I. MAHMUD, J.-Letters Patent Appeals Nos. 13/68 and 34/68 arise out of a common judgment dated 20-12-67 passed by a learned Single Judge of the erstwhile High Court of West Pakistan, Karachi Bench, on the Original Side (Kadir Kawaz Awan, J., as he then was) in Suit No. 4/67, whereby he modified the award of the arbitrator. As both parties have felt aggrieved by the judgment, they have filed separate Letters Patent Appeals to question the same. Both appeals will be disposed of by this judgment.
2. Briefly, the facts are that by letter dated 28-9-63 Jaffar Brothers Ltd., Karachi (hereinafter called the supplier), offered to supply to the Department of Investment, Promotion and Supplies, Government of Pakistan, Karachi (hereinafter called the Government), 38,500 long tons of portland cement of Chinese Origin C. & P., Chittagong at the price of Sb. 125/40 per long ton. Liner terms.
There is no dispute that by "liner terms", the parties understood to mean that the price quoted was inclusive of lighterage and unloading charges. The offer was accepted by the Government who issued advance acceptance of tender letter on 7-10-63. At about that time, a labour dispute was pending between the Chittagong Dock Workers' Union and the stevedoring contractors, inter alia, with regard to the Union's demand for increase of wages of dock workers. The dispute was decided by the Industrial Court by its award, which was notified in the Gazette of Pakistan on 8-10-73. The Industrial Court awarded an increase in the daily rates of wages payable to the dock workers. In its letter dated 21-10-1963 while requesting the Assistant Director, Department of I. & S., Karachi to approach the Chittagong Port Trust to give proper berthing facilities to the supplier for discharging the cement, the supplier pointed out that after the price of cement was negotiated, labour charges had risen pursuant to the Industrial Court award with the result that both stevedoring charges as well as lighterage expenses had also increased beyond expectation and, therefore, requested the Government to make provision for the increased stevedoring and lighterage expenses in the final acceptance of tender. But, the final acceptance of tender was issued on 26-10-63 without making the provision requested for. Thereafter, the supplier made no further approaches for revision of the contract price and after the contract was fully performed, the supplier was informed by the Government's letter dated 15-4-64, that the supplier's request for increase in price could not be acceded to as the price accepted was firm and final on liner terms, that is, that it was inclusive of stevedoring and lighterage charges.
3. The consignments of cement arrived from time to time and were unloaded from the ships into lighters at the outer anchorage of the port. But, as jetties were then not made available for discharging the cement, the lighters had to be detained in the port beyond the free days and the supplier had to incur demurrage. When the jetties were ultimately made available, the allottees of the cement failed to lift their quotas in'time. Therefore, the supplier removed the cement to a covered shed- in order, it was alleged, to protect the cement from moisture if left in the open and, on this account also, the supplier's case is that it had incurred extra expenses.
4. After the supplies were fully effected, the supplier raised claims for extra payments. These disputes were then referred to the sole arbitration of Mr. A. R. Kazi, a retired Joint Secretary in the Ministry of Law, Govern--ment of Pakistan and a retired Special Judge (Centre) under section 21 of the contract form P S-35. The supplier filed a statement of claims before the arbitrator claiming an amount of Rs. 1,64,938.48 on the following three main heads : (t) An amount of Rs. 99.303.58 as extra expenses incurred on stevedoring and lighterage charges due to the Industrial Court award dated 8-10-63; (2) an amount of Rs. 38,675 as demurrage suffered on account of detention of the lighters at Chittagong Port for want of jetties ; and (3) an amount of Rs. 26,959.90 for labour charges for transporting the cement from the lighters at the jetty to the co ered shed.
5. By his award dated 12-10-66, the arbitrator awarded the full amount of each of the three claims in favour of the supplier. When, the award was filed in Court in Suit No. 4/67, the Government filed objections to the award. By the impugned judgment dated 20th December, 1967, the learned Single Judge dismissed the objections of the Government against the award on the first head of claim of Rs. 99,303.58 but allowed the objections against the amounts awarded under the second and third hands of claims. Accord--ingly, the learned Judges modified the award and decreed the suit to the extent of Rs. 99,303.58 only. Being aggrieved by the impugned judgment, both the supplier and the Government have filed Letters Patent Appeals Nos. 13/68 and 34/68 respectively.
