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‑‑‑S. 39‑‑Law Reforms Ordinance (XII of 1972), S.3‑‑Appeal from judgment of Single Judge of High Court in its original jurisdiction‑ Appeal being a continuation of proceedings which had initiated on filing of award in Court, Court hearing an appeal under S.39, Arbitration Act, 1940 in respect of award filed in Court has to be treated as a Court under S.3, Law Reforms Ordinance, 1972.

An appeal by right is a continuation of the original proceeding and, therefore, this appeal is a continuation of the proceedings which had initiated on the filing of award in question on the original side of High Court and Bench hearing this appeal is a Court which is hearing the same matter and that it has all powers of the appellate Court as envisaged in the Arbitration Act.

Court, which hears an appeal under section 39 of Arbitration Act in respect of an award which has been filed in Court has to be treated as a Court under S.3 of Ordinance XV of 1981.

Appeal which has been filed under section 39 of the Arbitration Act gives right of appeal where the Court refuses to set aside an award, therefore, this appeal cannot be treated as merely an appeal under S.3 of Law Reforms Ordinance of 1972 and, thus, all the incidents of an ordinary appeal are attracted to the same. Moreover, even in a Letters Patent Appeal all the powers of an appellate Court are exercised by the Appellate Bench of the High Court against the judgment or final order of the Single Judge.

Such appeal cannot be treated as a review application and has to be treated as an appeal for all intents and purposes hence it is a proceeding in continuation of the original proceedings where the award was made rule of the Court.

The fact that an appeal under section 3 of Law Reforms Ordinance, 1972 was also competent does not detract from the position that it is an appeal. Even as an Intra‑Court Appeal it had to be regarded as continuation of the original proceedings, as a Letters Patent Appeal is not an appeal with lesser powers for the appellate Court and attracts all the incidents of appeal. The arguments that a letters patent appeal is merely a review is incorrect.

P L D 1963 Kar. 182; P L D 1960 S C 307; 1984 C L C 1077 and P L D 1985 S C 69 ref.

P L D 1971 Kar. 899 and P L D 1981 S C 94 distinguished.

‑‑‑Ss. 39 & 17‑‑Scopes of Ss.39 & 17 are quite different and in any case S.17 does not take away right of appeal given against order refusing to set aside award.

Section 39 of the Arbitration Act, 1940 gives a clear right of appeal where the Court refuses to set aside the award. The fact that the decree has followed is of no consequence as section 39 does not contain a proviso to the effect that the appeal would not be competent if decree has followed the order refusing to set aside the award. What actually happens is that if the objections to an award are dismissed and the Judge refuses to set aside the award then at the same time the award is made as the rule of the Court without there being any time lag between the two and, therefore, provision of appeal under section 39 against an order refusing to set aside an award cannot be made ineffective merely because the decree has followed the same. Moreover, the bar provided under section 17 of Arbitration Act in respect of an appeal against the decree following the award being made rule of the Court is really not a bar in respect of appeal under section 39 of the Arbitration Act, but it merely prohibits another appeal on the grounds mentioned under section 39 of the said Act. In fact, the provisions of section 17 of the said Act merely provide that where a person feels merely aggrieved against the contents of a decree then he is restricted in that appeal to the grounds mentioned in section 17 and cannot reagitate the grounds of section 39 if he has not contested the award or has contested the award being made rule of the Court in another appeal but the same has not succeeded and thereafter the appellant under section 17 of the Arbitration Act is restricted to only agitate that the decree is not in accordance with the award or is in excess of the same. Therefore, section 17 is restricted to the position where merely the contents of the decree are challenged and it does not affect the right of appeal granted under section 39. It, therefore, appears to be clear that scopes of section 39 and section 17 are quite different and in any case section 17 does not take away the right of appeal given against the order refusing to set aside the award.

‑‑‑S.14‑‑Award‑‑Award should give reasons sufficient in detail to enable Court to consider any question of law arising out of it‑‑Award not giving reasons sufficient in detail‑‑One out of two arbitrators dead but award signed by both‑‑Reasons of award can be signed by surviving arbitrator‑‑Award remitted back to surviving arbitrator for supplying reasons.

‑‑‑S. 39‑‑Law Reforms Ordinance (XII of 1972), S.3‑‑Appeal‑‑Documents in question though part of arbitration proceedings but were not part of the award‑‑High Court refrained itself to express opinion in that regard.

A. A. Fazeel for Appellant.

Khalid M. Ishaque for Respondent.

Dates of hearing: 6th, 10th and 11th March, 1986.

