IN THE HIGH COURT OF SINDH AT KARACHI

H.C.A. No.395 of 2003

[ Trading Corporation of Pakistan (Pvt) Ltd., v. Messrs Geomin S.A. Trading Company ]

PRESENT:

            Mr. Justice Arshad Hussain Khan

                                      Mr. Justice Amjad Ali Sahito        

Appellant                               :           Through M/s. Rafiq Ahmed Kalwar and

Muhammad Yasir, Advocates.

Respondents                         :           Nemo

Date of hearing                     :           21.10.2026

Date of decision                   :           28.10.2026

JUDGMENT

ARSHAD HUSSAIN KHAN J;                   Through the instant High Court Appeal, preferred under Section 39 of the Arbitration Act, 1940, the Appellant has assailed the judgment and decree dated 18.04.2003, passed by the learned Single Judge of this Court in its Original Civil Jurisdiction in Suit No.1587 of 1999, whereby the objections filed by the Appellant under Sections 30 and 33 of the Arbitration Act, 1940, were dismissed with costs, and the unanimous Arbitration Award dated 12.04.1999 was made Rule of the Court. Consequently, a decree was drawn in favour of the Respondent awarding damages amounting to US$1,173,395.025, together with the refund of the security deposit relating to the unshipped balance quantity of 23,704.95 metric tons of rice. Hence, the present appeal.

2.         Concisely, the facts giving rise to the present appeal are that the Rice Export Corporation of Pakistan (RECP), predecessor-in-interest of the Appellant, entered into a contract dated 11.08.1994 with the Respondent for the sale and supply of 150,000 metric tons of Pakistani Long Grain Irri-6 Sindh White Rice, containing 15–20% broken grains, of the 1992–93 and/or 1993–94 crop, at the agreed price of US$182.50 per metric ton. Under the contract, shipment was to be completed within 120 godown working days commencing from 01.09.1994, with time expressly stipulated to be of the essence of the contract, subject to extension in specified circumstances. Pursuant thereto, the Respondent established the requisite letter of credit, and the Appellant supplied 126,295.05 metric tons of rice, leaving an unshipped balance of 23,704.95 metric tons, which gave rise to a dispute between the parties. The matter was referred to arbitration under the Arbitration Act, 1940, and the learned Arbitrators, through their unanimous award dated 10.07.1996, directed the Appellant to supply the outstanding quantity at the contractual rate. However, upon the award being filed before this Court in Suit No.918 of 1996, the same was set aside and the matter remitted to the learned Arbitrators for determination of the Respondent's entitlement to damages, if any, arising from the alleged breach of contract. Upon remission, the Respondent relied upon a subsequent contract dated 05.10.1995 executed between RECP and M/s. Rustal Trading of Geneva, Switzerland, reflecting a price of US$232 per metric ton for rice of the 1995–96 crop, whereas the Appellant disputed its relevance on the grounds that it pertained to a different crop year and did not establish the prevailing market price of the contracted goods at the time performance was originally due. The parties also differed regarding the effective date of breach, the Appellant maintaining that the contract expired in January 1995, while the Respondent asserted that its performance had been extended through subsequent shipments and correspondence, particularly the communication dated 23.07.1995 offering delivery of the outstanding quantity from November 1995 onwards. The learned Arbitrators, accepting November 1995 as the effective date of breach, adopted the price of US$232 per metric ton reflected in the subsequent contract and, through their unanimous award dated 12.04.1999, awarded damages of US$1,173,395.025, representing the difference between the contractual price and the price so adopted, besides directing refund of the security deposit relating to the unshipped quantity. The Appellant challenged the award by filing objections under Sections 30 and 33 of the Arbitration Act, 1940, which were dismissed by the learned Single Judge through the impugned judgment dated 18.04.2003, and the award was made Rule of the Court.

3.         From the record, it appears that none has appeared on behalf of the Respondent despite service of notice through the prescribed modes, including publication. Since the instant appeal pertains to the year 2003 and has remained pending for a considerable period, we have proceeded to hear and decide the matter with the assistance of learned counsel for the Appellant and on the basis of the material available on record.

