' Order, dated 24-9-1990 whereby an award dated 1-9-1984 was ordered to be made a rule of Court and decree passed accordingly has been challenged through this appeal under section 39 of the Arbitration Act, 1940. It arises in the circumstances briefly stated below.
2. On 14-3-1978, a contract was signed between Pakistan Railways, the appellant herein, and the respondent. It was that the respondent would supply six lacs Elastic Rail Clips to Pakistan Railways in accordance with the terms and conditions mentioned therein and Pakistan Railways' standard conditions of contract (Serial No,A-3-65). In terms of clause (4) of the contract a bank guarantee of the value of US $29694 being 5% of the contract value was furnished by the respondent. A dispute arose between the parties as to the due performance of the said contract which resulted in the encashment of the bank guarantee. The respondent invoked the arbitration clause. Mr. M.Y. Arif, Chief Engineer (Retd.) Pakistan Railways, was appointed as sole arbitrator who gave award dated 1-9-1984. For making the said award a rule of the Court, the respondent made an application before the Civil Court at Lahore, whereas, the objections to the award were filed by the appellants.
After having framed the issues and recording evidence that was produced by the parties, the learned trial Court vide order dated 24-9-1990, ordered the award to be made rule of the Court.
This was challenged through the present appeal by the appellants. When the appeal came up for hearing some time ago, it was found by the Court that despite number of objections having been raised to the award, proper and necessary issues had not been framed. On 8-11-1999, the appeal was accepted with the direction to the learned trial Court for decision of the matter afresh, after framing necessary issues, in accordance with law. The judgment was challenged by the respondent before the Hon'ble Supreme Court of Pakistan through C.P. No,2074-L of 1999 which was disposed of in view of joint consensual stance of the parties. The relevant part of order of their lordships is as follows:-- "3. Malik Muhammad Nawaz, learned Advocate Supreme Court for the petitioner does not press the petition if the High Court itself decides the matter instead of remanding it to the trial Court, in that, sufficient material was available on record. Mr. Shahid Saeed, learned Advocate Supreme Court for the respondents has no objection to the above course.
4. Resultantly, the petition is converted into appeal and allowing the same the impugned order is modified to the extent that the High Court shall decide the matter itself afresh on merits and in accordance with law on the basis of material available on record after hearing the parties, instead of remitting it to the trial Court. There shall be no order as to costs."
' It is thus that the appeal has been heard afresh. It is the common stance of the learned counsel for the parties that Issue No,5 is exhaustive enough to cover the controversy as to whether the award is liable to be made rule of Court.
3. It is the case of the appellants that in terms of clause (5) of the contract, supply of the Elastic Rail Clips had to commence within 5/7 months of the receipt of letter of credit by the respondent with an option to supply in full or through instalments of 70 thousand pieces or more per month, the respondent having failed to adhere to the same and make supply encashment of the bank guarantee was fully justified and valid as the time for the delivery was of essence of the contract. It is contended by the learned counsel for the appellants that the arbitrator has not only misconstrued the relevant terms of the contract but also based his view on assumptions and conjectures in drawing the conclusion that the time was not of the essence of the contract. It is contended that the award was liable to be set aside as the arbitrator had misconducted the proceedings. According to the learned counsel the arbitrator acted illegally in relying upon certain notings appearing in the files of the appellants and correspondence which never formed part of these proceedings and evidence in the case. It is further contended that the award was ambiguous and was not capable of implementation/ executed. According to him, the arbitrator acted illegally and even ordered the payment of interest. It is thus contended that the learned trial Court erred in law in making the award a rule of the Court which award was liable to be set aside in view of the objections of the appellant under section 30 of the Arbitration Act, 1940.
4. The learned counsel for the respondent supports the order passed by the learned trial Court and contends that the appellant had produced no convincing evidence before the trial Court as to the misconduct of the arbitrator in the matter and that the Court acted rightly in making the award as rule of the Court. According to him, it was an honest determination of the dispute by the arbitrator: there being no misconduct committed by the arbitrator, the award was sacrosanct and that the Court does not sit as a Court of appeal in such a matter. It is contended that the time for delivery of goods was not of essence of the contract, the findings so given by the arbitrator is in accord with the terms of contract and the law. It is further contended that the award rendered by an arbitrator of the choice of the parties should be accepted by them.
