P L D 1978 Karachi 827 (PLP)

6. Referring to the first contention, it may be observed that there cannot be any quarrel on the proposition that an arbitrator is the sole Judge on facts and law and this Court will not interfere with his finding unless they is some error of law apparent on the face of the award. Referring to the second contention, it is true that a Court of law cannot examine an award by constituting itself as a Court of appeal, and cannot sift the evidence produced by the parties before an arbitrator. But there is difference between sufficiency of evidence and want of evidence. A Court will not interfere on the ground that the evidence produced before the arbitrator was not sufficient to arrive at a particular finding but a Court is competent to interfere with an award if it is based on no evidence.

7. Referring to the above rulings relied upon by the learned counsel for the plaintiffs, it will suffice to say that in all the three rulings the question as to whether an arbitrator can give an award without any evidence was not considered and, therefore, the same are not relevant to the instant case. In the Balgamwalla Cotton Ginning Factory v. Ali Muhammad and others, the disputes between the parties were referred to the sole arbitrator one Rais Daud Khan. He gave an award in favour of the appellant, which was set aside by the trial Judge upon the objections filed by the respondents inter alia on the grounds that the arbitration agreement was vague and that the respondents/defendants were not given opportunity to produce evidence. Against the judgment of the trial Court the appellants filed an appeal in the defunct High Court of West Pakistan Karachi Bench, which was allowed. Their Lordships were pleased to observe as follows in para. 9 at p. 477 (KWLR): "The other objection to the proceedings is that there is no record of the proceedings, except a copy of the account book which is in Gujrati, and no signature of the defendant Muhammad Ali on his admission of liability for the money decreed, was obtained. It is true that the arbitrator made no attempt to record the statements of the parties. He contended himself with verbal inquiries. He would no doubt, have been well advised if he had recorded their statements and obtained their signatures. But he was under no legal obligation to do so. It has been held in A I R 1959 Nag. 264, A I R 1940 Lah. 73 and in 23 I C 625 (P C) that there is no legal obligation on the arbitrator to record the statements of witnesses: even verbal inquiries are enough If the word of the arbitrator is to be believed, and we see no reason to disbelieve him, the arbitrator made oral inquiries in the presence of the parties, and based his award on those inquiries and on the inspection of the plaintiff's account book. It is not a case of no inquiry, or no notice or no evidence, as has been alleged by the defendants. The trial Judge, in our opinion, was not justified in holding that the arbitrator made no inquiries in this matter, gave no notice to the defendants to be present during the arbitration proceeding's, and made no opportunity to them to adduce evidence. It appears that be has not attached any weight to the evidence of the arbitrator. There was not a word against his evidence, and in the absence of any evidence to the contrary, his word should not have been rejected in the manner in which it has been done." A perusal of the above para. and other paras. of the judgment shows that the arbitrator had examined witnesses in the above case and it was not a case of no evidence.

8. In the case of Baghdadul Jadid, the facts were that the respondent filed a suit for the recovery of Rs. 621.12 on account of the price of wheat and on account of a loan of Rs. 100 against the petitioner. In the above suit the parties after the framing of the issues made an application for referring the dispute to a sole arbitrator. The arbitrator after entering upon the reference and after hearing the parties gave an award in favour of the res pondent for a sum of Rs. 478‑8‑0, which award was made a rule of the Court by the Sub‑Judge at Hasilpur. The petitioner filed objections to the award inter alia on the grounds that the arbitrator committed judicial misconduct in accepting certain entries of the account book of the plaintiff as correct without any other corroborative evidence in support thereof, and that the arbitrator was wrong in holding that the plaintiffs were members of a joint family and had a joint business among them, and that the arbitrator had without any reason rejected the documentary evidence of the defendant etc. With reference to the above objections Abdul Rashid, J. (as he then was) at page 59 was pleased to observe as follows;

"so long as the arbitrator acts within his jurisdiction without fraud and misconduct an award cannot be set aside by the Court unless there is an error in law which is patent on the face of the record. The arbitrators are Judges of both facts and law and therefore, an error in law does not vitiate the award. In fact an arbitrator is not bound by the technical rules of procedure or of the Evidence Act which the Courts are required to follow." In the above case the parties led evidence oral and documentary before the arbitrator. The contention of the learned counsel for the defendants was that the arbitrator should not have accepted certain entries of the account book of the plaintiff and that he should not have rejected certain documentary evidence produced by the defendant. In that context, his Lordship was pleased to observe that in the absence of any legal misconduct on the arbitrator or fraud, the Court would not interfere with the award as the arbitrator was the sole Judge of facts and of law.

9. Referring to the Lahore case, of 1940, it may be observed that the question before his Lordship was as to whether an arbitrator was bound to record the proceedings taken place before him and as to whether he was bound to hold a public inquiry. In that context, his Lordship Din Muhammad, J. was pleased to observe that in Schedule II of the Civil Procedure Code, no procedure was laid down for the arbitrator and, therefore, unless it was proved that the arbitrator refused to examine any evidence tendered by the parties, non‑recording of proceeding or non‑holding of a public inquiry, would not be a ground for setting aside the award. It may also be pertinent to point out that the award given by the arbitrator in the above case was signed by the respondent as a token of acceptance of the award, but in the Court an attempt was made to wriggle out. The above case has also no application to the instant case..