MUHAMMAD ZAHOORUL HAQ, J.‑‑This appeal is filed under section 3 of Law Reforms Ordinance; 1972 read with section 39 of Arbitration Act, directed against the order of Hon'ble Single Judge of this Court, dated 13‑1‑1979 making the award, dated 30‑3‑1976 rule of the Court.

2. The relevant facts are that on 10‑10‑1974 the parties had agreed for supply of 10,000 tons of pig iron by respondent to the appellant‑at 27,9 per ton from Khurramshaher, Iran by October/ November, 1974. 2500 tons was supplied by 31‑12‑1974 and its delivery was taken by appellant. There was an addendum to the contract reducing the price by 224.50 and reducing the quantity to 5,000 tons, place of shipment was not changed. There was correspondence between the parties and some difficulties about price and place of shipment. Finally 2575 tons were shipped by respondent from Japan, which the appellant refused to lift. But eventually on undertaking of respondent that they reduce the price to 187 per ton on the interference by Minister of Commerce, the appellants took delivery of the same.

3. Difference arose between the parties in respect of demurrage liabilities in respect of the two shipments and the validity of the reduction of price from 224 per ton to 187 per ton and in respect of the reduction of shipment of 10,000 tons to 5,000 tons and also in respect of insurance.

4. The matter was referred to Arbitration as per agreement, dated 10‑10‑1974 Mr. A. R. Khan was appointed as an arbitrator by the respondent and Mr. Yousuf Rafi was arbitrator on behalf of appellant. The arbitrators appointed late Mr. Justice Feroze Nana Ghulam. Ali as Umpire.

5. The parties filed their claims, counter‑claims and objections before the arbitrators. The parties also examined witnesses and filed documents before the arbitrators.

6. The arbitrators gave their unanimous award on 30‑3‑1976 and filed the same in Court. The Court issued notices and the appellants filed objections to the same which was replied by the respondents. After hearing the arguments, the original side Judge rejected the objections of the appellant and made the award the rule of the Court on 13‑1‑1979. Decree to that effect followed.

7. This appeal was filed on 21‑2‑1979. During the pendency of this appeal the Arbitration Act was amended on 11‑5‑1981. by these amendments it was made compulsory that where matter was pending before the arbitrators at the time when the amendments were introduced, the arbitrators must give reasons for award. It was also provided that where proceedings in respect of an award were pending in any Court, the Court may remit the award to the arbitrators for giving reasons. It may also be mentioned at this stage that Mr. A. R. Khan, who was one of the two arbitrators has died meanwhile.

8. The arbitrators had awarded a total sum of Rs.20,86,890 in favour of respondents against the appellant which was split as under:‑

(2) Rs. 3 4205913 as demurrage on the first consignment;

(2) Rs. 6,91,908 as demurrage on the second consignment;

(3) Rs. 9,54,462.37 on account of reduction in price of second shipment from U.S. 224.50 to U.S. 187 per ton which reduction was invalid in the opinion of arbitrators;

(4) Rs. 13,376 in respect of marine insurance on second shipment.

(5) Rs.17,160 as costs;

(6) 10% on the amount awarded from date of award until payment.

The first and foremost submission made by Mr. Ali Ahmed Fazeel, learned counsel for the appellant is that since the award was without reasons, therefore, it should be remitted to the arbitrators for giving their reasons in accordance with section 3 of Arbitration Act as amended on 11‑5‑1981. Counsel's submission is that the present appeal is a continuation of the proceedings in respect of the award which was filed in Court. He argued that the present appeal i s a statutory appeal which was available to the appellant as a right under section 39 of the Arbitration Act on account of refusal of the original side Court to set aside the award which should have been set aside on account of substantial illegalities having been committed by the arbitrators and on account of their misconduct. Argument is based on the principle that appeal is regarded as a continuation of the original proceedings. He also argued that words used ace proceedings pending in any Court', which means that it is not the original proceedings in the form of suit alone but includes the appellate proceedings as well. Moreover, the word 'Court' cannot be confined to original Court alone but had to be given a wider interpretation to include the appellate Court as well.

9. The word 'Court' is defined in section 2(c) of the Arbitration Act as a civil Court having jurisdiction to decide the question forming the subject‑matter of the reference. There is no doubt that the original Court having the proceedings in respect of the award is such a civil Court and similarly the appellate Court which bears an appeal against an order refusing to set aside an award is also a civil Court which decides the questions forming the subject‑matter of the reference which has culminated into an award and later on it has received consideration from the original Court. It is now completely a settled law that an appeal by right is a continuation of the original proceedings and, therefore, this appeal is a continuation of the proceedings which had initiated on the filing of award in question on the original side of this Court and this bench hearing this appeal is a Court which is hearing the same matter and that it has all powers of the appellate Court as envisaged in the Arbitration Act.

