M/s Saadullah Khan & Brothers (SKB) VS NHA, etc

JUDGMENT SHEET

IN THE ISLAMABAD HIGH COURT,

ISLAMABAD

R.F.A. NO. 754 OF 2021

M/s Saadullah Khan & Brothers (SKB), through an authorized representative Versus National Highway Authority and others

Appellants by : Mr. Babbar Ali Khan and Jawad ur Rehim, Advocates.

Respondents by : Mr. Wasim Abid, Advocate.

Date of Hearing : 24.09.2026.

SHAHRUKH ARJUMAND, J.-

1.Through this Regular First Appeal, the Appellants [M/s Saadullah Khan & Brothers (SKB)] have assailed the Judgment dated 18.09.2021 (“Impugned Judgment”) passed by learned Additional District Judge- IX, (West), Islamabad (“Trial Court”), whereby Trial Court allowed application of Respondent No. 01 under Section 33 Read with Section 30 of the Arbitration Act, 1940 read with all enabling provisions of applicable laws for setting aside of Arbitration Award dated 30.12.2020 and dismissed the application of Appellants for making the Arbitration Award dated 30.12.2020 rule of the court under Section 14 read with 17 of the Arbitration Act, 1940.

2.The facts of the case, as per record are that Appellants, M/s Saadullah Khan & Brothers, were awarded a Contract by Respondent No. 01 for surfacing and strengthening of National Highway (N-5), covering a 72-Kilometre patch between Mian Channu, Sahiwal and Okara, through cold recycling technology. The Letter of Acceptance was issued on 29.04.2006 and Contract was executed on 18.07.2006, with work

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scheduled for completion within two years from commencement date, i.e. 22.06.2006. The project, however, suffered delays and six extensions of time were granted, the last being on 02.11.2011. Upon completion of the project, Appellants raised a claim of Rs.565,955,278/- towards prolongation costs before the Engineer, which was rejected vide decision dated 16.09.2013. The Appellants thereafter approached the Dispute Review Expert (DRE), who also dismissed the claim vide decision dated 18.03.2014. Aggrieved, the Appellants invoked Arbitration and after proceedings before the learned Arbitral Tribunal, including framing of issues, recording of evidence and hearing of final arguments, an Award dated 30.12.2020 was rendered, whereby the Tribunal allowed the claim relating to the cost of idle period, while observing that the financial implications of the prolonged period could not be quantified. The Appellants thereafter filed an application under Sections 14 read with 17 of Arbitration Act, 1940, seeking that the Award be made the Rule of the Court, whereas the Respondent No.01 filed an application seeking setting aside of Award. The learned trial Court allowed the Respondent”s application and set aside the Award, while consequently dismissing the Appellants” application for making the Award Rule of the Court.

3.Learned counsel for the appellants, inter alia, contended that learned trial Court exceeded the limited supervisory jurisdiction available under the Arbitration Act, 1940 by reappraising the evidence, interpreting the contractual provisions afresh and substituting its own view for that of Arbitral Tribunal. He submitted that Tribunal had considered the contemporary record, afforded full opportunity of hearing to both parties and after detailed scrutiny, awarded only Rs.117,778,905/- against the Appellants” claim of Rs.565,955,278/-. Learned counsel maintained that Clause 53.4 of the Contract permitted determination of claims on the basis of verified contemporary record notwithstanding non-compliance with the notice requirements, which provision was correctly interpreted and

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applied by the Tribunal. He further contended that six extensions of time granted by Engineer expressly recognized the delays and contemplated assessment of prolongation costs and such entitlement was also supported by contractual provisions and NHA Code, 2005. It was argued that there was no violation of natural justice or other ground warranting interference with the Award, whereas the Trial Court, by entering into the merits and reassessing evidence, had travelled beyond its lawful jurisdiction. Learned counsel, therefore, sought setting aside of the impugned judgment.

4.On the other hand, learned counsel appearing on behalf of respondents controverted the assertions made by learned counsel for Appellants and has submitted that Impugned Judgment is well reasoned and in accordance with law. He therefore, prayed for dismissal of this appeal.

5.I have heard the learned counsel for the Appellants as well as Respondents and have perused the record with their able assistance.

