2024 C L D 491
[Balochistan]
Before Muhammad Ejaz Swati and Rozi Khan Barrech, JJ
MALIK & COMPANY through Proprietor--- Petitioners
Versus
CHAIRMAN PAKISTAN TOBACCO BOARD, PESHAWAR and others -- Respondents
C.P. No. 747 and Civil Revision No. 201 of 2020, decided on 26th May, 2021.
Arbitration Act (X of 1940) ---
----S. 20 ---Arbitration ---Award made rule of the Court ---Petitioner/contractor resisted
payment of balance contractual amount and invoked arbitration clause ---Trial Court
appointed arbitrator who announced the award which was made rule of the Court ---Validity --
-According to agreement, petitioner/contractor was required to make payment of balance
amount in ten equal installments on monthly basis on first day of each month but not later
than 10 of same month and the last final installment was due on 30 -11-2002---
Petitioner/contractor deposited an amount of Rs. 890,000/ - with Pakistan Tobacco Board and
an amount of Rs. 7,200,000/ - along with penalty was to be paid--- When petitioner/contractor
was directed by the Board to deposit outstanding installment, he invoked arbitration clause of
the agreement by way of filing an application under S. 20 of Arbitration Act, 1940---Question of loss suffered by petitioner/contractor on account of exemption letter issued by Pakistan Tobacco Board was properly determined in the agreement ---Where two views were
possible with regard to powers of an arbitrator and the ground upon which arbitration award could be set aside, the Court could not interfere with the award adopting its own interpretations ---High Court declined to interfere in the matter ---Constitutional petition was
dismissed, in circumstances.
2018 SCMR 662 rel.
Adnan Ejaz for Petitioners (in Constitutional Petition No. 747 of 2020 and Civil
Revision Petition No. 201 of 2020).
Syeda Tehmina Samad for Respondent No. 1 (in Constitutional Petition No. 747 of
2020 and Civil Revision Petition No. 201 of 2020).
Date of hearing: 19th May, 2021.
JUDGMENT
MUHAMMAD EJAZ SWATI, J. ---The respondent No.1 (Chairman Pakistan
Tobacco Board, Peshawar) invited bids for collection of cess on Rustica Tobacco in the
province of Balochistan for the year commencing 1st January, 2002 to 31st December, 2002. Malik Allauddin Khan (the then contractor) through open bid was declared successful bidder by offering bid of Rs.89,00,000/ - (rupees eighty nine lac only). Pursuant to above bid, an
agreement dated 18th January 2002 was signed between the Contractor and Director, Zonal
Office, Pakistan Tobacco Board, Lahore.
2. According to the contract, the contractor was authorized to charge cess @ 0.076 per
kg on tobacco leaf and its bye -products of Rustica Tobacco and on Niswar @ 0.076 per kg
produced in the Province of Balochistan.
3. It appears from the record that the Director Zonal Office, Lahore through a letter
dated 18th March, 2002 restraining them not to charge cess on bye -products main stalk
(Dandi), viz "khaka", "Khara" and "rorh" being exempted form levy of cess. The subsequent
Director Zonal Office, Lahore vide letter dated 1st July, 2002 withdrawn earlier letter dated 18th March, 2002 and directed the contractor to collect cess over main stalk of Rustica Tobacoo (Dhandi) and its bye -products. The contractor vide order dated 6th June, 2002 was
also directed to deposit the outstanding installments, in case of failure contract would be cancelled.
4. The contractor/petitioner filed an application under section 20 of Arbitration Act,
1940 by invoking clause -III of the contract for appointment of sole arbitrator for passing
award and also sought injunction from cancellation of agreement. The application was allowed on 19th September, 2002 and matter was referred to arbitrator vide order dated 29th October, 2002 and the petitioner was also directed to deposit the due amount to Pakistan
Tobacco Board. The petitioner filed an application for removal of the arbitrator, being a party in the issue, which was rejected vide order dated 29th October, 2002 by the Senior Civil Judge, Quetta. The award dated 7th January, 2003 was made by the then Director Zonal Office, Lahore, regarding which an application under sections 14 and 17 of the Arbitration, Act for making afore referred award as rule of the Court was filed by the respondent, which after contest was allowed by the learned Senior Civil Judge -I, Quetta vide judgment/decree
dated 31st July, 2009 and award dated 7th January, 2003 was made rule of the Court. The aforesaid award was challenged by petitioner by way of filing Civil Miscellaneous Appeal No.19 of 2009, which was allowed by this Court vide order dated 15th April, 2015. The relevant reproduced as under: -
"In view of the above, consent of the parties, without touching merits of the case, Civil Misc. Appeal No.19 of 2009 and Civil Revision No.379 of 2009 are accepted with no order as to cost, the Arbitration award dated 07.01.2003 passed by the Director, Zonal Office, Pakistan Tobacco Board is declared null, void and of no legal effect, the impugned judgment and decree dated 31.07.2009 passed by the learned Senior Civil Judge -I, Quetta is set aside and the matter is referred to the Chairman,
Pakistan Tobacco Board as sole Arbitrator to conduct arbitration afresh and to pronounce the Arbitration Award after affording opportunity of hearing and producing evidence to all the concerned; without being influenced by the earlier proceedings or decisions made therein.
The Sole Arbitrator should positively conclude the proceedings within three months
of receipt of this order."
