RANA BHAGWAN DAS, J.---This High Court Appeal is directed against the judgment dated 4-2-1991 passed by the learned Single Judge making the award rendered by the Sole Arbitrator Mr. Justice (Retd.) Fakhruddin G. Ebrahim as rule of the Court.
2. Respondent Building Contractors were awarded the work of construction of "International Pavilion at Pakistan International Trade Fair 1984" by the appellants. Bill of Quantities for civil works incorporated various items of works to be executed by the respondents. However, with regard to seven items of works, respondents were required to submit their unit rates as these items of works were not quantified, while in relation to all other items, quantities were clearly mentioned alongwith the unit rates. Total value of the works assigned to the respondents was Rs.27,37,000 including civil works, plumbing works and electric works vide Letter of Intent dated 26-4-1984. It may, however, be made clear that the said seven items of works were excluded when the works were awarded to the respondents Physically and virtually, however, the work of these seven items was executed by the respondents and thus there arose a dispute between the parties with regard to the unit rates for the said items.
3. Respondents' case in a nutshell was that they had quoted rates in respect of these seven items and the same had been accepted by the appellants. Consequently they carried out the work on the said items under instructions from the appellants and were thus, entitled for payment on account of said items on the basis of the unit rates quoted by them. Case of the appellants, however, was that the work on the said seven items could not be carried out without their approval and consent as to the unit rates to be charged by. The respondents. Appellants thus, pleaded that the respondents were entitled to receive only minimum rate for each of the said items.
4. Upon examination of the claim and replies submitted by the parties, learned Arbitrator struck the following issues for making an award:
(1) Whether for the above seven items, the plaintiff is entitled to the rates quoted in the BOQ or whether these quoted rates were subject to further negotiation between the parties?
(2) Whether the plaintiff had not complied with the obligations under clause 66 of the General Conditions of the contract to refer the dispute to the Employer?
(3) Whether the claimant is entitled to interest on the withheld amount?
(4) What should be the Award?
5. Both the parties adduced evidence before the learned Arbitrator who upon a careful consideration thereof concluded that although respondents had been awarded the work at the price quoted by them in their tender i.e. Rs.27,37,000 which included all the items of works incorporated in the Bill of Quantity, however, the same did not represent the aforesaid seven items for which they were required to quote unit rates only. He observed that the respondents while accepting the letter of intent dated 26-4-1984 and notified to the appellants that the acceptance was "subject to our mutual understanding that all the rates of items quoted by us in Bill of Quantity shall be binding on the parties, i.e. Ourselves and the owners." As per award by the Arbitrator respondents had reiterated that the parties would be bound by the Bill of Quantity rates including the rates given therein for the aforesaid disputed items. Indeed their letter was received by the appellants and its contents were not controverted at any point of time and at least not in writing.
The respondents had thus, submitted their five running bills from time to time to the appellants. The cost of the total civil work executed by the respondents was Rs.34,87,495.60 but the appellants sanctioned the bill for Rs.34,38,96.90 by accepting respondents quoted unit rates in respect of seven disputed items in the Bill of Quantity. The Arbitrator, therefore, held that the respondents were entitled to payment for the work done on the disputed seven items at the unit rates quoted by them for valid reasons after discussing the relevant oral as well as documentary evidence and interpreting relevant clauses of the General Conditions of the Contract.
6. In addition to the amount due and payable to the respondents by the appellants, Arbitrator awarded a sum of Rs.14,38,75.38 as a sum due and payable by the appellants for the work executed. He also awarded a sum of Rs.2,50,579.06 by way of interest at 6% per annum with effect from 15-10-1984 upto the date of award for the reason that the principal amount had been wrongfully withheld by the appellants and the cost of. Arbitration proceedings in the sum of Rs.60,000.
7. Appellants impugned this award before the Single Judge who after taking into consideration respective contentions of the parties dismissed the objections raised and made the award as rule of the Court.