4.         Learned counsel for the Appellant, while assailing the impugned judgment and award, contends that the learned Single Judge failed to appreciate that the learned Arbitrators had acted contrary to the express terms of the contract and the settled principles governing assessment of damages. He submits that time was expressly stipulated to be of the essence of the contract, with 23.01.1995 being the last date for shipment, and that the learned Arbitrators erroneously treated November 1995 as the effective date of breach on the basis of subsequent correspondence, despite the Respondent having rejected the conditional proposal for supply of rice from the 1995–96 crop. He further contends that the award of damages amounting to US$1,173,395.025 was unsupported by legally admissible evidence, as the Respondent failed to establish the prevailing market price of rice of the contracted specification at the relevant time. Instead, reliance was placed upon a subsequent contract with M/s. Rustal Trading relating to a different crop year, which was neither formally proved nor exhibited in accordance with law. Learned counsel further submits that, following the setting aside of the earlier award, the learned Arbitrators improperly relied upon previous findings without recording fresh evidence regarding damages. He also questions the authority of the Respondent's attorney to invoke arbitration proceedings and maintains that the contractual provisions relating to extension of time, force majeure and non-availability of the contracted goods were not properly considered. According to learned counsel, the award suffers from misreading and non-reading of material evidence, erroneous determination of the date of breach and improper assessment of damages, thereby attracting interference under Sections 30 and 33 of the Arbitration Act, 1940. He, therefore, prays that the appeal be allowed and the impugned judgment and decree, along with the Arbitration Award dated 12.04.1999, be set aside or, alternatively, the matter be remanded for fresh determination in accordance with law. In support of his submissions, learned counsel has relied upon Javed Iqbal v. PASSCO and another [2004 CLC 478], Abdul Qadir v. Mrs. Ameer Zadi and others [2020 MLD 213], Sher Asfandyar Khan and others v. Neelofar Shah and others [unreported judgment dated 08.05.2025 passed by the Hon'ble Supreme Court in Civil Appeals Nos.1843 to 1846 of 2019], Mst. Akhtar Sultana v. Major (Retd.) Muzaffar Khan Malik and others [PLD 2021 SC 715], Capital Development Authority v. Muhammad Hanif Abbasi and others [2020 CLC 1804], Messrs Aslam Saeed & Co. v. Messrs Trading Corporation of Pakistan [PLD 1985 SC 69] and Injum Aqeel v. Latif Muhammad Chaudhry and others [2023 SCMR 1361].

5.         We have heard learned counsel for the Appellant and carefully examined the impugned judgment, the Arbitration Award and the material available on record in the light of the governing statutory provisions and the judicial precedents cited at the Bar. The foremost question arising for determination is whether the learned Single Judge was justified in rejecting the objections filed under Sections 30 and 33 of the Arbitration Act, 1940, and making the award Rule of the Court, particularly when the Appellant questioned the determination of the effective date of breach and the assessment of damages as being contrary to the contractual terms and unsupported by the requisite evidence.

6.         Before examining the controversy, it would be appropriate to consider the scope of judicial interference with an arbitration award. In Injum Aqeel v. Latif Muhammad Chaudhry and others [2023 SCMR 1361], the Hon'ble Supreme Court reiterated the settled principle that an arbitrator is ordinarily the final judge of questions of law and fact submitted for determination and that the Court, while examining objections under Section 30 of the Arbitration Act, does not sit as a Court of Appeal over the award. Mere erroneous appreciation of evidence, insufficiency of reasoning or the possibility of another view would not, by itself, justify interference. However, where an arbitrator exceeds the scope of the reference, disregards the contractual obligations, acts upon extraneous considerations or commits legal misconduct, the Court may interfere within the statutory limits. Similarly, in Messrs Aslam Saeed & Co. v. Messrs Trading Corporation of Pakistan [PLD 1985 SC 69], the Hon'ble Supreme Court, while examining an arbitration dispute arising from a contract for the sale of rice, emphasized that the authority of an arbitrator must be exercised within the contractual framework and that damages cannot be awarded on a basis inconsistent with the governing contractual provisions. The ratio of these decisions, read together, is that although the Court cannot substitute its own assessment of facts for that of the arbitrator, an award founded upon a legally impermissible basis or exceeding the contractual authority may warrant interference.

