P L D 1967 Karachi 445 (PLP)

(1) Whether the firm, following devaluation of Pakistan currency were entitled to pay the rupee component of the contracted price at the old rate of exchange, or the revised rate of exchange ; and (ii) whether the firm failed to export the contracted quantity within the stipulated period, or the Government failed to deliver the goods. It may be stated, as referred to in para. 2 of their letter, that the dispute has been referred to arbitration at the request of the other party, namely Messrs Transocean Asia, Karachi.

3. The material facts are that by the agreement of the 5th of July 1955 modified on the'13th of July 1955, Messrs Transocean Asia agreed to purchase from the Government of Pakistan whom in turn had agreed to sell them for export 2,1;03 tons of Kangni rice 1953/f4 crop at 25/10/- sterling per ton F. O. B. Karachi by agreeing to lift and export the entire quantity within two months of the signing of the contract, it being required of them to deposit cash security in the sum of Rs. 59,100 being the 10 % total value of the contracted goods at the rate of exchange then prevailing which was Rs. 9-5-4 per sterling. Under clause 10 of the agreement, it was open to the buyers to pay or deposit the full price in Pakistan currency at the official rate of exchange then prevailing. On the 1st of August the rate of exchange via-a-via the Pakistan rupee per sterling was fixed at Rs. 13-5-4 and the buyers requested the Government to reduce the contract price proportionate to the exchange of devaluation on the ground that the customers were no longer bound to take delivery at the devaluation price; and that in other contracts entered into by Government after devaluation, Government had reduced the ate ling price of comfortable quality of rice to about 20 per ton. Government agreed to the export of rice by the buyers on condition of payment of f 20 sterling per ton plus 5/10/ per ton in Pakistan currency, extending the period of export until the 31st of December. A total quantity of 1898. 1341 tons was exported by the buyers who paid -Government at the rate of Rs. 340 per ton in accord rice with the post devaluation exchange rate, that is, a sum of Rs. 102 per ton over and above the pre-devaluation exchange rate and claimed this amount in various representations made to the Government, totalling a sum of Rs. 1,93,358 as excess over the contractual amount with two additional sums of Rs. 52,578 as damages for the inferior quality of rice supplied by the Government, and Rs. 0,063 as addition damages for Government's failure to deliver the balance of the quantity of rice to make up the contractual quantity. They also claimed interest at 6 % per annum from the 1st of January, 1956, and cost of the legal proceedings.

4. The arbitrator heard the parties and came to the conclu sion that a sum of Rs. 1,93,610 being the amount received by Government in excess of the contractual amount, calculated at the rate of Rs. 102 per ton, was due to the buyers, but disallowed the two other claims with regard to damages, as also the buyer's claim for interest.

5. In the main, the objections raised by the Government to the award are that the rate of exchange that should have been allowed was that prevalent at the time of the contract, and not that subsequent to the date of the contract, or that prevalent at the time of the claim, that the learned arbitrator had not answered specifically the two points w itch were required for determination by him, and that the award should therefore, be set aside.

6. I have heard Mr. Akram for the Government of Pakistan, and Mr. Ali Ahmad Fazeel for the buyers. It is conceded by learned counsel on either side, that the first point for determination was a specific one on a point of law. It is contended by the learned counsel for the Government, that the conclusions of the arbitrator are not is accordance with the law applying to the facts of the case, and that the conclusions drawn by the learned arbitrator are apparent on the face of the record.

7. It is obvious on a reading of the award, that the learned arbitrator has come to a finding in favour of the Government in regard to the second point referred to him for determination, as to the two amounts claimed as damages for inferior quality of rice supplied by the Government, and for their failure to deliver the balance of the contracted quality to the buyer. These amounts have been disallowed. This finding is not contested, not even by the buyers.

8. As to the contention as to the point of law referred to the arbitrator, the primary consideration is the extent and the grounds on which the findings of an arbitrator appointed by the consent of the parties, should be interfered with, by our courts an aspect that has received the anxious consideration of various High Courts over the number of years.

