P L D 1996 Supreme Court 108 (PLP)

SAIDUZZAMAN SIDDIQUI, J.‑‑‑This judgment will govern the disposal of above‑noted three civil appeals in which leave to appeal has been granted by this Court against the judgment of a learned Judge in chambers of Lahore High Court dated 22‑3‑1993 to consider the following legal contentions:‑‑ Decision of the High Court as mentioned above, has given rise to three petitions for leave to appeal filed in this Court. C.P. No.945‑L/93 is filed by the consultants and C‑P.No.1159‑L/93 is filed by the borrower and in both these petitions filed by opposite‑parties, the contentions raised are more or less common which show that both parties are not satisfied with the decision of the High Court. Contentions are firstly, whether interpretation of section 3.01 of Article III of agreement was specifically referred to arbitration for decision and, therefore, finding thereon was not open to exception under sections 30 and 33 of the Arbitration Act. Secondly, whether conclusion with regard to section 3.01 suffers from errors of law apparent on the face of record. Thirdly, whether claim of borrower against consultants was not correctly decided. Additionally on behalf of consultants contention is raised whether dispute about currency contract was specifically referred to the arbitration.

7. In C.P. No.946‑L of 1993, arising from dismissal of revision, which is filed by the consultants, contention is raised that no separate reasons have been assigned by the High Court for its dismissal in spite of the observation that reasons are given in judgment in FA.O. 113 of 1987.

8. Since both parties have challenged the decision of the High Court, we grant leave to examine the impugned judgment in the light of contentions mentioned above." Civil Appeals Nos.988 and 989 of 1M are filed by M/L Joint Venture KG Rist Bangard Strasse 3, 4000 Dusseldorf‑30, Federal Republic of Germany (hereinafter to be called as 'the Consultants' only) while Civil Appeal N0.990 of 1993 is filed by Federation of Pakistan (hereinafter to be referred as 'the Borrowers' only). The background of the controversy are in the above appeals is as follows. The international Development Association a subsidiary of World Bank (W.B.) advanced foreign currency loan to the Borrowers for the purposes of establishing seeds industries in the Provinces of Sindh and Punjab. The Development Credit Agreement No.620‑Pak dated 29‑3‑1976 was entered into between the I.DA, W.B. and the Borrowers. The agreement required the borrowers to acquire the services of Consultants for proper utilization of the loan granted by the W.B. The Borrowers, accordingly, entered into an agreement dated 26‑11‑1976 with the consent of W.B. with M/s. Joint Ventures Basics GMBH/Kocks Y‑G. of Federal Republic of Germany. However, during execution of the project one of the partners of the said joint venture namely, M/s. Basico & Co. went into liquidation which led to the execution of a fresh agreement of consultancy on 28‑5‑1978 between the Borrowers and the Consultants. The agreement dated 28‑5‑1978 entered into between the Borrowers and the Consultants, however, provided that all the terms and conditions of the original agreement of consultancy executed on 26‑11‑1976 between the Joint Venture Basico GMBH/Kocks K.G. of Federal Republic of Germany and the Borrowers shall remain applicable to the parties. It appears that on account of depreciation in the value of dollar, a dispute arose in the year 1980 between the Borrowers and the Consultants with regard to the payment of consultancy fees. The Consultants throughout had been submitting their bills for payment of consultancy fees in Dutch Marks(D.M.) which used to be paid by the Borrowers. However, on account of depreciation in the value of the dollar against D.M., the Borrowers insisted that the consultants should submit their bills for consultancy fees in dollars and not in D.M. As the Borrowers and the Consultants were unable to agree to the mode of payment, the dispute was referred to the arbitrators for settlement which finally came to be decided by the Umpire who rendered the award dated, 9‑9‑1984. Before the arbitrators, both the Borrowers and the Consultants filed their respective claims against each other. The claim of the Consultants was as follows:‑‑ D.M. . (i) Deduction Exchange Rate: 921.6622 (ii) Price Escalation: 1449330.42 (iii) Other Deductions: 71720.86 (iv) Invoices 1/81 and 11/81: 184668.48 (v) Addl. Eng. Service: 727721.27 (vi) Loss of Profit: 453716.18 The total claim made by the Consultants, after deduction of the advance received by them, was to the tune of D.M. 2,774,637.52. The Borrowers also submitted their claim before the arbitrators which included the following:‑‑ (i) Reimburesment of D.M233770.49andRs.636829.00 proportionate part of sums paid to Consultants of the advance money on account of premature termination of the Contract: (ii) Compensation for loss suffered by Punjab. and Sin A Seed Corporation: (a) for wrong selection of site for Khanewal Seed Factory‑ Rs.5Lac (b) for wrong designing of Rs.5Lac Sahiwal Factory: (c) for wrong design of Shell Rs.30Lac Roof of Khanewal Factory. (d) placing of striup at improper places at Sahiwal Factory: Rs.1Lac

