IN THE SUPREME COURT OF PAKISTAN

(Appellate Jurisdiction)
PRESENT:

MR. JUSTICE SARDAR TARIQ MASOOD

MR. JUSTICE AMIN-UD-DIN KHAN
MR. JUSTICE MUHAMMAD ALI MAZHAR

CIVIL PETITIONS NO. 3059 & 3060 OF 2021

(Against Judgment dated 01.03.2021 passed by the
Islamabad High Court, Islamabad in RFA.Nos.01 & 2 of
2018)

Injum Aqeel ….Petitioner

(In both cases)

Versus

Latif Muhammad Chaudhry, etc. ….Respondents

(In both cases)

For the Petitioner : Mr. Mohammad Siddique Awan, ASC

Syed Rifaqat Hussain Shah, AOR

For the Respondents : N.R.

Date of Hearing : 18.05.2023

JUDGMENT

MUHAMMAD ALI MAZHAR, J:- These Civil Petitions for leave to appeal
are directed against the consolidated judgment dated 01.03.2021 passed
by the Islamabad High Court in RFA.Nos.1 & 2 of 2018 whereby both the
Regular First Appeals filed by the petitioner were dismissed and the ex-
parte award dated 27.02.2017 (“Award”) was maintained, however the
additional claim of the respondent No.1 referred to in the local
commission report was found to be beyond the scope of the Arbitration
Proceedings which could be agitated through separate proceedings.

2. The transient facts of the case are that the instant respondent No. 1
instituted a suit for specific performance of agreement to sell dated
27.5.2004 (“Agreement”) and injunction against the present petitioner
and respondent No. 2 before the Islamabad High Court, Islamabad. The
petitioner filed an application under Section 34 of the Arbitration Act,
1940 to enforce Clause 17 of the Agreement which provided a
mechanism to deal with the disputes by way of arbitration. The learned
Trial Court appointed the Arbitrator who commenced the proceedings.
According to the petitioner, the Arbitrator, without adopting proper
procedure or giving an opportunity of defence to the petitioner and
respondent No. 2, announced the Award. The petitioner came to know
on 10.3.2017 that he has been proceeded ex-parte, therefore he moved
C.P. Nos.3059 & 3060/2021 2

two applications on 24.3.2017 before the learned Trial Court; one for
setting aside the ex-parte proceedings, and the second for setting aside
the Award. The learned Trial Court vide Order dated 04.10.2017 only
accepted the application for setting aside the ex-parte proceedings before
it, but dismissed the application for setting aside the ex-parte Award
and made the Award the rule of court vide judgment dated 03.11.2017
against which the petitioner filed Regular First Appeals in the Islamabad
High Court, however the both appeals were dismissed vide the impugned
consolidated judgment.

3. The learned counsel for the petitioner argued that the impugned
judgment is against the facts of the case and the law. It was further
averred that the arbitrator committed misconduct, hence the Award is
liable to be set aside. He further contended that a glaring illegality is
floating on the face of the record which was not considered by the Trial
Court and Appellate Court, including the fact that the petitioner
surrendered his entire share in the project much prior to the decision of
the Trial Court in view of the revised partnership agreement. It was
further argued that the Arbitrator intentionally failed to associate the
petitioner in the arbitration proceedings, and thus committed
misconduct which has not been taken into consideration by both the
Courts below.

4. Heard the arguments. The record reflects that there was no dispute
with regard to the appointment of the Arbitrator in view of the
arbitration agreement. In fact, the Arbitrator was nominated on the
application of the petitioner and thereafter the learned Trial Court
appointed the Arbitrator. The bone of contention activated taking into
consideration the Agreement with respect to two Apartments against a
total sale consideration of Rs.4,600,000/- each, out of which a sum of
Rs.1,150,000/- each was paid as earnest money, while the balance sale
consideration of Rs.3,450,000/- each was to be paid in 10 equal
installments with effect from 21.08.2004 to 31.12.2006. The petitioner
promised to hand over the possession of both the flats by 31.12.2006
with a grace period of 03 months, failing which he was bound to pay
rent of both the flats to respondent No.1. The construction of the flats
could not be completed within the stipulated time, hence the petitioner
executed an undertaking to pay the rent in terms of Clause 18 of the
Agreement @ Rs.20,000/- per month and paid the rent till April 2018,
thereafter he neither paid the rent nor completed construction to
handover the possession. The Arbitrator delivered the Award and found
C.P. Nos.3059 & 3060/2021 3