6.The primary judgment on which both of the parties have put reliance in support of their respective claims is the case of Gerry”s International (PVT.) LTD. v Aeroflot Russian International Airlines, wherein August Supreme Court of Pakistan has set thirty (30) principles with regard to power of courts for interference into and setting aside the award pronounced by the arbitrator(s). August Court set forth these principles in the following manner:

“8. The principles which emerge from the analysis of above case-law can be summarized as under:-

(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

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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 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.

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(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.

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(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;

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(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.1”

7.Based on above mentioned thirty principles, this Court further expanded the scope of interference by the courts in an award by directly relying on the case of “Hodgkinson v. Fernie”. It was held by this Court in the case of “Pak Gulf Construction (Private) Limited v Godwin Austen Johnson” that:

“The differences are primarily dictional, but in essence express the same key underlying principles, which, despite the passage of 170 years, have not departed in any substantial sense from the statement of the principles for the scrutiny of an award laid down in Hodgkinson v. Fernie, which was reproduced at paragraph 6 of Gerry's judgment as follows: “Where a cause, or matters in difference, are referred to an arbitrator, he is the sole and final Judge of all questions, both of law and of fact. However, the only exceptions to that rule are 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 or upon some paper accompanying and forming part of the award.

So we incorporate this principle also in our improvisation of the Hodgkinson principle and, adding two provisos for clarity and some edits for neatness, complete it as follows: Where a dispute is referred to an arbitrator, he is the sole and final judge of all questions, both of law and fact. However, the only exceptions to that rule are cases where:

(a)the award is the result of corruption or fraud;

(b)the question of law necessarily arises on the face of the award; or

Gerry”s International (PVT.) LTD. v Aeroflot Russian International Airlines, 2018 S C M R 662.

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(c)the award does not state the reasons in sufficient detail to enable the Court to answer a question of law arising out of the award.

Provided that, where two opinions on the question of law are equally plausible, then the Court shall not substitute its preferred view for that of the arbitrator expressed in the award; and Provided further that, in relation to both clauses (b) and (c), reference to the expression 'award' includes the 'record' on which the award is based, if the answer to the question of law necessitates a reference to the record.

Explanation. The expression 'question of law' includes conclusions drawn from proven facts.”2

8.This Court in the case of Pak Gulf Construction (Private) Limited supra, in my view, expanded the scope of interference in the award and arbitration proceedings in the case where the award does not state the reasons in sufficient detail to enable the Court to answer a question of law arising out of the award. The phrase has not been included within thirty principles contained in Gerry”s International (PVT.) LTD. by August Supreme Court of Pakistan. Moreover, doctrine of “autonomie de la volonte” (autonomy of will) has been well recognized world-wide and the same is also the spirit of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985. Concept and scope of autonomie de la volonte was discussed in the case of “Trimex International FZE Ltd. Dubai versus Vedanta Aluminium Ltd., India” wherein it was held that:

“60. Technicalities like stamps, seals and even signatures are red tape that have to be removed before the parties can get what they really want--an efficient, effective and potentially cheap resolution of their dispute. The autonomie de la volonte' doctrine is enshrined in the policy objectives of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985, on which our Arbitration Act is based. (See Preamble to the Act.) the courts must implement legislative intention. It would be improper and undesirable for the courts to add a number of extra formalities not envisaged by the legislation. The courts' directions should be to achieve the legislative intention.

Pak Gulf Construction (Private) Limited v Godwin Austen Johnson, 2024 C L D 1451 (Islamabad).

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61.One of the objectives of the UNCITRAL Model Law reads as under:

the liberalization of international commercial arbitration by limiting the role of national courts, and by giving effect to the doctrine `autonomy of will', allowing the parties the freedom to choose how their disputes should be determined". [See Policy Objectives adopted by UNCITRAL in the preparation of the Model Law, as cited in Law and Practice of International Commercial Arbitration, Alan Redfern and Martin Hunter, Street & Maxwell, London (1986) at p. 388 (citing UN doc.A/CN.9/07, Paras 16-27).]”3

