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Suit No. 193 of 1963, decided on 1st April 1966.
Ss. 13, 30 & 33-Arbitrator judge of law arid fact-Technical rules of procedure and Evidence Act, 1872-Not applicable-Award made by arbitrator generally final-Error to law ors face of record-What amounts to.
There are two forums for settling the disputes between the parties (1) Law Courts established in the country and (2) the arbitrators, i.e., the domestic tribunals. When parties refer their disputes for settlement to the arbitrator the award made by him is generally final. No appeal lies against this award. However, this award can be challenged for reasons provided under section 30 of the Arbitration Act, 1940, and the procedure for which is laid under section 33 of the Arbitration Act. An award does not give reasons for the conclusions arrived at by the sole arbitrator. Where a cause or matters in difference are referred to an arbitrator, whether a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and of fact. The only exceptions to that rule are cases where the sward is the result of corruption or fraud, and one other, viz, where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. An error in law on the face of the award means that you can find in the award or a document actually incorporated 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 the arbitrator considered all, the evidence, documents and accounts before him and the arguments of the pleaders, and then made the award, a mere error in construing a contract between the parties which is referred to in the award simply to earmark the origin of dispute in question between the parties cannot be said to be an error in law on the face of the award.
Champsey Co. v. Jivraj Balloo Co. A I R 1923 P C 66 ; Firm Saleh Muhammad v. Nathoomal A I R 1927 P C 164; Lutufullah v. Muhammad Sadik A I R 1946 Sind 117; Muhammad Din v. Allah Ditta P L D 1964 B J 56; Overseas Cotton Co. v-S. M. Fazail & Co. P L D 1958 Kar. 27; Suleman Haji Muhammad & Co. v. State Bank of Pakistan P L D 1960 Kar. 78 and Amin Jute Baling Co. Ltd. v. Aminpur Union Co-operative Multipurpose Society Ltd. P L D 1961 Dacca 102 ref.
Ss. 29 & 14-Amount awarded otherwise than as damages-Court has power to allow interest from date of decree till payment at rate It deems reasonable.
A. Z. Company v. S. Maula Bakhsh Muhammad Bashir P L D 1965 S C 505 distinguished.
Ss. 13 & 30-Arbitrator Accountant employed for checking measurements-Arbitrator cannot be said to have delegated his duty.
Muhammad Saghir Bhatti & Sons v. Federation of Pakistan PLD1958SC221ref.
K. A. Ghani for Plaintiffs.
Muhammad Akram for Defendant.
Date of hearing: 11th March 1966.
These two applications under sections 16 and 30/33 of the Arbitration Act by the plaintiff (Sulaiman E. H. Jaffer) and defendant (Karachi Co-operative Housing Union Ltd., Karachi) respectively have followed the main application under section 14(2) of the same Act filed by the sole Arbitrator (Khan Bahadur Muhammad Sulaiman, C.I.E., Consulting Engineer Quaid-i-Azam Memorial Fund, Karachi) plaintiff has prayed that the award be remitted back to the sole arbitrator as he has not determined his entire claim. The award has been chal lenged by the defendant mainly on the grounds that the refer ence agreement is illegal and void as the receiver appointed by the Civil Court in the civil suit had no authority to refer the disputes, secondly the arbitrator is guilty of legal misconduct, thirdly, there is error apparent on the face of the record, fourthly that the award has been illegally procured and, lastly, the arbitrator had delegated his powers to an accountant.
2. In order to appreciate the objections filed by both the parties, brief reference to the facts giving rise to this litigation appears necessary. K. S. Muhammad Usman (deceased) had entered into sub-partnership with plaintiffs 4 and 5 in March 1955, for carrying out the work in respect of which contract was given by the defendant. He died on 22-10-55 and thereafter some disputes arose between the partners regarding the winding up of the said firm and consequently Civil Suit No. 144/57 was filed in civil Court No. IV Karachi Receiver (plaintiff No. 6 Suleiman E. H. Jaffer) was appointed by the civil Court on 2-8-58, and he was empowered to collect various amounts including the money due from the defendant. Present sole Arbitrator (K. B. Muhammad Sulaiman) was appointed by plaintiff No. 6 who had obtained consent of the heirs of K. S. Muhammad Usman (plaintiffs 1 to 3) and his sub-partners plaintiffs 4 and 5. Defendants bad also agreed to this arbitration. Accordingly by a written agreement dated 11-6-61, the matter was referred to his arbitration and it was signed by defendant and plaintiff No. 6. This fact was brought to the notice of the civil Court. K. B. Muhammad Suleiman, thereafter, entered upon the reference and the case proceeded before him from tine .to time and both the parties attended the meetings and participated in the proceed ings without any objection and with full knowledge of the facts. After the period of four months had expired, an application under section 28 of the Arbitration Act for extension of time was made to the Civil Court No-IV and it was granted. The said application was consented to by the plaintiffs Nos. 1 to 3 (heirs of K. S. Muhammad Usman) and the sub-partners (plaintiffs Nos. 4 and 5) who were parties to the said suit and who had been joined as proforma plaintiffs in this case. Permission was granted by the said civil Judge with retrospec tive effect for referring these disputes to arbitration 6f sole arbitrator and it also granted permission. to move this Court for extension of time for making award. In view of this position, an application was moved under section 28 of the Arbitration Act (Misc. No. 57/62) by the receiver Sulaiman E. H. Jaffer (plaintiff No. 6) on 6-12-62, and extension of time for 4 months was granted. This decision is Sulaiman v. Karachi Co-operative Housing Societies Union Ltd. (P L D 1963 Kar. 316). Thereafter proceedings started before the sole arbitrator again and as he could not make the award in time two more applications were filed under section 28 of the Arbitration Act and the award was made by him in 9-11-53 within the time granted by this Court and it has been duly signed and published. Thereafter at th6 request of Sulaiman E. H. Jaffer (receiver and plaintiff No. 6) the award has been filed under section 14(2) of the Arbitration Act by the sole arbitrator with a prayer that it should be made rule of the Court.
