HIGH COURT OF WEST PAKISTAN
Letters Patent Appeal No. 106 of 1960
Decided On: 27.02.1964
Appellants: Governor-General of Pakistan
Vs.
Respondent: Asafia Construction Ltd.
Hon’ble Judges:Wahiduddin Ahmed and Sardar Muhammad Iqbal, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: Abdul Qadir Sheikh Additional A.G.
For Respondents/Defendant: Shah Yaqub
Subject: Contract
Catch Words
Mentioned IN
Disposition:
Appeal dismissed
Industry: Real Estate
JUDGMENT
Sardar Muhammad Iqbal, J.
- The facts which gave rise to the present appeal are that a building contract was entered into between the Governor-General of Pakistan (now the President) represented by the Engineer-in-Charge, G.H.Q., Rawalpindi, and Messrs Asafia Construction Limited, Karachi, the respondent. After the completion of the contract, the Surveyor of Works and the Garrison Engineer technically checked the final bill and issued a certificate about the completion of the work. They also gave a certificate as to the quantity of the cement used in the work. The respondent was consequently paid the final bill. Subsequently a departmental test audit was carried out and it transpired that the respondent had been issued more cement than what had been shown in the final bill. The Department claimed a recovery of Rs. 22,172 and based their claim on clause 67 of the General Conditions of Contracts (P.A.F.W. 2249) according to which the Government has the right to carry out a post-payment audit and technical examination of the final bill, and if as a result of such audit and technical examination any over payment is discovered in respect of any work done by the contractor, the Government has the right to recover it from the contractor, or if any under payment is discovered the Government has to pay the same to the contractor. The respondent repudiated the claim of the Government and asserted that the certificates issued by the Surveyor of Works and the Garrison Engineer, certifying the quantity in the final bill, could not be the subject-matter of a post-payment audit and technical examination of the final bill as was contemplated in clause 67 of the General Conditions of Contract. In clause 33 it is provided that with regard to the work and the quality of stores or materials the decision of the C.M.E.S. shall be final and conclusive. The respondent also lodged a claim with the Government for extra payment due to devaluation of Pak currency under Notification No. I-JSP (EXCH), dated the 1st of August 1955. The Government, however, did not admit this claim on the ground that clause 63 of the General Conditions of Contracts (P.A.F.W.-2249) was not applicable to the case as the devaluation had not been consequent to an act of the Legislature, but had been done only through a notification. These disputes were referred to the sole arbitration of Mr. Abdul Ghaffar Khan under Clause 68 of the General Conditions of Contracts. The arbitrator stated both these questions for the opinion of the Court.
- The learned Single Judge gave his opinion on the 24th of October 1960 that the decision of the Garrison Engineer with regard to the execution of the work and about the material and the stores was final and conclusive, and clause 67, whereby the Government has been empowered to carry out a post-payment audit, did not override the clauses which gave finality to the certificates of the Garrison Engineer, etc. He also opined that the notification, whereby the Pak currency was devalued, had the same effect as an act of Legislature mentioned in clause 63 of the General Conditions of Contracts.
- The Government felt aggrieved and preferred an appeal against the opinion given by the learned Single Judge. A preliminary objection was raised on behalf of the respondent that this appeal was not competent. Under section 39 of the arbitration Act an appeal is competent against an award stated in the form of a special case. In the present case the arbitrator had only stated a special case for the opinion of the Court on the question of law involved under clause (b) of section 13 of the arbitration Act. He could state the award, wholly or in part, in the form of a special case of such question for the opinion of the Court. In that case the appeal would have been competent under section 39 of the arbitration Act. No appeal is provided for under the arbitration Act against the decision of the Court on the special case stated by the arbitrator for the opinion of the Court on any question of law. The appeal under the arbitration Act against the said decision is, therefore, not at all competent.
- The fact, however, that an appeal is not provided for against a particular order under the arbitration Act is no bar to an appeal being filed under clause 10 of the Letters Patent. It was held by their Lordships of the Privy Council in Hurrish Chunder Chowdhry v. Kali Sundari Debia (1883) ILR 9 Cal. 482, that the special provisions contained in the Letters Patent could not be deemed to have been overridden by the provisions contained in section 588 if the Code of Civil Procedure, 1877 (which were worded almost similarly to those of subsection (1) of section 39 of the arbitration Act). It was observed by their Lordships as follows:–
It only remains to observe that their Lordships do not think that section 588 of Act X of 1877, which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the Judges of the Court to the full Court.
