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Suits Nos. 504 and 505 of 1984 and Suit No. 68 of 1979, decided on 7th May, 1986.

‑‑‑S. 14‑‑Award‑‑Filing of award in Court‑‑Notice to parties‑‑Validity‑ Determination of validity or sufficiency of notice, held, entirely depended upon facts of each case‑‑Where no fixed date was given by Court for filing award, constructive notice for filing award, held, could not be presumed.

P L D 1981 Kar. 302; 1985 S C M R 597; A I R 1962 SC 666 and P L D 1984 Pesh. 285 ref.

‑‑S. 26‑A‑‑Award‑‑Object of S.26‑A‑‑Reasons in sufficient detail given in award‑‑Question as to what amounts to sufficient details, held, depended upon facts and circumstances of each case‑‑Requirement of law would be met if Arbitrator gave reasons to support his finding which were clear logical, unambiguous and understandable and question of law arising out of award could be understood and considered‑ Arbitrator having given reasons in sufficient detail had complied with provisions of S . 26‑A .

P L D 1982 Klar. 260; 1984 C L C 1077 and P L D 1983 Kar. 261 ref.

‑‑‑Ss. 14, 26‑A & 30‑‑Award of damages, setting aside of Arbitrator awarding damages by simply calculating with reference to decision of Government granting escalation in lump sum contract executed by K . D . A .‑‑Such decision of Government having not been incorporated in agreement between parties, Arbitrator, held, had mis-conducted by awarding damages on basis of such calculation‑‑Award set aside and remitted to Arbitrator for determining damages suffered by plaintiff on basis of evidence on record or such fresh evidence which might be produced by parties.

Messrs Bajranglar Laduram v. Ganesh Commercial Co. Ltd. AIR 1951 Cal. 78 and A I R 1952 Cal. 440ref.

M.A. Rafiq Khan for Plaintiff.

Muslim Naqvi for Defendant.

Date of hearing: 7th May, 1986.

These two suits will be disposed of by this judgment. In Suit No. 504 of 1984 the claim relates to the construction of Phase I of the building known as Abasi Shaheed Hospital, Nazimabad. On 24‑5‑1969 the plaintiff was awarded lump sum contract for Rs.53,54,904. In terms of contract the work was to be completed within a period of two years. According to the plaintiff it would have completed the work within the contractual period, but due to delay caused by the defendant it was not completed. It was alleged that escalation started in January, 1972, and the plaintiff had spent large amount on the contract particularly towards the price of materials, wages and overheads. The defendant failed to supply agreed materials for the said work and the plaintiff had to purchase the same at higher rate from open market. In these circumstances it claimed Rs.10, 46, 576.45 as damages suffered by it. The defendant denied the claim and the matter was referred to the sole‑arbitrator who made an award but it was set aside. The learned Arbitrator then made a fresh non‑speaking award which was made rule of the Court. The defendant filed appeal and the learned appellate Court by its judgment (1984 C L C 1077) remitted the award to the Arbitrator for stating the reasons in sufficient detail within two months. He served the notice on the parties for hearing on 12‑5‑1984. As defendant did not appear after hearing the plaintiff the Arbitrator filed his award with reasons and awarded Rs.1,60,647 to the plaintiff. In Suit No. 505 of 1984 the plaintiff had claimed damages on similar grounds as in Suit No. 504 of 1984 in respect of construction of Phase II of the same hospital, the award was made simultaneously as in the above suit and proceedings under both the awards were common and identical. The award was remitted by the learned appellate Bench for stating the reasons in sufficient detail within two months. The learned arbitrator awarded Rs.7,23,300 as damages suffered by the plaintiff. Both the awards with reasons were filed in Court on 17‑6‑1984. The defendant flied objections to the award on 15‑10‑1984.