3. Both the parties have objected to this award. There are two forums for settling the disputes between the parties (1) Law Courts established in the country and (2) the arbitrators, i.e., the domestic tribunals. When parties refer their disputes for settlement to the arbitrator the award made by him is generally final. No appeal lies against this award. However, this award can be challenged for reasons provided under section 30 of the Arbitration Act and the procedure for which is laid tinder section 33 of the Arbitration Act. Plaintiff No. 6 (Sulaiman E. H. Jaffer) has disputed this award mainly on the ground that his claim amounting to Rs. 4,86,090 and other items have not been properly determined by the arbitrator and he has therefore, prayed that the award should be remitted back to him for determination of his entire claim. This position does not. appear to be correct. Perusal of the award shows that the total bill as per Schedule A filed by the plaintiff amounted to Rs. 3,66,054 but the arbitrator after giving very careful consideration to the plaint, replies of the Union (defendant) subsequent rejoinders, statements, scrutiny of measurement books and arguments of both sides, he awarded a sum of Rs. 1,10,000. It cannot to said that the arbitrator has not considered all the items of the claim filed on behalf of the plaintiff. No evidence has been led by him. Apart from this fact, this application or the objection was not argued on behalf of the plaintiff. This objection, therefore, fails.
4. I will now consider the objections raised on behalf of the defendant seriatum. The main objection raised on behalf of the defendant is that the reference agreement is illegal and void for the reason that the receiver had no authority to refer the disputes in support of this objection, it was argued before me that the partners and the other parties in suit were not the parties to this reference agreement and therefore the arbitration is miscon ceived. I find very little force in this objection. This objection has already been decided by Kharal, J., when the application under section 28 of the Arbitration Act came before him and his decision is reported in P L D 1963 Kar. 316, it was observed by him that:
"The receiver (plaintiff No. 6) was not acting as a receiver but as an agent of the parties to the suit, and the authority given by the Court was a formal approval to receiver's so acting. As stated already the parties to Suit No. 144/57 agreed and do still adhere to their authority to the Receiver to nominate the arbitrator on their behalf."
After the objections filed by the present defendant were dismissed and time was extended under section 28 of the Arbitration Act and participated in the proceedings. This decision was not disputed by the defendant. Apart from this fact, two more similar applications under section 28 of the Arbitration Act were filed in this Court and time was granted to the sole arbitrator to make his award. For all these reasons I find very little force in this objection and therefore it fails.
5. It brings me now to another objection raised on behalf of the defendant. Defendant has disputed the award alleging that there is error apparent on the face of the record and secondly that the proceedings are nullity and without jurisdiction and, lastly, that the arbitrator has been guilty of misconduct. I have already pointed out that the award made by an arbitrator is generally considered final, unless it is set aside or remitted under different provisions of the Arbitration Act. What is error apparent on the face of the record has been deter mined by various High Courts and at different times. Similarly these Courts have defined what is meant by the arbitrator misconducting himself or the proceedings. The earliest decision on this point is reported in Champsey Co. v. Jivraj Balloo Co. (A I R 1923 P C 66). It was held that:
"Where a cause or matters in difference are referred to an arbitrator, whether a lawyer or a layman, he is constituted the sole and final Judge of all questions both of law and of fact. The only exceptions to that rule are cases where the award is the result of corruption or fraud, and one other which though it is to be regretted is now, firmly established, viz., where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award.
An error in law on the face of the award means that you can find in the award or a document actually incorporated thereto, as far 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."
Same view is expressed in another case reported in Firm Saleh Muhammad v. Nathoomal (A I R 1927 P C 164) where it was held that:
Where the arbitrator considered all the evidence, documents and accounts before him and the arguments of the pleaders, and then made the award, a mere error in construing a contract between the parties which is referred to in the award simply to earmark tire origin of dispute in question between the parties cannot be said to be an error in law on the face of the award."
