P L D 1993 Karachi 429 (PLP)

Mr. A. G. Khan, Cost and Management Consultant, was appointed as sole Arbitrator being nominated by the Managing Director, Sui Gas Transmission Company Limited (hereinafter called the defendants) under clause 16 of Contract dated 14-6-1983 entered into between the plaintiff, namely M/s. Intercom Services Limited. Clause 16 relates to the arbitration and stipulates as follows: "Any dispute or difference arising between the parties in connection with the Contract/Agreement or any clause thereof which cannot be amicably settled shall be referred to sole arbitration by the Managing Director, or any General Manager (Finance and Materials) or any other person nominated by him. The arbitration shall be held in Karachi in accordance with the provisions of the Arbitration Act, 1940. The decision of the sole Arbitrator shall be final and binding upon both the parties." The contract between the parties was in respect of transportation of 18 inch diameter line pipe consignment to be imported by the defendants for the Pirkoh Gas Field Project. According to the plaintiff, claims before the sole Arbitrator were filed under rive heads as follows: (i)???? Claim for Rs.12,39,000for detention of trailers; (ii)??? Claim for Rs. 24,00,000 for loss of 4 trailers during civil riots. (iii)? Claim for Rs. 14,64,750 for loss of profit and expenses due to reduction by defendants in the quantum of their contract work over 50%. (iv)?? Claim for Rs. 100,000 for undue loss of tyres of the trailers. (v)?? Claim for interest at 14% per annum on each of the above claim. The learned sole Arbitrator by his award dated 8-4-1.986 accepted the plaintiff's claim only in respect of items (i) and (ii) above and rejected claim in respect of the other three items. According to the defendant the only dispute referred to the sole Arbitrator by the plaintiff related to compensation for detention charges of the trailers in the sum of Rs. 12,39,000 as appearing at item (i) -above, which too was without any supporting evidence and is liable to be set aside. After the riling of the award, notices were issued to the parties in response to which the defendant riled objections under sections 30 and 33 of the Arbitration Act, 1940 which I propose to decide by order. ??????????????????? The case of the plaintiff was that under the contract, the plaintiff was obliged to take delivery of linepipe directly from the Ships at Karachi through its vehicles. In order to carry out its obligations under the contract, the plaintiff had to hire additional vehicles from the market to meet the number of vehicles required for fulfilmcnt of their obligation. There was a delay of 48 hours in the arrival of the vessel in question (Eda) relating to second consignment which did not start unloading until 11th of August, 1983. It had hardly unloaded 180 pipes, when it was again taken away from the port and was rebirthed on 19-8-1983. During this period of 8 days, the plaintiffs vehicles had not been discharged by the defendant and remained continuously in waiting. Again consignment of pipes which was to arrive per s.s. "KOHEUN", there was a delay of 8 days which should have arrived after an interval of at least 35 days from the date of the said arrival of the second consignment. Despite law and order situation prevalent in the country, the plaintiff continued to transport the linepipes till January, 1984. However, in violation of, their. Contractual obligation, the defendant began to transport the linepipes by rail where upon the plaintiff had-lodged their protest with defendant. At no point of time, the plaintiff ever refused to carry the linepipes and were entitled to the claims made by it including their claim for Rs. 24,00,000 for loss of 4 Trailers during civil riots. In the first place it was urged by Mr. A.A. Sharif learned counsel for the defendant that there was only one dispute which was referred to arbitration in regard to the plaintiff's claim of detention charges of their trailers. Thus the plaintiff could not be permitted to raise additional claim towards thealleged loss of trailers in the sum of Rs.24,00,000 which was not the subject-matter of reference. This claim was rejected by the defendant, whereafter the plaintiff preferred an appeal before the defendant which too was rejected. On merit also award of compensation 6f Rs.24,00,000 for the alleged loss of 4 trailers is based on no evidence. In terms of contract dated 4-6-1983, the defendant is also not liable to compensate the plaintiff for the alleged loss. In this regard learned counsel for defendant made reference to the plaintiff's letter 26th September, 1983 which was confined to a claim of Rs.12,39,000 for the said detention charges and also to the admission made by the plaintiff in para. 20 of its Affidavit-in-joinder. The proceedings before the learned Arbitrator held on 27th, 29th January, 13th and 14th February, 1986 were also referred to in order to show that the dispute between the parties related to a single dispute. Lastly learned counsel referred to the plaintiffs letter dated 17-8-1983 in which the claim in respect of detention charges only was made by it. It may be stated here that