9.Applicable law in India is almost like Pakistan as both countries are influenced by colonial legislation and the Arbitration Act, 1940 was promulgated prior to independence of both countries though the same was replaced by India with the Arbitration and Conciliation Act, 1996. Provisions of the said Act are also similar. With regard to objections for setting aside the award under Section 30 and 33 of the Act, the Supreme Court of India has attached great sanctity to arbitration awards. In Kwality Manufacturing case, it has been observed by the Supreme Court of India that:

“7. At the outset, it should be noted that the scope of interference by courts in regard to arbitral awards is limited. A court considering an application under Section 30 or 33 of the Act, does not sit in appeal over the findings and decision of the arbitrator. Nor can it re-assess or re-appreciate evidence or examine the sufficiency or otherwise of the evidence. The award of the arbitrator is final and the only grounds on which it can be challenged are those mentioned in Sections 30 and 33 of the Act. Therefore, on the contentions urged, the only question that arose for consideration before the High Court was, whether there was any error apparent on the face of the award and whether the arbitrator misconducted himself or the proceedings.”4

10.Primarily two grounds have been mentioned in this case justifying interference into an award i.e. error apparent on the face of the award and the Arbitrator misconducting himself or the proceedings. However, the scope of error Trimex International FZE Ltd. Dubai versus Vedanta Aluminium Ltd., India, (2010) 3 SCC1.

Kwality Manufacturing Corporation versus Central Warehousing Corporation, (2009) 5 SCC 142.

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and misconduct has further been elaborated in the case of “State of Rajasthan versus Puri Construction Co. Ltd.”, where the Supreme Court of India held that: “30. A court of competent jurisdiction has both right and duty to decide the lis presented before it for adjudication according to the best understanding of law and facts involved in the lis by the judge presiding over the court. Such decision even if erroneous either in factual determination or application of law correctly, is a valid one and being inter parties. It does not, therefore, stand to reason that the arbitrator's award will be per se invalid and inoperative for the simple reason that the arbitrator has failed to appreciate the facts and has committed error in appreciating correct legal principle in basing the award. An erroneous decision of a court of law is open to judicial review by way of appeal or revision on accordance with the provisions of law.

Similarly, an award rendered by an arbitrator is open to challenge within the parameters of several provisions of the Arbitration Act. Since the arbitrator is a judge by choice of the parties, and more often than not, a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. Over the decades, judicial decisions have Indicated the parameters of such challenge consistent with the provisions of the Arbitration Act. By and large the courts have disfavoured interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the material on record and have shown definite inclination to preserve the award as far as possible.

As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the courts were impelled to have fresh look on the ambit of challenge to an award by the arbitrator of the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not given the wide immunity as enjoyed earlier, by expanding the import and implication of legal misconduct' of an arbitrator so that award by the arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decisions of the lis between the parties to arbitration. Precisely for the aforesaid reasons, the erroneous application of law constituting the very basis of the award and improper and incorrect findings of fact, which without closer and intrinsic scrutiny, are demonstrable on the face of the materials on record, have been held, very rightly, as legal

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misconduct rendering the award as invalid. It is necessary, however, to put a note of caution that in the anxiety to render justice to the party to arbitration, the court should not reappraise the evidence intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the court, erroneous. Such exercise of power which can be exercised by an appellate court with power to reverse the finding of fact, is alien to scope and ambit of challenge of an award under the Arbitration Act. Where the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible view points, the interference with award based on erroneous finding of fact is permissible. Similarly, if an award is based by applying a principle of law which is patently erroneous and but for such erroneous application of legal principle, the award could have been made, such award is liable to be aside by holding that there has been legal misconduct on the part of the arbitrator. In ultimate analysis, it is a question of delicate balancing between the permissible limit of error of law and fact and patently erroneous finding easily demonstrable from the materials on record and application of principle of law forming the basis of the award which is patently erroneous.5

11.Generally the Courts are reluctant to interfere in the awards announced by the Arbitrators and interference is only an exception to be sparingly exercised. This approach has also been adopted by Indian Courts. In “State of U.P. versus Allied Constructions”, the Supreme Court of India held that: “4. ...Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the Court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law...”6

12.The Primary object to move to arbitration is to avoid traditional litigation primarily for the reason that arbitration is speedy and inexpensive as compared to State of Rajasthan versus Puri Construction Co. Ltd., (1994) SC 6 485.