5. The foremost point of controversy that had arisen between the parties and was subject-matter of the dispute before the arbitrator was the true construction of the relevant clauses of the contract, such as, the delivery period and whether the time was of essence of the contract. As mentioned earlier, it was a contract for the supply of Elastic Rail Clips, clause (5) whereof took care of the delivery. It reads like this:- "CLUSE, DELIVERY ' The Elastic Rail Clips on order shall be delivered at Manufacturer's option either in full or in lots of 70,000 pieces per month or more but in any case the delivery shall commence within five/seven months after receipt of letter of credit."
' The other clauses of the contract having bearing and relevance are these: clause (14) which reads as follows:-- 'CLAUSE (14) CONDITIONS OF CONTRACT ' Except so far as otherwise expressly stated this Contract shall be governed by the conditions of Contract A-3-65 enclosed with the Tender Documents."
' By clause (15) (Arbitration), the arbitration clause (23) of the Standard Conditions of Contract A-3- 65 enclosed with the Tender Documents was adopted. It is evident that Standard Conditions of Contract A-3-65 were part of Tender Documents, reference to which had been made in the contract finally executed between the parties on 14-3-1978. There was, however, a rider contained in clause (14) of the contract that "except so far as otherwise expressly stated this contract shall be governed by the conditions of contract A-3-65 enclosed with the Tender Documents". It is thus to be seen as to whether clause (5) of the contract was correctly construed and interpreted by the learned arbitrator. In paragraph No,3.1 of the award by referring to clause (5) of the contract, it has been observed by the learned arbitrator that "so far as the monthly rate of supply is concerned, this Clause is very specific and there is no controversy on this aspect. Confusion, worst confounded, however, persists even after 6 years of signing of the Agreement regarding the 'effective' date for the purpose of reckoning 5-7 months after receipt of the letter of credit". According to the respondent even, 5/7 months had to reckon from the date of receipt of letter of credit which though opened by the appellants on 5-4-1978 was admittedly received by the respondent on 29- 8-1978. There was thus no confusion whatsoever as to the commencement of the delivery in terms of clause (5) of the contract. It appears that the learned arbitrator was more influenced by his own imagination and experience in finding faults with the relevant clauses of the contract and quoted certain instances how it ought to have been drafted. It should not have been the function of the learned arbitrator to act like this rather should have construed the contract as it was. In the context of the goods to be supplied and delivery schedule given in clause (5) of the contract, the observation that the agreement was devoid of "the date or the dates" was also not called for. The effective date for reckoning the commencement of the supply was clearly and easily understandable i,e, 5/7 months, from the date of receipt of the letter of credit. According to the own admission of the respondent the L.C. Was received on 29-8-1978 taking even the maximum period of seven months for the commencement of supply from that date would mean 29-3-1979.
Reference may here be appropriately made to paragraph No,7 of the statement of claim, filed before the learned arbitrator by the respondent which reads as follows:--
7. "That from the dates mentioned in the preceding paragraphs it would be evident that the supply of the first consignment of the rail clips was to be commenced from 28th March, 1979 to be completed by 27th April, 1979. It is also evident from the aforementioned dates that the supply of the rail clips was to be completed by 27th of December, 1979. In this connection reference may be made to clause 5 of the Contract dated 14-3-1978 read with clauses 4 and 5 of the Standard Conditions of Contract for the supply of stores bearing Serial No,A-3-65."
