1999 PLP 295 (YLR)

The instant appeal has been filed against the order, dated 2‑9‑1986, passed by learned Civil Judge, whereby the Award, dated 25‑5‑1985 made and signed by Khan Mushtaq Ahmed, acting as sole arbitrator between the parties to resolve their dispute, was made rule of the Court.

2. Briefly stated the facts of the case are, that the respondent had filed a suit for rendition of accounts claiming to be dealer of the appellant for the sale of certain tractors and in view of illegal termination seeking the accounts of the amount due to it. This suit was contested by the appellant. Issues were framed; parties were put to trial and learned Civil Judge seized of the matter on 24‑4‑1984, was pleased to pass a preliminary decree for rendition of accounts in favour of the respondent and against the appellant. The commission was appointed to examine the accounts. However, before anything could finally take place, the parties made joint statement before the Court on 4‑4 1985, whereby they sought that the dispute between them be resolved through arbitration of Khan Mushtaq Ahmed, Advocate, Sheikhupura. In the light of above, vide order, dated 4‑4‑1985, the Court appointed Khan Mushtaq Ahmed, Advocate as an arbitrator for the resolution of dispute. The said arbitrator made and signed his award on 25‑5‑1985, whereby he awarded a sum. of Rs.7,70,400 as commission due to the respondent and also awarded Rs.9,20,604 as interest on the said amount.

3. The appellant challenged this award by filing objections but those were dismissed by the Court below, vide impugned order. Hence this appeal.

4. Learned counsellor the appellant has candidly conceded that he leas no objection with regard to the award regarding the commission amounting to Rs.7,70,

400. However, his objection is, that in Law, the arbitrator has no jurisdiction and authority to award the interest. In reply, learned counsel for the respondent has stated that this objection has not been taken by the appellant before the Court below nor this is one of his grounds in the present appeal, consequently, the appellant cannot sustain the above argument. Besides, it is also submitted that the arbitrator after its appointment in fact was the "Court" for all intends and purposes and, thus, in view of section 34 of the C.P.C., had ample jurisdiction to award the interest on equitable principle.

5. Counsel for the parties have been heard and record perused.

6. From the contents of the plaint, which is basic document initiating the dispute between the parties, as per paragraph No.9, it is stated that cause of action had arisen in favour of the respondent, when the appellant instead of rendering the accounts, had asked the respondent to sign the document acknowledging a credit balance without rendition thereof. The prayer in the plaint is reproduced as below:‑‑‑ "Under the circumstances, it is prayed that the suit be decreed in favour of the plaintiff and against the defendant in accordance with law and after rendition of accounts by the defendant a decree for the amount due may kindly be passed with costs. "

7. It is worth mentioning that in the suit the respondent had not asked for the award of any interest by the Court. Therefore, when the preliminary decree was passed in favour of the respondent and against the appellant, the finding on the issue of relief is as under:‑‑‑ "As a result of my finding on issue No. l‑A, I hereby pass a preliminary decree in favour of the plaintiff as prayed for. The final decree shall be passed in his favour after the receipt of the local commission."

8. From the above even it is manifest that while passing the preliminary decree for rendition of accounts, no interest was awarded. Only omission was appointed to take the accounts but unfortunately matter could not be accomplished. In view of above and also from the statements made by parties on 4‑4‑1985, and also, from the order of the Court, while referring the matter to the arbitrator, it was only accounts which were to be taken by the arbitrator and not with the object of resolving or allowing any other relief to the respondent. It is for the first time, that before the arbitrator, a claim was put forth by the respondent in which certain amount was claimed as interest. Though this was an arbitration with the intervention of the Court, during the pendency of litigation between the parties and the reference was only qua the rendition of accounts and nothing more than that.

9. Anywhere, the arbitrator while pronouncing his award touched the aspect of interest on equitable ground, stating that as the respondent had suffered hardship, spread over a period of eight years and had to institute two independent suits and his commission had remained blocked during that time. Had the respondent got the above amount, he could have earned interest by depositing it in some fixed deposits or Saving Account, consequently, the respondent was entitled to additional interest of 2 % above the Bank rate, bank rate being 12 % , thus, respondent was found entitled to 14 % of interest on Rs.7,70,400.

10. The award of interest is not the sweet‑will of an arbitrator. If the parties or the Court has not referred to the arbitrator for resolving the question with regard to the interest, the arbitrator would have no authority in law to award any interest. In the present case, it has been seen that the preliminary decree passed by the Court was remained intact. In the preliminary decree, the interest was not awarded; therefore, after passing of preliminary decree, the only dispute remained was as to what amount is due to the respondent in pursuance of the decree. It is this dispute which was referred to the arbitrator alone. Besides, the award of interest was ‑not even the case of the respondent in the suit itself.

10. Learned counsel for the appellant has relied upon the judgments reported as Sh. Mahboob Alam v. Sh. Mumtaz Ahmed (PLD 1960 (W.P.) Lah. 601), Messrs A.Z. Company, v. Messrs S. Maula Bakhsh Muhammad Bashir (PLD 1965 SC 505) and Ghulam Abbas v. Trustees of the Port of Karachi (PLD 1987 SC 393) to contend that the arbitrator had no authority to award the interest. .