8. Learned counsel for the appellants has impugned the judgment on the following grounds:--
(i) That the learned Arbitrator exceeded his authority by traversing the scope of reference made to him inasmuch as in para. 4 of the plaint respondents had referred to the letter of intent dated 26- 4-1984 whereas the Arbitrator acted upon the letter dated 28-4-1984 altering the terms of the agreement.
(ii) That in the absence of any agreement between the parties for payment of interest the Arbitrator was not legally authorized to award the interest on the amount found due by him.
9. Reverting to the first contention of the learned counsel for the appellants namely that the learned Arbitrator exceeded his authority in arbitrating upon the dispute highlighted by the appellants with reference to letter dated 28-4-1984 whereas the respondents had referred to the Letter of Intent dated 26-4-1984, suffice to observe that the dispute between the parties was essentially governed by the tender documents which incorporated the impugned terms and conditions of contract between the parties. No doubt Letter of Intent dated 28-4-1984 also embodied additional terms stipulated between the parties but the learned Single Judge has dealt with such aspect of the case in a very elaborate and lucid manner in his judgment. Undisputedly clause 66 of the General Conditions of Contract provided for reference of dispute, if any, between the parties to arbitration. It is not the case of the appellants that the dispute resolved by the Arbitrator between the parties was beyond the purview of clause 66 of the General Conditions of Contract as embodied in the tender documents. In our view as the tender documents remained intact and unchanged the circumstance that parties had exchanged letters dated 26-4-1984 or 28-4-1984 would not by any stretch of reasoing vitiate the award or render it without jurisdiction. It is un-controverted that the dispute referred by Court to the learned arbitrator related to payment of Rs.14,38,75.65 claimed by the respondents from the appellants on account of aforesaid seven items.
10. In fact the dispute dilated upon and finally resolved by the arbitrator centres around the sole controversy between the parties to which no lawful exception could be taken merely because the arbitrator had taken into consideration letter dated 28-4-1984 addressed by respondents to the appellants accepting the Letter of Intent. Evidently through this letter respondents had referred to an understanding between the parties that all the rates of items quoted by them in the Bill of Quantity would be binding on both the parties. It would thus, very clearly appear that besides the terms agreed by the respondents vide Letter of Intent dated 26-4-1984 there was further understanding between the parties that all the rates of items quoted by the respondents in the Bill of Quantity would be binding on the parties. It may be pertinent to observe that there was no other evidence adduced by the parties in relation to the terms mutually agreed between them besides those clearly stipulated in the Letter of Intent dated 26-4-1984. It may further be observed that since the receipt of this letter was acknowledged by respondents witness Aziz Y. Siddiqui and the recitals of this letter were not controverted at any stage by the appellants, the same was justifiably relied upon by the arbitrator as adequate evidence for determining the rates agreed upon by the parties in relation to aforementioned seven items of work. Indeed there was no error of law or fact apparent on the face of award committed by the learned arbitrator, therefore, the finding on this aspect of the case does not appear to be open to any exception.
11. It is well-settled that mere absence of objection per se does not absolve the Court of its primary responsibility of deciding whether the award was valid on the face of it. It is equally recognized principle of law that where a dispute is referred to an arbitrator of the choice of the parties and he makes an award, it becomes the duty of the Court to give every reasonable intendment in favour of the award and lean towards upholding it rather than vitiating it. It may not be out of context to reproduce the dictum of Koy, L.J., In Re: Heihley, Maxsted & Co. And Durant & Co., (1893) 1 Q B 405: "The Courts have already been exceedingly cautious in dealing with awards. Prima facie, an award is final and not subject to appeal; the arbitrator is chosen by the parties who presumably prefer a domestic tribunal which is not bound rigidly by the rules of evidence; and a mistake of law or fact is not, per se, a ground for sending back the award of such a Tribunal."