7.         Reverting to the facts of the present case, it is undisputed that the Appellant failed to supply the outstanding quantity of 23,704.95 metric tons of rice under the contract dated 11.08.1994. The controversy essentially concerns the effective date of breach and the basis adopted for assessment of damages. The learned Arbitrators treated November 1995 as the relevant date, relying upon shipments made after the original contractual period and the Appellant's communication dated 23.07.1995, indicating that the remaining quantity would be supplied from November 1995 onwards. The learned Single Judge endorsed this finding, observing that the contractual provision permitting extension, read with the subsequent conduct of the parties, demonstrated that the original period of performance had not been treated as inflexible. It is, however, equally settled that the question whether time is of the essence must be determined from the contractual language, the nature of the transaction and the subsequent conduct of the parties. In Javed Iqbal v. PASSCO and another [2004 CLC 478], the effect of subsequent contractual arrangements and conduct upon the original stipulations concerning time was considered, whereas Abdul Qadir v. Mrs. Ameer Zadi and others [2020 MLD 213], though arising from a transaction concerning immovable property, also emphasizes the relevance of contractual intention and surrounding circumstances. These decisions do not support the proposition that the original contractual deadline must invariably prevail notwithstanding subsequent conduct, nor do they establish that every subsequent proposal necessarily amounts to an agreed extension.

8.         In the present case, the Appellant specifically maintained that its subsequent proposal concerned rice of a different crop year and had been rejected by the Respondent. The award itself records the competing submissions concerning rejection of an earlier offer and the alleged non-rejection of the subsequent communication dated 23.07.1995. The distinction between a mutually agreed extension of the original contract and a proposal involving altered contractual terms was undoubtedly relevant. Nevertheless, the learned Arbitrators considered the subsequent shipments, correspondence and conduct of the parties and concluded that the contractual relationship continued beyond January 1995. The learned Single Judge examined these circumstances and upheld the conclusion. Even if another interpretation of the correspondence were possible, that circumstance alone would not establish misconduct or an error of law apparent on the face of the award. The Appellant has not demonstrated that the finding was based on no material whatsoever or that the learned Arbitrators exceeded the reference in determining the effective date of breach. We are, therefore, not persuaded to interfere with this finding merely on the ground that the original contract stipulated time to be of the essence.

9.         The next objection concerns the assessment of damages. The learned Arbitrators adopted the difference between the contractual price of US$182.50 per metric ton and the price of US$232 per metric ton reflected in the contract dated 05.10.1995 between RECP and M/s. Rustal Trading. The Appellant contends that the latter contract concerned rice of the 1995–96 crop, whereas the original contract related to the 1992–93 and/or 1993–94 crop, and therefore could not furnish a lawful basis for determining damages. It is correct that, under Section 73 of the Contract Act, 1872, compensation for breach must bear a reasonable relationship to the loss naturally arising from the breach, and where the difference between the contractual price and the prevailing market price is adopted as the measure of damages, the market price must reasonably relate to goods corresponding to the contractual description at the relevant time. However, the mere difference in crop years does not necessarily establish that the goods were commercially incomparable or that the subsequent transaction was incapable of providing evidence of the prevailing market price. The learned Arbitrators considered the description of the commodity, the proximity of the subsequent transaction to the date of breach and the absence of contrary evidence concerning the price. They also declined to adopt the enhanced price of US$242 per metric ton reflected in the addendum and confined the assessment to US$232 per metric ton. The learned Single Judge examined this reasoning and found no legal infirmity warranting interference.

10.       We are mindful that the Appellant has questioned the formal proof and admissibility of the Rustal Trading contract. In this regard, learned counsel has relied upon Sher Asfandyar Khan and others v. Neelofar Shah and others (Civil Appeals Nos.1843 to 1846 of 2019, decided on 08.05.2025), Mst. Akhtar Sultana v. Major (Retd.) Muzaffar Khan Malik and others [PLD 2021 SC 715] and Capital Development Authority v. Muhammad Hanif Abbasi and others [2020 CLC 1804]. These authorities emphasize the importance of proper consideration of documentary evidence and observance of applicable procedural safeguards in civil adjudication. However, the principles governing formal proof of documents in ordinary civil proceedings cannot be applied mechanically to arbitration proceedings, where the strict rules of evidence do not necessarily operate with the same rigidity. The record reflects that the Rustal Trading contract was placed before the learned Arbitrators, that the Appellant had an opportunity to contest its relevance and that the objection raised principally concerned the date of breach and the different crop year. The award, therefore, cannot be characterized as one based on no evidence merely because the Appellant disputes the evidentiary value of the document. The question of what weight should be attached to such material was primarily for the learned Arbitrators, and the Court cannot undertake a fresh appraisal of the same in the absence of a recognized statutory ground for interference.