11. On the other hand, learned counsel for the respondent has relied upon the judgments reported as Ghulam Abbas v. Trustees of the Port of Karachi (PLD 1987 SC 393), Province of Sindh, etc. v. Waseem Construction Co. (1991 CLC 66), Sh. Mahboob Alam v. Sh. Mumtaz Ahmed (PLD 1960 (W.P.) Lah. 601) and M/s. Al‑Farooq Buildings v. The Federation of Pakistan (NLR 1992 UC 401). In PLD 1960 (W.P.) 601, it has been held that:‑‑‑ "An arbitrator decided only a dispute between the parties. If the dispute is what is the amount which one person is liable to pay to another, the arbitrator can only determine that amount and cannot, merely because a dispute has been referred to him, give a direction that if the party which is liable does not pay the amount by a particular date; he should also be liable to pay interest. In PLD 1965 SC 505, the following passages are of significance:‑‑‑ "Now I come to the third objection, namely, that the arbitrators had no jurisdiction to allow any interest in this case. " "This objection may be dealt with under two heads, namely, whether an arbitrator can allow interest after the date of the award and also pendent elite. As regards the pendent elite interest, the matter generally lies within the domain of contract and statutes. " "It is true that great 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 is not much divergence of judicial opinion. Hence in the light of the aforesaid decisions I am of 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. In PLD 1987 Supreme Court 393, the question was whether the arbitrator was competent to award interest in the circumstances of that case or in the other word whether the award of interest was an error apparent on the face of the award. Relying upon the aforesaid judgment of the Supreme Court, reported in PLD 1965 SC 505, it was held that:‑‑‑ "The compensation for breach of contract qua the claims accepted by the Arbitrator as awarded could not, therefore, be subjected to a further liability to pay interest according to the dictum laid down in the aforesaid decision. " The question of award of interest also came up in the case reported as F.J. Rambarts (Pakistan) Ltd. v. Pakistan Steel Mills Corporation (1987 CLC 2198) and the same view has been taken that "Arbitrator awarding interest on amount found due and payable 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". Reliance is also placed on 1991 CLC 66.

12. On the other hand, learned counsel for the respondent has relied upon the case reported in NLR 1992 UC 401 to argue that the award of interest by arbitrator is not open to any exception. However, in this judgment, it was found that the question of payment of interest on the amount was before the arbitrator in the reference and it is for such reason that the amount of interest was justified. The other judgment reported in PLD 1960 (W.P.) Lahore 601 which has alto been relied upon by the learned counsel does not support the view point of the respondent because the amount of the partnership profit could not be exactly worked out and the interest was awarded in lieu of the share of the profit, not as compensation of damages. The judgment reported in 1991 CLC 66, relied upon by the learned counsel, also does not help the respondent. Similarly, the case reported as Dampskibsselskabet Norden Aktieselskale Copenhagen K. Denmark v. Ahmed Shipping Lines Ltd. Karachi (PLD 1983 Kar. 247) does not support the respondent as the question of grant of interest was being examined not under the law of our country, but that applicable in England. The other judgment referred to by the learned counsel for the respondent reported in PLD 1987 SC 393, has been discussed above.

13. From the ratio of case‑law cited above, it is amply clear that the interest can be awarded by arbitrator prior to the institution of the suit or pendent elite, if a reference in that behalf has been made to him. In the instant case as is vivid from the back drop in which the reference was made; the parties did not agree for the determination or grant of any interest to the respondent. The only matter which was referred to the arbitrator was, what amount is due to respondent in terms of his claim which he has put forth in his suit. As there was no claim for interest, nor it was allowed to respondent by way of preliminary decree, therefore, the arbitrator in law had no authority to grant the interest. I am not impressed by the argument of the learned counsel for the respondent that as under the provisions of section 34, C.P.C., the Court has authority to grant interest, therefore, because the arbitrator was also performing the function under the authority of the Court to resolve the dispute between the parties, thus, would be vested with the power to award interest. The provisions of section 34 would have no application to the present situation, because the arbitrator do not act as a Court in its true sense, but under the principle of Arbitration Law to resolving the dispute inter se the parties as per terms of reference, therefore, to equate the arbitrator with the Court for the purpose of provisions of section 34 would not be an apt application of the said provisions. In the instant case, the arbitrator has not only granted interest prior to the institution of the suit, but most of the period considered for the grant of interest is pendent elite, which the arbitrator has no authority. Reference can be made to the case reported in 1989 MLD 2137.

14. In view of the above, I ain of the considered view that the error in granting interest was apparent on the face of the award and consequently, the award to that extent could not be made rule of the Court.

15. Learned counsel for the respondent has argued that the objection vis‑a‑vi s the interest was not taken before the Court. From the reading of objection petition, it does seem to be so, that there is no such precise objection, but according to paragraph No.15 of the impugned judgment, it is clear that this objection was very much raised by the appellant, discussed by the Court and turned down. Even otherwise, while making the award rule of the Court, it is the duty of the Court to examine its validity and if any error is apparent on the face of the award, should refuse to make it rule of the Court and have recourse to various provisions of Arbitration Act to meet the situation. Reference in this behalf is made to the judgment reported in 1992 SCMR

602. In the present case, the error being patent on the face of the record, the Court should have itself considered this question before making the award rule of the Court. In the light of above, this appeal is accepted to the extent of decree awarding interest amounting to Rs.9,20,

604. There is no order as to costs. Appeal accepted. Q.M.H./M.A.K./M‑1011/L