State of U.P. versus Allied Constructions, (2003) 7 SCC 396.

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litigation which normally is lengthy and expensive. In the words of Justice Adam Sean Jeremy Campbell of Ontario Court of Justice:

“78. The great merit of arbitrations is that they should be, compared to courts, comparatively quick, cheap, and final. There is a trade-off between perfection on the one hand and speed, economy, and finality on the other hand. If you go to arbitration, you can get quick and final justice and you can get on with your life. If you go to court, you can get exquisitely slow and expensive justice and you can spend the rest of your life enduring it and paying for it.”7

13.Therefore, it is the primary intent of the arbitration that it should not be considered a formal method of adjudication rather should remain an informal method of justice as recognized by World Justice Project, Rule of Law Index. Canadian jurisdiction has also adopted the approach of not interfering in the arbitration award except in serious cases. In case of Volvo, the Supreme Court of Canada ruled that when an Arbitrator is tasked with interpreting a collective agreement, their decision should not be interfered with by a court unless the interpretation is completely unreasonable or the arbitrators have misdirected themselves on the law.8 The primary question involved was the construction of agreement and the Court observed that:

“... But where a question of construction is the very thing referred for arbitration, then the decision of the arbitrator upon that point cannot be set aside by the Court only because the Court would itself have come to a different conclusion.

14.In another case, the Ontario Court of Appeal ruled that settlement of a matter in arbitration means there should not be any further recourse after an award. It was held by the Court that:

“[44] This is especially so since the presumption pulled in favour of consistent meaning being given to the word “settled”. Section 20.6 states that “[u]nless settled amicably” the parties can bring a dispute (that is not the subject of a final and binding DAB decision) to arbitration, where it will be “finally settled”. The meaning conveyed is that amicably settled disputes have been Mungo versus Saverino, [1995] O.J. No. 3021, 58 A.C.W.S. (3d) 175, Court File No. RE 178/95).

Volvo Canada Limited versus International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), Local 720, ([1980] 1 S.C.R. 178).

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resolved such that further recourse beyond the settlement is not available. When the word is used in the context of a dispute being finally settled by arbitration, the word settled reinforces the same intent − that no further recourse regarding the dispute, beyond the arbitration award, is available.”9”

15.The Court of Appeal for Ontario in the case of “the United Mexican States versus Cargill, Incorporated” laid down basis for scrutiny of award despite observing that interference should be sparingly exercised. It was held that: “[35] Accepting that courts should interfere only sparingly or in extraordinary cases, the court must have some basis to test whether the panel acted beyond its jurisdiction. If we were to use judicial review principles that apply in a domestic context, we would conduct a Dunsmuir analysis and determine whether the applicable standard is reasonableness or correctness. Normally, where the issue is one of pure jurisdiction, the correctness standard would apply, implying possible consideration of, but no deference to, the decision of the tribunal under review...” 10 16. Scope of interference in arbitration award has further been discussed by the Supreme Court of Canada in Desputeaux v. Éditions Chouette (1987) inc., where it was observed:

“22. The parties to an arbitration agreement have virtually unfettered autonomy in identifying the disputes that may be the subject of the arbitration proceeding. As we shall later see, that agreement comprises the arbitrator”s terms of reference and delineates the task he or she is to perform, subject to the applicable statutory provisions. The primary source of an arbitrator”s competence is the content of the arbitration agreement (art. 2643 C.C.Q11.). If the arbitrator steps outside that agreement, a court may refuse to homologate, or may annul, the arbitration award (arts. 946.4, para. 4 and 947.2 C.C.P12.).”

“69... the remedies that may be sought against arbitration awards are limited to the cases set out in arts. 946 et seq. C.C.P. and that judicial review may not be used to challenge an arbitration decision or, most importantly, to review its merits (Compagnie nationale Air Baffinland Iron Mines LP v. Tower-EBC G.P./S.E.N.C., 2023 ONCA 245.

The United Mexican States versus Cargill, Incorporated, Judgment of the Court of Appeal for Ontario - 2011

ONCA 622.

