Peshawar Development Authority through its Director General, Peshawar Vs M/S Al-Enterprises and another.

IN THE PESHAWAR HIGH COURT, PESHAWAR

[JUDICIAL DEPARTMENT]

RFA No. 67-P/2024

Peshawar Development Authority through its Director General, Peshawar .. ..............Appellant Vs

M/S Al-Mehreen Enterprises and another.

....Respondents

Present: Malik Hashim Ali, Advocate for the appellant.

Mr. Umair Iqbal, Advocate, for the respondents.

Date of hearing: 17.09.2025

JU D G M EN T

MUHAMMAD IJAZ KHAN, J.- Through this Regular First Appeal, the appellant has challenged the judgment and decree of the learned Additional District Judge-IV, Peshawar dated 17.11.2023, whereby the objection petition filed by the appellant was turned down and consequently the award furnished by the Umpire was declared as Rule of the Court and thereby granted a decree in favour of the respondents/applicants.

2.Precisely, the facts leading to the filing of this appeal are that the respondent namely, M/S Al-

Mehreen Enterprises through its Director filed a petition / application under Section 14(2) read with Section 17 of The Arbitration Act, 1940 (hereinafter to be referred as “The Act of 1940”) for directing the respondent No.2 to submit its award and declare it as a Rule of the Court, which desires directions were accordingly issued to him, who submitted the award and later on, the appellant-PDA filed objection petition to the same, however, the said objection petition was turned down and consequently the award submitted by respondent No.2 was declared as Rule of the Court vide a composite order/judgment dated 17.11.2023, which judgment and decree has now been challenged by the appellant before this Court through the instant appeal.

3.Arguments heard and record perused.

4.The main arguments of the learned counsel for the appellant was that the objections so filed by the present appellant against the award before the learned trial court have not been properly addressed and his further ancillary objection to the impugned judgment was that the same lacks sufficient reasons, therefore, he prayed that the same may be set aside.

As against this, the learned counsel representing the respondent-decree holder stated that a well-reasoned judgment has been passed by the learned trial court where the objections of the appellant have also been discarded with required sufficient reasons.

5.As far as the objection of the learned counsel for the appellant qua lacks of reasons in the impugned judgment is concerned, this Court gone through the objections so submitted before the learned trial court and the reasons recorded by the learned trial court for discarding them, and the same were found as sufficient. The impugned judgment would show that the objections of the appellant have been discarded mainly on the ground that on one hand these objections were found as vague and evasive and on the other a detailed award encompassing all the disputes of the parties have been dealt with in a proper and judicious manner and necessary references have been made to the materials collected by the umpire, therefore, these objections of the learned counsel for the appellant are not legally sustainable especially1 when it is Trading Corporation of Pakistan (Pvt) Ltd through Chairman .vs. Amanullah Khan and another (2017 CLC 588), A. Qutubuddin Khan .vs. Chec Millwala Dredging Co. (Pvt). Limited (2014 CLD 824) and Al-Abdullah Constructors (Pvt) Ltd. .vs. Pakistan Water and Power Development Authority through Chief Engineer (2008 CLC 798).

settled since long that the court of law could not act as a supervisor in the arbitration proceedings nor it could sit as an appeal court, It may be reiterated that an arbitrator/umpire is a private judge appointed by both the parties with their consent and as such any decision rendered by an arbitrator has to be respected and regarded to the fullest unless and until there are some apparent errors on the face of it which are apparently missing in the present case. In a case2 the Apex Court held that the arbitrator alone is the judge of the quality as well as the quantity of the evidence. He is the final arbiter of dispute between the parties. He acts in a quasi-judicial manner and his decision is entitled to utmost respect and weight. Court is not supposed to sit as a court of appeal and make a roving inquiry and look for latent errors of law and facts in the Award. The arbitration is a forum of the parties' own choice its decision should not be lightly interfered by the court, until a clear and definite case within the purview of the section 30 of the Arbitration Act, 1940 is made out.