in its letter dated 21-8-1983 the plaintiff mentioned its alleged loss of trailers due to riots in Dadu, in which the plaintiff also expressed its inability to dispatch vehicles till such time conditions improve and further claiming Rs. 24,00,000 as damages. This claim was repudiated by the defendant vide letter dated 12-9-1983 in the following words: "We have fullest sympathy with you for the loss of trailers in the unforeseen incident of arson near Dadu on 17th August, 1983. However, the Managing Director in his meeting on 20th August, 1983, we have no liability in this regard and deeply regretted that we are not in a position to compensate you in any manner in the loss of your trailers." Despite this the plaintiff vide its letters dated 26-9-1983 and 10-10?1983 persisted with its claim for the detention charges which was once again rejected on 31-1-1985 as according to the defendant it was not maintainable under the contract, -against which the plaintiff preferred an appeal which too was rejected. Thereafter the plaintiff vide its letter dated 3-12-1985 invoked clause 16 of the Contract relating to the arbitration in respect of its claim for detention charges only. In this letter there is no reference to other claims including the plaintiffs claim towards total loss of 4 trailers in the sum of Rs.24,00,

000. Similarly no reference to other claims is found in the letter dated 20-1-1986 whereby the Managing Director of the defendant had appointed MrA.G. Khan as Arbitrator in the dispute. It was disputed by the plaintiff's counsel Mr. Muhammad Ali Syeed that dispute to arbitration was confined to the plaintiff's claim for detention charges. But here all that was urged by him was that the question whether a dispute did exist or not was for the Arbitrator to decide, subject however, to the view of the Court and in the present case the learned Arbitrator rightly held that a dispute did exist in relation to the plaintiffs claim for loss of four trailers. Mr. A-A. Sharif, learned counsel for the defendant supported his contention with T.ext-Books on the subject and decided case-law. He first referred to Russell on Arbitration 20th, Edition 267 at page 268 which reads: "It should in this connection be remembered that it is proper for an arbitrator to make such inquiries as are necessary to enable him to decide whether he has or has not jurisdiction over a matter which one or other party asks him to consider." Brown v. Oesterreichischer Waldbesitzer etc. R. GmbH. (1954) 1 QB

8. In (1887) 12 AC 738, The House of Lords held that "the Court had power to give leave to revoke the submission where it appeared that the arbitrator was going wrong in point of law even in a matter within his jurisdiction. And further (at page 743) the Tribunal must decide the points submitted." In Ramaswami Chettiar v. Vcnkatarama AiyAr & others AIR 1926 Madras 204, a Division Bench of Madras High Court was of the view- "Misconduct must be misconduct in carrying out the terms of the reference and within the scope of it. Anything beyond that, is action without jurisdiction whether or not it may amount also to misconduct. If the arbitrators' award is beyond their jurisdiction and therefore made without jurisdiction then obviously the decree which embodies it is also made without jurisdiction." In Babubhai Tansukhlal v. Madhavji Govindji & Company AIR 1931 Bombay 343 it was held: "In cases where, an arbitrator enters upon a consideration of matters which are not referred to him or which he has no jurisdiction to try by arbitration clause or submission between the parties, the appearance of the party after objection taken and protest made, does neither give the arbitrator authority to make an award nor estop him from urging that the arbitrator has exceeded his authority." In Malik Fateh Muhammad.Khan and others v. Malkani Bhag Bhari PLD 1956 Lahore 596 the only question referred to the arbitrator was what share Malkani Bhag Bhari had in the property left by late Nawab and the arbitrator travelled beyond authority of reference when he took upon himself the decision of the extent of property which would have come to late Nawab if his father and grandfather had been governed by the Muslim Law and not by the custom as they were. It was held that the arbitrator could not decide the matter not referred to him and the award was consequently set aside. . In Muhammad Sadiq Muhammad Afzal v. Ministry of Industries PLD 1966 Karachi 412 (DB) the dispute referred to the arbitrator was whether the Government was justified in cancelling the contract and whether the Government having committed a default was bound to compensate the other party in damages. However the question as to the interpretation of the contract was not referred to, It was held that the arbitrator could not interpret the contract and there was an error - apparent on the face of the record. Accordingly the award was set aside. In Pakistan through Secretary v. Asian Associated Agencies PLD 1974 Karachi 155, another Division Bench held that the jurisdiction of an arbitrator is limited by the terms of submission or reference. Similar view was taken in Pakistan v. Messrs M.A. Aziz & Sons PLD 1980 Lah.

