Judgment Sheet

IN THE HIGH COURT OF SINDH AT KARACHI

Suit No. 1171 of 2011

Present :

Mr. Justice Nadeem Akhtar

Date of hearing : 31.10.2012.

Plaintiff : Zulfiqar Shakoor, through Mr. Badar Alam Khan, advocate.

Defendant : M/s Quetta Town Cooperative Housing Society Ltd., through Mr. Abdul Jabbar Qureshi, advocate.

J U D G M E N T

NADEEM AKHTAR, J.- This judgment will dispose of the objections filed by the defendant to the Award rendered by the learned Sole Arbitrator, Hon’ble Mr. Justice Ajmal Mian, the former Chief Justice of Pakistan.

2. The plaintiff filed an application under Section 20 of the Arbitration Act, 1940, (the Act) before this Court against the defendant praying that the disputes between the parties may be referred to as Sole Arbitrator. The application was registered as Suit No.1023 of 2010. The dispute between the parties had arisen in respect of the execution of civil works in the defendant’s Quetta Town Housing Scheme No.33 (the Scheme), for which bids were invited by the defendant from its pre-qualified contractors. The said bids were invited by the defendant in respect of (i) Internal Development Works in Sector 18-A, (ii) Internal Development Works in Sector 18-B, and (iii) Construction of a sewerage line, a park, an underground water tank of 250,000 gallons and a Community Office in Sector 3-A of the Scheme. As the tenders submitted by the plaintiff for all the aforementioned three works were the lowest, the same were accepted by the Managing Committee of the defendant. Accordingly, all the three said works were awarded to the plaintiff by the defendant on the basis of items rates contract through acceptance letters, two dated 16.02.2005 and one dated 31.10.2005. However, the estimated amounts of each of the works mentioned in the letters of acceptance / work orders issued by the defendant were increased by 10% after negotiation due to which the revised estimated figure came to Rs.19,291,893.50. The defendant appointed M/S Shahzad Associates as the Consultants / Engineer (the Consultant) in respect of all the said three contracts.

3. Vide Order dated 15.12.2010 passed by this Court in the said Suit No. 1023 of 2010, Hon’ble Mr. Justice Ajmal Mian, the former Chief Justice of Pakistan (the learned Sole Arbitrator) was appointed as the Sole Arbitrator with the consent of the parties. The learned Sole Arbitrator entered upon the reference and issued notices to the parties. In response to such notices, the plaintiff / claimant filed his claim of Rs.60,735,232.00 against the defendant before the learned Sole Arbitrator. The case of the plaintiff was that the defendant’s office was being used for the works by the plaintiff and the Consultant. On 17.11.2007, the plaintiff discovered that the Consultant had not only vacated the site office and shifted to some other place, but he had also removed from the site office all the plaintiff’s record / files relating to the works. When the plaintiff approached the defendant and the Consultant, they promised to return all the record / files to the plaintiff. Subsequently, the plaintiff became aware of the fact that one Zafar Saleem, Ex-Director General, Sindh Works Welfare Board, had purchased all the files of the plots from the members of the defendant- Society, and had deputed his brother Javed Saleem to act as the Honorary Secretary of the defendant. The plaintiff also came to know that the Consultant was actually owned by one Shahzad Anwar, who had been living in USA for a long time, and that some non-professional persons were acting as the Consultant by using his name.

4. It was also the case of the plaintiff before the learned Sole Arbitrator that the plaintiff continued to execute the works of all the three contracts, and also continued to press for the return of his record / files, but the same were not returned to him. The plaintiff submitted Interim Payments Certificates (IPCs) of the approximate amount of Rs.60,000,000.00 for the three contracts, out of which the defendant paid to the plaintiff the total amount of Rs.51,963,811.00 during the period from 05.03.2005 to 05.11.2007 after deducting 5% retention money / security deposit. The plaintiff had alleged that the defendant avoided and failed to pay the balance amount of approximately Rs.9,000,000.00 to the plaintiff despite his repeated requests and reminders. The plaintiff had further alleged that it was due to the defendant’s financial constraints that the defendant and the Consultant avoided and failed to issue further instructions for completing the remaining works of the contracts. The plaintiff, through his counsel, issued to the defendant a notice dated 19.01.2010 with a copy thereof to the Consultant, terminating the three contracts as per Clause 69.1 of the General Conditions of the Contract. Through the said notice, the defendant was called upon to pay to the plaintiff his outstanding dues and the damages assessed by him. In the above background, the plaintiff submitted the claim of Rs.60,735,232.00 against the defendant before the learned Sole Arbitrator.

