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Suit No. 30 of 1985, decided on 3rd August, 1986.

‑‑‑ Ss. 13, 30 & 32‑‑Jurisdiction of arbitrator‑ ‑Party participating in proceedings before arbitrator without raising objection to his jurisdiction, submitting his claim and examining witnesses on disputed points without demur‑‑Such party cannot, in the end, turn back to challenge jurisdiction of arbitrator on such submissions.‑ [Jurisdiction]

PLD 1977 Lah. 1017; PLD 1981 Kar. 553; AIR 1963 SC 90; AIR 1931 Bom. 343; AIR 1937 Mad. 405 and Russel on Arbitration, 20th Edn.,p. 430 ref.

‑‑‑ Ss. 30 & 33‑‑Award, setting aside of‑‑Award cannot be set aside unless there is a patent error on face of record not requiring scrutiny beyond the award for discovering same‑‑Court, held, not competent to set aside award if on basis of evidence on record‑before arbitrator, Court might reach a different conclusion or conclusion of fact seemed to be erroneous‑‑ Award can, however, be set aside if it is not based on any evidence on record.

AIR 1931 Bom. 343; AIR 1937 Mad. 405; PLD 1954 BJ 56; PLD 1964 Dacca 527; PLD 1967 Dacca 797; PLD 1974 Kar. 155; 1981 CLC 311; PLD 1960 Kar. 78; PLD 1980 Kar. 207; PLD 1973 Kar. 413; 1981 CLC 1667; 1984 CLC 155 and 1982 CLC 1984 and 1982 C L C 2568 ref.

‑‑‑ Ss. 30 & 33‑‑A ward‑ ‑Contract awarding work of shifting, installation and commissioning of process equipment of factory to plaintiff‑ Conclusions arrived at by Arbitrator in respect of volume of work, amount of work done by plaintiff, work not completed and amount of extra work based on abundance of evidence oral as well as documentary‑‑Findings of Arbitrator, held, could not be challenged‑ Award modified and made rule of Court.

‑‑‑ Ss. 30 & 33‑ ‑A ward‑ ‑Contract for shifting, installation and commissioning of process equipment of factory‑‑Claim for addition of 2% weight on account of nuts, bolts, etc.‑‑Nothing in documents relied upon by plaintiff to show that defendants had agreed to pay for such claim‑‑Addition of 2% in installed weight and consequence award of payment on such account, held, was not legal and proper.

‑‑‑ Ss. 30 & 33‑‑Award‑‑Contract for installation and commissioning of process equipment of factory‑‑Painiting work‑‑Nothing in evidence to show that painting work was awarded to plaintiffs and that they were entitled to do such work‑‑Question of loss and profit, held, would not arise and grant of payment on such account was not justified‑‑ Award modified accordingly.

‑‑‑Ss. 30 & 33‑‑Award‑‑Contract for installation and commissioning of process equipment of factory‑‑Conclusion that entire work of installation of trollies was awarded to plaintiffs found to be based on presumption and conjectures‑ ‑Grant of amount on such account, held, had no basis and hence same was excluded.

‑‑‑Ss. 30 & 33‑‑Award‑‑Contract for installation and commissioning of process equipment of factory‑ ‑Conclusions of Arbitrator found to be based on presumptions and not on any evidence that trial commissioning work for additional structural work was awarded to plaintiffs‑‑No damages or loss of profit could be granted on assumption and supposition‑‑Plaintiffs, held, were not entitled to grant of amount as loss on such account

‑‑‑ Ss. 30 & 31‑‑Contract Act OX of 1872), S. 73‑‑Interests Act (XXXII of 1839), S. 1‑‑Award‑‑Breach of contract‑‑ Damages‑ Interest‑‑Arbitrator awarding interest on amount found due and payable on account of damages for breach of contract‑‑No agreement to pay such interest nor claim for interest on such amount covered by Interests Act‑‑No interest, held, could be granted on damages for breach of contract in circumstances

PLD 1966 Lah. 601; PLD 1965 SC 505; AIR 1976 Madh. Pra. 126; AIR 1966 Cal. 478; AIR 1971 Ker. 243; Russel on Arbitration XXth Edn. and Hadson's Building and Engineering Contract, Xth Edn., pp. 575 ‑ 576 ref.

PLD 1965 S C505 rel.

‑‑‑ Ss. 30 & 33‑‑Award‑‑Costs‑‑Arbitrator granting cost equal to half of amount paid by plaintiffs‑‑No objection raised except that according to agreement parties were to bear their own costs‑‑Held, there was error on face of record in respect of grant of cost.

Bilal Khawaja for Appellant.