' Paragraphs Nos.1 and 2 of ExhLA1, the record of proceedings held on 13-7-1984 before the learned arbitrator would also show that the supplier was fully aware of the Mandate and implication of clause (5) of the contract that 'the delivery was required to commence within 5/7 months after receipt of L.C. i,e, 28-3-1979, the first consignment of 70,000 Elastic Raid Clips were required to be supplied by 27-4-1979 and the full supply of 6.00 lacs was to be completed by 27th December, 1979". Even if, some importance was attached to the appointment of the inspectors, the averments made in paragraph No,6 of the statement of claim would show that the Inspectors had been appointed by 22-2-1979. The L.C. Was still valid up to 31-5-1979 but no steps were taken by the respondent for ensuring the supply of the rail clips during this time. It was only a quantity of 5000 pieces which were offered for inspection but were rejected by the Inspectors on their inspection. It was in this context and the circumstances when the respondent had failed to commence supply as per clause (5) of the contract that the appellants took steps for the encashment of the bank guarantee which was en cashed on 8-4-1980. There was no reason for the respondent to have not adhered to the schedule of supply in terms of paragraph No,5 of the contract. There is nothing on record to establish that the respondent took material steps showing its readiness to commence the supply at least the first consignment of 70,000 pieces of rail clips by 28-3-1979; clearly, therefore, the respondent was at fault and was responsible for the breach of clause (5) of the contract. The learned arbitrator could not have relieved the respondent of its contractual responsibility by attributing certain ambiguities to the contract, for which there was no valid basis or justification. Clause (5) of the contract suffered from no such confusion or ambiguities and was explicit enough.
6. The other point at which the parties were at variance and arose as a dispute before the learned arbitrator was as to whether the time was essence of the contract? Undoubtedly, it was a contract for the supply of rail clips. It was a commercial contract. It is an established law that in a contract relating to immovable property time is not ordinarily regarded as of essence but as to other contracts, commercial or mercantile, the time is prima facie of the essence of the contract with respect to the delivery of the subject-matter of the contract. Section 55 of the Contract Act, 1872 and section 11 of the Sale of Goods Act, 1930 would govern the contracts falling within their ambit. In Messrs China Cotton Exporters v. Beharilal Ramcharan Cotton Mills Limited AIR 1961 SC 1295 the principle was reiterated like this "Remembering, as we must, that in commercial contracts time is ordinarily of the essence of the contract." Similar expression was used in Orissa Textile Mills Limited and another v. Ganesh Das Ramkishun AIR 1961 Patna 107 that time is prima facie of the essence of the commercial contracts. In Messrs Hafiz Abdul Aziz Yusufani and Co. v. Burma Oil Mills Limited PLD 1967 Kar. 318 it was observed that in commercial contracts "the usual rule is that time is of the essence of the contract". It was further held that "when two traders enter into a contract of sale of goods and fix a date for performance, then performance must take place on that day assuming time to be of the essence of the contract. If delivery under that contract is of a commodity considerable in quantity---then delivery has to commence on that day and continue according to the usage of that trade if the terms of the contract themselves do not provide for it. But the date of delivery must be adhered to". Same rule is stated in Messrs Zamindar Cotton Factory v. Burma Oil Mills Limited PLD 1967 Kar.
388. In Bunge Corporation v. Tradax SA (1981) 2 All ER 513 Megaw LJ of the Court of appeal stated it as a long standing accepted principle of English Law that in a contract for the sale of goods prima facie a stipulated time of delivery is of the essence. It was also stated that a question of the construction of the contract is a question of law for the Court. Referring to a House of Lords' decision in United Scientific Holdings Limited v. Burnley Borough Council (1977) 2 All ER 62 that "in commercial contracts for the sale of goods prima facie a stipulated time of delivery is of the essence, but prima facie a stipulated time of payment is not", it was observed that stipulation as to time for delivery are usually to be treated as being of the essence of the contract "even though this is not expressly stated in the words of the contract". In Messrs Venkateswara Minerals Firm and another v. Jugalkishore Chiranjilal, Firm AIR 1986 Karnatka 14 also similar view was taken. In the present case, the learned arbitrator took the view that time for delivery of the rail clips was not the essence of the contract, as according to him, clause (5) of the contract was devoid of the date or dates and there was no proper delivery schedule annexed to the contract. For taking such a view he thought that 'there should have been an express provision in the delivery clause to the following effect with no `should', 'ifs' or 'buts', whatsoever". It was his unique approach to the matter as to how the relevant clause of the contract should have been drawn. Clause (5) of the contract needs to be considered in this context and is reproduced again at the cost of repetition. It is as follows:-- "CLAUSE (5). DELIVERY ' The Elastic Rail Clips on order shall