6.It would also be relevant to mention here that apart from the above grounds, the appellant could National Highway Authority through Chairman, Islamabad .vs. Messrs Sambu Construciton Co. Ltd. Islamabad and others (2023 SCMR 1103)

have challenged the award on any grounds as set under Section 30 of The Act of 1940. Section 30 of The Act of 1940 being relevant is reproduced below:-

30.Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely:--

(a)That an arbitrator or umpire has misconducted himself or the proceeding;

(b)That an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings had been invalid under section 35;

(c)That an award has been improperly procured or is otherwise invalid.

The plain reading of the aforesaid provisions stipulates that an award could be set aside if the arbitrator or umpire misconducted himself or the arbitration proceedings or that an award has been made after the issuance of an order by the court superseding the arbitration or that an award has been improperly procured or is otherwise invalid, however, during the course of his arguments, the learned counsel for the appellant did not challenge the award-cum-decree on any of the aforesaid grounds. With the able assistance of the learned counsel for the parties, this Court gone through the

detailed award comprising of 43 pages which contains more than sufficient materials-cum-reasons to justify that the award has been passed with a full and conscious application of mind, therefore, the learned trial court has rightly dismissed the objections of the appellant and has rightly declared it as Rule of the Court. In a case3 the Apex Court held that Arbitrator misconducts the proceedings when (i) there is a defect in the procedure followed by him; (ii) he commits breach and neglect of duty and responsibility; (iii) he acts contrary to the principles of equity and good conscience; (iv) he acts without jurisdiction or exceeds it; (v) he acts beyond the reference; (vi) he proceeds on extraneous circumstances; (vii) he ignores material documents; or (viii) he bases the award on no evidence.

7.During the course of arguments, an objection was also raised by the learned counsel for the respondent-decree holder to the effect that since the objection petition of the appellant was dismissed and the award was declared as a Rule of the Court through a composite order, therefore, the appellant Injum Aqeel .vs. Latif Muhammad Chaudhry and others (2023 SCMR 1361)

should have either been challenged dismissal of its objection petition independently or at least it should have been taken a ground in the memo of the instant appeal, however, it has neither filed any independent appeal against that part of judgment whereunder its objection petition was turned down nor it has taken any ground in the memo of the instant appeal so as to challenge the dismissal of its objection petition on the grounds as mentioned in Section 17 of The Act of 1940. With the able assistance of the learned counsel for the appellant, this Court gone through the memo of this appeal, however, no such ground has been taken in the same challenging the dismissal of the objection petition.

8.It would be relevant to mention here that under the theme and scheme as provided under the various provisions of The Act of 1940, a judgment passed by the court of law on the basis of award could be challenged in appeal before the higher forum and in this regard reference can be made to Section 17 and Section 39 of The Act of 1940, the same being relevant are reproduced below:-

17.Judgment in terms of award: Where the Court sees no cause to remit the award or any of the matters referred to

arbitration for consideration or to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree exception the ground that it is in excess of, or not otherwise in accordance with, the award.

39.Appealable orders: (1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order:

An order-

(i)superseding an arbitration;

(ii)on an award stated in the form of a special case;

(iii)modifying or correcting award;

(iv)filing or refusing to file an arbitration agreement;

(v)Staying or refusing to stay legal proceedings where there is an arbitration agreement;

(vi)setting aside or refusing to set aside an award;

Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court.

(2)No second appeal shall lie from an order passed in appeal under this section, but nothing in this section affect or take away any right to appeal to the Supreme Court.