12. Identical view was expressed in Abdul Rauf v. Muhammad Saeed Akhtar (PLD 1958 (W.P.) Kar.
145) in the-following words: "A well-settled rule of construction of the award is that the award should be construed liberally and in accordance with common sense, and it should be so read that it can be given effect to, and not so that it would nullify the efforts of the arbitrator appointed by the parties themselves. "
13. Truely speaking the arbitrator is 2 judge of all matters arising out of a dispute whether of fact or of law and the Court is not to act as a Court of appeal sitting in judgment over the award. It is not expected of the Court to scrutinize the award with a view only to discover an error for the purpose of setting it aside. The error must be apparent on the surface of the record and no latent such as can be discovered only after appraisal of the material beyond the record. Sole purpose of the Arbitration Act is to curtail litigation in Courts and promote settlement of disputes amicably through persons in whom both the parties repose their confidence. The Court should always endeavour to sustain the award rather than to destroy it unless it could be shown by sufficient and reliable material on record that the arbitrator was guilty of misconduct or that the award was beyond the scope of reference or that it was violative of statute or in contradiction to the well- settled norms and principles of law. In our view learned Single Judge was perfectly justified in upholding the findings arrived at by the arbitrator founded on adequate, oral as well as reliable documentary evidence. In the absence of any circumstance to reflect that the arbitrator committed any misconduct or he acted beyond the scope of authority or without jurisdiction, there appears to be no strong reason for setting aside the award which was rightly made rule of the Court.
14. Adverting to the second ground of attack, it may be observed that section 29 of the Arbitration Act providing for award of interest on payment of the amount due reads as under:-- "S.29. Interest on award.---Where and in so far as an award is for the payment of money the Court may in the decree order interest, from the date of the decree at such rate as the Court deems reasonable, adjudged by the award and confirmed by the decree."
15. Learned counsel did not dispute the authority of the Court to award interest on an award for-the payment or money from the date of decree as the Court deems reasonable but he vigorously contended that in the absence of any clause in the contract between the Contractor and the Employer, arbitrator appointed by the parties does not possess any authority to grant interest. For this proposition, he referred to the following cases:
(a) Plaintiffs v. Sole Arbitrator etc. (NLR 1992 CLJ 321),
(b) Dr. Mahmoodur Rehman v. Secretary, Ministry of Law, Justice and Parliamentary Affairs (PLD 1992 FSC 153), and
(c) Ghulam Abbas v. Trustees of the Port of Karachi (PLD 1987 SC 393).
16. This argument was also raised before the learned Single Judge and the case of Ghulam Abbas was cited before him, but the objection raised was that the arbitrator could not have awarded interest on uncertained amount. Contention was repelled by the learned Single Judge by observing that in the statement of claim respondents had claimed a total amount of Rs.14,38,075.38 as due and payable by the appellants. Learned Single Judge found that this amount had been wrongfully withheld by the appellants as ascertained by the arbitrator who had awarded interest from the date of award of contract till the date of award which was not open to exception.
17. In the case reported in NLR 1992 CU 321, a learned Single Judge of this Court held that Arbitrator is not empowered to award interest against one party or other unless there is an agreement to that effect between the parties.
18. The case reported as Dr. Mahmoodur Rehman is famous authority by the Federal Shariat Court relating to Riba (interest) founded on 115 Shariat Petitions and three (3) suo motu notice cases which is presently sub judice before the Shariat Appellate Bench of the apex Court and lays down the guidelines for regulating the award of interest and the express precipitations in Islam. This judgment in our view is not operative as contemplated by proviso to Article 203-D of the Constitution because of pendency of appeal enforce the Supreme Court.