4. Negligence and dishonesty Rs.70 lacs in prequalifying number of contracts:

5. Loss of cement for Rs.7 lacs inefficiency of consultants:

6. Delay in installation of Rs.34 lacs machinery:

7. Payments to NESPAK of Rs.5 lacs remedial measures in construction of factories:

8. Rebuilding of factories at Rs.3,50,00,000 Sahiwal and R.Y. Khan: The total claim of the Borrowers against the Consultants filed before the arbitrators thus worked out to Rs.5 , 86,01,483.60. Large number of issues were framed on the basis if controversy between the parties. The arbitrators appointed by the parties, however, did not decide the dispute and entrusted the reference to the Umpire appointed by them. 'I he learned Umpire who acted as the arbitrator in the case, after recording evidence in the case came to the conclusion that the Consultants were entitled to the payments of their bills in D.M. currency as provided in paragraph 3.01 of the agreement and‑ accordingly, held that the Consultants were entitled to receive from the Borrowers a sum of D.M.92,122.66 illegally deducted from their bills by the Borrowers on account of fluctuation in the rate of dollar. The learned arbitrator also allowed the claim of D.M.71,720.86 which related to the reimbursement of fringe benefits paid to the expatriate staff of the Consultants. The learned arbitrator also allowed the claim of Consultants with regard to reimbursement of payments made by them to their engineers for their unavalid leave. The rest of the claim made by the Consultants before he arbitrator was disallowed. In respect of the claim of the Borrowers against the Consultants the arbitrator allowed D.M.233,770.49 and Rs,62,829.00 which the Consultants admitted as due and payable "to the‑Borrowers on account of premature termination of the consultancy agreement. The test of the ' claim filed by the Borrower b against the Consultants were rejected by the learned arbitrator. The award given by the arbitrator was filled before the Civil Judge Lahore. The Borrowers submitted objection under section 30 of the Arbitration Act against the award. The Civil Judge, Lahore, after hearing the learned counsel for the parties rejected the objection filed by the Borrowers and made the award rule of the, Court, by order. dated 30‑6‑1987. It appears that before the Civil Judge, Lahore, the Consultants had made a prayer for grant of interest on the amount awarded by the arbitrator but no finding was given by the Court in this respect. The order of Civil Judge making the award rule of the Court was challenged by the Borrowers in F.A.0. No.113 of 1987 filed before Lahore High I Court. The consultants also filed Civil Revision Application No.1662 of 1987 seeking grant of interest on the amount awarded by the arbitrator from the date of decree which the Civil Judge had omitted to award. The F.A.0. and C.R.A. were heard together and were disposed of by the impugned judgment. . The learned Judge in chambers came to the conclusion that the question of interpretation of section 3.01 of the agreement between the parties was not specifically referred to the arbitrator and, therefore, the learned arbitrator was not competent to record his findings on the interpretation of this section. The award, to this extent, was held beyond the scope of the reference. The learned Judge in chambers also came to the conclusion that in terms of section 3.01 of the agreement, the Consultants were entitled to the payments of their bills in US dollars and as such the Borrowers were justified in deducting the amounts of D.Ms.92,122.66 and 71,720.86 from their bills on account of fluctuation in the rate of US dollar. The decree awarding D.Ms.92,122.66 and 71,720.86 to the Consultants was, accordingly, set aside. The decree/award in so far it related to the claim of Borrowers against the Consultants was maintained. Leave was granted against the judgment of learned Judge in chambers as aforesaid. The learned counsel for the Consultants in support of Civil Appeals Nos. 988 of 1993 and 989 of 1993 contended that the order of learned Judge in chambers disallowing the claim of the Consultants on account of deductions made from their bills amounting to D.Ms.92,122.66 and'71,720.86 is based on an erroneous assumption and misconstruction of section 3.01 of the agreement executed between the Borrowers and Consultants. It is urged that according to section 3.01 of the agreement all payments to the Consultants were to be made in D.Ms. With regard to disallowance of the claim of the Consultants amounting to D.M.71,720.86 the learned counsel contended that the learned Judge wrongly bracketed this amount as deduction permissible on account