The plain reading of the aforesaid provisions would show that as per the mandate of Section 17 of The Act of 1940 when an award is declared as Rule of the Court which is followed by a decree then no appeal shall lie against such decree but except on two grounds i.e. when the decree is in excess of or

not otherwise in accordance with the award, whereas the provisions of Section 39 has enlarged the scope of appeal as under the same a decree could be challenged on any ground(s). The difference and comparison of the aforesaid two provisions of law and their applicability came up before the Apex Court in a case4, wherein few questions were formulated in para-6 of the judgment and in para-9 thereunder, the comparative requirement of Section 17 and Section 39 of The Arbitration Act have been discussed and the answer to the aforesaid questions has been given in para-10. Paras-9 and 10 of the ibid judgment being relevant are reproduced below:- “9. The learned High Court has held that even where an application to set aside an Award is rejected by the Trial Court under section 17 of the Act, 1940, nonetheless, the right of an aggrieved party under section 39 of the Act, 1940 cannot be circumscribed since, in a composite order, each part of the order may be taken as an independent and separate order and can be challenged under sections 39 and 17 separately. The learned High Court has further held that a challenge under section 17 "shall only be maintainable if conditions laid down in section 17 of the Act were met". It, therefore, becomes necessary to examine section 17 of the Act, 1940, which is reproduced as under:- "17. Judgment in terms of award.

Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, Shahin Shah .vs. Government of Khyber Pakhtunkhwa through Secretary Irrigation Department, Peshawar and others (2022 SCMR 1810)

after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award."

Section 17 ibid provides that an appeal under the said provision may only be filed against a decree on the grounds that (a) the decree is in excess of the award and (b) it is otherwise not in accordance with the award.

10.The difference between section 39 and section 17 is that section 39 provides more grounds under which an order passed under the Act, 1940 may be challenged, than the grounds of challenge under section 17. It is evident from the grounds taken by the Respondents in R.F.A. 94/2007 that they did not dispute the decree of the Trial Court as being either in excess of the Arbitration Award or otherwise, against the Arbitration Award. The learned High Court conceded that, for a challenge to be maintainable under section 17, the conditions prescribed therein must be met. However, it escaped the learned High Court's notice that the Respondent had not challenged the decree of the Trial Court on the grounds mentioned in section 17 (supra) inasmuch as it was not the stance of the Respondents that the judgment and decree of the Trial Court was either in excess of the Arbitration Award or otherwise against the Arbitration Award. Since the Respondents had not taken the stance that the decree of the Trial Court was in excess of or against the Arbitration Award; they effectively admitted that the decree of the Trial Court was correct to the extent that the decree was in accordance with the Award. As such, the findings of the learned High Court in this respect are in our opinion erroneous and unsustainable. If the High Court found that the order of the Trial Court had two distinct parts, then, it had to examine whether the Respondents had challenged both parts of the order independently by raising

independent grounds in terms of section 17 and section 39. The High Court could not have suo motu implied that such grounds had been taken. The High Court was required to proceed on the basis of record which clearly showed that the Respondents had nowhere taken the stance that the decree of the Trial Court was in excess of or against the Arbitration Award. As such, the High Court could not have assumed jurisdiction in the matter, especially when the Respondents did not question the decree on the grounds mentioned in section 17 of the Act, 1940. Even otherwise, the failure of the Respondents to agitate the grounds mentioned in section 17 before the Trial Court barred them from raising any such grounds before the High Court since the Respondent was appealing against the judgment of the Trial Court. They were to show that the judgment of the trial Court was hit by any of the grounds available under section 17 ibid which they failed to do. The High Court, in our opinion, erred in law and exceeded its jurisdiction in proceeding beyond the grounds agitated by the Respondent in its appeal”.

In view of the aforesaid clear dicta as laid down by the Apex Court when the appellant has neither challenged the dismissal of its objection petition by filing an independent appeal nor it has agitated any ground in the memo of the instant appeal qua the dismissal of its objections then the appellant is barred to challenge such part of the impugned composite judgment before this Court in the proceedings of the instant appeal.

