2003 PLP 2596 (YLR)

6. On the pleadings of the parties learned Arbitrator adopted the following issues for adjudication:

(1) Whether claims, if any, are barred by limitation and to what effect? (2) Whether the plaintiff was not required to provide services on percentage of cost of works under the contract dated 22-2-1975 upto final completion of the works? If so, its effect? (3) Whether the averments made in paras.13(a) to 13(u) are correct? If yes, to what effect? (4) Whether the time specified in the contract was dependent on the timely completion of the work/jobs by the other associates such as the defendants, the contractors, the K.D.A., the Railway Authorities, the Russian Experts, the Japanese Firm etc. etc. if so, its effect? (5) Whether the claimant is entitled to the amount claimed under various items of claims, if so, to what extent? (6) Whether the claimant is not liable to refund the excess amount received than the amount due, if so, what is such amount? (7) Whether the plaintiff is entitled to the reliefs claimed in the reference? (8) What should the Award be?

7. After hearing the parties and examining the evidence available on record learned Sole Arbitrator came to the conclusion that the claimants were entitled for the following amounts:-- (a) Professional fee Rs.54,49,698 (b) For overheads on Rs.5,44,970 account of delay (c) Extra copies of Rs.1,05,225 tender document and drawing (d) Electrification and Rs.10,000 other work of 110 M.G. Reservoir Total dues: Rs.61,09,893.

8. Objections to the award were filed on behalf of the claimants on various grounds. It was accordingly prayed that the award be either remitted to the learned Sole Arbitrator or the same be set aside as it was not based on the established principles of law.

9. Mr. Balal A. Khawaja, learned Advocate addressed arguments on behalf of the claimants while Mr. Akhtar Ali Mahmood, learned Advocate argued the case on behalf of the respondents.

10. It was argued on behalf of the claimants that the learned Sole Arbitrator committed gross error in relying upon the figure of cost of work as furnished by the respondent despite the fact that the figure was not supported by any evidence. It was next argued that the compensation granted to the claimants by the learned Sole Arbitrator was disproportionate to the loss suffered and was thus against justice arid settled principles of equity. It was next contended that the learned Sole Arbitrator quite erroneously misapplied the case of Karachi Transport Corporation, reported in PLD 1992 SC

479. Elaborating his arguments it was contended by learned counsel that the burden was upon the respondent to have proved the actual cost incurred on the project but it was not proved by tendering tangible document. Instead deliberately reduced figure was put forth, which was accepted by learned Sole Arbitrator and he did not make any effort to satisfy himself to the figures of cost of project as furnished by the respondent. Learned counsel urged that the judgment delivered in the case of Karachi Transport Corporation was absolutely distinguishable inasmuch as the same was given in the case of a construction company, whereas the claimants in this instant case were providing services and that they had to maintain their offices and retain their staff for an exceeded period of 40 months to complete the job. Though the learned Sole Arbitrator gave a definite findings that the project was delayed and that the respondents were responsible for such an inordinate delay, yet the learned Sole Arbitrator granted the compensation @10% which was devastatingly minimal, thus the compensation amounting to Rs.544970 allowed by the learned Sole Arbitrator was inadequate. Learned counsel heavily relied upon the definition "cost of- work" as appearing under Article III of the contract and argued that in any case the compensation ought to have been granted to the claimants on the total cost of the project and not the 10% of the total dues. In support of his arguments learned counsel placed reliance on (1) PLD 1985 SC 69, (2) PLD 1999 Karachi 112, (3) 1991 CLC 66, (4) PLD 1974 Karachi 155, (5) AIR 1975 SC 1259 and (6) books namely; "Hudson's Building and Engineering Contracts" and "Keating on Building Contracts".

11. Conversely learned counsel for the respondent controverted submissions made on behalf of the claimants. It was contended that the learned Sole Arbitrator recorded the findings in a lawful manner, same were based on concrete evidence and that the award was free from any ambiguity and it was clear and transparent. It was urged that the Court was to infer the intent of the parties to the agreement from the words used therein, and that in case of inconsistency the effect must be given to the part calculated to display the real intentions of the parties. It was vehemently contended that this Court while examining the validity of an award does not act as a Court of appeal, therefore while hearing objections to the award cannot undertake reappraisal of the evidence recorded by the Sole Arbitrator in order to discover the error or infirmity in the award. It was finally argued, that in any case the compensation was payable only to the extent of the actual loss or damage caused in order to recompense for the loss suffered by the plaintiff. In support of his arguments learned counsel placed reliance on (1) PLD 1996 SC 108, (2) 1997 CLC 212, (3) PLD 1987 SC 393, (4) 1991 CLC 66; (5) PLD 1973 SC 222 and (6) 1992 SCMR 19.

12. I have considered the arguments advanced at the bar in juxtaposition of case law relied upon by the learned counsel for the parties and have also availed the opportunity of going through the contents of the Award.

13. Insofar as the case-law relied upon by the learned counsel for the respondents is concerned, it is to the effect that the Court while examining the validity of award does not act as Court of appeal and, therefore, while hearing the objections to the award cannot undertake reappraisal of evidence recorded by the arbitrator in order to discover the error or infirmity in the award. Authorities as mentioned at Serial Nos. 1, 2, 3 and 4 are to that effect. In the citation referred at Serial No.5, it was held that the compensation is payable for the actual loss or damage caused. In this authority Honourable Supreme Court has laid down the rules for awarding compensation. In the citation referred at Serial No.6 principles of construction of agreement were elaborated. In the said authority it was held that while interpreting the terms of contract, Court has to ascertain the intention of the parties.