11.       The reliance placed upon Messrs Aslam Saeed & Co. (supra) also does not advance the Appellant's case to the extent suggested. In that case, the question concerned the authority of the arbitrator to award damages beyond the liability contemplated by the contractual provisions. In the present matter, no contractual provision has been demonstrated which expressly excludes compensation for non-supply of the contracted quantity or restricts the Respondent's remedy in a manner inconsistent with the award. The learned Arbitrators were specifically required, pursuant to the earlier order of remission, to determine whether the Respondent was entitled to damages and, if so, their quantum. The award was thus rendered upon the very question referred for determination. The principle enunciated in Aslam Saeed & Co (Supra). that an arbitrator must act within the contractual framework remains applicable, but no departure of the nature contemplated in that decision has been established on the material before us.

12.       As regards the objection concerning the authority of the Respondent's attorney to invoke arbitration, the learned Single Judge examined the power of attorney, exhibited as Ex.5 in the arbitral proceedings, and observed that paragraph 7 thereof expressly authorized invocation of the arbitration agreement and institution of proceedings under the Arbitration Act. The document was also stated to have been attested by the Pakistan Embassy. The learned Single Judge further noticed that this objection had not been raised in the earlier proceedings concerning the first award. Although the Appellant has questioned the legal sufficiency of the instrument, no material defect has been demonstrated which would justify interference with the finding recorded by the learned Single Judge. Similarly, the contention that the earlier arbitration proceedings stood wholly nullified upon the setting aside of the first award is misconceived. The earlier award was set aside and the matter remitted for determination of damages; this did not necessarily render the evidence already recorded unavailable for consideration or require a complete rehearing of the dispute. The learned Arbitrators were required to determine the question remitted to them, and the subsequent award reflects that they proceeded to do so.

13.       The objection concerning the contractual provisions relating to force majeure and non-availability of rice of the contracted specification also does not establish a ground for interference. The mere assertion that the contracted goods were no longer available does not, without proof of circumstances falling within the relevant contractual provision, necessarily discharge a party from its obligations. The learned Arbitrators considered the contractual relationship, the subsequent shipments and the correspondence between the parties before determining the consequences of non-supply. No specific contractual provision or material circumstance has been shown to have been disregarded in a manner constituting legal misconduct or an error apparent on the face of the award. The Appellant's disagreement with the conclusions drawn from the material cannot, by itself, justify setting aside the award.

14.       Having examined the impugned judgment and the award in the light of the foregoing principles, we find that the learned Arbitrators determined the dispute within the scope of the reference and adopted a recognized measure of damages arising from non-supply of goods. Their conclusions regarding the effective date of breach and the prevailing price were based upon material placed before them and were examined by the learned Single Judge while deciding the objections. The Appellant has not established that the award was founded upon a complete absence of evidence, that the learned Arbitrators exceeded their authority or that any error of law apparent on the face of the award warranted interference under Section 30 of the Arbitration Act, 1940. The objections essentially invite reconsideration of the factual conclusions and the weight attached to the documentary material, which is impermissible within the limited scope of judicial scrutiny contemplated by the Act. The principles reiterated by the Hon'ble Supreme Court in Injum Aqeel (supra) reinforce that an arbitral award cannot be disturbed merely because another view of the material may be possible. We, therefore, find no legal infirmity in the impugned judgment warranting interference in the present appeal.

15.       Consequently, the instant High Court Appeal is dismissed, and the impugned judgment and decree dated 18.04.2003, whereby the objections filed by the Appellant under Sections 30 and 33 of the Arbitration Act, 1940, were dismissed and the unanimous Arbitration Award dated 12.04.1999 was made Rule of the Court, are maintained. There shall be no order as to costs in the present appeal.

JUDGE

JUDGE

Naveed PA