The Civil Code of Quebec (CCQ) is the foundational law of the province of Quebec in Canada that governs private relationships between individuals, people's status, and property. Art 2643: Subject to the peremptory provisions of law, the arbitration procedure is governed by the contract or, failing that, by the Code of Civil Procedure .

The Code of Civil Procedure dictates the procedural rules.

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France, supra, at pp. 724-25; International Civil Aviation Organization v. Tripal Systems Pty. Ltd., [1994] R.J.Q. 2560 (Sup. Ct.), at p. 2564; Régie intermunicipale de l”eau Tracy, St-Joseph, St-Roch v. Constructions Méridien inc., [1996] R.J.Q. 1236 (Sup. Ct.), at p. 1238; Régie de l”assurance-maladie du Québec v. Fédération des médecins spécialistes du Québec, [1987] R.D.J. 555 (C.A.), at p. 559, per Vallerand J.A.; Tuyaux Atlas, une division de Atlas Turner Inc. v. Savard, [1985] R.D.J. 556 (C.A.)). Review of the correctness of arbitration decisions jeopardizes the autonomy intended by the legislature, which cannot accommodate judicial review of a type that is equivalent in practice to a virtually full appeal on the law. Thibault J.A. identified this problem when she said:

[translation] In my view, the argument that an interpretation of the regulation that is different from, and in fact contrary to, the interpretation adopted by the ordinary courts means that the arbitration award exceeds the terms of the arbitration agreement stems from a profound misunderstanding of the system of consensual arbitration. The argument makes that separate system of justice subject to review of the correctness of its decisions, and thereby substantially reduces the latitude that the legislature and the parties intended to grant to the arbitration board.”13

17.A careful analysis of above-mentioned case law makes it evident that autonomie de la volonte has been recognized as a universal principle. All the Courts have adopted the approach of not interfering into an arbitration award except in serious violations. The scope of such interference is limited in almost all the main jurisdictions of the world. The primary purpose of this limited scope can be gauged to make the will of the arbitration prevail instead of traditional modes of adjudication including litigation. Arbitration is one of the components of Alternative Dispute Resolution (ADR) and should be kept in the same spirit instead of burdening the parties with traditional modes of adjudication despite their will to resort to ADR. This Court was pleased to observe in Pak Gulf Construction (Private) Limited v Godwin Austen Johnson that if the Courts have no role to play then there was no need to submit the award before the courts for making the same rule of the court. However, it should equally be understood that if the purpose of Desputeaux v. Editions Chouette (1987) Inc., [2003] 1 S.C.R. 178, 2003 SCC 17.

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scrutiny of award before the courts is re-adjudication of the matter on merits then concept of ADR would collapse and the parties would be burdened twice for settling their dispute first before the arbitration and then its adjudication before the courts. Therefore, the scope of scrutiny should be kept limited in accordance with the principles outlined in above-mentioned cases of various jurisdictions including our own i.e. if there is an error floating at the surface of award or Arbitrator misconducts himself or the proceedings. Misconduct was also defined in Gerry”s International (PVT.) LTD. where august Supreme Court elaborated its categorizing it into two and held that:

“In the case of Sh. Saleem Ali v. Sh. Akhtar Ali (PLD 2004 Lahore 404), the "misconduct" in terms of Arbitration Act was described to be of two kinds i.e. 'legal misconduct' and 'moral misconduct'. The detail of this was observed by the Court in the following words:

Legal misconduct:

14."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. To sum up, an arbitrator misconducts the proceedings when (i) there is a defect in the procedure followed by him; (ii) commits breach and neglect of duty and responsibility (iii) acts contrary to the principles of equity and good conscience; (iv) acts without jurisdiction or exceeds it; (v) acts beyond the reference; (vi) proceeds on extraneous circumstances; (vii) ignores material documents;

and (viii) bases the award on no evidence. These are some of the omissions and commissions which constitute legal misconduct or, in other words, that an arbitrator has mis-conducted the proceedings within meaning of clause (a) of section 30 of the Arbitration Act, 1940.