Mr. M.A. Rafiq the learned counsel has contended that the objections filed by the defendants are barred by time. Mr. Muslim Naqvi the learned counsel for the defendant has pointed out that the notice under section 14 of the Arbitration Act for filing award in Court was served on the defendant on 29‑8‑1984 which applied for obtaining certified copy of the award on 4‑9‑1984. It was made ready on 24‑9‑1984 and delivered on 27‑9‑1984. Objections were filed on 15‑10‑1984, therefore, after excluding time for obtaining the certified copy of the award the objections were filed within time. Mr. Rafiq the learned counsel for the plaintiff has contended that the defendant had constructive notice of filing the award as the learned appellate Bench had passed the order directing the Arbitrator to file award within two months of the receipt of the order and record of the case. The learned counsel has referred to P L D 1981 Kar. 302, 1985 S C M R 597 and AIR 1962 S C 666 to establish that notice under section 14 need not be in writing and it can be oral which is sufficient compliance of the provision of law. He also referred to P L D 1984 Pesh. 285 to show that the Court can give notice in writing or oral. The proposition of law as enunciated in these authorities cannot be disputed but the determination of the validity or sufficiency of notice under section 14 of Arbitration Act entirely depends upon the facts of each case. In the present case for purposes of notice to the defendant the learned counsel for the plaintiff has relied on the judgment passed by the learned Bench which had directed the learned Arbitrator to state reasons for the award and submit it within two months from the date of receipt of the judgment and the record of the case. No fixed date was given to the learned Arbitrator for filing the award with reasons. The ascertainment of date for filing reasons was not possible and the defendant did not have any intimation of the date on which the record was received by the Arbitrator. Mr. Rafiq contended that for the purpose of this case two months should be computed from 8‑5‑1984 when the Arbitrator had served notice of hearing as at least from that date the defendant was aware that the award and its reasons will be filed within two months. In the present case even after that notice the learned Arbitrator did not file the award and reasons within two months. There is nothing on record to show that he had issued any notice to the parties for filing the award in Court. In these circumstances, it would not be possible for any party to presume that award shall be filed upto a particular date. Even if the award is filed unless copy of the award and its reasons are supplied or obtained it is not possible to file objections. And for that reasons section 14 of the Arbitration Act specifically provides, that notice should be issued to the parties. There may be circumstances in which oral notice may constitute sufficient notice and written notice may be dispensed with, but in the present case in view of the uncertainty and as no fixed date had been given by the Court for filing the award constructive notice of filing of the award cannot be presumed. The objection is thereafter overruled.

Mr. Naqvi, the learned counsel for the defendant has contended, that the learned Arbitrator in spite of directions by the Court has failed to give sufficient reasons in detail and, therefore, the award should be set aside. The objection is based on the provision of section 26‑A of the Arbitration Act which requires the Arbitrator to state reasons for the award in sufficient detail. The object of this provision is to ensure that sufficient details and reasons are given in the award to enable the Court to consider any question of law arising out of the award. In this regard reference can be made to P L D 1982 Kar. 260, 1984 C L C 1077 and P L D 1983 Kar. 261. According to Mr. Naqvi, the learned Arbitrator has not given the reasons for the award. I have gone through the award and found that reasons in sufficient detail have been given and by reading it any question of law arising out of the award can be considered. The question what amount to sufficient details depends upon the facts and circumstances of each case. One cannot expect from an Arbitrator except those who have legal training and expertise to make award and give reasons in the same manner as in the judgments pronounced by the Court. If the Arbitrator has given reasons to support his finding which are clear, logical, unambiguous and understandable, the requirement of law is met. If a party or Court does not agree with the reasons given in the award it cannot be termed as an award without reasons in sufficient detail. The law, however, requires that the Arbitrator must give reasons and these reasons should not be cursory, concise and slipshod. It should be in such detail that the question of law arising out of the award could be understood and considered. In the present case the learned Arbitrator has given reasons in sufficient detail and has complied with the provisions of section 26‑A of the Arbitration Act.

In Suit No. 504 of 1984 the plaintiff has claimed Rs.10,46,576.94 as damages under separate heads which include extra cost of the cement, escalation in cost of overhead, extra cost of overhead incurred on the project due to suspension of work, over deduction of water charges and extra cost incurred due to damages done by the electrical, air‑conditioner, sui gas and other agencies. In Suit No.505 of 1985 the plaintiff has claimed Rs.21,43,543.43 as damages suffered by it due to the delay caused by the defendant as categorised in Suit No. 504 of 1986.