14. Indeed, it is now well-settled that the Court while examining the validity .of award does not act as Court of appeal and is not vested with the powers to undertake reappraisal of evidence in order to discover any error or infirmity in the award. However, the supervisory role of this Court in the scheme of Arbitration Act, 1940 is out of question.

15. An award may be modified or corrected when it falls within the scope of section 15 of the Act and it can be set aside if it is governed by section 30 of the Act. If any reference is needed the case of Messrs Waheed Brothers (Pakistan) Limited v. Messrs Izhar (Pvt.) Limited 2002 SCMR 366 can conveniently be referred. Section 16 of the Arbitration Act, 1940 gives enough power to this Court to remit the award to the arbitrator for reconsideration.

16. However, where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court is empowered under section 17 of the Arbitration Act, 1940 to proceed to pronounce the judgment according to the award. On perusal of the provisions of section 17 ibid it is glaringly evident that the award is to be made rule of the Court only if the Court sees no reason to remit or set aside the award, and that the plain reading of the award shows that it does not suffer from patent illegality or defect necessitating either setting aside of the award or its remission to the arbitrator. Thus section 17 of the Act imposes a duty on the Courts to see that there is no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award. To support the above view reliance can be placed on the case of Ascon Engineers (Pvt.) Limited v. Province of Punjab 2002 SCMR 1662.

17. For the reasons stated above, it is obviously certain and clear that while exercising supervisory jurisdiction, this Court is vested with enough powers to satisfy itself with regard to legality, validity and propriety of the award. Having arrived at the above conclusion, it seems appropriate to examine the validity of the award.

18. A contention was raised on behalf of the respondents that the term "value of work" should be construed to be the cost of the work. I am afraid this contention could not be accepted, as the same is untenable and absolutely illogical. The cost of work cannot be the basis for grant of compensation for the simple reason that no financial stake of the consultant firm was involved insofar as the cost of the work was concerned. Admittedly, they were not the construction contractors but only service providers and, therefore, no financial investment on their part was involved for the completion of the work as consultancy is merely an intellectual service. Accordingly, the value of the work shall be the value of the amount payable to the contractor. The findings of the learned Sole Arbitrator on this aspect need no interference.

19. Regarding the contention of the plaintiff with regard to the quantum of costs, suffice it to say that no evidence whatsoever was produced by the claimants to substantiate their claim. On request they were also provided full details of the costs by the respondents and in pursuance thereof the claimants filed a revised claim. After having filed revised claim on the basis of the costs shown by the respondents, seemingly the claimants were contended and satisfied with the figures of costs provided to them, thus the objection appears to be an afterthought which has to be repelled. The same is accordingly repelled.

20. In my view the only contention put forward by the claimants which requires to be considered is with regard to quantum of compensation. After having gone through the case of Karachi Transport Corporation as reported in PLD 1992 SC 479, I am of the view that the learned Sole Arbitrator has rightly distinguished the present case from the said case as it was in respect of construction contractor and that the Honourable Supreme Court was pleased to grant 5% construction charges to the construction contractor. I am of the view that the learned Sole Arbitrator was absolutely correct in not following the said ratio of compensation. In West Pakistan Industrial Development Corporation, Karachi v. Aziz Qureshi PLD 1973 SC 222 while discussing the point of compensation, the Honourable Supreme Court enunciated the following principles for payment of compensation: -- "Compensation is payable for the actual loss or damage caused; the loss or damage must be the proximate result of the branch, and foreseeable by the defendant. In estimating the loss or damage, the means which existed of remedying the inconvenience caused by the non performance of the contract must be taken into account. Speaking generally the underlying principle is restitutio in integrum. There is no specific rule upon the matter, and it is left to the good sense of the Court to assess as best it can what it considers to be an adequate recompense for the loss suffered by the plaintiff. Every injuria, although without loss or damage, would entitle the plaintiff to judgment. It is not always necessary that actual damage should be proved in order that damages may be awarded. In actions for breach of contract nominal damages are recoverable although no actual damage can be proved." Admittedly, in the instant case there was a delay of 40 months as per findings recorded by the learned Sole Arbitrator which was 8 times beyond the period fixed in the agreement for completing the work. Learned Sole Arbitrator granted compensation at the rate of 10% of the value of the work which in the circumstances was correspondingly inadequate and comparatively below proportion. It will not be difficult to comprehend that the consultants would have to retain the technical staff and would have also maintained the establishment and incurred overhead expenses for the extended period of time. Besides, they also got themselves engaged in the work. In such circumstances the loss suffered by them was inevitable. The plaintiffs in the case were always ready and willing to perform their part of duty, as no neglect, laxity or refusal was attributed to them. Thus, the plaintiffs are entitled to equitable amount compensation. I am of the considered view that the compensation so awarded to the plaintiffs was unjustly insufficient. It needs to be enhanced. Certainly there is no hard and fast rule for ascertaining the compensation nor is there is a yardstick or formula to measure the monetary loss suffered by the contractors. However, since the contractors/claimants remained admittedly engaged for 40 months over and above the period of contract, I am of the view that they are entitled to an extra amount, totaling to the extent of 40% of their professional fees which already have been determined by the' learned Arbitrator in para.35 of the award. Accordingly, the claimants would be entitled to 40% compensation instead of 10%. With this modification, award is made rule of the Court. M.B.A./I-82/K Award made rule of Court.