IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: MR. JUSTICE MIAN SAQIB NISAR, CJ 
MR. JUSTICE FAISAL ARAB 
MR. JUSTICE IJAZ UL AHSAN  
 
CIVIL APPEAL NO. 539 OF 2003  AND  
CIVIL APPEAL NO. 1773 OF 2016 
(on appeal against the judgments dated 
19.03.2003 and 08.04.2016 of the High 
Court 
Of 
Sindh, 
Karachi 
passed 
in 
J.M.A.22-A/99 and H.C.A.239/1999) 
 
 
Gerry’s International (Pvt.) Ltd  
 
 
…Appellant(s) 
VERSUS 
Aeroflot Russian International Airlines 
 
…Respondent(s) 
 
For the Appellant(s): 
Khawaja Muhammad Farooq, Sr. ASC 
Mr. Mehr Khan Malik, AOR 
 
 
For the Respondent(s):  
Mr. Khalid A. Rehman, ASC 
 
 
Date of Hearing:  
01.01.2018 
ORDER  
 
 
MIAN SAQIB NISAR, CJ.— The facts of these appeals 
are intertwined and the questions of law arising therefrom are also 
intrinsically connected, thus the same are being disposed of 
together. 
2. 
 
The facts of Civil Appeal No. 1773/2016 shall enable 
us, for the most part, to decide the other appeal as well. In this 
context the brief facts of the case are that the respondent is an 
international airline incorporated in Russia, conducting its 
business with its office in Karachi. Vide a General Sales Agreement 
(GSA) dated 22.02.1993 entered into between the parties, the 
respondent conferred upon the appellant rights as a sales agent, 
for sale of its tickets, which GSA was subsequently cancelled by it 
(the respondent) on 19.10.1994. The aggrieved appellant filed a suit 
CAs 539/03 etc 
-: 2 :-
bearing No.252/1995 before the learned High Court of Sindh, 
Karachi, challenging such termination and seeking enforcement of 
the GSA. In this suit the respondent moved an application under 
Section 34 of the Arbitration Act, 1940 (the Arbitration Act) which was 
allowed vide order dated 17.12.1995. The other suit bearing 
No.569/1995 was initiated by the respondent against the appellant 
for recovery of Rs.97,585,085/60 on account of amounts 
outstanding against the appellant under the GSA, wherein an 
application for stay of the proceedings under Section 34 of the 
Arbitration Act was moved, which was allowed vide order dated 
11.1.1996 and the proceedings in the said suit were also stayed. 
The respondent appointed Mr. Justice (R) Abdur Rehim Kazi, as an 
arbitrator on 12.2.1996, but the appellant refused to agree to his 
appointment as the sole arbitrator. Since the appellant failed to 
appoint an arbitrator, on 11.3.1996, pursuant to Clause 14.4 of 
the GSA, the respondent requested the International Air Transport 
Association (IATA) to appoint the same. IATA initially required the 
appellant to appoint an arbitrator itself, but on its failure to do so, 
appointed Dr. Parvez Hasan, Senior Advocate as an arbitrator on 
behalf of the appellant. Subsequently, the arbitrators unanimously 
appointed Mr. Justice (R) Shafi-ur-Rehman as the Umpire. The 
appellant participated in the arbitration proceedings. As the 
arbitration proceedings could not be concluded within the 
stipulated period, the respondent filed an application for extension 
of time period for making the award by two months, which 
(application) was allowed vide order dated 8.5.1997. Ultimately a 
unanimous award (award) was made on 25.08.1997, which was filed 
in Court on 17.3.1998, wherein the respondent was awarded 
CAs 539/03 etc 
-: 3 :-
Rs.35,356,171.60. The appellant filed objections thereto, which 
were rejected and the award was made the rule of Court vide 
order/decree dated 17.11.1998. The detailed judgment in this 
regard was released on 19.4.1999. The appellant challenged the 
said judgment and decree before the learned High Court through 
H.C.A. No.239/1999, which was dismissed vide judgment dated 
8.4.2016 (impugned in CA No.1773/2016). 
3. 
 