The same view was taken in Hanuman Chamber of Commerce Ltd. v. Jassa Ram Hira Nand AIR 1948 Lah. 64, where it was held that subsection (2) of section 39 of the arbitration Act does not take away the right of appeal conferred by clause 10 of the Letters Patent of the Lahore High Court either expressly or by necessary implication. This matter was considered exhaustively in Sheikh Muzaffar Din v. Mst. Allah Vasai PLD 1953 Lah. 284 and Mr. Justice S.A. Rahman, after referring to the conflicting judicial opinion on this point, observed that Letters Patent Appeal in an arbitration matter was competent. The same view was taken in Sh. Mahboob Alam v. Sh. Mumtaz Ahmad PLD 1960 Lah. 601. We do not desire to discuss this subject any further. We may, however, observe that by providing an appeal against certain orders under the arbitration Act it was never intended by the Legislature to alter the effect of clause 10 of the Letters Patent by such indirect legislation. If it had been intended to do so, the alteration in the law would have been expressly declared. The question, however, arises whether the instant case is one in which an appeal is competent under clause 10 of the Letters Patent. An appeal under the said clause lies only from the “Judgment” of one Judge of the said High Court. Is the opinion given by the Court on a special case referred to it under section 13(b) of the arbitration Act a “judgment” ? In subsection (9) of section 2 of the Civil Procedure Code “judgment” is defined as “the statement given by the Judge of the grounds of a decree or order”. There is nothing in the Letters Patent itself to enable one to say what the exact meaning of the term “judgment” is and what orders would be governed by that term. The definition given in the Code of Civil Procedure is intended for the construction of the “judgment” as used in the Code only. It obviously cannot apply to the word as used in the Letters Patent. The meaning of the word “Judgment” in the Letters Patent has been, however, the subject-matter of consideration in several reported cases. The leading case which has been referred to in almost all subsequent judgments is The Justices of the Peace for Calcutta v. The Oriental Gas Co. (1872) 17 Suth WR 374 (370-371), in which Couch, C.J., defined it as meaning “a decision which affected the merits of the question between the parties by determining some right on liability which may be either preliminary or interlocutory, the difference between them being that a final judgment determines the whole cause or suit, and a preliminary or interlocutory judgment determines only a part of it leaving other matters to be determined.” The definition has become almost classical. The judgment must determine some right between the parties. According to the definition given in this case the judgment must determine the whole or part of the case and it does not embrace within its scope the order passed in independent proceedings ancillary to the suit for example, orders passed on applications for temporary injunctions or the appointment of receivers or for the stay of execution, because none of these orders affects the merits of the case or determines any right or liability. The definition of the word “Judgment” given by Couch, C.J., was considered not to be exhaustive. Since then the meaning of the term, has again been considered by a Full Bench of the Madras High Court in T.V. Tuljaram Row v. M.K.R.V. Alagappa Chettiar (1912) 35 Mad. 1. The learned Chief Justice Sir Arnold White was of the opinion that the definition given by the Calcutta High Court was too narrow, and he himself laid down the test to be applied to decide whether any particular order amounted to a judgment or not within the meaning of the Letters Patent. At page 7 he says–
The test seems to me to be not what is the form of the adjudication but what is its effect in the suit or proceeding in which it is made. If its effect, whatever its form may be, and whatever may be the nature of the application on which it is made, is to put an end to the suit or proceeding so far as the Court before which the suit or proceeding is pending is concerned, or if its effect, if it is not complied with, is to put an end to the suit or proceeding, I think the adjudication is a judgment within the meaning of the clause.
And he added:
An adjudication on an application which is nothing more than a step towards obtaining a final adjudication in the suit is not, in my opinion, a judgment within the meaning of the Letters Patent.
I think, too, an order on an independent proceeding which is ancillary to the suit (not instituted as a step towards judgment, but with a view to rendering the judgment effective if obtained) e.g., an order on an application for an interim injunction, or for the appointment of a receiver is a ‘judgment’ within the meaning of the clause.
