability by referring the matter to an audit firm. The retirement benefit can easily be got estimated by referring the matter to the firm indicated therein.
The report of the joint auditor appointed with the consent of the parties is binding upon them and same constitute part and parcel of the award. The award is neither inexecutable nor incomplete in any respect. The conduct of the appellant in not evaluating the price inspite of having received the report of the auditor, appointed with the consent of the parties for a very long period forced respondent No. 1 to knock the door of the Court for this purpose. An undertaking was given before the Arbitrator for its finalization before 15.1.1998, but even that having not been done, respondent No. 1 again submitted an application for re-referring the case to the arbitrator and ultimately, under order of the Trial Court dated 30.3.1998, the award was remitted to the arbitrator to himself finalize and evaluate the audit report of M/s.A.F.
Ferguson and submit a complete, detailed and final award within two months from the date of aforesaid order. The evaluation was made by the arbitrator under the direction of the Court as the appellant was delaying the matter under one pretext or the other.
18. Keeping in view the history of the case and failure on the part of the appellant to comply with clause 11(C) of the sale agreement dated 21.12.1995, the learned Trial Court directed the sole Arbitrator to determine the evaluation himself in the light of audit report. The impugned judgment is based on proper appreciation of evidence and warrants no interference.
19. In the case of National Construction Co. Vs. WAPDA (PLD 1987 Supreme Court 461), it was observed by Zaffar Hussain Mirza, J. (as then he was) that:- "The general principle underlying the concept of arbitration as translated in the scheme of the Arbitration Act is that, as the parties choose their own arbitrator to be the Judge in the dispute between them, they cannot when the award is good on the face of it, object to his decision, either upon law or the fact. In other words an arbitration in substance, ousts the jurisdiction of the Court, except for the purpose of controlling the arbitrator and prevailing misconduct and for regulating the procedure after the award. It is well-settled that the Court has no right to review the award or to consider it".
It was further observed that: "Section 15 provides an additional power to the Court and lays down the circumstances under which the award might be modified or corrected. In such case the award is not set aside as a whole, but if a part of the award is found to be invalid as being in excess of the arbitrator's power and is separable from the rest, the remainder of the award being good can be maintained and acted upon , while the excessive part of the award can be declared to be unenforceable."
It was also held that:- "The only condition for the Court to exercise power of modification of the award so far as clause (a) is concerned is that such invalid part of the award "can be separated from the other part and does not affect the decision on the matter referred."
"In Mr. Amir Begum v. Syed Badr-ud-Din Hussain and others (AIR 1914 P.C. 105) their Lordships observed that the principle of severability is invalid from the valid part of the award as under:- It is well-recognized law that when a separable portion of an award is bad, the remainder of the award if good, can be maintained." "the offending portion of the award being separable from the rest of the award could be struck off as mere surplusage."
20. It was observed in M/s. Valike Woollen Mills Company Ltd., Karachi Vs. Government of Pakistan through Director General Procurement (Army), Ministry of Defence, Rawalpindi and another (1993 M LD 1291) that: "It is an established position of law that an arbitrator is the sole judge of facts and the Court while considering objections to the Award cannot assume power of an Appellate Court and cannot embark upon the exercise of appreciation of evidence and decision of facts as held in case of 1991 CLC 1023, Interform Design Associates Limited v. Bahria Foundation and 1991 CLC 1966, Province of Sindh Vs. Waseem Construction Co.
It also appears to me that in cases in which the Government enters into a contract which contains an Arbitration Clause which, in turn, provides for the reference of the dispute to a sole arbitrator who must be a senior officer of the concerned department, like the arbitration clause between the parties in the present case , the Award of such arbitrator may, in all decency, be challenged by the contracting party other than the Government but not by the Government whose own senior officer has acted as Arbitrator and who is without any doubt, amenable to disciplinary action under the Government Servants (Efficiency and Discipline) Rules, 1973 and who, while acting as an Arbitrator, is fully aware of the consequences of any misconduct on his part. The scales ar thus heavily loaded against the private contracting party in such cases and, therefore, when the Government itself raises such. Objection to an Award by such an Arbitrator, the stand taken by the Government looks rather deplorable if not out rightiy outrageous. I may, in this context, refer to the judgment in the case of Lahore Development Authority v. M/s. Khalid Javed and Company (1983 SCM R 718) wherein it is so observed in the concluding paragraph"
It is further held that:- "Enough water has flown down the Ganges since the .Above observations were made by the Hon'ble Supreme Court but it is a matter of regret that there does 'not appear to be any visible change in the attitude of the Government Departments in this regard."