After having obtained the decree, the respondent 
applied for the winding up of appellant company (J.M. No.22-A/1999) 
under the provisions of Section 306 of the Companies Ordinance, 
1984 (the Companies Ordinance). The appellant resisted the winding up 
petition on various grounds. However, the learned Judge in 
Chambers dismissed the petition of the respondent vide order 
dated 2.5.2000. On appeal filed by the respondent, vide judgment 
dated 6.8.2002, the matter was remanded back to the learned 
single Judge for deciding the case afresh. After the remand, the 
application for winding up was allowed vide judgment dated 
19.03.2003 (impugned in CA No.539/2003). 
4. 
 
 For brevity, the respective arguments of the parties 
are not separately set out, but shall find mention later in our 
opinion. The questions which emerged from the record and require 
consideration are: what is the true scope, import and application of 
Sections 30 & 33 of the Arbitration Act; what is the jurisdiction of 
the Court while making an award rule of the Court; whether the 
Court can sit in appeal over the decision of the arbitrators; 
whether the Court can make a roving inquiry and look for latent or 
patent errors of law and facts in the award; which flaws and 
shortcomings, if allowed to remain shall cause failure of justice 
CAs 539/03 etc 
-: 4 :-
and vitiate the proceedings before the arbitrator and the award; 
what are the questions for determination of arbitration agreement; 
and what are the grounds/basis on which an arbitrator should be 
held to have misconducted himself? 
5. 
 
In order to ascertain the answers to the above 
questions, it is imperative to consider the relevant provisions of the 
Arbitration Act as well as the case-law concerning the powers and 
authority of the arbitrators in arbitration proceedings viz. the 
jurisdiction of the Court while determining the validity of the 
award. The relevant provisions of the Arbitration Act read as 
under: -  
2.(a) 
“arbitration agreement” means a written agreement to 
submit present or future differences to arbitration, whether an 
arbitrator is named therein or not”. 
13. Powers of arbitrator. The arbitrators or umpire shall, unless a 
different intention is expressed in the agreement, have power to:  
(a) 
administer oath to the parties and witnesses appearing;  
(b) 
state a special case for the opinion of the Court on any 
question of law involved, or state the award, wholly or in 
part, in the form of a special case of such question for the 
opinion of the Court;  
(c) 
make the award conditional or in the alternative;  
(d) 
correct in an award any clerical mistake or error arising 
from any accidental slip or omission;  
(e) 
administer to any party to the arbitration such 
interrogatories as may, in the opinion of the arbitrators or 
umpire, be necessary. 
 
15. Power of Court to modify award. The Court may by order 
modify or correct an award: 
(a) 
Where it appears that a part of the award is upon a matter 
not referred to arbitration and such part can be separated 
CAs 539/03 etc 
-: 5 :-
from the other part and does not affect the decision on the 
matter referred; or  
(b) 
Where the award is imperfect in form, or contains any 
obvious error which can be amended without effecting such 
decision; or  
(c) 
Where the award contains clerical mistake or an error 
arising from an accidental slip or omission. 
 
26-A. Award to set out reasons: (1) The arbitrators or umpire 
shall state in the award the reasons for the award in sufficient 
detail to enable the Court to consider any question of law arising 
out of the award.  
(2) 
Where the award does not state the reasons in sufficient 
detail, the Court shall remit the award to the arbitrators or umpire 
and fix the time within which the arbitrator or umpire shall submit 
the award together with the reasons in sufficient detail:  
Provided that any time so fixed may be extended by subsequent 
order of the Court.  
(3) 
An award remitted under sub-section (2) shall become void 
on the failure of the arbitrators or umpire to submit it in 
accordance with the direction of the Court. 
 
30. Grounds for setting aside award. An award shall not be set 
aside except on one or more of the following grounds, namely: 
(a) 
that an arbitrator or umpire has misconducted himself or 
the proceedings;  
(b) 
that 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;  
(c) 
that an award has been improperly procured or is 
otherwise invalid. 
 
