P L D 1987 Supreme Court 461 (PLP)

ZAFFAR HUSSAIN MIRZA, J.‑‑This appeal by leave of the Court arises out of judgment of the Lahore High Court, Lahore, dated 4th March, 1974, by a learned Single Judge, whereby the first appeal filed by the respondent was accepted and the award made in favour of the appellant by the Arbitrator was set aside.

2. M/s. National Construction Company, the appellant herein, was awarded a contract for the renovation of Railway Track from Sumberial Railway Station to Head Marala District Sialkot, by the West Pakistan Water and Power Development Authority, respondent herein. The work was completed and a completion certificate was issued by the respondent on 30th March, 1965. However, disputes and differences arose between the parties regarding the payment of the appellant's bill, with the result that it filed a suit for rendition of accounts against the respondent. The respondent, before filing the written statement submitted an application under section 34 of the Arbitration Act for stay of the proceedings, in view of the Arbitration clause in the agreement relating to the work awarded. Thereafter with the consent of the parties Mr. Sardar Allah Bakhsh, PSE‑I, Chief Engineer, Reclamation Division, West Pakistan WAPDA was appointed as Arbitrator. It is common ground that in its claim the appellant claimed a total sum of Rs.7,60,378.07, comprising 16 different items, for which a total amount as stated was claimed. The Arbitrator after considering the evidence documentary as well as oral, produced by the parties gave an award of Rs.3,84,264.18 in favour of the appellant. The details whereof may be reproduced from the award as under:‑ Items of dispute. Amount claimed Amount by the awarded by contractor the Arbitration in rupees.

1. Earth work 3,80,176.42 3,12,267.39

2. Sand Ballasting 75,970.85 56,958.34

3. Girder Repairs, 1,072.00 NIL

4. Stone supply 26,764.06 NIL

5. Rt. 407 9,335.00 NIL

6. Rt. 405 84,000.00 NIL

7. Rt. 406 Bill No.I 84,082.00 NIL

8. Rt 406 Bill No.II 23,155.00 NIL

9. Rt 406 Bill No.III 50,200.00 NIL

10. Improving Track 5,445.00 5,455.00

11. Excavation for 827.18 90.78 structure.

12. Cresoting oil 3,600.00 3,502.67

13. Legal fees etc. 7,000.00 7,000.00

14. Earnest money 6,000.00 6,000.00

15. Interest Not calculated NIL

16. Arbitration fee 2,750.00 NIL . TOTAL:‑ 7,60,378.07 3,84,264.18 .

3. The aforesaid award dated 26th October, 1968 was filed in the trial Court to which the objections were filed by the respondent. The learned trial Court rejecting these objections by order dated 28th April, 1972, mad‑, the award the rule of the Court and passed a decree in terms thereof. Being dissatisfied the respondent appealed against the order of the Trial Court which came up before a learned Single Judge of the Lahore High Court. The learned Judge in the High Court, while discussing the award item‑wise upheld the decision of the Arbitrator in respect of all the items excepting items No.2 and 13 but proceeded further to consider the question whether on account of these findings the Arbitrator had misconducted himself as well as the proceedings of Arbitration and whether the award was on that account liable to be set aside. Placing reliance on a decision of this Court reported as A.Z. Company v. M/s. Mola Bux, Muhammad Bashir P L D 1965 S C 505, the learned Judge came to the final conclusion as under:‑ "It cannot be held in the circumstances of the present case that the decision on these two items was merely consequential or a surplusage. The decision of these two items was material. The entire award is, therefore, liable to be set aside." Accordingly by the impugned judgment the appeal was allowed and the award passed by the Arbitrator was set aside.

4. Leave was, inter alia, granted for appeal against the judgment of the High Court to consider the contention that the High Court had erred in setting aside the award as a whole and in this behalf, reliance placed on A . Z . Company case was misconceived.

5. Mr. S.'M. Zaffar learned counsel appearing in support of the appeal has very fairly conceded that he has no grievance as to the claim of the appellant in respect of items No.2 and 13 having been disallowed by the learned Judge in the High Court and has only contended that the learned Judge was not justified in law to have set aside the whole award on the basis that two of the items in the claim set up by the appellant were found, according to the learned Judge to have been based upon complete misreading of the record. In regard to these two items the finding of the Judge may be reproduced. With regard to item No.2 the finding reads as follows:‑ "It will be clear from these findings that although the Arbitrator has tried to give some reasons for awarding a rate of Rs.3 per ton for transportation but no such reason has been given for increasing the rate of filing track or for collecting stock piling of sand. The award of the arbitrator is, therefore, based upon complete misreading of the record. In fact, it is a case of ignoring the record. Clearly the Arbitrator has misconducted himself in the award as well as in the proceedings on this item." As regards item No.13 the conclusion of the learned Judge is as follows:‑ "Similarly he has also misconducted himself in regard to the legal fees claimed under item No.14 of the claim. According to this item, he had not given a decision on this question as the parties had agreed that it was not within his provisions to decide this matter yet without deciding it he included the sum of Rs.7,000 in the amount actually awarded to the respondent."