Kamal Mansoor Alam for Respondent

Date of hearing: 11th March, 1986.

Under a contract dated 23‑1‑1978 the plaintiffs were awarded work of shifting, installation and commissioning of process equipment of factory and lime production plant of the defendants. The defendants first terminated the contract on 19‑7‑1979, but it was withdrawn on 11‑10‑1979. It was finally terminated by the defendants on 2‑12‑1979. As the contract provided for an arbitration the dispute was referred to the sole arbitrator, who by award dated 2‑12‑1984 awarded to the plaintiffs Rs.34,65,527 made up as follows and cost of Rs.30,000.

(1) Amount payable for the work done: Rs. 174,829

(2) Interest on item No.1: Rs. 971. 458

(3) Damages: 679.458

(4) Interest on item No.3 139.296

from July 81 to date of award i.e. 2‑12‑1984.

The total comes to Rs.3,465,526 and not Rs.3,465,527.

The counter‑claim filed by the defendants was dismissed. The defendants have filed objections to the award made by the learned arbitrator.

Mr Kamal Mansoor Alam the learned counsel for the defendants has contended that the arbitrator could not have valued the work or measurement which was entirely the jurisdiction of the Engineer under the contract and the same as measured by him is binding and final. It was further contended that the acceptance of 11th running bill is contrary to record. Mr. Bilal Ahmad Khawaja the learned counsel for the plaintiffs has contended that the defendant has not challenged the jurisdiction of the arbitrator during the course of proceedings and in fact such objection was raised during argument which was too late in the day to be accepted. It was also pointed out that in the pleadings no objection was raised to the jurisdiction of the arbitrator, and therefore, the defendants to are estopped from challenging the jurisdiction. In this regard reference has been made to PLD 1977 Lah. 1017, PLD 1981 Kar. 553, AIR 1963 S C 90, AIR 1931 Bombay 343, AIR 1937 Mad. 405 and Russel on Arbitration, 20th Edition page. 430 The pith and substance of all these authorities is that where a party participates in the proceedings before the arbitrator without raising objection to his jurisdiction, submits his claim and examines witnesses on disputed points without demur then in the end he cannot turn back to challenge the jurisdiction of the arbitrator on such submissions. This rule equally applies to the present case. In this regard reference can be made to the following observation of the learned Arbitrator.

"At the fag end of the proceedings it was argued that quantum of work is to be decided by the Engineer under the Contract and this matter is not within the purview of Arbitration clause. It does not lie in the mouth of the plaintiff to raise this belated plea after having allowed to take on record a lot of evidence on the extent of work done and wanting to prove ex parte assessments of work as correct which incidently is even otherwise not a determination of quantum of work by the Engineer under the contract, for the reasons that it was ex‑parte and not by the Engineer under the contract. In these circumstances I am constrained to accept the percentage of work done on individual machine and structure as given in the 11th running bill of the plaintiff."

Mr. Bilal Ahmad Khawaja the learned counsel for the plaintiffs has contended that the jurisdiction to challenge the award is a limited one as provided by Section 30 and Section 33 of the Arbitration Act and the jurisdiction to hear such objection is different from the appellate jurisdiction of the Court. It is well‑settled that unless there is an error apparent on the face of the record the award cannot be set aside. There should be a patent error not requiring scrutiny beyond the award for discovering it. A court is not competent to set aside the award if on the basis of evidence on record before the arbitrator the Court may reach a different conclusion, or the conclusion of fact seems to be erroneous. However, the award can be set aside if it is not based on any evidence at all. In this regard reference has been made to PLD 1954 Bagdadul Jadid 56, PLD 1964 Dacca 527, PLD 1967 Dacca 797, PLD 1974 Kar. 155 and 1981 C L C 311, P L D 1960 Kar. 78, PLD 1980 Kar. 207, PLD 1973 Kar. 413, 1981 CLC 1667, 1984 CLC 155 and 1982 CLC 1984 and 2568. Keeping these principles in mind it is now to be considered whether the award can be set aside.

In arriving at the conclusion in respect of the volume of work, the amount of work done by the plaintiffs the work not completed and the amount of extra work, there is abundance of evidence which; includes oral evidence of the witnesses of the parties as well as the' documents. The finding of the learned arbitrator cannot be challenged.