10. In P L D 1963 Kar. 182 the word 'proceeding' was interpreted as sufficiently comprehensive to include proceedings in appeal.

In P L D 1960 S C 307 the word Court was interpreted to mean not only the trial Court but the appeal Court as well.

In 1984 C L C 1077 it has been held that provisions of section 26(A) of the Arbitration Act apply to proceedings in appeal as well as the original Court as suit and appal are step‑in‑one‑proceeding.

11. We had asked Mr. Fazeel if the word 'any Court' used in section 3 of Ordinance XV of 1982 would include even the Supreme Court where the appeal is not filed as a matter of right but only with the leave of the Supreme Court. He replied off hand that word 'Court' should include the Supreme Court as well if it was hearing a matter forming the subject‑matter of the reference. We find that his interpretation is borne out from the observations of the Supreme Court itself in P L D 1985 S C 69, where the Supreme Court was considering the option available to it in a matter where the award which did not state reasons had been made rule of the Court by the High Court, but the Supreme Court came to the conclusion that prejudice had been caused to the appellant. One of the options open to the Supreme Court was mentioned as remission of the award to the arbitrators for giving their reasons. Of course the Supreme Court did not exercise that option but instead finally decided the matter itself and allowed relief to both the parties. However, what is important is that the Supreme Court was of the view that it was a Court before which proceedings were pending in respect of an award which had been filed in Court.

12. Therefore, it is obvious that this Court, which hears an appeal under section 39 of Arbitration Act in respect of an award which has been filed in Court has to be treated as a Court under section 3 of Ordinance XV of 1981.

13. Khalid Ishaq, learned counsel of respondent had argued that the present appeal cannot be treated as an appeal under section 39 of Arbitration Act, but it was only an appeal under section 3 of Law Reforms Ordinance and was as such merely an intra‑Court appeal which is merely in the position of review by the same Court of its own decision, but by a bench consisting of two or more Judges. And hence it cannot be considered as an appeal in the ordinary sense of the term and that the powers in such appeal should be restricted to the powers of a review Court under section 114 of C.P.C. read with Order XLVII. He submitted that appeal under Law Reforms Ordinance, 1972 was similar to appeal under Letters Patent of the High Court which was interpreted in P L D 1971 Kar. 899 as not really an appeal in the strict sense, but an internal arrangement of the Court reviewing its own decision. He also relied upon P L D 1981 S C 94 where it was held that assumption that review is continuation of an appeal is not correct and it was also observed that scope of review and appeal is different. He had also argued that since section 17 of Arbitration Act prohibits an appeal against a decree on award after refusing to set aside the award, therefore, since decree had been passed in this case, therefore, this appeal was not competent.

14. A simple answer to both the objections of the respondents' counsel is that this appeal has been filed under section 39 of the Arbitration Act which gives right of appeal where the Court refuses to set aside an award, therefore, this appeal cannot be treated as merely an appeal under section 3 of Law Reforms Ordinance of 1972 and, therefore, all the incidents of an ordinary appeal are attracted to the same. Moreover, even in a Letters Patent Appeal all the powers of an appellate Court are exercised by the appellate Bench of the High Court against the judgment or final order of the Single Judge. The learned counsel has not been able to cite any case where the Letters Patent Appeal was in fact treated as merely a review application and the appellant was restricted to the four corners of section 114 and Order XLVII of C.P.C. Therefore, the cited cases are not applicable in this case and the present appeal cannot be treated as a review application and has to be treated as an appeal for all intents and purposes hence it is a proceeding in continuation of the original proceedings where the award was made rule of the Court.

15. The fact that an appeal under section 3 of Law Reforms Ordinance, 1972 was also competent does not detract from the position that it is an appeal. Even as an intro‑Court appeal it had to be regarded as continuation of the original proceedings, as a Letters Patent Appeal is not an appeal with lesser powers for the appellate Court and attracts all the incidents of appeal. The arguments that a Letters Patent Appeal is merely a review is incorrect.