36. Power of Court, to order that a provision making an award a 
condition precedent to an action shall not apply to a particular 
difference. Where it is provided (whether in the arbitration 
agreement or otherwise) that an award under an arbitration 
agreement shall be a condition precedent to the bringing of an 
action with respect to any matter to which the agreement applies, 
the Court, if it orders (whether under this Act or any other law) 
that the agreement shall cease to have effect as regards any 
CAs 539/03 etc 
-: 6 :-
particular difference, may further order that the said provision 
shall also cease to have effect as regards that difference. 
6. 
 
In order to ascertain the principles set out by the 
Courts on the questions cited above, firstly we shall consider the 
case-law from the foreign jurisdictions. In the case of Hodgkinson 
v. Fernie [(1857) 3 C.B. (N.S.) 189] = (140 Er 712) Williams, J. 
held that 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. In 
Anchor Marine Ins. Co. v. Corbett. [(1882) 9 SCR 73] the 
Supreme Court of Canada held as under: - 
“The award of the arbitrators is conclusive, and the 
appellants cannot go behind it. Russell on Arbitration 
(P. 476); Hodgkinson v. Fernie et al. (3 C. B. N. S. 189); 
Cummings v. Heard (L. R. 4 Q. B. 668). 
In order to entitle the appellants to impeach the 
award, they should have made the submission a rule 
of court and moved to set aside the award, and not 
having done so, the court cannot in this suit review 
the award, nor entertain any question as to whether 
the arbitrators decided properly or not in point of law 
or otherwise. Delver v. Barnes (1 Taunt. 48).” 
In Champsey Bhara Company v. The Jivraj Ballo Spinning and 
Weaving Co. Ltd. (AIR 1923 PC 66), it was held that an error in 
law on the face of the award means that you can find in the award 
or a document actually incorporated thereto, some legal 
proposition which is the basis of the award and which you can 
then say is erroneous. In the cases of Government of Kelantan v. 
Duff Development Company Ltd. (1923 A.C. 395) and F. R. 
CAs 539/03 etc 
-: 7 :-
Absalom Ltd. v. Great Western (London) Garden Village Society 
Ltd. (1933 A.C. 592) it was held that if it is evident that the 
parties desire to have a decision from the arbitrator rather than 
from the Court on a question of law, then the Courts will not 
interfere. However, in cases where the question of law is 
incidentally material in order to decide the question actually 
referred to the arbitrators it is open to the Court to set aside the 
award if an error of law is found patent on the face of the record. In 
Heyman v. Darwins Ltd.  [(1942) A.C. 356], it was held that if a 
party has to have recourse to the contract in a dispute, that 
dispute is a dispute under the contract. In Durga Prasad Chamria 
v. Sewkishendas Bhattar (AIR 1949 PC 334) the Privy Council 
applied the above English view to Indian cases and upheld the 
award on the ground that the error of law was committed on points 
of law which were specifically referred to the arbitrator. In A.M. 
Mair & Co v. Gordhandass Sagarmull (AIR 1951 SC 9) it was 
held that 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. Here, the respondents must have 
recourse to the contract to establish their case and therefore it is a 
dispute falling within the arbitration clause. In Ruby General 
Insurance Co. Ltd Vs. Pearey Lal Kumar and another (AIR 1952 
SC 119) the Court observed that 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. In M/s. 
Alopi Parshad v. Union of India (AIR 1960 SC 588) it was 
CAs 539/03 etc 
-: 8 :-
observed that a contract is not frustrated merely because the 
circumstances in which the contract was made are altered. In 
Jivarajbhai ah 41 Ujamshi Sheth and others Vs. Chintamanrao 
Balaji and others [(1964) 5 S.C.R. 481] it was held as under:   
“The Court in dealing with an application to set aside 
an award has not to consider whether the view of the 
arbitrator on the evidence is justified. The arbitrator's 
adjudication is generally considered binding between 
