P L D 1966 (W (PLP)

"What the expression error on the face of the award means has been thus stated by the Privy Council in the well‑known case of Champesy Bhara and Company v. Jivraj Ballo Spinning and Weaving Company Limited 50 I A 324:‑-- `An error in law on the face of the award means in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating reasons for his judgment to the same legal proposition which is the basis of the award and which you can then say is erroneous.' The above has been accepted as a general rule since the decision in the case of Hodgkinson v. Fernie 1923 A C

395. Later an "exception was engrafted on this rule to the effect that when a specific point of law is referred to arbitrator the award cannot be set aside if the arbitrator wrongly decides the point of law. See Government of Kelantan v. Duff Development Company (1857) 3 C B (N S) 189; Absalom Limited v. General Western (London) Garden Village Co. 1933 A C 592."

9. In the present case too the learned counsel for the parties did not dispute that the real question for consideration is whether a question of law was specifically referred to they arbitrators or it merely arose in the course of proceedings.1 Thus what is to be examined is whether what was referred to the arbitrators was the general question, whether involving of fact or law or only some specific question of law in express terms as a separate question was submitted. In other words, whether there was a reference in which the questions of construction arose as being material to the decision of the matter which has been referred to arbitration or a reference in which a specific question of law was referred to the decision of the arbitrators as the sole tribunal. Before we consider the contention of the parties on merits, it will be convenient here to mention that this is not one of those cases in which the arbitrators have not given any reason on the findings reached by them. The learned arbitrators have at length discussed the dispute between the parties and had also given reasons in support of the award. It is to be noticed that in the award the learned arbitrators have noted that the following two points emerged for determination: (a) Whether the Government was justified in canceling the contract? (b) If not to what damages, if any, is the contractor entitled ? After stating the circumstances in which the contract was cancelled the arbitrators had further observed that the liability or otherwise of the cancellation of the contract depended in the context of the case on the answers to the following two questions:‑ (i) Whether the poles could be rejected by Government on the score of an objection as to treatment? and (ii) Whether according to the terms of contract, treatment of poles by creosote "forced in under pressure" was compulsory? In rejecting the claim of the Department the arbitrators made the following observations:‑-- "Inasmuch as the method of treatment is provided in clause 1 and not in clause 2 it follows that poles could not be rejected on the score of an objection as to the method of treatment. That being so, the plea of the Government that it was entitled to reject poles for want of pressure treatment, and therefore to cancel contract, is devoid of force and is not tenable." They further observed:‑-- ... . . . . it was not open to the Government to read in the A/T that only the pressure method of treatment, to the exclusion of the other approved method, was prescribed. Such a construction will be doing violence to the plain language used in A/T. It may be said that the contractor should have got `the other approved method' clarified before putting in the quotations. This point does not create any complications as the contractor did make the enquiry during the subsistence of the contract. Had the Government suggested the other approved method of treatment at any time during the subsistence of the contract and had the contractor failed to comply the case would have been quite different and the responsibility could be pinned on the contractor." The learned Judge has held that these conclusions which formed the basis of the award were erroneous on their face and the award, was liable to be set aside for that reason.

10. Mr. Sohail's grievance is that the above observation was made in respect of the specific questions of law referred to the arbitrators and there is no justification to set aside the award on the ground that the arbitrators have taken an erroneous view in construing the terms of the contract. He contended that the question of interpretation of the contract was specifically referred to the arbitrators and even if the decision of the arbitrators is found to be wrong on that point the learned Judge was not competent to set aside the award on that ground. However, the learned counsel was unable to refer us to any document on the record to show that the parties had specifically referred the question of interpretation of the contract in dispute to the arbitrators. Mr. Sohail referred us to the notice, referred to above but there is nothing in it to show that any such specific question was intended to be referred to the arbitrators by the parties. In the award itself the learned arbitrators have not stated that this question was specifically referred to them for their decision. On the other hand, we find that at the outset the arbitrators had framed two general issues and while considering them had further noted two subsidiary points and it is in that context that the question of the interpretation of the contract and other points are discussed.

11. Mr. Sohail finding himself in this difficulty contended that even if the dispute is referred in general terms to the arbitrators and in such case certain specific questions of law arise for their determination it should be presumed that specific questions of law were referred to the arbitrators. In support of his contention the learned counsel relied on the decision of the Privy Council in Durga Prosad Chamria v. Sewkishendas Bhattar. In that case their Lordships observed that the reference in it was of such a nature that the arbitrators may be treated as having been appointed by the parties to decide amongst 'others some specific questions of law which he bad been said to have decided wrongly. That was a case in which a suit for declaration as to the shares of the plaintiff in the partnership business and its dissolution and winding up was claimed. Panckridge, J., had settled certain issues in the action that was then pending. Out of them two issues were as under: "(a) Is the agreement dated 16tb November 1916 relating to the alleged family settlement valid or admissible in evidence? (b) Is the plaintiff's claim or any portion thereof barred by limitation?" After these issues, had been settled the parties agreed to refer to arbitration the outstanding matters in the suit. In this background the Privy Council was satisfied that the two points of law as to which it was said that the arbitrator's error vitiated the award were specifically referred to him to decide. In the present case no such inference can be made. In the notice itself the appellant never asked the decision of the arbitrators on any question of law. The only dispute that he raised was that the Government was not justified in canceling his contract and the Government having committed the default was bound to compensate him in damages. It was, therefore, incidentally that the question of the interpretation of contract which was material for the decision of the case arose before the arbitrators. It is not possible to hold that in the present case that the appellant firm wanted to refer any specific question of law to the arbitrators or that any such question was referred for their decision. It is one of those cases in which the question of construction of the term of the contract arose incidentally for the decision of the dispute referred to them. It seems to us that simply because the question of interpretation of the relevant clause of the contract was incidentally referred in the pleadings by the parties that would not clothe the arbitrators with the exclusive jurisdiction to decide the question of law involved in it.