the respondent No.1 entitled to receive the rent till actual possession of
the suit flats. The objections were filed under Section 30 of the
Arbitration Act, 1940 on the ground that the Arbitrator afforded no
opportunity to the petitioner to defend the proceedings, hence the Award
is liable to be set aside. On the contrary, the arbitration proceedings
reflect that Mr. Muhammad Anwar Dar (Advocate) contacted the
Arbitrator and inquired about the proceedings. The petitioner was also
contacted telephonically who appeared before the Arbitrator on
04.12.2015 and informed that Mr. Rehan Uddin Golra (Advocate) will
appear. The statement of claim was also handed over by the Arbitrator
to Mr. Rehan Uddin Golra (Advocate) to submit the reply of the claim but
neither the learned counsel nor the petitioner appeared before the
Arbitrator despite being afforded repeated opportunities and ultimately,
vide order dated 27.02.2016, the Arbitrator initiated ex-parte
proceedings and delivered the Award after adopting the proper
procedure. The petitioner has failed to point out any misconduct of the
Arbitrator and also remained unsuccessful in demonstrating any other
deficiency, error or legal infirmity in the Award.

5. The stratagem of resolving the bone of contention by means of

arbitration is in essence a consensual methodology for resolving
disputes on the strength of an arbitration agreement. It is an alternative
course of action by means of which the disputes are submitted by
agreement of the parties to the arbitrator(s) for resolution and rendering
an award for the referred dispute(s). Due to somewhat moderate and
flexible procedural rigidities, the resolution of disputes through
arbitration often proves to be speedier and more cost-effective than
Court litigation which passes through different stages or rounds of
litigation from original to appellate forums. It is also a form of alternative
dispute resolution (ADR) in which the parties may adopt to settle their
disputes or differences outside the courts of law which sometimes runs
faster to its logical end and proves to be more expeditious rather than
litigating in court. Under Section 13 of the Arbitration Act, 1940,
the arbitrators or umpires, unless a different intention is expressed in
the agreement, may exercise (i) the powers to administer oath to the
parties and witness appearing; (ii) state a special case for the opinion of
the Court on any question of law involved; (iii) make an award
conditional or alternative; (iv) correct in an award any clerical
mistake or error arising from any accidental slip or omission; and
(v) administer to any party to the arbitration such interrogatories as may
in the opinion of arbitrator or umpire be necessary. In the arbitration
C.P. Nos.3059 & 3060/2021 4

proceedings, the parties may also engage lawyers and produce oral and
documentary evidence vice versa in order to enforce the reference/claim
or oppose it, and the arbitrator within the stipulated time records the
evidence produced by the parties and the dispute is culminated through
an award which is presented in Court for making it the rule of the Court,
and the Court is not supposed to act in a perfunctory manner in this
regard, rather it should look into the award and, if any patent illegality
is found, the Court may remit the award to the arbitrator for
reconsideration or set aside the same. At this juncture, the following
judicial precedents are quite relevant to be cited with regard to the
scheme of arbitration, powers of the arbitrator and powers of the Court
while making the award the rule of the Court:

1.Messers National Construction co Vs. the West Pakistan Water

and Power Development Authority through its Chairman (PLD 1987
SC 461). The general principle underlying the concept of arbitration
as translated in the scheme of the Arbitration Act is that, as the
parties choose their own arbitrator to be the Judge in the dispute
between them, they cannot when the award is good on the face of it,
object to his decision, either upon law or the fact. In other words
arbitration in substance ousts the jurisdiction of the Court, except
for the purpose of controlling the arbitrator and preventing
misconduct and for regulating the procedure after the award.

2. M/s Joint Venture KG/RIST & others Vs. Federation of Pakistan,

through Secretary & another (PLD 1996 SC 108). A Court hearing
the objection to the award cannot undertake reappraisal of evidence
recorded by the arbitrator in order to discover the error or infirmity
in the award. The error or infirmity in the award which rendered the
award invalid must appear on the face of the award and should be
discoverable by reading the award itself. Where reasons recorded by
the arbitrator are challenged as perverse, the perversity in the
reasoning has to be established with reference to the material
considered by the arbitrator in the award.