422. In order to examine what dispute or disputes were referred to the learned Arbitrator and whether he had jurisdiction In relation to all of any by them, It will be useful to reproduce plaintiffs's letter dated 23-12-1991983 addressed to the defendant to appoint an arbitrator ah Under: INCOM SERVICES LIMITED Shipping & Forwarding Agents INTERNATIONAL FREIGHT FORWARDS Rcf. No, ISL/GEN/001/85/730 The Managing Director, M/s. Sui Gas Transmission Company, State Life Buildinj No.3, 5kh Floor, Dr. Ziauddin Ahmed Road, Karachi. Dated 3rd December 1985 Subject- CONTRACT NO. DGM/M/PlRKOHME/002/83 DATED 4-&1983 TRANSPORTATION OF PIPE LINE PIPES-?CLAIM OF DETENTION CHARGES FOR TRAILERS, Dear Sir, We refer to our letter No. I8L/SGTC/007/84/172 dated 154)1-1084 and Appeal No. ISL/Gen/001/85/524 dated 5-09-1985 which despite the services tendered under very adverse conditions have been turned down. We therefore invoke clause 16 of the contract and ask for arbitration of the claim and request the Managing Director to arbitrate in the matter. Yours faithfully, for INCOM SERVICES LIMITED, (Sd.) (MANAGING DIRECTOR)" Upon the receipt of the above named letter the Managing Director of the defendant nominated the learned Arbitrator In the dispute vide letter dated 20-1-1986 which may advantageously be reproduced as under, "Mr. A.G. Khan, D-1/1, Maymar Heights, Gulshan Iqbal, Karachi. Dear Sir, 20th January 1986 Contract No. DGM (M) PIRKOH/TPT/002/83 dated 4-6-1983- Transportation of PGFIP Linepipe-Claim of Detention Charges by M/s. Incom Services Limited. This is to advise that a dispute has arisen between Sui Gas Transmission Company Limited and Messrs Incom Services Limited in respect of transportation of linepipe to P.C.F.I.P. for which M/s. Incom Services Limited have riled a claim of detention charges. In pursuance of the powers given under clause 16 of the above Contract, hereby nominate you as Sole Arbitrator in the dispute between S.G.T.C. and Incom Services Limited. The Arbitrator may fix his fee which will be shared equally by both the parties. Yours faithfully, Sui Gas Transmission Company Ltd. (Sd.) (F.K.Khilji), Managing Director. Copy to: M/s. INCOM SERVICES LTD. ?????????? SHIPPING & FORWARDING AGENTS, ?????????? SHERNAZBOUSE, WEST WHARF, ?????????? KARACHI Noocc: DGM (M)/DGM (F)" , There is also no controversy that upon filing of claims by. the plaintiff before the learned arbitrator, the defendant made an application for rejection of other claims and in its reply statement had also raised specific objection to the jurisdiction of the arbitrator to entertain the additional claims. The learned arbitrator has indeed referred to this objection of jurisdiction but refrained from answering as to what specific dispute or disputes were referred to him. All that was held by him was that at one stage the plaintiff had claimed Rs.24 lacs for loss of trailers in civil commotion, loss of business etc. which was rejected by the defendant giving rise to a dispute and further that the arbitration agreement relates not only to present but also future difference. Learned Arbitrator in holding so completely overlooked that the terms and scope of reference clearly indicate that he had no jurisdiction over claim not referred to him which tantamounts to misconduct on his part. His interpretation as to 'future difference' is also erroneous. Future differrice does not mean that although a difference was not referred to arbitration it could be raised at any time by any party during the course of arbitration proceedings. With regard to the award for Rs.12,39,000 as compensation for the detention charges, Mr. A.A. Sharif learned counsel for the defendant contended that the arbitrator did not give full and fair opportunity to the defendant to lead evidence and without any proof awarded this claim which has resulted into miscarriage of justice. The award of the said compensation is also not supported by the evidence because there was no proof that -the plaintiff detailed 25 trailers per day, and suffered a loss of Rs.1,000 per trailer per day for the alleged detention of the trailers. It was further submitted that there is no provision in the contract dated 4th June, 1983. (Exh.4) that the defendant will be liable to pay for the alleged detention charges of the trailers for the late arrival of the ship. In support of his contention he placed reliance on Russell on Arbitration, 20th Edition 409 in which the term 'misconduct' is defined as denoting irregularities, breach of natural justice resulting in miscarriage of justice, partiality and unfairness. - Further reference was made to PLD 1977 SC 237 (266 and 267) in which it was held that misconduct means such a mishandling of arbitration as is likely to cause substantial -miscarriage of justice: In PLD 1978 Karachi 827 it was held that disputed questions of facts must be decided by recording evidence. In this case the defendant had denied the correctness of the documents produced by the plaintiff. Learned counsel 6r the plaintiff Mr. Muhammad Ali Sayeed laboriously endeavoured to . show that a Court is precluded by law from examining the evidence on record and to reach conclusions ' which may be contrary to those reached by the Arbitrator. A Court bearing an application for setting aside an award cannot codstitute itself into a Court of appeal -over the decision of the Arbitrator unless it is first shown that the award is bad on the face of it.. In Durga Parsad Chamnia's case PLD 1949 PC 187, it was held that it would be contrary to. well-established principles of law to interfere with the award even if the Court itself would have taken a different view of either of the points of law or of facts before. it. In S. Zahir Hussain v. Province of Sindh, 1981 C L C 379, it was held that mere error or erroneous conclusion or inference drawn from facts would not bring the error within the purview of error of law apparent on the face of the award -nor would it give-rise to a ground for setting aside the Award under section 30 of the Arbitration Act.- in a D.B. Decision Of this Court reported in Premier Insurance Company v. Aijaz Ahmed, 1981 CLC 311 it was pointed out that an error apparent on the face of the Award must be an error which is dikoverable'by reading the Award itself and not by reference to other materials, like the record proceedings before the Arbitrator. Learned counsel next referred to two other cases. One Ghularn Abbas?? v. Karachi Port Trust, PLD 1987 SC 393 (404) and other National Construction Company v. WAPDA PLD 1987 SC 461 (465). The ratio in both these cases wwas whether work under certain clauses of the agreement was executed or not and whether certain untoward happening was an anticipated risk, were li questions of fact and matters within the exclusive jurisdiction of the Arbitrator .oto decide or not. It was observed that no error was apparent on the face of the award in view of the positive finding of the Arbitrator that the contractor had completed the item of work and the Court could not go behind the award and upset those findings. However, on the merit of the case, learned counsel for plaintiff -ercferred to the fact that after about 2 years of the -claim being quantified, defendants, on' 31-~7-1985, wrote to the plaintiffs saying that under the )iprovi sions of the contract the claim was not tenable. The Managing Director of the defendants by his letter dated 6-11-1985 also rejecied the claim for Wetention. of the trailers for Rs. 12,79,000 as being not tenable under the xcontract. ????????????????????? Averting to the objection raised by the defendant that the learned kArbitrator refused to record , its evidence. Mr. Muhammad Ali Sayeed learned ,ccounsel for plaintiff argued that there is nothing in the record or in any order xpasscd by the Arbitrator or the Award itself which suggests that the Arbitrator i,had refused to record evidence that was tendered. Had the defendafits brought ,htheir evidence and tendered the same and the Arbitrator refused to record nevidcnce that was tendered, plaintiffs contention would perphaps have pgathered some seriousness. In support of his contention he placed reliance on NAIR 1970 Lower Burma page 68,. at page 71 and on AIR 1954 Mysore page 46 itat page 48 where it has been observed that in order to set aside an Award for rcrefusal of the Arbitrator to receive evidence,'the evidence should have been xtctidered and the Arbitrator should have refused to receive it. He then referred to the case of Muhammad Saghir Bhaffi and Sons, P'PLD 1958 (SC.Pakistan) page 221 at page 226 wherein the Supreme Court has Dlobserved that the Evidence Act does not apply toarbitration proceedings and aian Award cannot be set aside because evidence was not recorded or notes of -)evidence have not been taken. in the case of Louis Drey(us v. Araromal 45 Indian Cases page 1151, r.4 equivalent to 3 Sindh Law Reporter page 164, it has been held that the refusal c)jof the Arbitratorsto admit evidence which was unnecessary and which would ninot have in any way influenced the decision does not amount to misconduct. To LIthe same effect is the decision in the case of Kbshorilal Piar Chand AIR 1966 IV MP page

56. In fact, it was argued, by Mr. Muhammad Ali Sayccd that the v,,~various claims preferred by the plaintiffs and the counter-claims of the had been carefully considered 'and studied by the learned defendants Arbitrator in the right of the various evidence placed before it and then he gave his Award on the basis of various, documentary evidence produced before him and refers to them as Exhs. 1 to

30. The contention raised by Mr. Muhammad Ali Sayeed is not without' substance. Admittedly the claim of the plaintiff for detention charges rests, on documentary evidence and referred to by the learned Arbitrator in his Award. The grievance of the defendant is not non-production of any document vital for just decision of the case nor it was their plea that ocular evidence would have improved their case: Mr. A.A. Sharif, learned counsel for the defendant candidly conceded . that the dispute revolves round documentary evidence, which was relied upon by both the parties. Reference hore may also be made to para. 19 (vii) of.the Award N~hich states: "The documentary evidence for the detention charges provided -by Intercom Services (plaintiff)- to SGTC (payment) ur;der their Jetter dated 10-10-1983 (Exh. 10) at SGTC's request were not disputed by SGTC, and under charge 3.6 of the Contract, INCOM SERVICES were to provide for not. less than 25 trailers at the ship's side." The finding of the learned Arbitrator as to the plaintiff's claim for detention charges is based upon documentary evidence as well as admission made by the defendant. This will also dispose of the legal plea raised by them that there is no provision in -the Contract (Exh.4) that they will be liable to pay for the detention charges of the trailers for the late arrival of the ship.. In any case the question whether the defendant was liable, to pay for detention charges on. account of late arrival of ship or not was. within the exclusive domain of the. learned Arbitrator and does not call for interference by 'he Court. While hearing an application under sections 30 and 33 of Arbitration Act a Court should not travel beyond the permissible limits of Aribtration Act so as to assume the jurisdiction of an appellate Court. The findings of the learned Arbitrator -in this regard are based upon proper application of mind and free from ambiguity, hence, cannot be questioned. In the result, the plaintiff's claim for Rs. 12,39,000 (Rupees Twelve Lacs and Thirty-Nine Thousand Only) is made rule of the Court. I also allow to the plaintiff interest on the said amount at the rate of 14% per annum from the date of riling of the award ' i.e. the date of the suit till the date of payment. The parties are left to bear their own costs. A.A./1-220/K Suit decreed.