6. In these circumstances the only question for determination is whether the decision of the Court to the effect that the amounts claimed under the aforementioned two items could not be legitimately awarded was legally sufficient to vitiate the whole award. In this connection the law regarding the powers of the Court is contained in section 15 of the Arbitration Act, 1940, which is in the following terms: ‑ "Power of Court to modify award.‑‑The Court may by order modify or correct an award‑‑ (a) where it appears that a part of the awards is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred; or (b) where the award is imperfect in form, or contains any obvious error which can be amended without effecting such decision; or (c) where the award contains a clerical mistake or an error arising from an accidental slip or omission." The general principle underlying the concept of arbitration as translated in the scheme of the Arbitration Act is that, as the parties choose their own arbitrator to be the Judge in the dispute between them, they cannot when the award is good on the face of it, object to his decision, either upon law or the fact. In other words an arbitration in substance, ousts the jurisdiction of the Court, except for the purpose of controlling the arbitrator and preventing misconduct) and for regulating the procedure after the award. it is well settled that the Court has no right to review the award or to consider it. Section 30 of the Arbitration Act sets out the grounds on which the 1 Court may set aside an award which may not be reproduced here except that one of the grounds for setting aside the award is where the arbitrator has misconducted himself and/or the proceedings. Section 15 provides an additional power to the Court and lays down the circumstances under which the award might be modified or corrected. In such case the award is not set aside as a whole, but if a part of the award is found to be invalid as being in excess of the arbitrator's power and is separable from the rest, the remainder of the award being good can be maintained and acted upon, while the excessive part of the award can be declared to be unenforceable. In regard to the item No.2 it could be well argued and indeed to begin with Mr. S.M. Zaffar did attempt to argue that the Court was not justified in reviewing the reasons given by the arbitrator in support of his finding, in view of the settled principle that the Court cannot sit in judgment over the award. However, we find that in regard to this item the appellant had already received payment without protest so that the matter was settled and no real pre‑existing dispute subsisted between the parties before the reference to arbitration. It has been laid down that the existence of a difference or dispute is an essential condition for the Arbitrator's jurisdiction, See Dawoodbhai Abdulkadar v. Abdulkader Ismailji A I R 1931 Bombay

164. It, therefore, follows that if there is no dispute there can be no right to demand arbitration and the Court must, therefore, be satisfied that there was some real point of difference which had to be submitted to arbitration. In our opinion the facts on record clearly make out that in regard to item No.2 there was no real difference between the parties and, therefore, on that short ground the Court ought to have held that the Arbitrator, so far as this item is concerned, acted in excess of his authority but merely because he went on to award to the appellant further amount in excess of the payment he had already received would not constitute misconduct rendering the whole award bad in law. No decision was pointed out to us from the opposite side to justify such a conclusion that a mistake of this nature would amount to misconduct within the meaning of section

30. As regards item No.13 as observed by the Court itself the Arbitrator himself did not wish to give a decision on this item as the parties had agreed that this question did not call within the reference. Therefore, clearly the award in respect of this item was a mistake or accidental error which somehow crept in the body of the award made by the Arbitrator. Such an error is incidental to all actions performed by human agency and cannot without more be the basis for reaching a finding of misconduct.

7. In the light of the above we are of the opinion that the part of the award so far as it relates to item No.2 falls clearly within the ambit of clause (a) and so far as it relates to item No.13 within the provisions of clause (c) of section

15. The only condition for the Court to exercise power of modification of the award so far as clause (a) is concerned is that such invalid part of the award "can be separated from the other part and does not affect the decision on the matter referred". So far as the law on this subject is concerned we may point out that section 15 dealing with the Court's power to correct an award is a reproduction without change of paragraph 12 of the Second Schedule of the Civil Procedure Code which was repealed by the Arbitration Act. This power is a peculiarity of the statutory law on arbitration in the sub‑continent and there was no corresponding provision in the English law of Arbitration. In Mt. Amir Begum v. Syed Badr‑ud‑Din Hussain and others A I R 1914 P.C. 105 their Lordships stated the principle of severability is invalid from the valid part of the award as under:‑ "It is well‑recognized law that when a separable portion of an award is bad, the remainder of the award if good, can be maintained." Applying this principle to the facts of this case we feel that as the parties went before the Arbitrator on each item separately, so that separate issues were framed in regard to each item and in the award each item of claim was separately discussed and decided, the two items in question are clearly separable without affecting the decision on the rest of the items on which the Court itself found the Arbitrator's award justified and sustainable. , For a similar instance see Metro Electric Co. v. Delhi Development Authority A I R 1976 Delhi 195.

8. Before concluding we may now refer to the decision of this Court in A.Z. Company (supra) on which the High Court had relied for coming to the contrary conclusion. In our opinion this decision on the contrary supports the conclusion arrived at by us because in this case also on page 518 it was stated that "the offending portion of the award being separable from the rest of the award could be struck off as mere surplusage. " Therefore, their Lordships also applied the test laid down in the cited Privy Council decision. The portion of the judgment reproduced from page 517 of the report also does not render the award in this case bad as a whole. The real point was whether the invalid part of the award is material for the decision of the matter adjudicated in the valid part of the award and since we have held that each item was a separate part of the dispute, it cannot be held that the decision on the two items in question was material for the determination of dispute in regard to other items of the claim. Indeed the difference between the parties constituted several disputes which were lumped together for purposes of arbitration, the parties being the same and the transaction out of which they arose being a single contract for carrying out the work.

9. We hold that the learned Single Judge of the High Court ought to have held so and modified the award by excluding the two D items in question and upholding the rest of the award as valid. In the result we would modify the award by striking off the portion of the same that relates to the award of Rs.56,958.34 under item No. 2 and Rs.7,000 under item No.13. With this modification we affirm the judgment and decree passed by the Court of first instance.

10. This appeal is accordingly allowed to the extent as indicated above with costs. K . B . A . /N‑2915 Appeal partly accepted.