3. Pakistan Steel Mills Corporation, Karachi Vs Messrs Mustafa

Sons (PVT.) LTD., Karachi. (PLD 2003 SC 301). 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. Even,
if there was wrong interpretation of a clause in a contract, in such
cases, view has been taken that an Arbitrator is not bound to give
specific findings on each and every issue nor he is required to state
reasons for his conclusion, if the findings are within the parameters
of submissions made before him.

4. Mian Corporation through Managing Partner Vs. Messrs Lever

Brothers of Pakistan Ltd. through General Sales Manager, Karachi.
(PLD 2006 SC 169). While examining the award, the Court does not
sit in appeal over the award and has to satisfy itself that the award
does not run counter to the settled principles of law and the material
available on record. An award cannot be lawfully disturbed on the
premise that a different view was possible, if the facts were
appreciated from a different angle. In fact Court while examining the
correctness and legality of award does not act as a court of appeal
and cannot undertake reappraisal of evidence recorded by an
arbitrator in order to discover the error or infirmity in the award.

5. Federation of Pakistan through Secretary, Ministry of Food,

Islamabad and others Vs Messrs Joint Venture Kocks K.G. /RIST
C.P. Nos.3059 & 3060/2021 5

(PLD 2011 SC 506). While considering the objections under

sections 30 and 33 of the Arbitration Act, 1940 the court is not
supposed to sit as a court of appeal and fish for the latent errors in
the arbitration proceedings or the award. The arbitration is a forum
of the parties' own choice and is competent to resolve the issues
which decision should not be lightly interfered by the court while
deciding the objection thereto, until a clear and definite case within
the purview of the section noted above is made out, inasmuch as the
error of law or fact in relation to the proceedings or the award is
floating on the surface, which cannot be ignored and if left
outstanding shall cause grave injustice or violate any express
provision of law or the law laid down by the superior courts or that
the arbitrator has misconducted thereof. The courts should not
indulge into rowing probe to dig out an error and interfere in the
award on the reasoning that a different conclusion of fact could
possibly be drawn.

6. If we delve into the scheme of the Arbitration Act, 1940, it divulges

that the Court has been vested with ample powers to render judgment in
terms of the award, or modify or correct it, remit the award for
reconsideration, or set aside the award. According to Section 30 of the
Arbitration Act, 1940, the Court may set aside the award if (a) an
arbitrator or umpire has misconducted himself or the proceedings; (b)
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; or (c) that an award has been improperly
procured or is otherwise invalid. Merely filing an objection under Section
30 of the Arbitration Act, 1940 carries no great weight and is
inconsequential unless some substantial grounds are alleged in the
objections warranting and deserving the setting aside of the award
which the petitioner failed to underline. The record reflects that an
ample opportunity was afforded to join the proceedings but the
petitioner was so reckless and reluctant to join for which the Arbitrator
cannot be blamed. Even no plausible grounds are raised in the objection
which may infer, corroborate or substantiate any act of misconduct on
the part of the Arbitrator which could be proved to the satisfaction of the
Court. It is a well settled exposition of law that the significance and
connotation of the term ‘misconducting the proceedings’ is broader than
the arbitrator’s personal misconduct. Simply making an erroneous
decision would not automatically be tantamount to misconduct unless it
is proved that the arbitrator has failed to decide all the issues or
objections; or decided such issues not included in the scope of the
arbitration agreement, or the award was inconsistent, uncertain or
vague; or there was some mistake of fact, if this mistake is either
admitted or is clear beyond any reasonable doubt; or the arbitrator had
some pecuniary interest in the matter. Here there is also a need to
distinguish the phraseology “legal misconduct” and “moral misconduct”.
C.P. Nos.3059 & 3060/2021 6

"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) 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. Above are some of the omissions and commissions which
constitute legal misconduct or, in other words, that an arbitrator has
misconducted the proceedings within meaning of clause (a) of Section 30
of the Arbitration Act, 1940. In the case of “moral misconduct” it is
difficult to define exhaustively or determine exactly what amounts to
"misconduct" on the part of an arbitrator. It is essential that there must
be 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 the party appointing
him, nor is such party deemed to be his client. When a claim or matter
in dispute is referred to an arbitrator, he is the sole and final Judge of
all questions, both of law and of fact. The arbitrator cannot act
arbitrarily, irrationally, capriciously or independently of the contract. 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 also be tantamount to mala fide action and vitiate the award.