of devaluation of US currency against German currency. The learned counsel pointed out that the amount awarded by the arbitrator in the sum of D.M.71,720.86 was on account of fringe benefits which the Consultants had paid to their employees and this claim did" not relate to the deduction on account of devaluation of U.S. currency as erroneously held by the learned Judge in chambers. It is contended that the finding of the learned Judge in chambers, that the question of interpretation of section 3.01 of the agreement was not referred to the arbitrators, is based on a misconceived notion as both the parties throughout relied on this provision of the contract in support of their respective contentions before the arbitrator as well as before the Civil Judge, when the objections to the award were riled. It is further contended by the learned counsel for the Consultants that under section 29 of the Arbitration Act the Court while making the award rule of the Court ought to have awarded interest from the date of decree. Regarding claim of the Borrowers against the Consultants, the learned counsel contended that, each and every item of the claim of Borrowers was examined by the arbitrator and rejected as there was no evidence in support of the claims. The learned Deputy Attorney‑General for the Borrowers in reply to the above submissions of the counsel for the Consultants, supported' the judgment of the High Court in so far it disallowed the claim of the Consultants for D.Ms.92,122.66 and 71,720.86 and contended that although the Consultants were to be paid their bills in D.M. as provided in section 3.01 but the basis for the exchange rate 'applicable for conversion ; of D.M. into dollar was the rate prevailing on the date of submission of the bills by the Consultants to the Borrowers. The learned counsel, accordingly, contended that the Borrowers rightly deducted a sum of D.M.92,122.66 from the bills submitted, by the Consultants applying the then prevailing rate of dollar into D.M. with regard to the deduction allowed by the High Court in respect of 71,720.86 D.M., the learned counsel for the Borrowers contended that the Consultants were not entitled in the terms of the agreement to claim reimbursement of these amounts. The learned Dy. A.‑G. contended that the Consultants were in fact not entitled. to any payment in respect of their bills in terms of section 6.06 of the agreement. In support of Civil Appeal No.990 of 1993 filed by the Government against the impugned judgment, the learned Dy. A.‑G. contended that the claim of the Borrowers was disallowed by the arbitrator on a totally wrong premises. It is contended by the learned Dy. A.‑G. that absence or presence of (Punjab Seed Corporation or Sindh Seed Corporation PSC; SSC) in the proceedings were wholly immaterial. as the Borrowers had made the claim for damages in terms of the agreement executed between the Borrowers and the Consultants which was to be decided by the learned arbitrator keeping in view the provision of the agreement and the evidence led before him. The parties have not placed before us the reference made to the arbitrator in the case. However, from the issues framed in the case by the arbitrator and the contentions raised before the Civil Judge, it is quite clear that the real dispute between the parties related to the mode of payment of the bills submitted by the Consultants to the Borrowers. The Consultants claimed that they were entitled to the payment of their bills in D.M. while. the Borrowers insisted that the, Consultants were entitled to receive payment of their bills in US dollars. In support of their respective contentions both the parties relied on section 3.01 of the agreement. As the determination of the above controversy raised before the arbitrator depended mainly 'on the construction of section 3.01 of the agreement, we are unable to agree with the conclusion of learned Judge in chambers that the interpretation of section 3.01 of the agreement was outside the scope of reference made to the arbitrator. Firstly, from the proceedings before the learned arbitrator and as well from the proceedings before the Civil Judge, where objections were filed to the award by the Borrowers, it is quite clear that both the parties pressed into service provisions of section 3.01 of the agreement in support of their respective stands. Therefore, scope of section 3.01 ibid was the main bone of contention between the parties in the case. Apart from it, even if it is presumed that the parties had not specifically referred the question of interpretation of section 3.01 of the agreement to the arbitrator, the interpretation of section 3.01 