In both the matters the plaintiff had filed the documents whereas the defendant had examined one witness and produced certain documents. In Suit No. 504 of 1984 the work started in May, 1969 and was to be completed in May, 1970. It was completed in December, 1973, and therefore, according to the Arbitrator a delay of 2 years and 7 months was caused due to default of the defendant. In Suit No.505 of 1984 the work started in August, 1971 and was completed in December, 1973 instead of February, 1973. Hence there was a delay of 10 months. The learned Arbitrator came to the conclusion that delay was caused due to the act of omission and commission of the defendant. Consequently in phase I due to the delay 5% of the financial value of the work equivalent to Rs.2,67,745 could not be completed within the stipulated period. Likewise in Suit No. 505 of 1985 relating to phase II 39% of the financial value of the work could not be completed within the contractual period. After determining the financial value and the date of completion by the plaintiff during the year 1973, the learned Arbitrator awarded damages on the basis of the decision of the Government to allow 60 increase on lump sum contract jobs executed by K . D . A . between the period 1‑7‑1973 to 30‑11‑1973. It would be pertinent to reproduce the relevant part of the award as follows:‑

(i) In Suit No. 504 of 1984.‑‑"Therefore, the plea of the contractor that his work valuing Rs.2,67,745 was stranded and he had to pay extra amount due to rise of prices in material and labour is justified and assessment of the justified claim has been given due to consideration on the following basis:‑

(i) Plots are given to private companies by K . D . A . for construction of flats and according to the conditions of allotment the prices of these apartments have to be fixed by K . D . A . Due to the rise of prices materials and labour, an increase of 45% over the 1968 schedule of rate of Pak. P . W . D . has been allowed by K . D . A . for construction during 1973.

(ii) K.D.A. has been executing Government Projects of Industrial Labour Housing as 'Deposit Works'. The Government has allowed an increase of 60% on the lump sum tendered contracts of the executing contractors on such building Projects between the period 1‑7‑1973 to 30‑11‑1973.

The principle under (i) is not applicable since this case is a lump sum contract job. However, principle under (ii) is applicable in this case. The justified compensation, accordingly on this principle works out to Rs.1,60,647."

In Suit No. 505 of 1984 after stating the two grounds for granting increase by K . D . A . it was observed 'the principle under (i) is not applicable since this is a lump sum contract job. However, principle under (ii) is applicable. Based on this principle, the justified compensation works out to Rs.7,23,300'.

Mr. Muslim Naqvi the learned counsel for the defendant has contended that under the agreement the defendant was not liable to pay escalation charges as provided by clause 1.2(1) but this clause only relates to escalation during the contractual period. However, the method of assessment of damage by applying the rule or decision of a particular Department of the Government or authority, which has not been agreed upon between the parties or incorporated in the agreement, cannot be treated as proper assessment in law. In Messrs Bajranglar Laduram v. Ganesh Commercial Co. Ltd. A I R 1951 Cal. 78 it was held that 'it is for the arbitrators to decide how damages are to be assessed and they should not accept the view of any other person or association as such would amount to legal misconduct. The arbitrators must themselves fix the point of time at which damages have to be assessed and a rule of Sunny Traders Association not incorporated in the contract could not form basis for the assessment of such damages. In A I R 1952 Cal. 440 it was held that if an Arbitrator has awarded damages on wrong basis the award is bad on the face of it. In the present case the learned arbitrators has awarded damages by simply calculating with reference to the decision of the Government granting escalation in lump sum contract executed by K . D . A . This is clear and apparent, on the face of the award. This decision of the Government was not incorporated in the agreement between the parties. The Arbitrator has thus mis-conducted. I, therefore, set aside the award in both the suits and remit it to the learned Arbitrator for determining the damages suffered by the plaintiff, on the basis of evidence available on record or such fresh evidence which the parties may produce before him. The award should be made within four months.

S. Q. ‑‑‑‑‑ Order accordingly.

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