5. The Sole Arbitrator had passed award dated 30th June, 2015. The learned trial Court
vide impugned judgment while making the award dated 30th June, 2015 rule of the Court also dismissed the objection filed by the petitioner. On appeal filed by the petitioner, the learned Additional District Judge -VII, Quetta vide order dated 14th July, 2020 (the impugned
order) also dismissed the appeal.
6. The impugned order/decree dated 5th July, 2018 passed by the trial Court and
appellate Court dated 14th July 2020 have been challenged by the petitioner by way of filing Constitutional Petition (C.P) No.747 of 2020 and Civil Revision Petition No.201 of 2020, therefore, the both are dealt through this common judgment.
7. Learned counsel for the petitioner contended that agreement of collection of cess was
to be commence from 1st January, 2002, but it was executed on 13th January, 2002, thereby petitioner had not been allowed proceeded to collect cess for 17 days; that without novation of the agreement the petitioner was restrained from collecting cess on various items for three months regarding which the arbitrator has failed to consider the case of the petitioner; that documentary evidence provided by the petitioner had not been taken into consideration on the basis whereof impugned award is not sustainable.
8. Learned counsel for the respondent contended that petitioner has failed to deposit the
installment as per schedule given in the agreement; that arbitrator had been given benefit of three months during which petitioner could not collect cess on various items and reduced the outstanding amount from 72 lac to 62 lac; that petitioner has failed to make out case of
misconduct on the part of arbitrator through any documentary evidence, despite availing opportunity.
9. We have heard the learned counsel for the parties and perused the record. The
petitioner had succeeded in obtaining the contract at the highest bid of Rs.89,00,000/ -
(rupees eighty nine lac only) in the open auction proceedings held on 6th of December, 2001. The petitioner had taken the charge of the contract from the previous contractor on 1st January, 2002, however, agreement was executed on 18th Day of January, 2002, whereby petitioner was bound to make payment of Rs.89,00,000/ - (rupees eighty nine lac only).
According to the agreement, the petitioner was required to make payment of balance amount in ten equal installments on monthly basis on first day of each month, but not later them 10th of the same month and the last final installment was due on 30th November, 2002. The contractor/petitioner deposited an amount of Rs.890,000/ - (eight lac ninety thousand) as
earnest money and a single installment of Rs.810,000/ - (eight lac ten thousand only) with the
Pakistan Tobacco Board and an amount of Rs.72,00,000/ - (seventy two lac only) alongwith
penalty was yet to be paid.
10. It appears that when the contractor was directed by the then Director Zonal Office,
Lahore vide letter dated 6th June, 2002 to deposit the outstanding installment, the petitioner/contractor invoked arbitration clause of the agreement by way of filing an
application under section 20 of the Arbitrator Act, which culminated the instant proceedings.
The main contention of the petitioner is that agreement was executed with delay of 17 days on 18th January, 2002, due to which he could not collect cess for 17 days; that petitioner sustained loss of Rs.60,58,895/ - due to issuance of letter dated 13th March 2002 and 18th
March, 2002 on the basis whereof he could not collect cess on bye -products of main stalk
(Dhandi) viz. khaka, kera, rorh till the withdrawal of aforesaid letter on 1st July, 2002. The
arbitrator in its award attended the same as under;
"Estimating/ascertaining the loss sustained by ex -contractor vide letter of 13.03.2002
and 18.03.2002, in which the then contractor was restrained from collection of cess
one bye -products of main stalk (Dandi), viz khaka, kara, rorh, ex- contractor produced
documentary evidence for Rs.60,58,895/ - in the shape of voucher/receipts, showing
cess exemption on the subsequently identified options of the plant vide the above letters. If the exempt portion of the plant is taken as one third in weight of the total, one can arrive at a reasonable calculation of the loss suffered and the collection made. Therefore, keeping in view that ex -contractor deposited an amount of Rs.8,90,000/ - as
earnest money and a single installment of Rs.8,10,000/ - with the Pakistan Tobacco
Board, leaving a total payable of Rs.72,00,000/ - plus 10 % penalty therefore, I being
Sole Arbitrator by invoking clause -IX of the Agreement, accept the loss suffered on
account of exemption letter issues by the PTB among other mitigating and extenuating circumstances, and order the award of Rs.62,00,000/ - (Rupees Sixty Two
Lacs) payable now instead, along with waiver of the penalty of Rs.8,09,000/ -. If the
Contractor failed to deposit Rs.62,00,000/ - within a month from the date of Award,
then recovery will be made as per law and procedure applicable in such circumstances."
11. From the above, it appears that the question of loss suffered by the
petitioner/contractor on account of exemption letter issued by the (PTB) had properly been determined in view of Clause- IX of the agreement.
It is well settled that where two views are possible with regard to power of an
arbitrator and the ground upon which an arbitration award could be set aside, the Court could not interfere with the award adopting its own interpretation. Reference in this respect is to be made on care reported in 2018 SCMR 662.
In view of the above, Constitutional Petitions No.747 of 2020 and Civil Revision
Petition No.201 of 2020 are dismissed. Parties are left to bear their own cost.
MH/136/Bal. Petition/Revision dismissed.This judgment is reproduced from a publicly available source for informational purposes and does not constitute legal advice. If you believe this listing contains an error,
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