fell within the scope of reference, as without interpreting ‑section 3.01 of the agreement, the dispute referred to the arbitrator could not be resolved. It is interesting to note that although the learned Judge remarked that interpretation of section 3.01 was outside the scope of reference yet the learned Judge while holding that the Borrowers' 'were justified in making deductions from the bills of the Consultants on account of depreciation in the value of US dollar against D.M., made reference to section 3.01 of the agreement to support his conclusions. We have also noticed that in the objections to the award filed by the Borrowers before the Civil Judge as well as in the memo. of appeal filed before the High Court against the order of Civil Judge, confirming the award, the Borrowers did not raise any specific ground contending that the interpretation of section 3.01 was outside the scope 'Of the reference made to the arbitrator. We, therefore, hold that interpretation of section 3.01 ibid was ‑one of the main questions which required determination by the arbitrator in the circumstances of the case under the reference. We will I now proceed to examine whether the learned arbitrator committed any error in, interpretation of section 3.01 of the agreement which is apparent on the face of the award. Section 3.01 of the agreement is to the following effect:‑‑‑ "Section 3.01. The President shall pay to the Consultants in Deutche Marks an amount not exceeding in value U.S. Dollars 2,137,878.00 (D.M. 5,173,665) at the present rate of exchange viz. 2.42 D.M. to U.S. Dollar. The details of such payments and the items against which shall be payable appear in paragraphs (a) through (f) of this section. Out of the total amount mentioned above, 18 per cent. would be payable in local currency and the balance 82 per cent. in foreign exchange." A careful reading of the above, section of the agreement would show that the payment was expressed to be made to the Consultants in D.M. and the total amount payable to the Consultants in D.M. was also mentioned thereunder with its equivalent in US dollars, calculated at the rate of 2.42 D.M. equal to one dollar. The total amount payable to the Consultants under the agreement having been specified both in, US dollars and D.M. and the conversion rate of D.M. to U.S. dollar having also been stated specifically, the intention of the parties was quite clear. The parties intended that all payments were to be made to the Consultants in D.M. subject to, the maximum amount specified in section 3.01 ibid, but the rate of conversion would remain the same, namely, 2.42 D.M. to one US Dollar. The amount payable to the Consultants under the agreement having been specifically mentioned with its equivalent in U.S. dollars and the "change rate, there was no scope for the interpretation that in the event of devaluation of the U.S. dollar the amount payable in D.M. to the Consultants would be reduced accordingly. We are, therefore, of the view that irrespective of any exchange rate prevailing at any time during the currency of the agreement, the payment was to be made to the Consultants in D.M. by converting the same into dollars at the given rate of 2.42 D.M. to one dollar. Since it was not disputed before the arbitrator that a ,um of 92,1=.66 D.Ms. was deducted by the Borrowers on account of depreciation in the value of the US dollar against D.M., the learned arbitrator was justified in allowing the claim on account of these deductions taking into account the exchange rate of 2.42 D.M. to one dollar. We are, therefore, unable to agree with the learned Judge in chambers that the Borrowers were entitled to the deduction of the amount to D.Ms.92,M.66 from the bills submitted by the Consultants on account of, devaluation of US dollar. The learned Judge in chambers also disallowed the claim of 71,720.86 I).Ms. There is no discussion at all in the impugned judgment as to how and on what basis the claim allowed by the arbitrator amounting to 71,720.86 D.Ms. was disallowed by the learned Judge in chambers. However, from reading of the last paragraph of the judgment it appears that this amount was disallowed. Considering it a deduction from the bills of the Consultants by the Borrowers on account of devaluation of US currency. This assumption by the learned Judge appears to be wholly incorrect. From paragraph 23 of the award it is quite clear that the claim of 71,720.86 D.Ms. by the Consultants was made on account of reimbursement of fringe benefits which they had paid to their expatriate staff. This claim was dealt with by the learned arbitrator in paragraphs 23 and 24 of the award as follows:‑‑ "