Another case on this point is reported in Lutufullah v. Muhammad Sadik (A I R 1946 Sind 117). It was held that:-
"An award is binding between parties in all matters which it professes to decide. The fact that parties to the award have not carried out its terms is not in law sufficient to deprive the award of its binding effect."
It was held in another case reported in Muhammad Din v. Allah Ditta (P L D 1959 B J 56) that where one of the three defendants had signed for himself and as mukhtar of other two and the other two defen dants had appeared before the arbitrator and raised no objection on account of the absence of their signature at no subsequent stage till arguments in revision petition in the High Court this objection was overruled. It was further held that arbitrator is Judge of law and fact and he is not bound by technical rules of procedure or Evidence Act.
"The proceedings before the arbitrators may be of some help to the Court in understanding tire award, but in an application to set aside an award the Court cannot look into it in order to find out the error apparent on the face of the award."
This view was expressed in a case reported in Overseas Cotton Co. v. S. M. Fuzail & Co. (P L D 1958 Kar. 27). Another case referred to me in this connection is reported in Suleman Haji Muhammad & Co. v. State Bank of Pakistan (P L D 1960 Kar. 78). It was held that:
"It is not open to the Court to consider the evidence led by the parties before the arbitrator not set out and discussed in the award."
Last case relied upon by the plaintiff is reported in Amin Jute Baling Co. Ltd. v. Amirpur Union Co-operative Multipurpose Society Ltd. (P L D 1961 Dacca 102). It was held that:-
"The arbitrator must remember that they determine the matter referred to them judicially. They should therefore, go into evidence when the nature of dispute requires it. If they decide such disputed questions without going into evidence they might be guilty of legal misconduct, because it may be said that they had decided such questions blindly without any materials before them. Of course, if the parties fail to adduce evidence. they will be justified to decide the case on materials before them. Deciding disputed questions of fact without material or evidence are not questions of technicality or mere irregularity but amounts illegality which may vitiate the award."
In this particular case as already pointed out, the sole arbitrator had given his award, after giving very careful consideration to the evidence produced before him by the parties. He is retired Chief Engineer and is at present consulting Engineer Quaid-i-Azam Memorial Fund. It appears that be was appointed sole arbitrator because of his long experience as an Engineer. The dispute related to the work given to K. S. Muhammad Usman by the defendant to carry out earth work and construction of internal roads in West Zone of Block Nos. 7 and 8. I have explained both factual and legal position. Defendant has failed to prove in what respect the arbitrator has misconducted himself or the proceedings. 'Award does net give reasons for the conclusions arrived at by the sole arbitrator. The total claim filed by the plaintiff before him amounted to Rs. 3,66,554 but he had allowed only a sum of Rs. 1,10,000. Second item of the claim refers to the repairs carried out to the roads. A sum of Rs. 13,041 was claimed but it has been disallowed by the sole arbitrator. He had also disallowed the counter claim filed by the defendant. Another sum of Rs. 1,60,770 was claimed by the contractor by way of interest at 9 % but he has allowed a sum of Rs. 40,000. The contentions 'of the defendant are that no interest was claimed by the plaintiff in the final bill submitted by the contractor and secondly that he is not entitled to interest as the amount due to them was not withheld by the defendant. Reliance was placed by the defendant on a case reported in A. Z. Company v. S. Maula Bakhsh Muhammad Bashir (P L D 1965 S C 505). It was held that: that interest on a sum awarded as damages cannot be allowed for the period prior to the date of award in the absence of express or implied contract or of usage of trade to contrary. It was further held that interest can be allowed from the date of award till the date of payment. In this parti cular case plaintiffs have not claimed damages. Nor the award shows that the arbitrator has allowed any amount to the plaintiff by way of damages. As already pointed out, while narrating the facts, there were some amounts due to the contractor from the defendant who did not pay this amount and it amounts to withholding it. I therefore allow the interest as awarded by the arbitrator. Under section 24 of the Arbitration Act Court has powers to allow interest to award from the date of decree till payment at such rate as it deems reasonable.
6. Last objection raised on behalf of the defendant is that the arbitrator had delegated his powers to the accountant. The award, recites that the sole arbitrator had appointed accountant to check up the measurements and he has been allowed Rs. 500 for doing this job. Apparently it does not amount to delega tion of his powers. In a. case reported in Muhammad Saghir Bhatti & Sons v. Federation of Pakistan (P L D 1958 S C (Pak.) 221), an arbitrator had appointed an expert for testing the cement used in the building. It was held it did not amount to delegation of duty by the arbitrator. Similarly, in this particular case it cannot be said that the sole arbitrator had delegated his powers to the accountant who was employed by him for checking the measurements. This objection also fails.
7. As a result of all this discussion I dismiss both the applications filed under section 16 of the Arbitration Act by the plaintiff No. 6 (receiver) and under section 30 r/w section 33 of the same Act by the defendant with costs. I therefore, allow the application under section 14(2) of the Arbitra tion Act filed by the sole Arbitrator and direct that award be made rule of the Court and decree to follow in its terms. Running interest is allowed at 6 % per annum from the date of application till the date of realisation.
K. B. A.
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