9.As far as merits of the case is concerned, it is part of the record that the controversy involved in

this case pertains to the cost claimed by the respondent-decree holder and as there was a contract between the parties having arbitration clause then the respondent-decree holder has rightly approached to the learned trial court for the desire relief. It is an admitted fact on both ends that initially both the parties nominated their respective arbitrators as the appellant nominated one Eng. Riaz Arshad as an Arbitrator, whereas the respondent-decree holder has nominated Dr. Shahid Mehmood and both of them have submitted their award, however, there was a disparity qua the quantum of compensation as claimed by the decree-holder as the arbitrator appointed by the appellant has recommended Rs.

126724164/ as compensation, whereas the arbitrator appointed by the respondent-decree holder has opined the tune of compensation as Rs. 172736971/.

In view of the above inconsistency qua the quantum of compensation as determined by the two arbitrators of the parties, the matter was then referred to an Umpire namely, Syed Asif Ali Burney and who too after hectic exercise has furnished his detailed award, whereby the respondent-decree holder has been found as entitled for the

compensation of Rs. 140537025/-. As stated herein above, that since The Act of 1940 is a special law which encourage the settlement of disputes through an arbitrator / umpire which is appointed with the consent of the parties, and thus if such arbitrator / umpire submits its award then the same has to be respected and regarded unless and until the same suffer from any error on the face of it. During the course of arguments, the learned counsel for the appellant was time and again asked to show the Court that as to whether the arbitrator / umpire has committed any legal misconduct or any misconduct in law or misconduct in fact, but he was unable to pin point any such factor to term the subject award as suffered from the same, therefore, the learned trial court has rightly declared it as Rule of the Court.

10.The scope, object of The Act of 1940, the duties of an arbitrator, the sanctity of an award and the powers and functions of a court of law to interfere with the award of the arbitrator have elaborately been dilated, evaluated and analyzed by the Supreme Court of Pakistan in Gerry's

International case5 where after a threadbare analysis of the all the law so far developed on the subject has been discussed and ultimately the following principles have been summarized:-

(1)When a claim or matters in dispute are referred to an arbitrator, he is the sole and final Judge of all questions, both of law and of fact.

(2)The arbitrator alone is the judge of the quality as well as the quantity of evidence.

(3)The very incorporation of section 26-A of the Arbitration Act requiring the arbitrator to furnish reasons for his finding was to enable the Court to examine that the reasons are not inconsistent and contradictory to the material on the record. Although mere brevity of reasons shall not be ground for interference in the award by the Court.

(4)A dispute, the determination of which turns on the true construction of the contract, would be a dispute, under or arising out of or concerning the contract. Such dispute would fall within the arbitration clause.

(5)The test is whether recourse to the contract, by which the parties are bound, is necessary for the purpose of determining the matter in dispute between them. If such recourse to the contract is necessary, then the matter must come within the scope of the arbitrator's jurisdiction.

(6)The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract.

(7)The authority of an arbitrator is derived from the contract and is governed by the Arbitration Act. A deliberate departure or conscious disregard of the contract not only manifests a disregard of his authority Gerry's International (Pvt.) Ltd .vs. Aeroflot Russian International Airlines

(2018 SCMR 662)

or misconduct on his part but it may tantamount to mala fide action and vitiate the award.

(8)If no specific question of law is referred, the decision of the arbitrator on that question is not final however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally.

(9)To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. An arbitrator acting beyond his jurisdiction is a different ground from an error apparent on the face of the award.

(10)The Court cannot review the award, nor entertain any question as to whether the arbitrators decided properly or not in point of law or otherwise.

(11)It is not open to the Court to re-examine and reappraise the evidence considered by the arbitrator to hold that the conclusion reached by the arbitrator is wrong.

(12)Where two views are possible, the Court cannot interfere with the award by adopting its own interpretation.

(13)Reasonableness of an award is not a matter for the Court to consider unless the award is preposterous or absurd.

(14)An award is not invalid if by a process of reasoning it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion.

(15)The only exceptions to the above rule are those cases where the award is the result of corruption or fraud, and where the question of law necessarily arises on the face of the award, which one can say is erroneous.