be delivered at Manufacturer's option either in full or in lots of 70,000 pieces per month or more but in any case the delivery shall commence within five/seven months after receipt of letter of credit." It is not fraught with 'shoulds', 'ifs' or 'buts'. The underlined portion is clearly demonstrative of the intention of the parties as to when the delivery had to commence. According to Chambers 21st Century Dictionary, Revised Edition, 1999 at page 192 'But' is used to emphasize the word that follows it. Likewise, the phrase 'in any case' is expressive of emphasis envisaged by the parties. In the context of the matter it would mean 'under all circumstances'. The supply had to commence within 5/7 months of the date of receipt of letter of credit, without fail. It was stated in Bunge Corpn.'s case (supra) at page 535 that 'in mercantile contracts stipulations as to time not only may be, but usually are, to be treated as being 'of the essence of the contract', even though this is not expressly stated in the words of the contract. '
(Underlined by me for emphasis). Such stipulation may not expressly appear in a particular contract but from the nature of the contract itself the time is regarded as to essence. It has been observed by the learned arbitrator that 'preparations were already afoot to award this supply to Messrs Precix Lishon, Portugal who were also executing a similar Contract' and that 'award of this supply to Messrs Precix and the concurrence of the Finance to this proposal were finalized in a record time of one week'. Perhaps, the object of taking note of the award to another supplier through an expeditious process was to attribute some motive, however, in the context, it would be indicative of the impelling need of the appellants to procure the rail clips immediately. The respondent had, as noted above earlier, offered only 5000 pieces of clips for inspection and that too after the date for the commencement of first consignment had passed which were rejected by the Inspectors. It all showed the casualness on the part of the respondent in performance and execution of the contract. The view taken by the arbitrator that the time was not the essence of this contract was based on misconstruction of the contract and legally incorrect and erroneous. His reliance upon Pakistan v. Firm Lodhi House PLD 1968 Lah. 923 was misplaced inasmuch as that was a case in respect of the construction contract wherein the clause of the contract indicated that "the intention of the parties was not to strictly enforce the clause regarding time". It is, however, not so in the present case. As discussed above, it was clearly understandable from clause (5) of the contract as to when the supply had to commence wherein great emphasis had been laid by using the expression 'but in any case' which was clearly indicative of the intention of the parties that time was the essence of the contract. Since the respondent had failed to commence the supply till even expiry of seven months of the receipt of letter of credit, it was the respondent who committed breach of the contract which justified the appellants to get the guarantee encashed.
7. It is thus to be seen whether such an award rendered by the learned arbitrator could be made rule of the Court. It may be observed that when an award was filed before the Court under section 14 of the Arbitration Act, 1940, the appellants raised the objections to its being made rule of the Court including that the same was invalid on the face of it the conclusion arrived by the learned arbitrator were contrary to law and evidence on record and were based on conjectures and surmises and that the award was impracticable, impossible and invalid under the law. It was also challenged on the ground of misconduct of the learned arbitrator resulting in gross miscarriage of justice. An issue was framed by the Court as to whether the award was liable to be made rule of the Court. A representative of the respondent appeared as P.W.1, whereas, R.W.1 appeared on behalf of the appellants. The learned trial Judge by picking up a sentence appearing in the cross- examination of R.W.1 that "he could not point out even a single instance which could show misconduct on the part of the arbitrator' ordered the award to be made rule of the Court without adverting to any of the objections, filed by the appellants. As held in Pakistan Railways v. Messrs Q.M.R. Expert Consultants PLD 1990 SC 800, "it is the duty of the Court to examine, whether there was any reason for modifying of the award or for setting aside the award notwithstanding that an affected party may have failed to file objections to the award on account of the expiry of the limitation period or the parties to the arbitration proceedings may be in collusion and because of that, they may not file any objection to a collusive award. If any authority is needed, reference may be made to the case of Union of India v. Pratap Chandra Biswas AIR 1964 Assam and Nagaland 141, in which a Division Bench of the above High Court held that there is nothing in section 39 or any other provision of the Act to show that the Court can refuse to set aside an award only on an application made by a party but from a bare reading of section 17, it is clear that even the Court can suo motu set aside an award, Reliance was placed on the case of Chhabba Lal v. Kallu Lal and others AIR (33) 1946 PC 72. We are inclined to hold that in a fit case, the Court may on its own under section 17 of the Act modify or set aside the award if the facts and dictates of justice so demand'.
