1999 PLP 2617 (MLD)

B Shortage of 29.820 M. Tons Cargo US $ 11,444.62 C Deviation Claim US $ 29,424.89 CLAIM OF DEFENDANT: i Amount of Bank Guarantee?????? US $ 29,424.89 ii Bank Charges/Liquidated Damages US $ 70,000.00 iii Legal Charges ???????????? US $ 110,000.00

4. During the arbitration proceedings, the plaintiff has examined two witnesses, namely, Anwar Ali and Mirza Kamal Baig, who have produced several documents which were brought on record as Exh.A/1 to A/25. Defendant has produced only one witness, namely, Anjum Sadiq Jaffery who has also filed documents as Exh.A/L. After considering the entire evidence, learned Arbitrators gave their findings partly in favour of the plaintiff and rejected the claim of the defendant to the extent of legal charges and bank charges. It would be advantageous to reproduce the operative portion of the said Award which reads as follows:-- "In the instant case, the authenticity and creditability of the copies of the statement of Fact and Sheet is not established as to the fact of deviation of the vessel. At the same time, there are copies of statement of Fact and Sheet produced by the claimants to show that there could be an incident of deviation. The question will then arise whether there was any loss occasioned to the claimants on that count. The admitted fact is that though as alleged there could be deviation, yet the cargo was received by the claimants in time. Accordingly in that situation there could be no occasion for any loss being sustained by the claimants. In that view of the matter even-if there was deviation as alleged at the most it was in the nature of technical default causing no loss or injury to the claimants. In consequence for technical nature of default the claimant could be awarded some damages which in the circumstances we assess at US $ 5,

000. The claimants have encashed the Bank Guarantee of US $ 29,424.89 since we allowed to the claimants a sum of US $ 5,000 as damages the Respondents are entitled to the refund of US $ 24,424.89 of the encashed Bank Guarantee amount lying with the claimants within two weeks from the date of this award failing that mark-up at the prevailing market rate shall be payable on that amount of US $ 24,424.89 from the date of expiry of two weeks from the date of this award. We make no order as to the claim for cost of litigation made by the claimants. This leaves us to consider the claim made by the respondents. The claimants have encashed the Bank Guarantee of the US $29,424.89. Since we have allowed to the claimants a sum of US $ 5,000 the respondents are entitled to the refund of US $ 29,424.89 of the encashed Bank Guarantee amount lying with the claimants. In the normal course, a mark up should also have been allowed on that amount for the period the amount lying with claimants but in view of partly relief allowed to the claimants we do not consider it fit to allow mark up for that period. However, the amount of US $ 29,424.89 should be refunded to the respondents not later than two weeks from the date of this Award failing that mark up at the prevailing market rate on that amount of US $ 29,424.89 from the date of expiry of the said two weeks from the date of this Award. In the absence of proof of Bank charges and Liquidated damages on record we see no reason to consider and allow those items of claims to the respondents. We also make no order regarding the claim of legal expenses made by respondents. To sum up, the claimants are allowed a sum of US $ 5,000 as damages. The claimants will deduct this amount of US $ 5,000 from the encashed Bank Guarantee amount lying with them and refund the balance of US $ 29,424.89 to the respondents within two weeks from the date of the this award failing that mark up shall be payable as ordered above."

5. I have heard Mr. M.S. Qureshi, Advocate for the plaintiff and Mr. Hashmat Ali Habib, advocate for the defendant. Mst. M.S. Qureshi has strongly argued that the findings of the learned Arbitrators are contrary to the record and that they should have awarded the entire claim of the plaintiff. He has particularly referred to Exhs.XX/16 and 17 which are photo copies of the fax sheet and which were held by the learned Arbitrators to be the documents as not proved. He has placed reliance on the cases Friends Corporation v. AIR Port Development Agency and another (1997 CLC 626); Messrs Joint Ventures KG/Rist and 2 others v. Federation of Pakistan and another (PLD 1996 SC 108) and Province of Sindh and 4 others v. Waseem Construction Company (1991 CLC 66). Mr. Hashmat Habib has supported the award to the extent whereby the plaintiff's other claim was disallowed but has objected on awarding damages of US $ 5,