6. With regard to the first head of claim for extra expenses incurred on stevedoring and lighterage expenses, the reasons given by tire arbitrator for awarding the same to the supplier was that as a result of the Industrial Court award, the supplier was compelled to engage port labour and pay them compulsory higher rates and that this fact was not foreseen at the time of the supp:ier's tender or even at the time of advance acceptance, as otherwise the parties would have made provision for it in the contract. This unforeseen and uncontemplated change of circumstance made it just and equitable to allow the increased labour charges to the supplier. He relied on the reasoning of the Court of Appeal in England in British Moviton--news Ltd. v. London & District Cinemas Ltd. ((1950) 2 All E R 390). In that case, Lord Justice Denning, who delivered the main judgment, observed that if the ensuing turn of events has so completely outside the contemplation of parties that the Court is sutisfied that the parties, as reasonable people, cannot have intended that the contract should apply to the new situation, then the Court will not apply it to the new situation but has the power to qualify the words of the contract in order to do therein what is just and reasonable. But this view of the law was overruled by the House of Lords on appeal and the judgment of the Court of Appeal was reversed unanimously in British Movitonnews Ltd. v. London & District Cinemas Ltd. (2). Their Lordships observed that it was erroneous to assume that there is any such general doctrine as was propounded by Denning L. J. That in a case where, although there has been no frustrating event putting an end to the contract but an uncontemplated turn of events has occurred, the Court has any discretion to qualify the contract for the purpose of doing what seems to it just and reasonable. Vicount Simon said "The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate-a wholly abnormal rice or fall in prices, a sudden deprecia--petition of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of th.- terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which had now unexpectedly emerged, the contract cases to bind at that point-not because the Court in its discretion thinks it just and reason--able to qualify the terms of the contract, but because on its true construction it does not apply in that situation. When it is said that in such circumstances, the Court reaches a conclusion which is `just and reasonable' (Lord Wright in Constantine's case : (194'2) A C 158) or one 'which justice demands' (Lord Summer in Hirji Mulji v. Cheong Yue Steamship Co. Ltd. (1926) A C 497), this result is arrived at by putting a just construction upon the contract in accordance with an 'implication . . . . . .' from the presumed common intention of the partieb' (Lord Summer in Bank Line Ltd. v. Arthus Capel & Co. (1919) A C 435."
7. In matters of contract, parties in this country are governed by the Contract Act, 1872 and, the legal position is not different under that Act. I In the case of an executory contract, where an uncontemplated turn of events has occurred which makes further performance impossible or unlawful, the contract becomes frustrated at that point and, the parties are absolved from further performance under it. This is provided in section 56 of the Contract Act. But, if the Court holds that notwithstanding the uncontemplated turn of events, the contract does not become impossible to perform, the partiesA continue to be bound by the terms of the contract. The Court has no power, or discretion to qualify the contract and depart from the express terms thereof in order to apply it to the changed circumstances on the ground that it seems just and reasonable to do so, because the change of circumstances was unforeseen by the parties at the time they entered into the contract or because the performance of the contract has become more onerous. The Supreme Court of India in Messrs Alopi Parshad & Sons Ltd. v. Union of India (A 1 R 1960 SC 588cited with approval the opinion of the House of Lords in the British Movitonnew's case abovementioned, and observed that the law in this regard was the same under the Indian Contract Act, 1872. The Court observed at page 594, as follows :- "There is no general liberty reserved to the Courts to absolve a party from liability to perform his part of the contract, merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous, That is the law both in India and in England, and there is, in our opinion, no general rule to which recourse may be bad, as contended by Mr. Chatterjee, relying upon which a party may ignore the express covenants on account of an uncontemplated turn of events since the date of the contract . . . . . . In india in the codified law of contracts, there is nothing which justifies the view that a change of circumstances, `completely outside the contemplation of parties' at the time when the contract was entered into, will justify a Court, while holding the parties bound by the contract, in departing from the express terms thereof."
8. In the present case, the contract had been fully performed and the supplier had been paid the price of the cement stipulated in the contract. It was a fixed price on liner terms, that is, it was agreed that the supplier was to be responsible for payment of stevedoring and lighterge charges.
Assuming, as did the arbitrator, that the increase in labour charges awarded by the Industrial Court was not in the contemplation of the parties at the time they entered into the contract, nevertheless the contract was not frustrated and it continued to bind the parties and, in fact, it was fully performed. The arbitrator was, therefore, not justified in departing from the express terms of the contract by awarding .Extra stevedoring and lighterage expenses to the supplier, on the ground that had the increase in labour charges been B foreseen at the time the contract was concluded, the parties would have made provision for it and that, therefore, it was just and equitable to allow the inerease for the supplier. There was no basis in fact for implying any such supposition. In fact, neither the labour charges nor the lighterage charges featured as an item of the price of cement quoted by the supplier and accepted by the Government. On the contrary, the price was a fixed price on liner terms and included stevedoring and lighterage charges and when the labour charges were increased by the Industrial Court award, the supplier asked for revision of the price, but it was declined by the Government on the ground that the price quoted included, stevedoring and lighterage charges. Moreover, the labour dispute was pending at the time of the tender and the supplier. Who had dealings with stevedoring labour must have foreseen the possibility of the increase in labour charges. The award of the extra charges to the supplier was, in our opinion, without any basis in law and was erroneous on the face of it.