Moral misconduct:

15.It is difficult to define exhaustively and exactly what amounts to "misconduct" on the part of an arbitrator. it is essential that there must be

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abundant good faith, and the arbitrator must be absolutely disinterested and impartial, as he is bound to act with scrupulous regard to the ends of justice. An arbitrator must be a person who stands indifferent between the parties. An arbitrator should in no sense consider himself to be the advocate of the cause of party appointing him, nor is such party deemed to be his client."14

18.Testing these principles on the case in hand, it appears that before pronouncement of award, a total of five (05) issues were framed. The first issue was whether Engineer's decision is as per provisions of Contract? In this regard, the Arbitral Tribunal held that it cannot endorse the decision of the Engineer and added that the tribunal is in no position to assess the costs at this stage. However, it further held that the Contractor suffered a loss due to delays of handing over of design drawings from employer and there was delay of 155 days. The second issue was whether DRE's decision is as per provisions of Contract? In this regard, the Arbitral Tribunal held that the DRE has not taken into consideration the decision of the Engineer, who had earlier given a conflicting verdict when he awarded EOTs to the Contractor. Tribunal was of the view that on the one hand, he awarded the EOTs as per Contract conditions and on the other decided that costs due to prolongation would be assessed later and the DRE should have taken up this issue and given a decision on its validity. Therefore, criticizing the decision of DRE, the Arbitral Tribunal did not agree with the same. The third issue was whether as per Contract, EOT award entails award of additional costs? The Arbitral Tribunal in this regard was of the opinion that as per Contract, EOT award entails award of additional costs, which, for reasons best known to the Engineer, have not been quantified by the Engineer. The DRE has accepted the Engineer”s decision, which states that EOT is to be granted with costs to be assessed later. The Arbitral Tribunal further held that the Contract supports the payment of additional costs associated with EOTs and in this regard, Clauses 44.1, 44.2 and 44.3 of GCC are relevant. Issue number 4 was whether, as per Contract, Contractor is entitled to Gerry”s International (PVT.) LTD.

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additional costs due to prolongation costs? In this regard, the Arbitral Tribunal was of the opinion that it has already explained in Issue No. 3 that the DRE has accepted the Engineer”s Decision to pay additional Costs to Contractor at a later date when Costs are to be assessed. The fifth and final Issue was whether Counter Claim and Claim of Liquidated Damages lodged by Respondent are maintainable? The Arbitral Tribunal over this issue held that the counter-claim and claim of liquidated damages lodged by the respondents are not maintainable for the reason that these were never raised previously in front of the Engineer and DRE and the delay is due to changes in the design which cannot be attributed to the claimant.

19.Based on the above-mentioned five issues, the Arbitral Tribunal awarded the relief to the claimant in the shape of Rs. 117,778,905/-. It further held that it cannot possibly quantify the financial implications of the prolonged period and it is not in their scope to do so at this stage or at any other stage. However, they have worked out the financial impact of cost of idle period, which includes salaries of field and head office staff, idling charges of construction equipment and loss of profit and consequently awarded Rs.117,778,905/- to the claimant. Upon these findings of the Arbitral Tribunal, learned Additional District Judge IX, (West), Islamabad set aside the said award primarily on the grounds that there is duality of findings of the learned Arbitrators who, on the one hand, upheld the decisions of the Engineer and DRE and on the other hand, termed the non-assessment of additional/prolongation cost for the Contractor for award of such cost. The learned court went on to scrutinize the findings of Arbitral Tribunal by relying upon several clauses of GCC including Clause 6.3, 6.4, dealing with delays and cost of delay of drawings, Clause 44.1 and 44.2 dealing with extension of time for completion and Clause 53 with regard to procedure for claims. Learned court primarily relied upon the fact that the notice was not issued by the Contractor within prescribed time period. However, while interpreting clause 53.1, 53.2, 53.3 and 53.4 of GCC, the learned Court itself held that if the Contractor does not comply with the procedure laid down in the conditions, his entitlement to payment may be limited. Furthermore, the Court also held that failure by the Contractor to

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make a claim in accordance with the provisions of sub-clauses 53.1, 53.2, or 53.3 should not bar the Contractor from receiving remuneration for any work which the Contractor can substantiate from contemporary records.