000. He has referred to the case of Trustees of the Port of Karachi v Messrs Iftikhar Brothers (1993 CLC 1491); Dr. Mrs. Azra Ali v. Arif Ali (PLD 1993 Kar. 683) and Messrs Income Services v. Sui Gas Transmission (PLD 1993 Kar. 429). It is now well-settled that a Court hearing an objection to the award does not act as a Court of appeal and, therefore, re-appraisal of evidence recorded by the Arbitrators in order to discover any error or infirmity is not permissible as held by the Hon'ble Supreme Court in the case of Joint Ventures KG/Rist (supra). The error or infirmity in the award which renders the award invalid must appear on the face of the award and should be discoverable before reading the award itself. It was held by a learned Division Bench of this Court in the case of Iftikhar Brothers (supra) that it is not permissible for the Court to first look into the material used by the arbitrator and then compare it with reasoning given in the award to discover any error. With this in view, I have gone through the entire reasoning of the award. The moot question which requires determination is whether a plaintiff despite a penalty clause in the agreement is entitled for damages. Both the learned counsel have agreed that in the circumstances of this case it will be section 74 of the Contract Act which will govern the grant or refusal of the damages. According to Mr. Qureshi, since parties have agreed for payment of US $ 5.0 per M/Ton in case of deviation in the route of the vessel, therefore, the plaintiff is entitled to this amount. On the other hand, Mr. Hashmat Habib has stated that this clause is not available to the plaintiff and that this fact appears from the evidence of the plaintiff, Secondly, clause (K) of the contract was not binding on the defendant not to deviate from its route. In other words, defendant was permitted to deviate from the agreed route subject to one condition that it was required to first intimate to the plaintiff at Karachi. In such circumstances, he says that even if any deviation was made in the route of the vessel the plaintiff is not entitled for the award of damages. The question of granting award was considered in detail by the Hon'ble Supreme Court in the case of Province of West Pakistan v. Messrs Mistri Patel & Co. and another (PLD 1969 SC 80). It was held, inter alia, that the award of compensation by the Court under section 74 of the Contract Act will depend upon its finding as to what in the facts and circumstances of the case is reasonable compensation subject to the limit of the amount mentioned in the contract. It was further held in the case of Mistri Patel (ibid) that it is true that an aggrieved party is entitled to recover compensation from other contracting party who is guilty of breach of the contract whether or not actual damage or loss is proved to have been caused thereby. Subsequent to the case of Mistri Patel (ibid) in couple of other cases damages awarded by the Courts were upheld by the Hon'ble Supreme Court on the reasoning given in section 74 of the Contract Act. Thus, in the case Syed Sibte Raza and another v. Habib Bank Ltd. (PLD 1971 SC 743), the amount of damages, as mentioned in the service bond and as deducted by the bank, was upheld by the Hon'ble Supreme Court. Yet in another case Messrs Saeed Aslam & Co. v. Messrs Treet Corporation of Pakistan Ltd. (PLD 1985 SC 69) the compensation awarded by he. Arbitrators for breach of contract was upheld by the Hon'ble Supreme Court.

6. In the instant case, even if it is held that the deviation was committed by the vessel while coming to the port of Karachi, it is of less significance as plaintiff was not able to show before the learned Arbitrators as to how and in what manner such deviation has caused any pecuniary loss to the plaintiff According to the findings of the learned Arbitrators, the burden was upon the plaintiff to prove that he had committed deviation in the agreed route without prior intimation and which had caused loss, which the plaintiff has failed to discharge its burden. In these proceedings which are under, section 14(2) of the Arbitration Act, 1940 read with Rule 282 of the Sindh Chief Court Rules (O.S.), I am not inclined to up set the findings of the learned Arbitrators as no illegality or error apparent on the face of Award was pointed out by the parties. This being the position, the Award is made rule of the Court with no orders z to costs and with no order as to interest or mark-up as granted by the Arbitrators. However, the defendant shall be entitled for the interest at the rate of 10 % per annum from the date of decree till realisation and not from the date of Award. In so far as the direction of learned Arbitrators for repayment of the amount of encashed bank guarantee is concerned, plaintiff is directed to refund this within one month to the defendant. Q.M.H./G-70/K?????????? Order according.