23. The plaintiffs next claim is for D.Ms. 71,720.86. The plaintiff claims this amount as reimbursement of the fringe benefits it has paid to its expatriate staff, and the smallest item is for the return fare of one Mr. Hartmann on his competing his services for the seed factories. The amount claimed is only D.Ms. 11,258.50, and it is not disputed that Mr. Hartmann had not thereafter returned to Pakistan or that anyone else had come over to take his place. But because he was in at the time of his repatriation to Germany, the Government's contention is that it is not liable for this amount. Merely because Mr. Hartmann was ill does not alter the fact that he was leaving Pakistan permanently, therefore, I allow this claim.

24. AD the other claims are for the reimbursement of the payments made by the plaintiff to its engineers for their unavailed leave. The government admits liability for utilized leave, but although unavailed leave was for the benefit of the PSC, Government repudiates liability for unavailed leave. Mr. Razzaque's submission was that the position taken by the Government was very unjust. The question is solely of the construction of clause (a) of section 3.02 of 'The agreement' under which the Government is liable to reimburse the plaintiff for payments made to its staff 'on the basis of the periods of time actually spent by the personnel of the consultants in performing these services including the annual leave of 4 days per month for the, long term personnel including necessary travel time.' Although the clause is not a mode of elegant drafting, having given anxious thoughts to the question, I am of the view that the construction put on the clause by the plaintiff is correct. The words 'the periods of time actually spent' have to be read with the provision about the annual leave, and therefore I hold that the Government has to reimburse the plaintiff for the payments made by it under this heading of unavailed leave." The learned Judge in chambers while disallowing the claim of 71,720.86 D.Ms. allowed by the arbitrator, did 'not advert to the above reasoning given by the learned arbitrator in his award. The learned counsel for the Borrowers is unable to point out that the amount allowed by the arbitrator by way of fringe benefits and payments for unavailed leave, was not covered by the terms of the agreement. The learned Judge in chambers was apparently under a mistaken apprehension while disallowing the claim of Consultants to the extent of 71,720.86 considering it a deduction on account of devaluation of US currency. We are, therefore, of the view that the learned arbitrator rightly allowed the claim of the Consultants to the extent of D.M. 92,122.66 and 71,720.86 D.Ms. The learned Judge in Chambers, therefore, was not justified in disallowing the above claim of the Consultants. We now take up the claims of the Borrowers against the Consultants in Civil Appeal No.990 of 1993. The learned by. A.‑G. contended that on account of termination of the contract the Consultants were not entitled to any payment except for the services satisfactorily performed prior to the date of such termination in view of the provisions contained in section 6.06 of the agreement. To support his contention, the learned counsel for the Borrowers contended that the supervision carried out by the Consultants was not only poor but they were also found negligent by the arbitrator in the award. It is, accordingly, contended by the learned Dy. A.‑G. that the arbitrator should have disallowed all claims of the Consultants. This contention of the learned counsel for the Borrowers was considered by the learned arbitrator as follows and rejected:‑‑

21. The plaintiff has two unpaid bills for 1981 and the bill for the first quarter is for D.M 93,

002. The Advocate‑General had pleaded the bar of section 6.06 which reads: 'Upon termination of this contract pursuant to the provisions of sections 6.03, 6.04, and 6.05, hereof no payment shall be made to the consultants except for services satisfactorily performed for expenditures incurred thereunder prior to the date of such termination, for these incident to the prompt and ordinarily termination of the services and for the return travel of the consultant's personnels and the eligible dependents. The Government cannot invoke the benefit of this provision until it has given a notice terminating the agreement, therefore, I have to point out that when the plaintiff gave its notice terminating the agreement with effect from *15th December, 1980, the Government's reply was that the plaintiff could not terminate the agreement and would be liable to it (the Government) if it ' withdrew its staff. Obviously, the benefit of this provision is not available to the Government for the bill for the first quarter of 1981, because throughout this period, its demand was that the plaintiff should carry on with the contract. However, on the 25th April it sent a telex to the Government that it would let the agreement terminate, on 31‑3‑1981, 'in accordance with the notice given by the Joint Ventures .. ... ... .. ... ... ... ... the agreement has been terminated by the Joint Ventures themselves'. Then the telex went on to state that the Government reserved the right to claim damages on account of plaintiff's unsatisfactory performance. Finally by a telex, dated 4th May the Government terminated the agreement on the ground that the plaintiff's services were unsatisfactory. In my view section 6.06 was attracted only by this second telex of 4th May. But nothing turns on whether section 6.06 was attracted by the Government's telex of the 25th April or of the 4th May. In either case, the Government was clearly entitled to refuse payment for the plaintiff's services, except to those expenses which were necessary for the prompt and orderly termination of the plaintiff's services. Therefore, for the first time in 1984, Mr. Bedar invited me to give guidelines to the Government for demarcating that part of the plaintiff's bill for the second quarter' of 1981 for which the Government was liable and that part of the bill for which the Government was not liable.