10. It is true that a Court of law cannot examine the question of sufficiency of evidence and can not set aside an award merely on the ground that the Court would not have taken the view adopted by the arbitrator on the basis of the evidence on record, but as pointed out hereinabove in the instant case the question involved is as to whether there was any evidence before the learned arbitrator justifying his giving of the award in favour of the plaintiff. It is an admitted position, as pointed out hereinabove and is also clear from the minutes of the proceedings dated 1‑3‑75, that the defendant denied the correctness of the documents produced by the plaintiff before the arbitrator (which fact is also borne out from the award at p. 6). Once the documents are denied by the other party, it becomes incumbent on the party relying upon such documents to prove the same through formal witnesses. An unproved document cannot become admissible before an arbitrator on the ground that an arbitrator is not bound to follow the strict D rules of the Evidence Act. An arbitrator though not bound to follow the Evidence Act with its full vigour, cannot depart from the basic principles of the Law of Evidence and, therefore, he cannot decided a matter without having any evidence before him. The disputed questions of facts are to be decided on the basis of some evidence and that the same cannot be adjudicated upon on assumptions. A further question may arise as to whether the Court is justified in scrutinizing the arbitration proceedings in order to arrive at a finding that the award is based on no evidence. 1n my opinion, a Court is competent to ascertain as to whether the arbitrator has committed an irregularity in conducting the arbitration proceeding which is so fundamental that it will vitiate the award, and for doing so the Court is bound to scrutinize the proceedings which have taken place before the arbitrator. In this connection, it may be pertinent to refer the case of Amin Jute Baling Company Ltd. v. Aminpur Union Cooperative Multipurpose Society Ltd. (P L D 1961 Dacca 102), the case of Kh. Ghulam Rasool Lone v. Azad Jammu & Kashmir Government (P L D 1971 Azad J & K 127), the case of Thawardas Phermal v. Union of India (A I R 1955 S C 46), the case of Messrs Bajranglal Laduram v. Ganesh Commercial Co. Ltd. (A I R 1951 Cal. 78) and the case of Bujoy Singh v. Bilasroy & Co. (A I R 1952 Cal. 440).

11. Referring to the first case, namely, P L D 1961 Dacca 102, it may be stated that the dispute relating to the purchase of certain quantity of Jute was referred to arbitration as per rules of the Chamber of Commerce. Upon filing of the award in the Court the same was made a rule of the Court by the subordinate Judge. Against which an appeal was filed before the Dacca High Court, which was heard by a Bench comprising of Mr. Justice Akbar and Mr. Justice Baqar. One of the objections to the award was that the arbitrator acted without any evidence on disputed question of fact. Their Lordships were pleased to observe as follows: at page 107, in paras. 19 and 20 . "

19. The Arbitrators must remember that they determine the matter referred to them judicially. They should, therefore, be well advised to go into evidence when the nature of dispute requires it. If they decide such disputed questions, namely, whether there was extension of time or whether the seller's alleged story of delivery on the due date was true or not without going into evidence they might be guilty of legal misconduct because it may be said that they had decided these questions blindly without any materials before them, of course, if the parties fail to decide the case on the materials before them.

20. These observations do not mean that they must act as a Court. When the propriety of an award is questioned before us, we allow the Arbitrator all possible latitude and ignore technicalities. But deciding disputed questions of fact without material or evidence are not questions of technicality or mere irregularity. This will, on the other hand, amount to illegality which may vitiate the award."

12. Referring to the second ruling of Azad Jammu & Kashmir High Court, it may be stated that a Division Bench of that High Court after reviewing the case‑law on the question as to whether a Court is competent to go into the question as to whether there was any evidence before the Arbitrator to justify the award was pleased to observe as follows at page 137; "We have thus seen there is no hard and fast rule defining the term misconduct by the arbitrator. Thus it cannot be said that the award has such a sanctity as to make a Court of justice powerless against it even if it is based on no evidence at all or if it is in clear conflict with the evidence in the case. It was urged on behalf of the Government that even in these circumstances this Court was precluded from setting it aside ; I must express my inability to fall in line with the argument or allow myself to be tempted by the convenience that it offers. The Courts exist for the dispensation of Justice and if it is clearly established that an award was really unjust, the judicial conscience naturally feels outraged and it becomes a duty to see that ends of justice are not defeated, of course within the bounds of law. When it is said that the appraisement of evidence is the discretion of the arbitrator, it means nothing more than this that if the award is based on some evidence, it cannot be set aside either because the trial Court or the appellate Court thinks it insufficient or because they may be able to come to a different conclusion on the basis of the same evidence but that is altogether a different proposition."