21. Admittedly, the Arbitrator is a Federal Finance Secretary who delivered the award in favour of respondent No. 1 against the appellant. The Hon'ble Supreme Court in its judgment in Lahore Development Authority Vs. Messrs Khalid Javed and Co. (1983 SCM R 718) ruled as under:- "In conclusion, we cannot refrain from observing that despite the declared policy of the Government for ensuring speedy and inexpensive justice we find, all too frequently, that even Government Departments and statutory bodies indulging in wasteful and unnecessary litigation. It is at their behest that in all contracts entered into by them a clause is inserted to the effect that any dispute, which may arise during the completion of the contract between the parties, will be decided through arbitration rather than by the ordinary Courts. It is also usually stipulated that the Arbitrators, who may be nominated for this purpose, must be the responsible officer of the said Department. It is, therefore, a matter of some regret that when an award is given by the Arbitrators, who are persons of their own choice and the award made is in a proceeding conducted in a forum desired by them but which is not wholly in accord with their point of view the Department of Government concerned instead of accepting the said award with good grace rushes to the Court with frivolous objection to prevent it from becoming the Rule of the Court and when these objections are overruled resort is taken to filing appeal upon appeal right upto Supreme Court which not only results in further financial loss to the Department and further delay in the settlement of the rightful claim of the private party but also in the unnecessary water of the valuable time of Courts which could be spent for more usefully in attending to other more meritorious cases. It is high time that Government Departments should accept more gracefully the awards made by forums selected by themselves and manned by their own officers. They would be well-advised if they took greater pains and more care than they are doing at present in preparing and prosecuting their case before the Arbitrators rather than in subsequently expending their time, energy and efforts on fruitless objections and appeals against the awards made against by, them, for which they are mostly themselves to blame."
22. The agreement between the appellant and respondent No. 1 was executed on 21.12.1995 and under its clause 13, the dispute between the parties was to be referred to the arbitrator. Inspite best efforts by respondent No. 1, the evaluation was not finalized for a considerably long period although the auditor i.e. M/s. A.F. Ferguson submitted its audit report on 25.7.1996. Respondent No. 1, having fed up from the behaviour of the appellant, approached the Civil Court under Section 20 of the Arbitration Act. Learned Civil Judge, vide order dated 25.9.1997, referred the dispute in terms of clause 13 for arbitration to the Finance Secretary, Government of Pakistan as the sole arbitrator. The arbitration proceedings were commenced and the appellant agreed to finalize the audit report dated 25.7.1996 by 15th of January, 1998. On this undertaking the arbitration proceedings were terminated vide order dated 9.12.1997. Even this time, the evaluation was not finalized. Respondent No. 1 wrote letter to the arbitrator on 19.1.1998 to treat the audit report dated 25.7.1996 as final regarding change in the not worth of respondent No. 3. No reply was received by respondent No. 1 which necessitated the filing of application under Section 16 of the Arbitration Act on 24.1.1998 for remitting the award between the parties to the arbitrator for re-consideration or alternatively to declare the audit report as final. Learned Civil. Judge, keeping in view the inordinate delay and persistent negative behaviour of the appellant to evaluate the not wroth 6f respondent No. 3, vide order dated 30.3.1998, directed the arbitrator to himself evaluate and finalize the aforesaid audit report. In compliance whereof, the arbitrator entered upon the reference and the technical evaluation of report of M/s. A.F. Ferguson dated 25.7.1996 was carried out and delivered the award on 30.5.1996 and filed the same in the Court on 1.6.1996. Learned Trial Court examined the contents of the award and also the objections raised by the appellant and made it as Rule of the Court through the impugned judgment. The impugned judgment is based on proper assumption of law and facts of the case. Civil Court is not a Court of appeal against the award. The contents of the award do not spell out any disqualification therein rendering it invalid. No allegation of misconduct is raised against the arbitrator who is a responsible officer of the Federal Government. It is strange that award was delivered by the Finance Secretary, Government of Pakistan a representative of the appellant, but he is still dissatisfied. The Hon'ble Supreme Court in the judgments referred above, deprecated the conduct of the Government to challenge the award in such circumstances. The facts and circumstances of the present case do not justify interference in the impugned judgment.
The appeal has no merit and is dismissed with no order as to cost.