22. For the reasons which I will presently give, I am satisfied that the plaintiff has been‑negligent, and the Government had a claim for taking action under section 6.06. But it is not possible for me to give any relief because. the Government has withheld the evidence on which I can give a finding on the plea raised by Mr. Bedar. An the invoices of the plaintiff are with the Government. As they are not before me, I have no means of knowing how much of the plaintiff's bill for the second quarter of 1981 (which is for D.M.91,668.44) is for those charges for which the Government is liable under section 6.06. And the Government has not produced this evidence because it had not raised this plea in his written statements. I have, therefore, to reject with regret' a genuine claim of the Government, but this is entirely due to the negligence with which the Government has prosecuted its claim, and I decree with reluctance the plaintiffs claim for D.M. 92,122.66 in its entirety." We may mention here that the Court while examining the validity of an award does not act as Court of appeal. Therefore, a Court hearing the objection to the award cannot undertake reappraisal of evidence recorded by the arbitrator in order to discover the error or infirmity in the award. The error or infirmity in the award which rendered the award invalid must appear on the face of the award and should be discoverable by reading the award itself. Where reasons recorded by the arbitrator are challenged as perverse, the perversity in the reasoning has to be established with ' reference to the material considered by the arbitrator in the award. Keeping in view these legal principles, we asked the learned counsel for the Borrowers to point out the error in the above, reasoning recorded by the arbitrator in support of his award but he was unable to point out any such infirmity or error committed by the learned arbitrator in interpreting the provisions of section .6.06 of the agreement, which rendered the award invalid. The learned by. Dy.‑G. next contended that the learned arbitrator disallowed the claim of the Borrowers for damages and compensation against the Consultants on wrong premises. It is contended by the learned Dy. A.‑G. that notwithstanding, the fact that PSC and SSC were the agencies for whom seed factories were being built at Sahiwal, Rahimyar Khan and Sakarand, the Consultants under the agreement were liable to the losses to the Borrowers and, therefore, in so far the claim of the Borrowers against the Consultants was concerned, it was to be adjudicated with reference to the terms of agreement executed between the Borrowers and the Consultants. The fact that PSC or SSC were not parties to the agreement executed between the Borrowers and the Consultants could not defeat the claim of Borrowers for damages against the Consultants which was to be decided in the light of the evidence produced before the learned arbitrator by the parties. The fact that PSC or SSC were not party to the agreement, according to learned Dy. A.‑G. was immaterial for the purpose of deciding the claim of the Borrowers against the Consultants. The contention of the learned counsel is not without force. The learned arbitrator while disallowing the claim of the Borrowers against the Consultants stated as follows:‑‑ "