It has been contended that addition of 2% weight (74 Tons) on account of addition of nuts, bolts, shimplates and electrode used etc. for installation work in respect of which Rs.61,864 has been awarded is patently not correct. According to the learned counsel for the defendants the finding is based on documents No. C‑154 and C‑159. The learned counsel for the defendants has further contended that the verification in C‑166 made by Ebrahim was not accepted. No importance can be attached to his verification of 2%, and, therefore, there was no evidence to support the finding of the Arbitrator. This addition of 2% in weight was made as during installation shimplates, nuts and bolts etc. were used and their weight has been added to the total weight of the work. According to the contract the installation work was awarded on weight basis mentioned in it. The weight of nuts and bolts etc. used for installation could be added in the weight provided there was an agreement to this effect. The installation work implied that must, bolts, shimplates and electrodes will be required and used for such work as without their use installation could‑not be completed. In this regard the learned Arbitrator has referred to documents C‑154 and C‑159 and observed that in these documents this claim has been referred and not disputed. There is nothing in these documents that the defendants had agreed to pay for this claim. There is in fact no such evidence and, therefore, addition of 2% in the installed weight and consequent award for payments of Rs.61,864 and the commissioning loss of Rs.8,880 was not legal and proper.

In respect of repairs and rectification bill the learned arbitrator has awarded Rs.1,72,333. The learned counsel for the defendants has objected that no order for this work was given, nor such work was carried out and wherever any work was carried out the plaintiffs had sought the defendants' permission. It was contended that having rejected document C‑166 no award could be made on that basis. Under this item reference has been made to the evidence of PW 1, P.W 1 and DW211 and documents C‑165 and C‑166. The learned counsel for the plaintiffs has referred to documents No. C‑55, C‑61 and C‑72 to establish that purposely vague orders were issued by the defendants and therefore, the evidence in this regard was not accepted. The learned Arbitrator has taken into consideration besides C‑166 the evidence of the parties and other documents to come to this conclusion. There does not seem to be any error apparent on the face of the record.

The learned counsel for the defendants has contended that the award regarding painting is not correct, and valid as there was no order for painting of 4,568 Tons. The order was only for painting and the plaintiffs were required to be paid according to the work and, therefore, the question of loss of profit does not arise. In this regard the learned counsel has referred to C‑55 to show the nature of the order placed by the defendants. From the letter written by the plaintiffs dated 28‑8‑1978 and the order placed by the defendants (C‑55) it cannot be spelt out that 4,568 Tons of painting work was awarded, therefore, the plaintiffs will be entitled to the work done contracted rate of Rs.34 per to by them namely 2,800 tons at the of profits does not arise and the question of loss ed. The award under item No.5 is' modified to Rs‑9,475 is not justified this extent.

Under item No‑6 with heading work not made available at page 38 of the award the learned arbitrator has awarded Rs.74,683 for loss of profit on trollies not made available and Rs.27,360for loss of profit for pipeline work not made available. According to the defendants was placed for 5 trollies @ Rs.340. In this regard reference the order tea of meeting dated 3 7‑1979 when the has been made to the minutes plaintiffs were asked to start work. Document No.C‑177 specifies the work of 5 trollies only. The learned counsel for the defendants has contended that the award for loss of profit on 115 trollies is based on assumption and guesswork. The finding of the learned arbitrator is based on the minutes of Meeting held on 3 _ 7‑1979 in which it is mentioned that the plaintiffs were asked to work on installation of trollies from 7‑7‑1979 to which they agreed. In the minutes of meeting held on 16‑5‑1979 to 17‑5‑1979 it was agreed that if this work was awarded to the plaintiffs a new contract would be signed, but if they failed to meet the schdule of work agreed upon it will not be given. In this background as no new contract was signed and the defendants were regularly complaining of plaintiffs failure to complete the work on schedule, the conclusion that the entire work of installation of trollies was awarded to the plaintiffs is based on mere presumption and conjectures. The grant of Rs . 74,683 has no basis and the same is excluded.

The plaintiffs have been awarded Rs.5,58,960 as loss of profit on commissioning 4,658 tons at the rate of Rs.120 per ton. Mr. Kamal Mansoor Alam the learned counsel has contended that under the contract or otherwise trial commissioning of additional structural work was never awarded to the plaintiffs and the award by the arbitrator is completely illegal and unjustified. It is further contended that there is no evidence to establish that toss has been suffered by the plaintiffs and the quantum of loss has also not been proved. It was contended that clause 6.2 of the tender document provides that no amount for payment will be admissible unless the claim is made in a particular manner. No such claim was made and the terms of contract do not justify such a claim. The main objection seems to be that additional structural work was not awarded as required by the contract. Further that trial commissioning of these additional work was also never awarded to the plaintiffs. The learned Arbitrator has proceeded on the assumption that as the additional structural work became integral part of equipment and were functional, it was necessary to be trial commissioned. And if the plaintiffs had carried out this additional work they would have been entitled to Rs.180 per ton for trial commissioning. These conclusions are based on presumptions and not on any evidence that trial commissioning work for additional structural work was awarded to the plaintiffs. Merely because a certain type of work has additionally been awarded it may not lead to the commissioning as was required in the case presumption that the plaintiffs were required to put it to trial of different items of work for which work of trial commissioning was also required to be done under a separate head on agreed rate. In these circumstances the finding of the learned arbitratory regarding loss of profit on 510 tons of additional structural work is based on mere presumption. No damage or loss of profit can be granted on assumption and supposition. The grant of loss of profit of Rs.91,800/‑ on 510 tons @ Rs.180/ per ton is a result of assumption and applying wrong basis of law for grant of damages. In view of the above discussion as the plaintiffs were not entitled to add 2% of additional weight i.e. 74 tons the question of grant of Rs.8,880/‑ as loss for trial commissioning does not arise.