5. Before the learned Sole Arbitrator, the defendant admitted that the three contracts of the works were awarded to the plaintiff, and that the Consultant was appointed for such purpose. However, the claim of the plaintiff was strongly resisted by the defendant. The defendant denied that its office had been used by the plaintiff or by the Consultant as the site office. It was averred by the defendant that the plaintiff and the Consultant had established their own offices at the site. The defendant also denied the plaintiff’s allegation that Zafar Saleem had purchased 5,000 plots from the members of the defendant-Society. It was averred by the defendant that its record was in the possession of the Administrator appointed by the Government. It was also denied by the defendant that the plaintiff repeatedly requested for payment of the balance amount of Rs.9,000,000.00, or that the defendant at any stage had shown its inability to provide funds for continuing the remaining works under the contracts. It was asserted by the defendant that it was the plaintiff who had failed to execute the remaining works under the contracts. The plaintiff’s claim of Rs.60,735,232.00 was denied by the defendant on the ground that the same was self assessed and of hypothetical nature. Regarding the termination of the contracts by the plaintiff, the defendant had stated that the notice for termination was issued by the plaintiff on 19.01.2010 after lapse of three years, wherein the plaintiff had claimed an amount of Rs.60,735,232.00. Finally, it was averred by the defendant that Clauses 69.1, 69.2 and 69.3 of the General Conditions of the Contracts were not applicable as the plaintiff himself had failed to execute the works as per the contracts.

6. On the basis of the pleadings of the parties, five issues were framed by the learned Sole Arbitrator, whereafter evidence was led by both the parties. The plaintiff examined himself and his Accountant, whereas the defendant examined its present Administrator and one of its members. After examining the record, evaluating the evidence and hearing the parties, the learned Sole Arbitrator gave the Award awarding the amounts mentioned therein to the plaintiff. Several substantial amounts claimed by the plaintiff were rejected by the learned Sole Arbitrator. The plaintiff did not file objections to the Award in respect of such portion of his claim which was rejected by the learned Sole Arbitrator. The defendant filed objections to the Award, which were within time. Only four objections have been raised by the defendant, which will be dealt with one by one.

7. The first objection of the defendant was that the plaintiff had no cause of action to file the claim against the defendant. According to the defendant, its ex-management was under “correction charges” and had been removed by the Government of Sindh by appointing an Administrator who had taken charge of the defendant-Society. In support of this objection, the defendant submitted that its Administrator and one of its members appeared before the learned Sole Arbitrator as witnesses, and they produced photographs showing that proper work had not been carried out by the plaintiff in terms of the quality and quantity. Mr. Badar Alam Khan, the learned counsel for the plaintiff, submitted that this objection is misconceived as it does not fall within the scope of Section 30 of the Act. I have noticed that, while dealing with the issues framed in the matter, the learned Sole Arbitrator has examined the entire oral and documentary evidence produced by the parties. After appreciating every aspect of the case, the learned Sole Arbitrator came to the conclusion inter alia that the plaintiff was not entitled to the amounts of Rs.614,829.00 in respect of Contract No.3 (Sector 3-A) (IPC No.9) and Rs.43,723,000.00 towards the salaries of staff and labour from January 2008 to December 2009, but was entitled to Rs.235,245.00 in respect of Contract No.1 (Sector 18-A) (IPC No.4) along with Rs.56,460.00 as the interest thereon at the rate of 8% per annum for three years ; the retention money / security deposit amount of Rs.2,625,035.00 along with Rs.210,000.00 as the interest thereon at the rate of 8% per annum from 03.02.2010 to 02.02.2011, plus future interest with effect from 03.02.2011 upto the date of making the Award a Rule of the Court ; and Rs.6,287,795.00 towards damages with 8% interest thereon from the date of the Award till the making of the Award a Rule of the Court. The amounts awarded to the plaintiff by the learned Sole Arbitrator on the aforementioned accounts, especially the damages, which were awarded to the plaintiff by the learned Sole Arbitrator after holding that the defendant had failed to prove that it was the plaintiff who had failed to execute the works as per the terms of the contracts, clearly show that the plaintiff had the cause of action against the defendant. The first objection has no force at all, and as such the same is rejected.