9. In Durga Prosad Chamria and another v. Sewkishendas Bhattar and others (PLD 1949 P C 187) a well-known followed principle was set down that where a question of law was referred to an arbitrator, who had decided wrongly, a Court should not interfere with such an award, since as their Lordships observed- "where a question of law is specifically referred to the arbitrator for decision and he decides it, it would be contrary to the well established principles for a Court of law to interfere with the award even if the Court itself would have taken a different view of the point of law had it been before it."

10. In Thawardas Pherumal and another v. Union of India (AIR1935SC468), Bose, J. delivering judgment observed that - "An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. He is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not, he can be set right by the Court provided by his error appears on the face of the award. The single exception to this is when the parties choose specifically to refer a question of law as a separate and distinct matter." 11: In a latest ruling of this High Court, Wahiduddin, J. in Sheikh Muhammad Sadiq Muhammad Afzal v. ministry of Industries (P L D 1966 Kar. 412), reviewing the entire case-law on the point in a similar matter and with particular reference to the objections to the award on the ground whether a Court is competent to set aside an award on the ground of error of law apparent on the face of the record; and what this particular expression in law means, observed as follows:-- "It is a well established rule in arbitration matters that in cases where question of interpretation of certain clauses in an agreement between the parties is referred to an arbitrator, such award being purely on a question of law, it is not open to any one of the parties to attack the award on the ground that the arbitrator had misconducted the proceedings. However, in law there is a settled distinction between the decision of the arbitrator upon a pure question of law and the decision of an arbitrator upon the dispute between parties, which rest incidentally upon the decision on a question of law. In the former case, the parties having elected to accept the decision of the arbitrator on the question of law, it would not be open to them to attack the decision on the ground that the decision was wrong while in the latter case, it would be open to them to attack the finding of the arbitrator if an error of law was apparent on the face of the record, which formed the basis of the finding of the arbitrator. An "error of law on the face of the award" means that one can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which one can then say is erroneous. The real question for consideration would be whether a question of law was specifically referred to the arbitrators or it merely arose in. the course of the proceedings. If a question of law is specifically referred and it is evident that the parties desire to have a decision from the arbitrator, about that rather than one from the Court, then the Court will not interfere. However, in cases where the questions of law is incidentally material in order to decide the question actually referred to the arbitrators, it is open to the Court to set aside the award if an error of law is found patent on the face of the record."

12. It is necessary then, to emphasise firstly that the error of law, must to apparent on the face of the award. I have not been able to see any such error on the face of the award. In the instant case. Besides, the learned counsel for the Govern ment, has been unable to show, or refer to any law by which the arbitrator was bound to decide that the rate of exchange that should have teen the basis for the determination of the dispute between the parties with regard to the amounts due to either, should be that at the time of the contract, and not on a sub sequent date when the claim was made. The arbitrator may not have stated specifically that the firm were entitled to pay to the Government at the old rate of exchange, but the gravamen of his finding to this effect, and the reasons for his so doing, are the acceptance of the contention that the devaluation which followed a few days after the signing of the contract, was made by the Government as a unilateral action of which Government could not in fairness itself take advantage to the detriment, of the interests of the other party, and that if the Pakistan rupee had not been devalued in 1955, Government under the contract would only have been entitled to Rs. 239 per ton as the pre -devaluation rate, whilst they had recovered from the buyer at the rate of Rs. 340 per ton, thus receiving a sum of Rs. 1,93,610 for the entire quantity of the rice exported under the contract before the 31st of December 1955. It has not been shown b the learned counsel for the Government that a statute cannot be interpreted as operating retrospectively in the absence of express provision to that effect, and that when a law is altered during the pendency of any action that the rights of the parties must be determined in accordance with the law as it stood when the action began. The buyers were not responsible for the devaluation and the contractual price of the export of rice was clearly fixed under the agreement of the 5th of July 1955, and it is an important aspect that the Government did not ask for any increase in the guarantee given by the buyers in pursu ance of clause (11) of the agreement dated the 5th of July, when it was later modified at the request of the buyers.

13. For these reasons, I am clearly of the opinion that the arbitrator in the present case had the exclusive jurisdiction to decide the point referred to him, arising out of the dispute between the parties, and that he has besides taken a broad view of the case, apart from the legal aspect, in deciding this point against the Government. I, therefore, disallow the objections, and order that the award be made a rule of the Court. K.B. A. Award made rule of Court.