16. In respect of the argument that this appeal is incompetent as the decree has been passed in the case and hence the bar of section 17 of Arbitration Act is applicable, the submission is completely misconceived. Section 39 of the Arbitration Act gives a clear right of appeal where the Court refuses to set aside the award and in this case the original side Judge has in fact refused to set aside the award and, therefore, the appeal is obviously competent. The fact that the decree has followed is of no consequence as section 39 does not contain a proviso to the effect that the appeal would not be competent if decree has followed the order refusing to set aside the award.

17. What actually happens is that if the objections to an award are dismissed and the Judge refuses to set aside the award then at the same time the award is made as the rule of 'the Court without there being any time lag between the two and, therefore, provision of appeal under section 39 against an order refusing to set aside an award cannot be made ineffective merely because the decree has followed the same.

18. Moreover, the bar provided under section 17 of Arbitration Act in respect of an appeal against the decree following the award being made rule of the Court is really not a bar in respect of appeal under section 39 of the Arbitration Act, but it merely prohibits another appeal on the ground mentioned under section 39 of the said Act. In fact, the provisions of section 17 of the said Act merely provide that where a person feels merely aggrieved against the contents of a decree then he is restricted in that appeal to the grounds mentioned in section 17 and cannot reagitate the grounds of section 39 if he has not contested the award or has contested the award being made rule of the Court in another appeal but the same has not succeeded and thereafter the appellant under section 17 of the Arbitration Act is restricted to only agitate that the decree is not in accordance with the award or is in excess of the same. Therefore, section 17 is restricted to the position where merely the contents of the decree are challenged and it does not affect the right of appeal granted under section 39.

It, therefore, appears to be clear that scope of section 39 and section 17 is quite different and in any case the section 17 does not take away the right of appeal given against the order refusing to set aside the award.

19. Respondents' counsel then argued that since the appellant's counsel had taken the position before the Single Judge that the award reveals the reasoning underlying the award, and hence he cannot now take the position that the award is without reason. We are not convinced that this submission is correct. We have seen the award. There is hardly any reason given in the award which consists of merely finding in different issues while the requirement of law now is that the award should give reasons for the award sufficient in detail to enable the Court to consider any question of law arising out of the award. The present award is completely devoid of the reasons and it is only in respect of reduction in price that the award states that reduction in price was invalid but even here it does not give reasons as to how that decision has been arrived. It is, therefore, quite apparent that the award in question is devoid of any reasons.

20. The respondent's counsel then submitted that the power given to the Court under section 3 of Ordinance of 1981 in respect of pending cases was a discretionary power to remit the award for writing of reasons in sufficient details. It was not mandatory in every case to remit the award. He argued that the present case is one in which the award should not be remitted as one of the arbitrators, namely, Mr. A.R. Khan is dead and moreover, it would put the clock back to 10 years after the award is remitted for writing of reasons.

21. The learned counsel for the appellant had argued that the award was unconscionable inasmuch as the arbitrator had failed to grasp the impact of the letter written by the respondents on 9‑4‑1974 where they had clearly stated that they had accepted the price of U.S. 187 without any reservation. Counsel argued that with that letter, the arbitrator could not come to the decision that the reduction in price was invalid. He had also argued that the original agreement of 10‑10‑1974, which contained the clause of arbitration, had come to an end before the second shipment was lifted and it was completely a new agreement which had come into force on 9‑4‑1975 between the parties when the respondent had offered a new price of U.S. 187 and had required the appellant to take the delivery of pig iron which had been shipped from Japan and not from Iran which was of a different specification than the one agreed earlier. The counsel had argued that since the price had been changed, the place of shipment had been changed and the specifications had also changed, therefore, there was material change in those terms of the agreement which was of the essence of the contract and, therefore, it was a completely new contract which had come into force since 9‑2‑1985 without any arbitration clause, therefore, the original agreement which contained the arbitration clause could not be used by the respondents, but the arbitrators have completely lost sight of the same. The appellant's counsel had further argued that the respondents had offered the price of 216 per metric ton on 5‑3‑1975 but even that has been lost sight of by the arbitrators. He further argued that there was hardily any evidence to come to the conclusion that there was any illegality involved in the reduction of the price from 224.50 to 187 and, therefore, the arbitrators had misconducted themselves incoming to the conclusion that the reduction in price was invalid or illegal. The appellant's counsel further argued that the award was otherwise invalid and it appeared that the arbitrators had failed to determine the effect of the documents which had been produced before them. We are of the view that the award being made for a very substantial amount of more than RsA0,00,000 and substantial defence having been involved, therefore, the reasons for the award should be available to the Court in sufficient details in order to come to the H conclusion that the question of law arising out of the award have been kept in view by the arbitrators. We have no intention of going into the merits of the submissions raised by the appellant's counsel in respect of the merits of the award as we do not want to pre‑empt the issues.