32. The other claims of the Government are for compensation for specific losses caused to the factories at Sahiwal, Rahimyar Khzn and Sakrand by the plaintiff's negligence, and aggregate more than 20 million rupees. Now even though the plaintiff was negligent its negligence has not caused any loss to the Government, but to the PSC and to the SSC, because it is these two corporations that owned the factories at Sahiwal, Rahimyar Khan and Sakrand. And presumably because the PSC owns the factories at Sahiwal and Rahimyar Khan, it has been impleaded by the Government as co‑plaintiff but not the SSC although the Government has filed a claim for Sakrand also. Nothing, however, turns on this, because as pointed out earlier, neither the PSC nor the SSC are parties to 'the agreement', therefore, if they have suffered any loss on account of the plaintiffs negligence, their remedy was to file a suit in tort against the plaintiff for negligence in the Civil Courts. That is elementary. I was told, however, that no suits have been filed either by the PSC or SSC. This is unfortunate, but neither the Advocate General nor Mr. Farooq Bedar attempted to explain how the Government could file suit for losses suffered by the PSC and the SSC. And as both these corporations are independent entities, the, plaintiffs contention has always been that except for the two admitted by it, the Government's suit was not maintainable." With respects to the learned arbitrator, we are unable to agree with the above reasoning. The claim made by the Borrowers arose out of the agreement which was entered into between the Borrowers and the Consultants. The fact that the factories constructed under the supervision of the Consultants were constructed for PSC and SSC could not detract the claim of the Borrowers against the Consultants in so far the same was covered by the terms of the agreement. The fact that SSC or PSC were no t parties to the agreement of consultancy executed between the Borrowers and Consultants could not defeat the claim of the Borrowers. The observations of the learned arbitrator that the losses suffered by PSC and SSC on account of negligence of Consultants could be recovered only through an action in tort were not relevant. There was neither any reference to the learned arbitrator for determining the losses suffered by PSC or SSC nor he was required to give any finding on the alleged losses suffered by PSC or SSC under the reference. This claim before the learned ‑arbitrator was by the Borrowers against the Consultants which was to be adjudicated in the light of the evidence produced by the parties in accordance with the terms of agreement executed between them. The learned Dy. A.‑G. very vehemently contended that in view of the findings of the learned arbitrator that the consultants were negligent in performance of their consultancy duty, damages/compensation should have been awarded to the Borrowers. It is also contended by the learned counsel that even if the evidence 6n record was not sufficient to determine the actual amount of damages suffered by the Borrowers, then nominal damages should have been awarded in the case. The learned counsel for the Consultants on the other hand contended that the learned arbitrator had not disallowed the claim of damages/compensation filed by the Borrowers against the Consultants only on the ground that SSC or PSC not being a party to the agreement of consultancy the claim of damages was not sustainable, but it was also found by ft arbitrator that there was no evidence on record in support of the claim of damages/compensation made by the Borrowers against the Consultants. No doubt the learned arbitrator did observe in the award that the Borrowers failed to prove the actual damages suffered by them but it cannot be denied that the predominant consideration for rejecting the claim of damages put forth by the Borrowers, by the learned arbitrator, was that the claim for damages was not maintainable as PSC and SSC which are autonomous bodies and for whose benefit the factories were constructed under the supervision of the Consultants, were not party to the Consultancy Agreement executed between the Borrowers and the Consultants and as such damages could not be recovered by the Borrowers who had not suffered any damages. The learned Dy. A.‑G. also very vehemently argued that even if the Borrowers had not led evidence in support of their claim for damages, there was unreported evidence of the expert, appointed by the learned arbitrator to ' assess the condition of the factories, available before the learned arbitrator which indicated the extent of the amount required to be spent on these factories to put them in safe working condition. According to learned Dy. A.‑G. the amount mentioned in the report of the expert appointed by the arbitrator and which was not disputed by any of the parties to the award could be taken as a measure of damages suffered by the Borrowers and awarded accordingly. As we have found the main reason given by the learned arbitrator in rejecting the claim of the Borrowers as invalid and are inclined to remit the award to the learned arbitrator for reconsideration of claim. of damages forth by the Borrowers, we would refrain from expressing any o pinion with regard to the merits of the claim of damages made by the Borrowers. As a result of the above discussion, Civil Appeal No.990 of 1993 filed by the Borrowers is accepted to the extent that the award given by arbitrator rejecting the claim of damages made by the Borrowers, and confirmed by the Courts below are set aside and the award is remitted to the learned arbitrator to reconsider the claim of damages made by the Borrowers against the Consultants in the light of the observations made in this judgment, in accordance with the law. The learned arbitrator may decide the claim of the Borrowers for damages either on the basis of the evidence already on record or he may in his discretion allow the parties to lead further evidence. The award will be made within four months from the date of the receipt of the copy of this Order. Civil Appeals Nos. 988 of 1993 and 989 of 1993 filed by the Consultants are allowed and the judgment of the learned Judge in chambers in so far it disallowed the claim of Consultants to the extent of D.Ms.92,122.66 and 71,720.86, which were accepted by the arbitrator and decreed by the trial Court is set aside and decree of the trial Court to that evident is restored. The question of grant of interest on the amount decreed in favour of the Consultants, in terms of section 29 of the Arbitration Act, is left open to be decided by the trial Court after the arbitrator decides the claim of damages made by the Borrowers against the Consultants, as indicated above. There will be no order as to costs in the circumstances of the cases. M.BA./J‑137/S Order accordingly.