' In the present case, the appellants had duly filed objections but have not at all been adverted to by the trial Court. In Messrs Awan Industries Limited v. The Executive Engineer, Lined Channel Division and another 1992 SCMR 65 it was again reiterated that section 17 of the Arbitration Act, 1940 imposes a duty on Court to see that 'there is no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award. This can be done by the Court suo moto, apart from the application which a party may make for either remission of the award or its reversal. Where, therefore, an award is found to be nullity because of the invalidity of the arbitration agreement or, for any other reason, or the award is prima facie illegal and not fit to be maintained, the Court has power under section 17 of the Act to set it aside without waiting for an objection to award being filed or without considering any application for setting it aside, if there be any, and irrespective of the question whether or not any objection to the award was filed or whether the objection, if filed, was not within time'. This judgment was latter followed in Muhammad Tayab v. Akbar Hussain 1995 SCMR 73. It is not thus necessary for a part to establish misconduct on the part of the arbitrator in every case when the award is found 'otherwise invalid'. Clause (c) of section 30 would get attracted which empowered the Court to set aside the same and refuse to make it rule of the Court. It may be noted that in clause (a) of section 30 of the Act the expression 'that an arbitrator or umpire has misconducted himself or the proceedings' has received attention of the Courts and been interpreted in numerous cases. According to the judicial interpretation 'misconduct' occurring here in clause (a) of section 30 of the Act does not necessarily mean amounting to moral turpitude and is usually called legal misconduct having a very wide meaning.
In Pakistan through Secretary, Ministry of Industries v. Messrs Asian Associated Agencies PLD 1974 Kar. 155 a learned Division Bench took the view that the term 'misconduct' with reference to arbitration proceedings would seem to be wide enough to include all such irregularities as would cause miscarriage of justice. In Brooke Bond (Pakistan) Limited v. Conciliator appointed by the Governor of Sind and 6 others PLD 1977 SC 237 it was observed that the term 'misconduct' used in connection with arbitration does not necessarily imply anything in the nature of fraud or moral turpitude. In The Indian Minerals Co. v. The Northern India Lime Marketing Association AIR 1958 Allahabad 692 it was held that where the arbitrator misdirected himself and exceeded the scope of his authority, the award cannot be sustained. Anything done by the arbitrator beyond the term of reference would be without jurisdiction whether it be called misconduct or not. In the present case, not only that the arbitrator misconstrued the contract, in particular clause (5) of the same and took wholly an unwarranted view about the delivery schedule as to the supply of rail clips but also issued directions of declaratory nature in paragraph No,7 of the award by restoring the contract.
Issuance of directions of such a mandatory nature was not within the scope of reference before him. It was in this context that an objection had been raised by the appellants that an award of impracticable nature rendering the same invalid had been given by the learned arbitrator. The learned counsel for the respondent also candidly submitted that it was not practicable or possible to implement or carry out the directions contained in paragraphs Nos.7.2, 7.3 and 7.4 of the award.
It would render the award otherwise invalid, not capable of implementation and execution. The Court failed to advert to this aspect as well and proceeded to make the award as rule of the Court without due. Application of mind to the matter before it. It appears that the Court was not conscious of its duty under section 17 of the Arbitration Act, 1940 and acted mechanically.
8. It is contended by the learned counsel for the respondent that where the arbitrator had made an honest determination of the matter, the award should not be interfered with in view of Abdur Rahman Munshi and 7 others v. Dr. Abdul Malek and 11 others 1968 SCMR 275. In the precedent case, it was found as a fact that the award did not fall within the mischief of any of the clauses of section 30 of the Arbitration Act. It was in that context that the petition for leave was dismissed in that case.