But we are of the view that the submissions are of substantial sequence and, therefore, it would be apt and proper and in the interest on justice that the arbitrators should be required to give their reasons in sufficient details. It is correct that one of the arbitrators is dead but on that ground alone the award cannot be upheld but we are of the view that the questions of substantial importance, requiring reasons in sufficient details are required in respect of the award. In view of the fact that the award has been signed by the two arbitrators, the reasons of the award can be given by the surviving arbitrator. It was held in P L D 1982 Kar. 250 (255) that in case a short order had been passed by two judges and the reasons for same were to be written later then in case of retirement of one of the Judges, the other who was still in office, could supply the reasons for the short order. In this case Mr. Yousuf Rafi, who was an eminent counsel of this Court, was one of thei arbitrator and he is present, and, therefore, he can be asked to give sufficient detailed reasons for the award which had been made by him alongwith late Mr. A.R. Khan. And we have, therefore, come to the conclusion that the award should be remitted back to Mr. Yousuf Rafi for supplying reasons in sufficient details about the award within a period of 3 months from the date that he receives notice of the same from this Court. Mr. Yousuf Rafi should obtain the record of the arbitration proceedings from this Court in order to enable him to give reasons.

22. We have mentioned above gist of the submissions which had been advanced by the appellant's counsel for the purpose of seeking an order that the award should have been set aside. A number of rulings had been cited by the appellant's counsel on the point that the award should be set aside, if unconscionable or if it is otherwise invalid. The most important of them was P L D 1985 S C 69 (81) where it had been observed by the Supreme Court that the words "otherwise invalid" are meant to include all cases of invalidities on grounds other than those mentioned. The Supreme Court had accepted in that case the contention of the appellant before them that prejudice had been caused to him on account of bulk sale price of the rice having been taken into consideration by the arbitrators. In that case, the Supreme Court had looked into the original contract, which had been arrived at between the parties, which was not a part of the award in order to come to the conclusion that the damages awarded in the award were not stipulated in the contract which had been entered into and, therefore, it was held that the award was illegal. On the same basis Mr. Fazeel had argued that since there was a novation of contract in the present case which had replaced the old contract which contained arbitration, therefore, there was an illegality committed by the arbitrators in failing to notice that the contract which had contained an arbitration clause had ceased to exist.

23. Mr. Khalid Ishaq, on the other hand had contended that the appellant had failed to raise such an issue before the Arbitrator we are of the view that there is some force in both the submissions. It had been specifically stated by the appellant before the Arbitrator that a new contract had come into existence with the change in price and place of shipment but a specific point that arbitration clause had ceased to have effect, had not been clearly raised. However, since we are remitting the award for reasons of the Arbitrator we will refrain from expressing any further view in the matter.

24. Mr. A.A. Fazeel had very strenuously argued that there was completely no justification in making ineffective the reduction in price agreed between the parties. He had argued that no coercion at all had taken place in the matter in the reduction of price and that it was given without any reservation by the respondent.

25. Mr. Khalid had submitted that the respondent had protested on the very next day about the fixation of price by the Commerce Minister and that the respondent had to agree to the said price on account of the pressure exerted by the appellant that they will get the second consignment forfeited by the Customs Authorities if the price was not reduced. We again refrain to express our opinion in this regard because the documents which were a part of the arbitration proceedings are not a part of the award, as such, because they have not been referred to therein and, therefore, it is not possible for us to go behind the award in order to arrive at the finding that the award was otherwise invalid or not. But this aspect of the case is the one which does require the giving of reasons by the Arbitrators and they are the best persons to give reasons in the matter and it is only thereafter that the Court can come to the conclusion, whether the question of law in that respect has been correctly dealt with or not.

26. The appellant's counsel had also argued that once the reduction in price which was contained in the letter of the respondents dated 9‑4‑1975 had been declared to be invalid by the Arbitrators then the rest of its contents should have also been ignored but the same was not done. However, we again do not feel inclined to express our opinion on that aspect of the case because the matter is being remitted to the Arbitrator for giving of reasons and our expression of opinion is, therefore, not necessary at this stage. Consequently, we direct the Arbitrator Mr. Yousuf Rafi to give within 3 months, reasons of award in sufficient. details as provided in section 3 of Ordinance XV of 1981. This appeal should, therefore, be consigned to record and should be put up after the reasons of the award are submitted.

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