12. In the present case the dispute raised in a number of letters written by the appellant to the Department culminated in the notice dated 7th February 1959, calling upon the Department to refer the dispute to arbitration in terms of clause 21 of P. S.

35. In this notice the claim of the appellant was that the Department had cancelled the contract without justification and they were liable to pay damages to them. This was the dispute between the parties which was referred to the arbitrators. In the arbitration proceedings both the parties had to refer incidentally to the relevant clause in the contract to support their plea. In our view that would not lead to the conclusion that by doing so any specific question of law was referred to them. In this connection it will be useful to reproduce the observations of Lord Wright in F. R. Absalom Ltd. v. Great Western (London) Garden Village Society which are as follows:‑ "There is here no submission of any specific question of law as such and as a specific question of law; no doubt incidentally, and indeed necessary the arbitrator will have to decide some questions on the construction of the building contract, but the two matters submitted are both composite questions of law and fact; there is no express submission of the true effect of the contract on the basis of undisputed facts as in the Kelantan case 1923 A C 395 or as a separate and distinct matter on facts to be separately assumed or found, as in re King and Duveen (1913) 2KB

32. The arbitrator was not being asked simply and specifically to decide, upon some agreed or assumed basis of fact, the true interpretation of either clause 26 or clause 30 of the conditions or of both together; he was being required to make an award on the two matters submitted on whatever questions of fact and law might emerge.." In that case clause 32 of the contract was as under:‑ "Provided always that in case any dispute or difference shall arise between the employer or the architect on his behalf and the contractor either during the progress of the works or after the determination, abandonment, or breach of the contract, as to the construction of the contract or as to any matter or thing arising there under (except as to the matters left to the sole discretion of the architect under clauses 4, 9, 16 and 19 and the exercise by him under clause 18 of the right to have any work opened up), or as to the withholding by the architect of any certificate to which the contractor may claim to be entitled, then either party shall forthwith give to the other notice of such dispute or difference, and such dispute or difference shall be and is hereby referred to the arbitration and final decision of a person to be appointed on the request of either party by the President for the time being of the Royal Institute of British Architects, and the award of such arbitrator shall be final and binding on the parties." The arbitrator, therefore, found himself competent to construe clause 26 and clause 30 of that contract. In spite of this the house of Lords held that in the absence of any specific reference about the interpretation of the contract it was open to the Courts to consider whether the finding of the arbitrator on that point was good or bad in law. In this connection Lord Russell of Killowen observed at page 610 of the report as under:-- "No specific question of construction or of law was submitted. The parties had, however, been ordered to deliver pleadings, and by their statement of claim the contractor had claimed that the arbitrator should under his power revise the last certificate issued. It is at this point that the question of the construction of condition 30 arose as a question of law, not specifically submitted but material in the decision of the matters which had been submitted. This question of law the arbitrator has decided; but if upon the face of the award he has decided it wrongly his decision is in my opinion open to review by the Court." This is exactly the situation here. In the present case also the general issue before the arbitrators was whether the Department had cancelled the contract on valid grounds and whether the Government was liable to pay damages for wrongfully terminating the contract. In our opinion, if for deciding these questions the construction of the terms of the contract in dispute became necessary for the decision of the case, it was not enough to confer on the arbitrators the exclusive jurisdiction to decide the point of law arising out of it. In that view of the matter we are clearly of the view that the learned Single Judge was fully justified in holding that it was open to the Court to consider the validity of the award on the reasoning advanced by the arbitrators in the award.

13. Finally, it was contended by Mr. S. M. Sohail that the view of the learned Judge that the arbitrators had committed an error of law is not correct. In this connection it will be noticed that the arbitrators had held that inasmuch as the method of treatment is provided in clause 1 and not in clause 2; it followed that poles could not be rejected on the score of an objection as to the method of treatment mentioned in clause 1 of the specification. Mr. Sohail contended that the arbitrators were justified in coming to this conclusion on the interpretation of the relevant clauses in the contract, This contention has no force. The learned counsel failed to note that in the specification laid down in the contract it is specifically provided in clause 1 that the "Sundri Wood Poles" required to be supplied were to be treated by "creosote forced in under pressure" or "by any other approved method". Clause 2 deals with the general requirements and clause 3 with causes of rejection. In the last mentioned clause it is clearly mentioned that in case the poles failed to comply with the requirements of clause 2 they would be rejected. But that did not mean that the poles referred to in clause 2 were other than those mentioned in clause 1, which deals with specification. It cannot be doubted that if the poles referred to in clause 2 were not of the description specified in clause 1 they were liable to be rejected under clause

3. The arbitrators' interpretation on this point is erroneous and this was sufficient ground for setting aside the award. In that view of the matter it is not necessary for us to discuss the other alleged errors committed by the arbitrators.

14. On the facts of the present case we are satisfied that the learned Single Judge was fully justified in setting aside the award on the ground that the arbitrators have committed an error of law and in directing the parties to have recourse to further arbitration. In case the appellant is not inclined to refer the dispute in question to further arbitration, it will be open to him to treat the arbitration clause as revoked and establish his claim in a competent Court of civil jurisdiction. In the result, subject to the above remarks, the appeal is dismissed with costs. K.B.A. Appeal dismissed.