7. 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. The Court cannot review the award, nor entertain
any question as to whether the arbitrators decided properly or not on a
point of law or otherwise. 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. Where two views are
possible, the Court cannot interfere with the award by adopting its own
interpretation. The general principle underlying the concept of
C.P. Nos.3059 & 3060/2021 7

arbitration as translated in the scheme of the Arbitration Act, 1940 is

that, as the parties choose their own arbitrator to be the Judge in the
dispute between them, they cannot, when the award is good on the face
of it, object to his decision, either upon law or fact. The error or infirmity
in the award which rendered the award invalid must appear on the face
of the award and should be discoverable by reading the award itself. 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.
An award cannot be lawfully disturbed on the premise that a different
view was possible. Arbitration is a forum of the parties' own choice and
is competent to resolve the issues of law and the fact between them,
which opinion/decision should not be lightly interfered by the court
while deciding the objection thereto, until a clear and definite case
within the purview of the section noted above is made out. The Court
does not sit in appeal over the award and should not try to fish for 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. 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 [Ref: Gerry's International (Pvt.) Ltd Vs Aeroflot
Russian International Airlines (2018 SCMR 662)]. The following
material is also quite relevant to highlight the concept and acuteness of
the expression “misconduct on the part of Arbitrator”:

1. Halsbury’s Laws of India, Volume 2, Butterworths India, at

Page 255 paragraph 20.124. Ex-parte awards. The arbitrator has
authority to pass an award ex parte especially where he is of the
opinion that absence of a party is deliberate in order to avoid or
delay the proceedings, but it is the duty of the arbitrator to apply his
mind to the facts and circumstances of each case and not proceed
ex parte automatically merely because a notice to proceed ex parte is
given. (Indian Iron and Steel Co Ltd v Sutna Stone and Lime Co Ltd
AIR 1991 Cal 3).

2. Halsbury's Laws of England, 3rd Edn. Vol. II, p. 57. The

expression 'misconducted’ is "of wide import" and includes: "on the
one hand bribery and corruption and on the other hand a mere
mistake as to the scope of authority conferred by the agreement of
reference or an error of law appearing on the face of the award. Thus
misconduct occurs if the arbitrator or umpire, as the case may be,
fails to decide all the matters which are referred to him; if by his
award he purports to decide matters which have not in fact been
included in the agreement of reference; if the award is
inconsistent...".

3. Halsbury’s Laws of England (4th Edn. Reissue) Volume 2 in

paragraph 694 states: ‘Misconduct has been described as "such a
mishandling of arbitration as its likely to amount to some
substantial miscarriage of justice". Where an arbitrator fails to
comply with the terms, express or implied, of the arbitration
C.P. Nos.3059 & 3060/2021 8

agreement, that will amount to misconduct … in particular, it would

be misconduct to act in a way which is or appears to be, unfair. It is
not misconduct to make an erroneous finding of law or fact.

4. Halsbury’s Laws of India, Volume 2, Butterworths India, at

Page 283 paragraph 20.157. Legal misconduct means any neglect
of duty and responsibility of the arbitrator. If the legal misconduct
does not in any way reflect on the integrity or impartiality of the
arbitrator, he cannot be said to have been guilty of such misconduct
as was likely to have affected adversely the confidence of the parties.
Such misconduct does not necessarily imply moral turpitude. It
means misconduct in the judicial sense of the word and not from a
moral point of view.

5. Atkin L.J. described "misconduct" in Williams & Wallis & Cox

[1914] 2 K.B. 478; "That expression does not necessarily involve
personal turpitude on the part of the arbitrator... The term does not
really amount to much more than such a mishandling of the
arbitration as is likely to amount to some substantial miscarriage of
justice". (Russel on Arbitration, 23rd edition, Footnote 493, Page
407).

6. “Misconduct” is often used in a technical sense as denoting

irregularity and not any moral turpitude. But the term also covers
cases where there is a breach of natural justice. Much confusion is
caused by the fact that the expression is used to describe both these
quite separate grounds for setting aside an award; and it is not
wholly clear in some of the decided cases on which of these two
grounds a particular award has been set aside." (Russel's Treatise
on Arbitration, 17th Edn. Pg. 332).

8. In the wake of the above discussion, we do not find any irregularity or

perversity in the impugned judgment passed by the learned High Court.
Consequently, these petitions are dismissed and leave to appeal is
refused.

Judge

Judge

Judge
Islamabad
18.05.2023
Khalid
Approved for reporting.