The next item relates to the claim of interest. The learned arbitrator has awarded Rs.9,71,951/‑ as interest @ 14% per annum on Rs.16,74,829/‑ which was payable to the plaintiffs for the work done and the sum of Rs.4,74,829/‑ from 16‑10‑1984 till the date of the award has further awarded sum of Rs.1,39,288/‑ being the interest payable on Rs.6,79,458/‑ @ 6% per annum from July, 1981 upto the date of the award. The learned counsel for the defendants has contended that there was no reference for interest and there being no terms in the contract, the learned Arbitrator could not have granted interest. The learned counsel has referred to PLD 1966 Lah. 601 and PLD 1965 S C 505 and contended that the arbitrator cannot award interest. Mr. Bilal Khawaja the learned counsel for the plaintiff has referred to Gajrias law relating to Building and Engineering Contracts in India and Edition P.912 and 913 in which it has been observed that ordinarily claim for interest must be based on contract or statute but it can sustain on equitable ground as well. Reference has been made to AIR 1977 Bombay 10, AIR 1976 Madh. Pradesh 126. AIR 1966 Cal. 418, AIR 1971 Kerala 243, Russel on Arbitration XXth Edition and Hudson's Building and Engineering Contract Xth Edition pages 575, and 576 and it has been contended that the arbitrator is competent to award interest on sum which is certain and payable under a contracted provided the claim for such interest is based on the agreement between the parties or provisions of law applicable thereto. However, the principle for awarding interest by the arbitrator has been laid down in A.Z.&. Co v. S. Moula Bakhah Bashir Ahmed, PLD 1985 S C 505 where it was observed as follows:‑

"It is true that a number of decisions under the Interest Act are not easily reconcilable. But so far as grant of interest by way of damages is concerned, there in no much divergence of judicial opinion. Hence in the light of the aforesaid decision. I am of the opinion that generally in the absence of an express or implied contract to pay interest or usage of trade, interest cannot be allowed on damages for breach of a contract."

It is thus well settled that on damages for breach of contract interest cannot be granted unless agreed upon by the parties or any .the claimant is entitled under a statute. The plaintiffs have not shown any agreement between the parties or any statute for claiming interest on damages. Reference has been made to Interest Act and notice dated 16‑10‑1980 in which the plaintiffs had notified the intention to claim interest @ 15% per annum on the amounts due and outstanding. It has also been pointed out that interest has been awarded only from the date of notice demanding interest from the defendants. The learned Arbitrator has granted interest @ 14% per annum on Rs.16,74,829/‑ which amount has been found due and payable to the plaintiffs for the work done by them and which had remained unpaid. This amount was not awarded as damages for breach of contract.

The plaintiffs had made this claim and referred to the learned Arbitrator. The grant of interest on this item is justified. The learned Arbitrator has also awarded Rs. 1,39,288/‑ as interest @ 6% P.A. from July. 1981 upto the date of the award on Rs. 6,79,458‑ /found due and payable on account of damages for breach of contract. There is no agreement to pay interest on this amount nor claim for interest on such amount is covered by the Interest Act. In view of the principles laid down in PLD 1965 S C 505 no interest can be granted on damages for breach of contract.

The learned Arbitrator has granted cost of Rs.30,000/‑ which is half of the amount of Rs.60,000/‑ paid by the plaintiffs. According to Mr. Kamal Mansoor Alam the learned counsel, the agreement is that the parties shall bear their own cost. Except this no objection has been raised with regard to cost. I find no error apparent on the face of the record in respect of grant of cost. In view of the above discussion the award is modified as follows:

The defendants are liable to pay to the plaintiff Rs.31,35,216/‑Ij and cost of Rs.30,000/‑. Subject to this modification the award is made rule of the Court. Parties to bear their own costs.

S.Q/F‑13/K. Order accordingly.

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