the parties, for he is a tribunal selected by the parties 
and the power of the Court to set aside the award is 
restricted to cases set out in S.30. 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. On the assumption that the 
arbitrator must have arrived at his conclusion by a 
certain process of reasoning, the Court cannot proceed 
to determine whether the conclusion is right or wrong. 
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. … The primary duty of the arbitrator under 
the deed of reference in which was incorporated the 
partnership agreement, was to value the net assets of 
the firm and to award to the retiring partners a share 
therein. In making the "valuation of the firm" his 
jurisdiction was restricted in the manner provided by 
paragraph 
13 
of 
the 
partnership 
agreement.” 
(Emphasis supplied) 
In Tarapore & Company vs Cochin Shipyard Ltd. Cochin & anr 
(AIR 1984 SC 1072) = [1984 SCR (3) 118] while considering the 
question whether the claim made by the contractor and disputed 
by the respondent would be covered by the arbitration clause, it 
was held that if it becomes necessary to have recourse to the 
contract to settle the dispute one way or the other then certainly it 
can be said that it is a dispute arising out of the contract. The test 
is whether it is necessary to have recourse to the contract to settle 
the dispute that has arisen. In Continental Construction Co. Ltd 
v. State Of Madhya Pradesh (AIR 1988 SC 1166) = [1988 SCR 
(3) 103] it was held that if no specific question of law is referred, 
CAs 539/03 etc 
-: 9 :-
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. 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 he is bound to follow and apply the law, and if he does not 
the award can be set right by the Court provided the  error appears 
on the face of the award. The arbitrator misconducted himself in 
not deciding the specific objection raised by the State regarding the 
legality of extra claim of the contractor. In Indian Oil Corporation 
vs Indian Carbon Ltd (AIR 1988 SC 1340) it was held that when 
the arbitration clause requires the arbitrator to give a reasoned 
award and the arbitrator does give his reasons in the award, the 
sufficiency of the reasons depends upon the facts of the particular 
case. He is not bound to give detailed reasons. The Court does not 
sit in appeal over the award and review the reasons. The Court 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 erroneous. In Sudarsan 
Trading Co Vs. Govt. Of Kerala & anr (AIR 1989 SC 890) = 
[1989 SCR (1) 665] the questions for consideration before the 
Court were that as to how the Court should examine an award to 
find out whether it was a speaking award or not; and if it be a non-
speaking award, how and to what extent the Court could go to 
determine whether there was any error apparent on the face of the 
award so as to be liable for interference by the court; and to what 
extent can the Court examine the contract though not incorporated 
CAs 539/03 etc 
-: 10 :-
or referred to in the award. It was held in the said judgment that 
there are two different and distinct grounds involved in many of 
the cases. 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 can not, unless the agreement was incorporated or 
recited in the award. One of the grounds of misconduct is that the 
decision by the arbitrator is on a matter which is not included in 
the agreement or reference. But in such a case one has to 
determine the distinction between an error within the jurisdiction 
and an error in excess of the jurisdiction. In Puri Construction 
Pvt. Ltd. vs Union Of India (UoI) (AIR 1989 SC 777) it was held 
as under: - 
“When a court is called upon to decide the objections 
raised by a party against an arbitration award, the 
jurisdiction of the court is limited, as expressly 
indicated in the Arbitration Act, and it has no 
jurisdiction to sit in appeal and examine the correctness 
of the award on merits. However, so far as the present 
case is concerned, the decision of the arbitrator is 