8. The second objection raised by the defendant is that the learned Sole Arbitrator failed to understand the importance of the application filed by the defendant for appointment of an independent architect to inspect (wrongly typed as “respect” in the objections) the work done by the plaintiff. The defendant has claimed that the learned Sole Arbitrator did not allow the said application filed by the defendant. In reply to this objection, the learned counsel for the plaintiff invited my attention to the following paragraph at page 25 of the Award :-

“ Mr. Abdul Jabbar Qureshi, the learned counsel for the Respondent had filed an application on 23-04-2011 for the appointment of two Consultants / Engineers as Commissioners for submitting report. The above application was disposed of by an order dated 23-04-2011 with the remark that the Respondent might get a report prepared if it so wished. But no such report has been produced in the evidence. Probably for the reason that any such report which would have been prepared after several years of the execution of the works might have carried no weight.” (Emphasis added)

The above shows that the defendant itself did not bother to prepare the report or to produce the same in its evidence. Despite this lapse on its part, this frivolous objection has been raised by the defendant without realizing that it actually amounts to an allegation against the learned Sole Arbitrator, who is the Hon’ble former Chief Justice of Pakistan and is undoubtedly a highly respected, honourable and upright gentleman of great integrity. This objection, on the face of it being baseless and false, is rejected.

9. The third objection raised by the defendant is that the learned Sole Arbitrator failed to appreciate the plaintiff’s reply when he was asked in his cross examination “Would you kindly tell us when you were told by the society that they did not have funds for the construction work ? ”. The reply of the plaintiff was “It was 2007. The Consultant did not give us instructions for further execution of contract works. We went to the Respondent-society where we were told that they did not have the fund and as soon as they would arrange the fund they would give us instruction for further execution of work.” In this context, the learned counsel for the plaintiff invited my attention to paragraph 9 on pages 21 and 22 of the Award. The relevant portions of the Award and the questions put to the plaintiff in his cross-examination are reproduced below for convenience and ready reference :-

“Though in the reply to the memo of claim, the Respondent has taken the plea that at no stage the Respondent / Consultant had shown inability to provide fund for continued balance works against the above contracts and that it was the Claimant who failed to execute the balance works against the above three subject contracts but the learned counsel for the Respondent Mr. Abdul Jabbar Qureshi in the cross-examination to PW-1 Zulfiqar Shakoor had admitted the plea of the Claimant that he was not allowed to complete the work of the remaining two contracts by putting the following questions in the cross-examination :-

…………………….

…………………….

Q. I suggest to you that in fact the Respondent-society had informed you in 2007 that they did not have the fund therefore, you should stop the work ?

Q. Is it correct that in 2007 when the Respondent-society informed you that they did not have the fund and asked you to stop the work, you stopped the work ? ”

(Emphasis added)

In my humble opinion, the finding of the learned Sole Arbitrator that the plea taken by the plaintiff that he was not allowed to complete the work of the remaining two contracts, stood admitted by the defendant which is clearly reflected by the above questions put to the plaintiff, is correct. The said finding does not call for any interference by this Court. This objection is also rejected in view of the above.

10. The last objection raised by the defendant is that the burden to prove issue No.3, that is, whether the plaintiff had miserably failed to execute the works as per the terms of the contracts, was put on the defendant by the learned Sole Arbitrator although the Suit / claim was filed by the plaintiff. The defendant has submitted that the defendant’s witness had given evidence that the works done by the plaintiff were not satisfactory, and photographs in support of this contention were also filed before the learned Sole Arbitrator. The learned counsel for the plaintiff submitted that this objection is misconceived and malafide. He referred to paragraph 10 on page 23 of the Award, wherein it was observed by the learned Sole Arbitrator that the burden of proof of issue No.3 was on the defendant as it was the defendant who had alleged that the plaintiff had miserably failed to execute the works as per the terms of the contracts. It was particularly observed in the same paragraph by the learned Sole Arbitrator that no particulars were given by the defendant showing failure of the plaintiff to execute the works in terms of the specifications. It is a well settled principle of law that, one who alleges, has to prove. In the instant case, admittedly it was the defendant who had alleged that the plaintiff failed to execute the works as per the terms of the contracts. Therefore, the burden to prove the alleged failure on the part of the plaintiff was on the defendant. The finding of the learned Sole Arbitrator on this issue is correct and the same does not require any interference by this Court. This objection is, therefore, rejected.