13. Referring to the case of Thawardas Phrumal v. Union India (AIR 1955 S C 468), it may be stated that the facts were that the contractor undertook to supply certain quantity of pucca bricks to the Union of India. Certain disputes arose between the contractor and the Union of India, in respect of the above transaction which were referred to arbitration. Before the arbitrator, the contractor made claim in respect of 17 items. The award given by the arbitrator, was made the rule of the Court by the subordinate Judge, Bhanband, against the above order, the Union of India filed an appeal in the High Court of Patna, which was partly allowed by the High Court. Being aggrieved by the above judgment of the High Court the contractor filed an appeal to the Supreme Court of India. While discussing the scope of the power of an arbitrator, their Lordships were pleased to observe as follows (in para. 27 at p. 277); "The error is apparent. Facts must be based either on evidence or on admission ; they cannot be found to exist from a mere contention by one side especially when that are expressly decided by the other. The inference from the facts stated above is that the contractor entered into the agreement with his eyes open and whatever his one‑sided hopes may have been he was content to enter into the agreement as it stood without binding the other side to the new con ditions and without even waiting to ascertain the reaction of the other side to his further proposals." A perusal of the above‑quoted observations shows that their Lordships were of the view that an arbitrator can decide disputed question of facts either on evidence or on admission of the other party, but the same cannot be decided on the basis of the contention advanced by a party.

14. Referring to the case of Messrs Bajranglal Laduram v. Ganesh Commercial Company Limited (A I R 1951 Cal. 78), the facts were that the disputes in respect of certain contracts of sale of Gunnybags were referred to arbitration of the Bengal Chamber of Commerce, under its rules. One of the questions before the arbitrator was, as to whether the contract period for the delivery was extended, the arbitrators without any evidence proceeded on the assumption that the period wag so extended. The arbitrators gave inter alia two awards which were filed in the High Court of Calcutta, arid which were made rules of the Court by a learned Single Judge. Against which an appeal was filed before a Division Bench of the same High Court which was allowed. Their Lordships while discussing the power of the arbitrators were pleased to observe as follows (in para. 41 at p. 83 of the above ruling) :‑

"In my view the arbitrators could not hold that the last date of delivery had been extended without some evidence. This was not the respondent's case and there is no suggestion in any of the docu ments which were placed before the arbitrators that the time for delivery had been extended. Arbitrators who are experts in the trade can decide matters which are within their expert knowledge without evidence. But they cannot decide whether two parties have extended the time of delivery except on evidence as such would not be a matter within their expert knowledge. Counsel for the respondent eventually conceded that the award could not be justified on the assumption that the arbitrators must have held that the time for delivery had been extended. If they had held that the time had been extended such would have been a finding upon no evidence at all and would clearly amount to legal misconduct. There are a number of recent decisions of this Court which have taken this view and which need not be referred to in this judgment." A perusal of the above‑quoted para. shows that their Lordships were also of the view that a disputed question of fact cannot be decided by an arbitrator without any evidence.

15. Referring to the case of Bigoy Singh v. Balsroy & Co, (A I R 1952 Cal. 440) a Division Bench of the Calcutta High Court after discussing some of the rulings on the question as to whether an arbitrator can decide disputed question of facts without any evidence was pleased to observe as under (in para. 31 at p. 443) :‑-- "In the case before us the matter of the extension could not be within the expert knowledge of the arbitrators. Therefore, the arbitrators were bound to take evidence and the onus to prove extension was on the buyers. It has been admitted on behalf of the buyers that they did not tender any evidence on the point. That being the position, the arbitrators came to a finding without evidence, and have mis-conducted the proceedings." The above‑quoted para. also shows that their Lordships adhered to the view taken by another Bench of the same High Court in the year 1951 referred to hereinabove in para. 14 and were pleased to hold that an arbit rator cannot adjudicate upon a disputed question of fact without having any evidence.

16. The ratio decidendi of all the above‑cited cases is that though an arbitrator is not bound to follow technical rules of the law of evidence and even is not obliged to record the statements made before him by the witnesses (though it is desirable to record the same), but at the same time he is not free to adjudicate upon the disputed question of facts without having any evidence. If be does so, it would amount to a legal miscon duct on his part and/or misconducting the proceedings vitiating the award.

17. In view of the above discussion, I am of the view that in the instant case the arbitrator has committed legal misconduct and/or mis conducted the proceedings in awarding certain amount without having any evidence which is also apparent from the contents of the award. It is alleged by the defendants that on the various dates mentioned hereinabove in para. 3, the defendants had taken two witnesses for examining them in support of their case, but the arbitrator refused to examine them and inter alia observed that he would hear only arguments. I could summon the arbitrator in order to ascertain the correct position, but since I am remitting back the disputes between the parties, it will be just and fair that the defendants should also be given an opportunity to prove their case. I therefore, set aside the award and remit back the disputes between the parties to the arbitrator Mr. M. W. Gohar with the direction to decide the same in accordance with law. The award is to de given within 4 months from the date of this order. S. A. H. Award set aside. Case remitted back.