supported by the evidence led before him including the 
evidence of the Union of India, and appears to be correct 
on merits also. 
………….. Mr. Sibal, therefore, appears to be right that 
apart from the fact that the award is not vulnerable to 
any 
objection 
which 
can 
be 
entertained 
under 
the Arbitration Act, it is a fair one. But this does not 
lead to the conclusion that for upholding an award the 
court has to examine the merits of the award with 
reference 
to 
the 
materials 
produced 
before 
the 
arbitrator. The court cannot sit in appeal over the views 
of the arbitrator by re-examining and re-assessing the 
materials. The scope for setting aside an award is 
limited to the grounds available under the Arbitration 
Act, which have been well defined by a long line of 
decided cases, and none of them is available here. For 
this reason the decision of the Division Bench of the 
High Court has to be set aside.” 
In Associated Engineering Co. Vs. Government of Andhra 
Pradesh and Another [1991] 4 SCC 93 the Court set aside the 
CAs 539/03 etc 
-: 11 :-
award by holding that the conclusion is reached not by 
construction of the contract but by merely looking at the contract. 
The authority of an arbitrator is derived from the contract and is 
governed by the Arbitration Act which embodies principles derived 
from a specialized branch of the law of agency. A conscious 
disregard of the law or the provisions of the contract from which he 
has derived his authority vitiates the award. In Hindustan 
Construction Co. Ltd. Vs. State of Jammu & Kashmir (AIR 
1992 SC 2192) = [(1992) 4 SCC 217] the Court observed that 
where the award was a non-speaking one and contained no 
reasoning which could be declared to be faulty; the scope of the 
Court’s jurisdiction in interfering with the non-speaking award is 
extremely limited. It was further observed that even if, in fact, the 
arbitrators had interpreted the relevant clauses of the contract in 
making their award on the impugned items and even if the 
interpretation is erroneous, the Court cannot touch the award as it 
is within the jurisdiction of the arbitrators to interpret the 
contract. … The clauses are not so clear or unambiguous as to 
warrant an inference that the interpretation placed on them by the 
arbitrators is totally unsustainable. This is purely a technical 
matter and we have no material to hold that the arbitrators' 
interpretation was erroneous.  It is difficult to say that the 
arbitrator's interpretation is erroneous on the face of it. In The 
Superintending Engineer Vs. B. Subba Reddy [1993 (2) ALT 
687] the Andhra High Court while explaining the concept of 
"misconduct" by an arbitrator highlighted some of the examples of 
the term, which reads as under: 
CAs 539/03 etc 
-: 12 :-
(i) 
if the arbitrator or umpire fails to decide all the 
matters which were referred to him; 
(ii) 
if by his award the arbitrator or umpire purports to 
decide matters which have not in fact been included in 
the agreement or reference; … 
(iii)  
if the award is inconsistent, or is uncertain or 
ambiguous; or even if there is some mistake of fact, 
although in that case the mistake must be either 
admitted or at least clear beyond any reasonable 
doubt; 
(iv) 
if there has been irregularity in the proceedings, as, for 
example, where the arbitrator failed to give the parties 
notice of the time and place of meeting, or where the 
agreement required the evidence to be taken orally and 
the arbitrator received affidavits, or where the 
arbitrator refused to hear the evidence of a material 
witness, or where the examination of witnesses was 
taken out of the parties' hands, or where the arbitrator 
failed to have foreign documents translated, or where, 
the reference being to two or more arbitrators, they did 
not act together, or where the umpire, after hearing 
evidence from both arbitrators, received further 
evidence from one without informing or hearing the 
other, or where the umpire attended the deliberations 
of the appeal board reviewing his award. 
 