11. In support of his submissions, the learned counsel for the plaintiff cited and relied upon the case of M/s Joint Venture KG/RIST and 2 others V/S Federation of Pakistan and another, PLD 1996 Supreme Court 108, wherein the Hon’ble Supreme Court was pleased to hold inter alia that, while examining the validity of an award, the Court does not act as a Court of appeal ; a Court hearing the objections to the award cannot undertake re-appraisal of evidence recorded by the arbitrator in order to discover the error or infirmity in the award ; and that the error or infirmity in the award which rendered the award invalid must appear on the face of the award. The learned counsel also relied upon the case of Pakistan Steel Mills Corporation, Karachi V/S Messrs Mustafa Sons (Pvt.) Ltd., Karachi, PLD 2003 Supreme Court 301, wherein it was held by the Hon’ble Supreme Court that the Arbitrator is the final judge on the law and facts and it is not open to a party to challenge the decision of the Arbitrator, if it is otherwise valid ; and if the Arbitrator has given his decision in terms of the submission, nothing adverse could be attributed to him.

12. The law that the Court is not to act as a Court of appeal and sit in judgment over the award, has been consistently laid down by the Hon’ble Supreme Court in the cases of Ashfaq Ali Qureshi V/S Municipal Corporation, Multan and another, 1984 SCMR 597, Mian Corporation V/S Messrs Lever Brothers of Pakistan Ltd., PLD 2006 Supreme Court 169, and Federation of Pakistan V/S M/s Joint Venture Kocks K.G./RIST, PLD 2011 Supreme Court 506.

13. Under Section 30 of the Act, an award may be set aside on one or more of the grounds specified therein ; namely, (a) when an arbitrator or umpire has misconducted himself or the proceedings ; (b) when an award has been made after the issue of an order by the Court superseding the arbitration, or after arbitration proceedings have become invalid under Section 35 of the Act ; and (c) when an award has been improperly procured or is otherwise invalid. The learned counsel for the defendant frankly conceded that there was no misconduct on the part of the learned Sole Arbitrator, the award has not been procured improperly, and that the defendant is seeking setting aside of the award only on the grounds / objections discussed above. The ground (b) is not applicable to the present case. That leaves only the second part of ground (c) that the Award can be set aside if it is otherwise invalid. The learned counsel for the defendant has not been able to point out any error, defect, infirmity or illegality in the Award which may lead to the conclusion that the same is otherwise invalid. The contention of the learned counsel for the plaintiff in this behalf that the objections raised by the defendant do not fall within the scope of Section 30 of the Act, appears to be correct in view of the above discussion.

14. The learned Sole Arbitrator has rendered the Award after carefully and minutely examining the entire evidence and after giving full opportunity of hearing to the parties. The Award is well-reasoned, and it reflects full application of mind by the learned Sole Arbitrator. In view of the law laid down by the Hon’ble Supreme Court that while examining the validity of an award the Court does not act as a Court of appeal, and that a Court hearing the objections to the award cannot undertake re-appraisal of evidence recorded by the arbitrator, the findings of the learned Sole Arbitrator, which even otherwise are legally sound and proper in all respects, are not liable to be disturbed.

The above are the reasons of the short order announced by me on 31.10.2012, whereby the objections filed by the defendant were rejected and the Award was made a Rule of this Court.

J U D G E

*Suit 1171-11 Arbitration.doc/Judgments Single/Court Work/D*

The Court is not to act as a Court of appeal and sit in judgment over the award, has been consistently laid down by the Hon’ble Supreme Court in the cases of Ashfaq Ali Qureshi V/S Municipal Corporation, Multan and another, 1984 SCMR 597, Mian Corporation V/S Messrs Lever Brothers of Pakistan Ltd., PLD 2006 Supreme Court 169, and Federation of Pakistan V/S M/s Joint Venture Kocks K.G./RIST, PLD 2011 Supreme Court 506.