20.Although the learned Court found that in accordance with Sub-clause 53.4, the Contractor does not become entitled to additional costs, rather the Contractor is required to cross the hurdle of establishing its claim from contemporary records of proper quantification of prolongation costs, but held that the Contractor is not entitled for the costs awarded by the Arbitral Tribunal. Said findings of the learned Court appear to be without properly adjudicating as to how his claim was not supported from the contemporary record. Learned court also failed to clearly hold as to how findings to Arbitral Tribunal with regard to award of costs were inconsistent with the provisions of GCC, particularly when the learned Court was of the opinion that failure by the Contractor to make a claim in accordance with the provisions of sub-clauses 53.1, 53.2, or 53.3 should not bar the Contractor from receiving remuneration for any work which the Contractor can substantiate from contemporary records. The learned Court”s findings are also silent with regard to decision of Arbitral Tribunal to the effect that despite the decision of Engineer and DRE, they have worked out the financial impact or cost of idle period which includes salaries of field and head office staff, idling charges of construction equipment and loss of profit. With regard to contradiction in the findings of Arbitral Tribunal qua decision of Engineer, the Tribunal though held that costs cannot be assessed at this stage, but clearly stated that the Contractor suffered a loss due to delays of handing over of design drawings from employer. The Tribunal also clearly held that EOT entails payment of additional costs and the Contract supports the payment of additional costs associated with EOTs if conditions of Clauses 44.1, 44.2 and 44.3 of GCC are met. Arbitral Tribunal also clearly held that it cannot quantify prolongation costs but have worked out on cost of idle period, including salaries of field and head office staff, idling charges of construction equipment and loss of profit and consequently awarded the relief of Rs.117,778,905/- to the claimant. Therefore, by holding that prolongation costs

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cannot be quantified as opined by the Engineer and as agreed by DRE and subsequently awarding cost of idle period, including salaries of field and head office staff, idling charges of construction equipment and loss of profit to the Contractor, Arbitral Tribunal has neither acted against the provisions of the Contract nor committed any type of misconduct, moral or legal, as defined in Gerry”s International (PVT.) LTD. supra. Moreover, the award also provides sufficient details enabling each party to find the reasons for such award. Even if no details are provided in an award, according to principle 16 of the principles stipulated in Gerry”s International (PVT.) LTD., Award cannot be set aside automatically rather the Court is open to speculate as to what impelled the Arbitrator to arrive at his conclusion. Since no material contradiction with the provisions of GCC could be pointed out by the learned Court in respect of findings of Arbitral Tribunal, the award, in accordance with universally settled principles, ought not to have been set aside merely for the reason that findings of Arbitral Tribunal were different from that of the learned Court and it was possible for the Arbitral Tribunal to adopt the view taken by the learned Court. It is also evident that the claim of Contractor was reduced to Rs. 117,778,905/- only, from his original claim of Rs. 565,955,278/-, meaning thereby that entire claim of prolongation costs of the Contractor was not entertained by Arbitral Tribunal.

21.It also appears that interpretation of referred provisions of the Contract in the impugned order could also be interpreted otherwise. In my view, the learned Court while dealing with the application for making the Award rule of the court was not authorized to scrutinize the findings of Arbitral Tribunal or interpret the clauses of the agreement in a manner where more than two views were possible. In such like cases, the view taken by the court cannot be given preference over the view taken by the Arbitrator or Arbitral Tribunal, simply because more than one interpretation was possible. In this case, neither corruption or fraud has been established on the part of Arbitral Tribunal, nor any error or question of law arises on the face of award for setting it aside. Sufficient details are also provided in the award and even in absence whereof it was open to learned Court to speculate as to

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what impelled the Arbitral Tribunal to arrive at this conclusion, which learned Court failed to do.

22.In view of the foregoing discussion, no patent illegality, misconduct, jurisdictional error or other ground warranting interference with the Award has been established. Consequently, the impugned Judgment dated 18.09.2021 is set aside, the Award dated 30.12.2020 is upheld and made Rule of the Court and the instant appeal is accordingly allowed.

(SHAHRUKH ARJUMAND)

JUDGE

Announced in open Court on 06th October, 2026

(SHAHRUKH ARJUMAND)

JUDGE

Approved for reporting

Farid ur Rehman/-