19. The question of grant of interest by arbitrator, however, received attention in the case of Ghulam Abbas (supra). In this judgment a Full Bench of the Supreme Court observed that the mere fact that pleadings were before the arbitrator and issues were then settled on the pleadings of the parties incorporating, the question of interest does not necessarily give rise to the inference that the parties had agreed to refer specifically the question of grant of interest as a question of law for the decision of the arbitrator, so as to preclude any party to the arbitration from challenging the award on the ,ground of error of law on the face of the award. Supreme Court observed that the real import of section 29 of the Arbitration Act 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 this interest covers the post-decree period on the principal sum in the award. Their Lordships further clarified that by its own terms, 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. While laying down that right to interest for the period prior to the date of suit or prior to the reference to arbitration was a matter of substantive law, as contrasted with the power given to a Court of law under section 34, C.P.C. Or section 29 of the Arbitration Act which is a statutory power within the domain of procedural law, apex Court observed that the right to interest for the period prior to the suit arises in one of the four following ways:
(i) Agreement, express or implied between the parties.
(ii) mercantile usage,
(iii) statutory provisions,
(iv) interest may be also allowed on equitable grounds in proper cases.
20. Supreme Court cited with approval the following extract from the Privy Council case reported as Bengal. Nagpur Railways Co v. Ruttanji Ramji and others (AIR 1938 PC 67): " ---------.The crucial question, however, is whether the Court has authority to allow interest for the period prior to the institution on the suit; and the solution of this question depends, not upon the Civil Procedure Code, but upon substantive law. Now, interest for the period prior to the date of the suit may be awarded, if there is an agreement for the payment of interest at a fixed rate, or it is payable by the usage of trade having the force of law, or under the provision of any substantive law entitling the plaintiff to recover interest as for instance, under section 80, Negotiable Instruments Act, 1881, the Court may award interest at the rate of 6 per cent. Per annum, when no rate of interest is specified in the promissory note or bill of exchange . . . . . "
21. As in the case before the Supreme Court, plaintiff/contractor had claimed interest by way of compensation for wrongful retention of moneys due to the plaintiff which amount was unascertained and claimed by way of un-liquidated damages reaffirming its earlier view in M/s. A.Z. Company v. M/s. Maula Bukhsh Muhammad Bashir (PLD 1965 SC 505), it was held that compensation for breach of contra could not be awarded by the Arbitrator. Furthermore, it was observed that even on the assumption that interest was recoverable as damages for wrongful detention of money since the claim of the appellant was disputed and required to be determined by adjudication in the arbitration proceedings, it was an unliquidated claim until the passing of the award. In any event interest could only be awarded if there were a debt or sum certain payable at a certain time. Supreme Court observed that interest on a claim for damages arising out of breach of contract could be allowed both on principle and in law. Dealing with the question whether Arbitrator was competent to award interest in the circumstances of the case and whether in having awarded interest he committed an error of law apparent on the face of the award, the Supreme Court held that the general rule of law is that an award is final as to both fact and law but there is an exception to the rule namely that an error of law apparent on the face of award is ground for setting it aside. There is a further rider to this rule namely that if the parties have specifically referred a question of law to arbitration then the general rule would apply and the award will be beyond reproach even if such a question is decided erroneously. It may also be pertinent to refer to another important principle of law laid down in the judgment that as a general principle, the Arbitrator has .Always been considered to have implied authority to follow the ordinary rules of law.
22. Relying upon "Russell on Arbitration" 19th Edition page 440, it was observed that intentional disregard of the law would, therefore, seem to be such a misconduct on the part of the Arbitrator as would justify setting his award aside.
23. The question of grant of interest by Arbitrator by way of damages for breach of contract came up for consideration before late Naeemuddin, J. (as his lordship then was) Hassan Brothers & Company v. Maqbool Cotton, Ginning and Pressing Factory, decided on 23rd April, 1978 and reported in PLD 1986 Karachi 21. The learned Judge who later rose to the august office of Chief Justice of the Court and a Judge of the apex Court upon consideration of the provision contained in section 29 of the Arbitration Act expressed the view that the Court is empowered while passing decree to award interest from the date of the decree at such rate as the Court deems reasonable.