In State Of Rahjasthan Vs. Puti Construction Co. Ltd [(1994) 6 
SCC 485] it was observed as under: - 
“The arbitrators have given the award by referring to 
various documents and statements available on record 
and indicating the reasons for basing the findings. 
Even if it is assumed that on the materials on record, a 
different view could have been taken and the 
arbitrators have failed to consider the documents and 
materials on record in their proper perspective, the 
award is not liable to be struck down in view of judicial 
decisions referred to hereinbefore. Error apparent on 
the face of the record does not mean that on closer 
scrutiny of the import of documents and materials on 
record, the finding made by the arbitrator may be held 
to be erroneous. Judicial decisions over the decades 
have indicated that an error of law or fact committed 
by an arbitrator by itself does not constitute 
misconduct warranting interference with the award.”  
In The Punjab State Through ... Vs. Amar Nath Aggarwal 
[(1993) 105 PLR 1] Punjab-Haryana High Court summed up the 
legal principles as under: - 
CAs 539/03 etc 
-: 13 :-
(1) 
The arbitrator is the final Judge of all questions, 
both of law and of fact. The only exceptions to this 
rule are cases of corruption or fraud or where the 
basis of the award is a proposition of law which is 
erroneous. (Champsey Bhara and Company v. 
Jivraj Balloo Spinning and Weaving Company 
Ltd.,5 A.I.R. 1923 P.C. 66). 
(2) 
The arbitrator is the sole judge of quality as well 
as quantity of evidence. (M/s Sudarshan ah 41 
Trading Co. v. The Govt. of Kerala and Anr.,6 
A.I.R. 1989 S.C. 890 and Municipal Corporation 
of Delhi v. M/s. Jagan Nath Ashok Kumar, A.I.R. 
1987 S.C. 2316). 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. (Union of India 
v. Kalinga Construction Co. (Private) Limited), 
A.I.R. 1971 S.C. 1646). 
(3) 
The Court cannot sit in appeal over the view of the 
arbitrator by re-examining and reappraising the 
materials. (Puri Construction Pvt. Limited v. 
Union of India,16 A.I.R. 1989 S.C. 777). 
(4) 
Where two views are possible, the Court is not 
justified in interfering with the award by adopting 
its own interpretation. (M/s Hind Builders v. 
Union of India,19 A.I.R. 1990 S.C 1340). 
(5) 
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. (Subhash Chandra Das Mushib 
v. Ganga Prosad Das Mushib and Ors.,20 A.I.R. 
1967 S.C. 878 and M/s. Hindustan Tea Co. v. K. 
Sashikant and Co. and Anr., 19 A.I.R. 1987 S.C. 
81). 
(6)  
Though it is not possible to give an exhaustive 
definition as to what may amount to misconduct, 
it is not a 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. (Food 
Corporation of India v. Joginderpal Mohinderpal 
and Anr.,17 A.I.R. 1989 S.C. 1263). 
(7)  
Assuming that there is an error of construction of 
the agreement by the arbitrator, it is not 
amenable to correction even in a reasoned award. 
(UP. Hotels etc. v. U.P. State Electricity Board,21 
A.I.R. 1989 S.C. 268). 
(8)  
Even in cases where the arbitrator is required to 
give his reason, it is not obligatory to give a 
CAs 539/03 etc 
-: 14 :-
detailed Judgment. (Indian Oil Corporation Ltd. v. 
Indian Carbon Ltd.,14 A.I.R. 1988 S.C. 1340). 
(9)  
Reasonableness of an award is not a matter for 
the Court to consider unless the award is 
preposterous or absurd (Gujarat Water Supply A 
Sewerage Board v. Unique Electors (G) (P) Ltd.,15 
A.I.R. 1989 S.C. 973). The amount awarded being 
quite high does not per se vitiate the award. (State 
of Orissa v. Dandasi Sahu,22 A.I.R. 1988 S.C. 
1791 (para 30). 
(10)  It is necessary to bear in mind that the arbitrator 
was a highly qualified engineer, fully conversant 
with the nature of work and should be presumed 
to correctly evaluate the additional work done. 
(Puri Construction Pvt. Ltd. v. Union of India,16 
A.I.R. 1988 S.C 777). 
(11)  Where additional work is done under a building 
contract, Section 70 of the Contract Act applies. 
(V.R. Subramanyam v. B. Thayappa (deceased) 
and 
Ors.,23 
A.I.R. 
1966 
S.C. 
1034, P. 
Hanumanthiah & Co. v. Union of India,24 U J. 
(S.C.) 134 (69). 
In Rajasthan State Mines & Minerals ... vs Eastern Engineering 
Enterprises (AIR 1999 SC 3627) after discussing the case-law in 