(16)It is not open to the Court to speculate, where no reasons are given by the

arbitrator, as to what impelled the arbitrator to arrive at his conclusion.

(17)It is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award.

(18)The Court does not sit in appeal over the award and should not try to fish or dig out the latent errors in the proceedings or the award. It can set aside the award only if it is apparent from the award that there is no evidence to support the conclusions or if the award is based upon any legal proposition which is incorrect.

(19)The Court can set aside the award if there is any error, factual or legal, which floats on the surface of the award or the record.

(20)The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. The arbitrator is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not do so he can be set right by the Court provided the error committed by him appears on the face of the award.

(21)There are two different and distinct grounds; one is the error apparent on the face of the award, and the other is that the arbitrator exceeded his jurisdiction. In the latter case, the Courts can look into the arbitration agreement but in the former, it cannot, unless the agreement was incorporated or recited in the award.

(22)An error in law on the face of the award means that one can find in the award some legal proposition which is the basis of the award and which you can then say is erroneous.

(23)A contract is not frustrated merely because the circumstances in which the contract was made are altered.

(24)Even in the absence of objections, the Award may be set aside and not made a Rule of the Court if it is a nullity or is prima facie illegal or for any other reason, not fit to be maintained; or suffers from an invalidity which is self-evident or apparent on the face of the record. The adjudicatory process is limited to the aforesaid extent only.

(25)While making an award rule of the Court, in case parties have not filed objections, the Court is not supposed to act in a mechanical manner, like a post office but must subject the award to its judicial scrutiny.

(26)Though it is not possible to give an exhaustive definition as to what may amount to misconduct, it is not misconduct on the part of the arbitrator to come to an erroneous decision, whether his error is one of fact or law and whether or not his findings of fact are supported by evidence.

(27)Misconduct is of two types: "legal misconduct" and "moral misconduct". Legal misconduct means misconduct in the judicial sense of the word, for example, some honest, though erroneous, breach of duty causing miscarriage of justice; failure to perform the essential duties which are cast on an arbitrator; and any irregularity of action which is not consistent with general principles of equity and good conscience. Regarding moral misconduct; it is essential that there must be lack of good faith, and the arbitrator must be shown to be neither disinterested nor impartial, and proved to have acted without scrupulous regard for the ends of justice.

(28)The arbitrator is said to have misconducted himself in not deciding a specific objection raised by a party regarding the legality of extra claim of the other party.

(29)some of the examples of the term "misconduct" are:

(i)if the arbitrator or umpire fails to decide all the matters which were referred to him;

(ii)if by his award the arbitrator or umpire purports to decide matters which have not in fact been included in the agreement or reference;

(iii)if the award is inconsistent, or is uncertain or ambiguous; or even if there is some mistake of fact, although in that case the mistake must be either admitted or at least clear beyond any reasonable doubt; and

(iv)if there has been irregularity in the proceedings.

(30)Misconduct is not akin to fraud, but it means neglect of duties and responsibilities of the Arbitrator.

In view of the above clear dicta as laid down by the Apex Court that an arbitrator is the sole and final Judge of all questions both of law and facts and the award furnished by an arbitrator could not be set aside merely for the brevity of reasons and that the Court of law cannot review the award, nor entertain any question as to whether the arbitrators decided properly or not in point of law or otherwise and that it is not open to the Court to re-examine and reappraise the evidence considered by the arbitrator to hold that the conclusion reached by the arbitrator is wrong and that where two views are possible, the Court cannot interfere with the award by adopting

its own interpretation. Similarly, it has also been held that it is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. Likewise, it is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion and over and above it has also been observed that the Court could not sit as an appeal over the award and should not try to fish or dig out errors in the proceedings or the award.

11.In view of the above discussion and exposition of law on the subject, the instant appeal being bereft of any merit is hereby dismissed.

Announced 17.09.2025 Sd/-

JUDGE

(S.B) Hon’ble Mr. Justice Muhammad Ijaz Khan Noor Shah