With reference to the particular case which was before the Full Bench it was held that an order refusing to frame an issue was not a “judgment”. The same view has been accepted and followed by the Lahore High Court in Gokalchand v. Sanwal Das AIR 1920 Lah. 326 and also in Ruldu Singh v. Sanwal Singh AIR 1922 Lah. 380 (2). The departure from the earlier view taken by the Calcutta High Court was that the word “judgment” was interpreted to include orders passed in supplemental proceedings provided they were obtained with a view to rendering the ultimate judgment effective, if obtained, and, therefore, a particular decision, according to this view, may be a “judgment” although it did not affect the merits of the suit or proceedings and did not decide any question of right raised in the suit or the proceedings. Whether we apply the definition given in The Justices of the Peace for Calcutta or in Tuljaram Row’s case, the decision in the instant case given by the learned Single Judge on a case stated under section 13 of the arbitration Act is not a “judgment” within the meaning of clause 10 of the Letters Patent. The decision given by the Court is not on merits. It has not determined any right or imposed any liability. It has not resulted in the determination of the whole case or a part of it. Applying the principles given in the Justices of the Peace for Calcutta it is not a “Judgment” at all. All that the Court has done is that it has given an opinion on a case stated. It cannot be considered to be an order on an independent proceeding which is ancillary to the suit and might have been passed with a view to rendering the judgment in the suit effective, if obtained. It may be a step towards obtaining a final award from the arbitrator but, as held in Tuljaram Row’s case, that will not make this to be a judgment. The decision given by the learned Single Judge, for all intents and purposes, is only in the nature of an advice or an instruction. The arbitrator may act upon it and pass the order accordingly. He is, however, not bound to do so. If he had any such intention he could have stated the award in the form of a special case for the opinion of the Court under section 13(b) of the arbitration Act, thereby rendering himself functus officio in the cause. When the arbitrator thinks that the decision of the Court on a point of law should be effective and binding, he does not state the case for the opinion of the Court but states the award in the form of a special case. In doing so, the arbitrator exhausts his power, and makes his award in such form that the opinion of the Court determines the rights of the parties. When the award is stated for the Court’s opinion, the award is final and the arbitrator becomes functus officio and the decision of the Court alone determines the rights of the; parties. The arbitrator has no power to change the award. It is presumably for this reason that the Legislature provided an appeal under the arbitration Act in such cases upon a special case. The very fact that the arbitrator has stated only a question for the opinion of the Court shows that he had not made up his mind to be bound by such opinion. When a case is submitted for the opinion of the Court the arbitration proceedings remain suspended until the Court has pronounced its opinion. The arbitrator is to be guided by the opinion. The arbitrator may accept the opinion, and this is what happens mostly. Since, however, by making a reference the arbitrator does not divest himself of the complete authority over the subject-matter of arbitration, he still remains the final Judge of law and facts. As held In re: Adamji Lukmanji and Louis Dreyfus & Co. AIR 1925 Sind 83 a fair and an honest arbitrator is, in the absence of special circumstances, bound in honesty and morality, after taking the opinion of the Court, to act upon such opinion. He is however, under no statutory obligation to do so, and if he gives the award contrary to the opinion of the Court, it will nonetheless be binding unless it is set aside in due process of law for containing an error of law apparent on the face of it.
- There is consensus of judicial opinion on the question that the decision of the Court on a case stated, if it is not binding on the functionary which referred it, is not a “judgment”, this being in its very nature only advisory and having been given by the Court in the exercise of its consultative jurisdiction. The important case in this respect is In re: Knight and the Tabernacle Permanent Building Society (1892) 2 QB 613, which has been referred to and relied upon in subsequent judgments. The facts of the case are that a special case was stated under the arbitration Act, 1889, section 19 of which provided that an arbitrator might at any stage of the proceeding under a reference,, and shall, if so directed by the Court or a Judge, state in the form of a special case for the opinion of the Court any question of law arising in the course of the reference. (These provisions are identical with the provisions of section 13 of the arbitration Act, 1940 except that under the English Law an arbitrator could be compelled to state a special case, yet in Pakistan such compulsion is not possible.) The case came up before the Divisional Court which decided the question in favour of Knight. Against this decision the Society appealed. Repelling the contention that the decision of the Court determined the rights of the parties, it was held that the appeal was not competent and Lord Esher, M.R., observed that “what the statute in terms provides for is an ‘opinion’ of the Court to be given to the arbitrator or umpire; and that there is not to be any determination or decision which amounts to a judgment or order.” It was further observed by Bowen, L.J., that–
The opinion of the Court does not finally determine the case; it only binds the arbitrator in honesty or morals to act upon the law as the Court states it. There could be no appeal from his decision because he did not do so, although it might be a ground for impeaching his award on the ground of misconduct if he did not. It appears to me that this consultative jurisdiction of the Court does not result in a decision which is equivalent to a judgment or order.