detail, principles enunciated thereunder were summarized as 
under: - 
(a) 
it is not open to the Court to speculate, where no 
reasons are given by the arbitrator, as to what 
impelled arbitrator to arrive at his conclusion. 
(b) 
It is not open to the Court to admit to probe the 
mental process by which the arbitrator has reached 
his conclusion where it is not disclosed by the terms of 
the award. 
(c) 
If the arbitrator has committed a mere error of fact or 
law in reaching his conclusion on the disputed 
question submitted for his adjudication then the Court 
cannot interfere.  
(d) 
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. In 
a case where specific question of law touching upon 
the jurisdiction of the arbitrator was referred for the 
decision of the arbitrator by the parties, then the 
CAs 539/03 etc 
-: 15 :-
finding of the arbitrator on the said question between 
the parties may be binding.  
(e) 
In a case of non-speaking award, the jurisdiction of 
the Court is limited. The award can be set aside if the 
arbitrator acts beyond his jurisdiction.  
(f) 
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. Arbitrator acting beyond his 
jurisdiction is a different ground from the error 
apparent on the face of the award.  
(g) 
In order to determine whether arbitrator has acted in 
excess of his jurisdiction what has to be seen is 
whether the claimant could raise a particular claim 
before the arbitrator. If there is a specific term in the 
contract or the law which does not permit or give the 
arbitrator the power to decide the dispute raised by 
the claimant or there is a specific bar in the contract 
to the raising of the particular claim then the award 
passed by the arbitrator in respect thereof would be in 
excess of jurisdiction.  
(h) 
The award made by the Arbitrator disregarding the 
terms of the reference or the arbitration agreement or 
the terms of the contract would be a jurisdictional 
error which requires ultimately to be decided by the 
Court. He cannot award an amount which is ruled out 
or prohibited by the terms of the agreement. Because 
of specific bar stipulated by the parties in the 
agreement, that claim could not be raised. Even if it is 
raised and referred to arbitration because of wider 
arbitration clause such claim amount cannot be 
awarded as agreement is binding between the parties 
and the arbitrator has to adjudicate as per the 
agreement. This aspect is absolutely made clear in 
Continental Construction Co. Ltd.(supra) by relying 
upon the following passage from M/s. Alopi Parshad 
Vs. Union of India [1960] 2 SCR 703 which is to the 
following effect: -  
There it was observed that a contract is not 
frustrated merely because the circumstances in 
which the contract was made, altered. The 
Contract Act does not enable a party to a 
contract to ignore the express covenants thereof, 
and to claim payment of consideration for 
performance of the contract at rates different 
from the stipulated rates, on some vague plea of 
equity. The parties to an executory contract are 
often faced, in the course of carrying it out, with 
a turn of event which they did not at all 
anticipate, a wholly abnormal rise or fall in 
prices, a sudden depreciation of currency, an 
CAs 539/03 etc 
-: 16 :-
unexpected obstacle to execution, or the like. 
There is no general liberty reserved to the courts 
to absolve a party from liability to perform his 
part of the contract merely because on account 
of an uncontemplated turn of events, the 
performance 
of 
the 
contract 
may become 
onerous. 
(i) 
The arbitrator could not act arbitrarily, irrationally, 
capriciously or independently of the contract. A 
deliberate departure or conscious disregard of the 
contract not only manifests the disregard of his 
authority or misconduct on his part but it may 
tantamount to mala fide action.  
(j) 
The arbitrator is not a conciliator and cannot ignore 
the law or misapply it in order to do what he thinks 
just and reasonable; the arbitrator is a tribunal 
selected by the parties to decide the disputes 
according to law. 
The same principles were reiterated in the case of Bhagawati 
Oxygen Ltd vs Hindustan Coper Ltd [2005 (6) SCC 462] 
7. 
 