On this analogy, learned Judge observed that, therefore, it follows that the Arbitrator cannot award interest beyond the date of the decree, unless the reference includes a term granting the power to the Arbitrator to grant future interest after the date of the decree. Learned Judge relied upon a case from the Lahore jurisdiction reported as Mehboob Alam v. Mumtaz Ahmed (PLD 1960 (W.P.)
Lahore 601) and Pash Behari v. Anand Sarup Bhargwa (AIR 1962 Punjab 51). In the Punjab case, it was laid down that under section 34 of the Civil Procedure Code, the Courts have specifically been given power to award future interest. An Arbitrator, however, is not a Court and eventually the powers given by section 34 to the Courts cannot be exercised by an Arbitrator.
24. In Muhammad Saleem Butt v. Trading Corporation of Pakistan (1986 CLC 254) once again the same learned Judge held that Arbitrator could award interest only upto the date of decree. He further held that the Court, however, had jurisdiction to award interest after the date of decree. In the context of the case before his lordship, it was observed that since the question of awarding of interest after the date of the decree could be separated and the error could be corrected, award was modified to this extent and made rule of the Court accordingly.
25. In F.J. Rambarts (Pakistan) Limited v. Pakistan Steel Mills Corporation (1987 CLC 2198), Saleem Akhtar, J. (as his lordship then was) dealing with objections to an arbitration award after resume of the case law from Pakistan as well as Indian jurisdiction and citing an extract from A.Z. & Company v. S. ' Moula Bux Bashir Ahmed (PLD 1965 SC 505) enunciated the rule of law laying down that it is well-settled that on damages for breach of contract, interest cannot be granted unless agreed upon by the parties or unless the claimant is entitled under a statute. In the reported case, by way of legal notice dated 16-101980, plaintiffs had notified their intention to claim interest at 15 % per - annum on the amounts due and outstanding. Arbitrator had granted interest from the date of notice demanding interest from the defendants on the amount found due and payable to the plaintiff for the work done by them which had remained unpaid. The plaintiff had made this claim and referred to the Arbitrator which was held by the Court to be justified. However, the amount was not awarded by way of damages for breach of contract which course bf action was upheld by the Court.
26. A Division Bench of the Lahore High Court in Mehboob Alam v. Mumtaz Ahmed (PLD 1960 (W.P.)
Lahore 601) authoritatively ruled to the effect that an Arbitrator decides only a dispute between the parties. If the dispute is what is amount which one person is liable to pay to another, the Arbitrator can only determine that amount and cannot merely because a dispute has been referred to him give direction that if the party which is liable does not pay the amount by a particular date, he should also be liable to pay interest. The Court held that in the absence of any specific reference to an Arbitrator as to what interest is to be paid subsequent to the passing of the decree, the Arbitrator does not possess any authority to award post-decree interest. His jurisdiction is limited by the terms of his reference. If the reference be to him only as to the liability of a person, he can only determine that liability.
27. In Secretary Irrigation Department, Government of Orissa v. G.C. Roy (AIR 1992 SC 732), a Full Bench of the Supreme Court of India expressed their view as under:-- "Where the agreement between the parties does-not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the Arbitrator, he shall have the, power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and, therefore, when the parties refer all their disputes or refer the dispute as to interest as, such to the Arbitrator, he shall have the power to award interest. This does not mean that in every case the Arbitrator should necessarily award interest pendente lite. It is a matter within his discretion .To the exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
28. In the latest case reported as State of Orissa v. B.N. Agrawalla (AIR 1997 SC 925), after taking note of the circumstance that in India the Interest Act, 1978 became applicable with effect from 19- 8-1981 conferring statutory power on the Arbitrator held that the Arbitrator has the jurisdiction to award pre-reference interest in cases which arose after the Interest Act, 1978 has become applicable. However, with regard to the cases prior to the applicability of the aforesaid Act and in the absence of any substantive law, contract or usage the Arbitrator has no jurisdiction to award interest, the Court observed. Furthermore, it was held that for the period during which the arbitration -proceedings are pending, the Arbitrator has the power to award interest. In the concluding paragraphs of this judgment, the Court held that under section 29 of the Arbitration Act, the Court can, even where the Arbitrator has awarded interest from the date of the award till the date of payment, disallow interest from the date of the decree or determine a different rate at which the interest is to be paid or confirmed the grant of interest as awarded in the award. When the Court does not modify the award with regard to grant of interest from the date of the award up to the date of payment, the effect would be as if the Court itself has granted interest from the date of the decree till the date of payment at the rate which was determined by the Arbitrator. The future interest would be regarded as having been ordered to be under section 29 of the Arbitration Act when the Court does not modify the award in this respect.