Relying on this judgment it was held in Purshotumdas Ramgopal v. Ramgopal Hiralal ILR 35 Bom. 130, that “if the arbitrators are merely stating a case for the opinion of the Court before they have made an award no appeal lies” against the decision of the Court. In British Westing House v. Underground Electric Railway Co. 1912 AC 673, it was held by the House of Lords that “the opinion given on a special case was not a judgment or order and was not susceptible of being subject of an appeal.” The law in England has since changed and by virtue of sub-clause (3) of section 20 of the arbitration Act, 1950 (14 Geo. 6 c. 27) an appeal against a decision of the High Court on a case stated on a question of law arising in the course of reference is competent by the leave of the Court or the Court of Appeal, and these provisions have rendered obsolete much of the case-law on what was formally called consultative cases. The position under the law of Pakistan, however, remains unchanged, because there is no corresponding provision introduced in the arbitration Act of 1940. It was further held in the British Westing House’s case that if an award was founded on that opinion, and the opinion was erroneous, the Courts dealing with the award could set aside the same as containing an error of law apparent on the face of the award. This observation, however, is not applicable in the present case for the obvious reason that the appellants challenged the opinion of the learned Judge without waiting for the action of the arbitrator which the arbitrator might have taken. The learned Additional Advocate-General states that the arbitrator has already given his award in accordance with the opinion of the learned Single Judge. That may be so, but we cannot take notice of it in this Letters Patent Appeal. The objection, if any, should have been taken in the proper forum.
- In the cases referred to above, the decision was based on the fact that the arbitrator was not bound to pass the orders in conformity with the opinion given. He could under special circumstances ignore it. There are, however, other important pronouncements in which notwithstanding the fact that the referring authority had to pass the order in conformity with the decision of the Court, it was still held with reference to the provisions of the Statute and the circumstances of the each case that the decision was only consultative in character. In Mrs. Parin R. Bamboat v. Collector of Karachi PLD 1962 Kar. 598, in which one of us was the author of the judgment, an appeal had been preferred under the Letters Patent against the decision of a learned Single Judge on a question which was referred to the High Court by the Collector of Karachi under section 84(2) of the Cantonments Act, 1924. It is provided in subsection (3) of section 84 of the Cantonments Act that “on a reference being made under subsection (2), the subsequent proceedings in the case shall be, as nearly as may be, in conformity with the rules relating to references to the High Court contained in Order XLVI of the First Schedule to the Code of Civil Procedure.” The important thing to be noted is that the Collector had to pass the order in conformity with the decision of the Court. The ratio decidendi of the Division Bench decision is that the decision given by the High Court in the case was only of advisory character, and relying on Tata Iron and Steel Company Ltd. v. The Chief Revenue Authority of Bombay AIR 1923 PC 148, it was held that no appeal was competent under clause 10 of the Letters Patent against the decision of the learned Single Judge. The Judicial Committee in Tata Iron and Steel Company’s case was dealing with an appeal from a judgment of the High Court of Bombay on a question referred to it under section 51 of the Indian Income-tax. Act, 1918. (It is equivalent to section 66 of the Income-tax Act, 1922). A preliminary objection was raised by the respondent to the effect that the appeal was not competent, inasmuch as no such appeal lay from the decision of the High Court on a reference by a case stated under section 51 of the Statute that such a decision is only advisory, as it is styled, and was something in the nature of an opinion for the guidance of the Revenue Authorities as to how they should deal with the question referred to the High Court. The precise contention relevant to the present case was that the 39th clause of the Letters Patent of the Bombay High Court which provided for an appeal to Her Majesty in Council was restricted to appeals against “final judgment, decree or order”. It was held by their Lordships of the Privy Council that the decision, judgment or order made by the Court under section 51 of the Income-tax Act was merely advisory, and not in, the proper and legal sense of the term ‘final judgment’ and that an appeal from it was incompetent. Sub-clause (3) of section 51 (it is like subclause (5) of section 55 of the Income-tax Act, 1922) reads as under:–
The High Court upon the hearing of any such case shall decide the questions raised thereby, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and shall send to the Revenue Authority by which the case was stated a copy of such judgment under the seal of the Court and the signature of the Registrar; and the Revenue Authority shall dispose of the case accordingly, or if the case arose on reference from any Revenue Officer subordinate to it, shall forward a copy of such judgment to such officer who shall dispose of the case conformably to such judgment.