Relying on Lahore Development Authority v. Messrs Khalid Javed & Co. 1983 SCMR 718, it is contended by the learned counsel that the appellants which is a Government Department should have accepted the award, particularly, when the arbitrator was a retired officer but this contention loses its efficacy, where the award is tainted by illegalities and is found to be invalid. Reference has been made to Ghulam Abbas v. Trustees of the Port of Karachi PLD 1987 SC 393; Joint Venture KG/Rist v. Federation of Pakistan PLD 1996 SC 108; Province of Balochistan and another v. Malik Haji Gul Hassan PLD 1982 Quetta 52; Ghee Corporation of Pakistan (Pvt.) Limited v. Broken Hill Proprietary Company Limited PLD 1999 Kar. 112 and K.F. Development Corporation Limited v. Messrs Dawood Cotton Mills Limited 1999 MLD 2953 that while examining the validity of the award the Court does not act as a Court of appeal and that the Court cannot undertake reappraisal of the evidence recorded by the learned arbitrator in order to discover the errors or infirmities in the award. There can be no cavil insofar as the proposition of law in general is concerned, it will, however, be in each case that an award is to be examined on the touchstone of parameters laid down by the superior Courts. Even in the above mentioned precedents the reasoning of the learned arbitrators were examined and considered by the Courts and only thereafter the view was taken as to the validity or otherwise of the award. In Joint Venture's case (supra) their lordships undertook the interpretation of the relevant clause of the agreement by themselves in order to find out whether the arbitrator had committed any error. Such a broad proposition that the Court cannot examine the reasoning or the correctness or otherwise of the view taken by the learned arbitrator, if endorsed, without exceptions, would denude the Court of its powers available to it under section 15 (Power of Court to modify the award), section 16 (Power of the Court to remit the award), section 17 Power of the Court to set aside the award and also make sections 14, 30 and 33 wholly nugatory. Such an intention cannot be imputed to the Legislature nor the Courts have given such a blanket immunity to an award which may suffer from illegalities and invalidities.
9. In the instant case, the learned arbitrator issued a further direction that "the encashed amount of the Guarantee Bond (plus interest on this amount at the prevalent Bank rate from 8-4-1980 to 1-9- 1984) should be restored to the account of the petitioner by 30-9-1984". The law is now fairly settled that interest cannot be allowed by the learned arbitrator for period prior to the date of award.
Reference may be made to Ghulam Abbas v. Trutees of the Port of Karachi PLD 1987 SC 393. In issuing such a direction, the learned arbitrator acted in excess of his authority.
10. In view of the above, I have reached the conclusion that:--
(i) Clause (5) of the contract explicitly provided for as to the mode of delivery and the time of commencement of delivery or rail clips by the respondent. It suffered from no ambiguities whatsoever. The approach of the learned arbitrator was misdirected and result of misinterpretation of the contract.
(ii) The time was of essence of the contract in a transaction of this nature. Since the contract was one, although delivery of rail clips was permissible through instalments, the non-supply of even the first consignment resulted in breach of the contract by the respondent.
(iii) It was the respondent who failed to adhere to the contractual terms, as to the delivery of rail clips, the appellants were justified in encashing the bank guarantee.
(iv) The learned arbitrator acted illegally in awarding interest from a date even prior to the award.
(v) As the award has been found liable to be set aside for the reasons mentioned above, as a whole, the learned trial Court acted illegally in making the same rule of the Court.
As a result of the above, the order of the learned trial Court dated 24-9-1990 making award dated 1-9-1984 rule of the Court is not sustainable. The appeal is accepted by setting aside the order of the trial Court as also the award. No order as to costs.
' By interim orders dated 14-3-1993 and 18-12-1994 the appellants were directed to deposit the decretal amount with the Registrar of this Court. It was to be invested in Defence Saving Certificates Scheme in view of order dated 10-7-1995 and to be remitted to the party ultimately succeeding in appeal. Since the appeal has been accepted, the appellant is entitled to the same.