29. In the case in hand, admittedly, there was no agreement between the parties as to the grant of interest on the amount found due and payable by the appellants. Likewise, there appears to be no consistent practice having the force of 'law or mercantile usage to uphold the grant of interest by the Arbitrator for the period prior to his entering upon the reference or even pendente lite. Besides there is no express statutory provision or rule of law authorizing an Arbitrator to grant interest in a dispute for recovery of money as he does not act as a Court under section 34, C.P.C. However, we think and -strongly feel that in the face of a definite claim by the respondents claiming a sum of Rs.2,77,675 by way of interest at 16%o per annum on the principal amount with effect from the date of un-responded legal notice i.e., 15-10-1984 claiming the interest on the amount due against the appellants, Arbitrator was in fact and law justified in equity in awarding interest on the amount found due and outstanding against the appellants at the rate of 6 % per annum only from the date of award and not from the date of legal notice. Admittedly prayer in the application of the respondents under section 20 of the Arbitration Act before the learned Single Judge was for a direction to the appellants to file the arbitration agreement in Court and an order for appointment of a sole Arbitrator for adjudication of their claim. The order passed by the learned Single Judge tends to show that the dispute between the parties i.e. Claim of the respondents against the appellants and the claims of the parties, if any, arising out of the contract between the parties were by consent referred for decision to the Arbitrator. Claims of the parties inter se arising out of the contract between the parties after reference to the Arbitrator in law, his scope of arbitration could not be restricted on mere technicalities. The sole Arbitrator appointed at the choice of the parties was, therefore, competent to decide the questions relating to grant of interest. The view expressed by the apex Court in this country is that the Arbitrator may be legally entitled to grant interest on the ascertained sum found due and payable in appropriate cases on equitable grounds but such authority seems to have been recognized from the date of award end not pendente lite. No doubt the Indian Supreme Court has upheld the power of the Arbitrator to grant interest for pre-reference period as well as pendente lite and from the date of award till payment. The view expressed is reconcliable with the enactment of the Interest Act, 1978 in India enforced with effect from 19-8-1981 which is not the position in. Law in this country. Since this Court is bound by the principle of law enunciated by the Supreme Court of our own country, Arbitrator cannot be held to be authorized and empowered to grant interest pendente lite. On equitable consideration, his authority to award interest from the date of award can undoubtedly be recognized. We are of the view that till such time appropriate amendment in law is introduced by the legislature since the Arbitrator does not enjoy the powers of a Court, his authority can be operative only from the date of award till payment whereas the period subsequent to the passing of the decree would be governed by section 29 of the Arbitration Act under which the Court is empowered to grant interest from the date of the decree till payment.
30. In the peculiar circumstances of the case, we would, therefore, modify the judgment and decree by upholding the grant of interest by the Arbitrator from the date of award till the date of decree. Subject to the abovesaid modification, the finding of the learned Single Judge is upheld.
31. No other point was urged before us in support of this appeal, which must fail and is accordingly dismissed subject to the observations and modification in the award in paragraph 30 of the judgment.