It may be noticed that notwithstanding the fact that the Legislature specifically termed the decision of the Court as “judgment” and further that the decision of the referring authority had to be in conformity with the judgment so given, the Judicial Committee still held this judgment not to be a “final judgment” within the meaning of clause 39 of the Letters Patent. In interpreting it, it was observed by their Lordships as follows:–
It is not an executive document directing something to be done or not to be done, but is merely the expression of the opinions of the majority of the Judges who heard the case, together with a statement of the grounds upon which those opinions are based. It amounts only to a ruling that a certain deduction claimed by a tax-payer to be allowed from the sum for which he has been already assessed to Income-tax is not permissible.
- Based on the decision of the Privy Council in Tata Iron and Steel Company Ltd. v. The Chief Revenue Authority of Bombay it was held in Bulaqi Shah v. The Collector of Lahore AIR 1925 Lah. 336. and Probhat Chandra Barma v. The King-Emperor AIR 1925 Cal. 598 that a judgment given by the High Court under section 66(2) of the Income-tax Act, 1922, was merely advisory, and in the exercise of its consultative jurisdiction was not a “judgment” within the meaning of clause 10 of the Letters Patent of the Lahore High Court and clause 15 of the Letters Patent of the Calcutta High Court, respectively (hereinafter to be referred to as clause 10 of the Letters Patent as these provisions are absolutely identical). It was argued in both the cases that the term employed in clause 10 of the Letters Patent was not a “final judgment”, but merely a “judgment”. Clause 39 of the Letters Patent provided for an appeal to the Privy Council from a “final judgment, decree or order” of the High Court. The expression “final judgment” does not occur in clause 10 of the Letters Patent. The word “judgment” only appears there. It was held in both the cases that according to the ratio decidendi of the Judicial Committee no significance could be attached to the absence of the word “final” from clause 10 and there was, in fact, no difference between “final judgment” mentioned in clause 39 and “judgment” mentioned in clause 10. According to their Lordships of the Privy Council in Tata Iron and Steel Company Ltd. v. The Chief Revenue Authority of Bombay the fact that the functionary, who stated a special case for the opinion of the Court is or is not bound to act upon it does not necessarily determine whether the order or decision of the Court is or is not merely advisory. They were, however, categorical in stating that “when a case is stated for the opinion of the Court, that would serve prima facie to indicate that the order made by the Court was only advisory” and was not a judgment. The words in section 13(b) of the arbitration Act for the purposes of the present case being “the arbitrators or umpire shall have power to state a special case for the opinion of the Court” bring the case within the observation of the Judicial Committee and are by all means advisory. It was only with reference to other cases where the authority which states a special case for the opinion of the Court is bound to act upon it and the case “was referred for the ‘decision’ or ‘determination’ of a question” that their Lordships observed that it may prima facie present some difficulty in holding that the order embodying this determination or decision was advisory. It was, however, held that “the use of these words or one of them was not decisive” and they observed that–
In order to determine whether an order made by a Court on a case stated is final or merely advisory, it is necessary to examine closely the language of the enactment, whether statute rule or order, giving the power to state a case.
- The upshot of the whole matter is that it will depend, upon the facts and circumstances of each case whether or not a particular decision given on a reference by some authority is a judgment within the meaning of the Letters Patent. The question depends on the accurate consideration of the language of the law under which the case is stated. In cases where a question is referred to the Court for its “opinion” only the decision of the Court will always be advisory and consultative in character, but in other cases where the reference is for a decision or determination of a question, it will depend upon the facts of each case and the language of the statute, or the relevant law under which the reference is made, whether or not the decision of the Court is advisory or otherwise. In all cases where the decision is given in the exercise of a consultative jurisdiction and is, therefore, advisory, it will not be a judgment within the meaning of clause 10 of the Letters Patent. We engender no doubt whatever that a decision of the Court in a case stated for its opinion under section 13(b) of the arbitration Act can operate no more than an advice and has no element or ingredient of a “judgment” within the meaning of clause 10 of the Letters Patent The Letters Patent appeal is not competent. The preliminary objection, therefore, succeeds. The appeal is accordingly dismissed with costs. The learned Additional Advocate-General made an oral request that the appellants should be granted special leave to file an appeal in the Supreme Court on the question of law involved in this matter as was done in Mrs. Parin R. Ramboat v. Collector of Karachi. It could be done under the law as was then applicable. Under sub-clause (a) of clause 2 of Article 58 of the Constitution of the Islamic Republic of Pakistan the High Court can issue a certificate only in cases involving “a substantial question of law as to the interpretation of the Constitution”. No provision of the Constitution is involved in the case. The certificate cannot, therefore, be granted.