9. The arbitrator also erred, in our opinion, in implying a term in the contract for reimbursement of extra labour charges to the supplier. Mr. Abdul Majeed cited West Pakistan Industrial Development Corporation, Karachi v. Aziz Qureshi (PLD 1973 SC 222wherein the Supreme Court observed that it is a well-settled principle that a stipulation, which is not expressed in a written contract, should not be implied merely because the Court thinks that it would be a reasonable thing to imply it, unless the Court is satisfied on a consideration of the terms of the contract in a reasonable and business like manner that the stipulation would necessarily have been intended by both the parties when the contract was made. The arbitrator, in our opinion, placed a wrong construction on the contract by implying therein a term in favour of the supplier.
10. The submission of Mr. Ibadatyar Khan, learned counsel for the supplier, is that as the arbitrator had not expressly mentioned any proposition of law, on which he had relied as being the basis of his award, it cannot be said that there was an error of law on the face of the award. This submis-1 sion is, in our opinion, misconceived, because it is now well-settled that in the case of a general reference to arbitration, if a question of law necessarily arises for determination of the dispute b.- fore the arbitrator, which is the ~' basis of the award, and the legal proposition is found to be a erronous, then there is said to be an error of law on the face of the award. The meaning of the expression `error of law on the face of the award has been explained in the old case of Hdgekinsons v. Ternic ((1857)3 C R N S 189) which was approved by the Privy Council in Champsey Bhara Company v. The Jivraj Balloo Spinning & Weaving Co. Ltd. (AIR 1923 P C 66and which has since been followed by a long line of anuthorities, in the following words :- "An error in law on the face of the award means, in their Lordships' view, that you find in the award or a document. Actually incor--porated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous."
Where an arbitrator states reasons for his decision, and they are erroneous on a point of law, there is an error of law on face of the award and the D award is liable to be set aside : Firm of Mahomedali A. Karimji & Sons v.` Charatsing Budsing (AIR 1925 Sind 51Again, as in the present case if an arbitrator construes a contract between the parties and gives his own construction or interpretation of the document as a reason for his award, it is open to the Court to examine the reason and set aside the award if the error in the construction is apparent on the face of the award : The Union of India v. Premchand Satram Das and another (AIR 1951 Pat. 201) we, therefore, hold that the award of the arbitrator suffers from an error of law on the face of the award and cannot be sustained on this head of claim. In our view, the learned Single Judge arred in failing to so hold.
11. With regard to the second head of claim for Rs. 38,675 for demurrage suffered on a:count of detention of the lighters at the port, because the suppliers did not get free jetty, the arbitrator awai ded this amount to the supplier without enquiring whether the Government was guilty of the delay.
It was the duty of the arbitrator to enquire into the terms of the contract and decide this question.
According to the legal and contractual rights of the parties and to award damages against that party who was found to have committed breach of contract. There was no dccision by the arbitrator a regards the real question at issue and, in our opinion, the award on this claim was bad for misconduct of the proceedings. It was held in Khiaram Hiranard v, Lalchand Hiranand (AIR 1930 Sind 103) that where arbitrators did not attempt to decise the real question at issue between the parties the award is bad for techncal misconduct. Had the arbitrator examined the contract, he would have realised that the cement was to be delivered C & P Chittagong that is, at the jetty. The responsibility for providing a jetty for the discharge of the cement was upon the Chittagong Port Trust and not the Government. In fact, the svpplier's letter dated 21-10-63 admits this position, in which the supplier had requested the Assistant Director, Department of I. P. & S. Karachi, in the following words "It is, therefore, in Government's own interest that you kindly issue orders to the Chittagong Port Trust Berthing Committee and others concerned there to allow minimum 3 and maximum 4 cement vessels on the berths at a time."
Where an award imposes a liability on a party which cannot possibly be said to have been provided for by the contract between the parties on a proper, construction of its terms, there is error of law on the face of the award, and the award is liable to be set aside. ' The learned Single Judge, therefore, rightly in our opinion, set aside the award on this claim although he did no state his reasons for doing so
12. With regard to the third and the last head of claim relating to reim--bursement of expenses incurred for transporting the cement from jetty to the covered shed, the finding of the arbitrator was that the allottees had failed to lift the cement in time despite being directed to take delivery at jetty immediately, and they were told that otherwise they would be held responsible for payment, of removal charges, shed rent etc. It was, therefore, a case of admission of liability by Government for payment of removal and rent charges. Moreover, it was the duty of the supplier to protect the cement from damage and under section 44 of the Sale of Goods Act, 1930, the buyer is liable to pay a reason--able charge for the care and custody of the goods if he does not take delivery within a reasonable time after request. It is, therefore, incorrect to say that the supplier removed the cement to the covered shed at its own risk. In our opinion, it cannot be said that the reasoning of the arbitrator is erroneous in law. In our opinion, the learned Single Judge erred in disallowing the claim on this ground.
13. In the result, L. P. A. No 34/68 of the Government is allowed, while L. P. A. No. 13/68 of the supplier is allowed partly. Accordingly, the award is modified to the extent of Rs. 26,959.90 only. There will be a decree in favour of the supplier for this amount against the Government. As success has been divided, the parties are left to bear their own costs.