Coming to cases from our own jurisdiction, in the case 
of Abdul Ghani Vs. Inayat Karim and others (PLD 1960 SC (Pak) 
98), wherein one arbitrator remained absent on one or two sittings 
with the consent of the other arbitrators and nothing of a disputed 
nature was done in those sittings and the decision was made by all 
the arbitrators; it was held by this Court that neither the arbitrator 
absenting himself or the remaining arbitrators continuing the 
work, could be said to constitute misconduct. In A. Z. Company v. 
S. Maula Bukhsh Muhammad Bashir (PLD 1965 SC 505) it was 
held that the expression “error” on the face of the award as 
described in Champesy Bhara’s case (supra) has been accepted as 
a general rule since the decision in Hodgkinson’s case (supra), 
however, later an exception was engrafted onto this rule to the 
effect that when a specific point of law is referred to the arbitrator 
the award cannot be set aside if the arbitrator wrongly decides the 
CAs 539/03 etc 
-: 17 :-
point of law. In the case of Messrs Badri Narayan Agarwala Vs. 
Messrs Pak Jute Balers Ltd (PLD 1970 SC 43), where the 
appellant therein wanted the award to be set aside on the ground 
that he did not execute the agreement which contained the 
arbitration clause, the Court while interpreting sections 30 and 33 
of the Arbitration Act held that “Section 33, no doubt, uses the 
word "challenge" as compared to the words "set aside" in section 30 
but that in my view does not make any difference. Section 33 says 
also that when the existence of the agreement is challenged "the 
Court shall decide the question". Since the agreement in question 
was challenged by the appellant after the award had been made 
there was no bar for him to do so in the present suit.” Resultantly, 
the case was remitted to the trial Court to determine whether the 
appellant had executed the contract. In the case of Haji Mushtaq 
Ahmad Vs. Mst. Hajra Bi and others (1980 SCMR 394), it was 
observed that the arbitrator has not given any reasons whatsoever 
for the payments ordered by him. As his silence about the reasons 
for his decision are like that of the sphinx, could any Court have 
read an error in the award much less an error on the face of the 
award? The question is of the meaning of the words “an error 
apparent on the face of the award”, the petitioner can succeed only 
by showing that the award itself or a note attached to it contained 
some legal propositions which were erroneous. But, as the 
arbitrator has not given any reasons whatever for his findings it 
follows that this sphinx like award could not possibly be set aside 
on the ground of an error apparent. In the case of Province of 
Punjab Vs. Habib Ullah (1982 SCMR 243), it was held that the 
decision of the Arbitrator must be based upon evidence produced 
CAs 539/03 etc 
-: 18 :-
before him and law applicable thereto. If the Arbitrator had not 
done so the award was liable to be set-aside. In the case of 
National Construction Company Vs. West Pakistan Water and 
Power Development Authority (PLD 1987 SC 461), it was 
observed that where the arbitrator himself did not wish to give a 
decision on an item, as the parties had agreed that the said 
question did not fall within the reference, the award in respect of 
that item was a mistake or accidental error which somehow crept 
in the body of the award made by the arbitrator. Such an error was 
incidental to all actions performed by human agency and could not 
be made the basis for reaching a finding of misconduct. In the case 
of Joint Venture KG/RIST Vs. Federation of Pakistan (PLD 
1996 SC 108), where the scope of a certain clause of an agreement 
was the main bone of contention between the parties, it was held 
by this Court that even if the parties had not specifically referred 
the question of interpretation of the said clause, its interpretation 
fell within the scope of reference, for without interpreting the said 
clause the dispute referred to the arbitration could not be resolved. 
In the case of Hitachi Limited Vs. Rupali Polyester (1998 SCMR 
1618), it was observed by this Court that Section 33 of the 
Arbitration Act not only covers the question as to the existence or 
validity of an arbitration agreement but also of an award, and also 
to have the effect of either determined. In the case of Trading 
Corporation of Pakistan Pvt. Limited, Karachi Vs. Messrs 
Nidera Handelscompagnie B.V and another (2001 SCMR 646), it 
was observed that under Section 32 of the Arbitration Act no suit 
for a decision upon the existence, effect or validity of an arbitration 
agreement or award could be filed; however, a party could in terms 
CAs 539/03 etc 
-: 19 :-
of Section 33 (ibid) file an application in the Court for challenging 
the existence or validity of arbitration agreement or an award, or to 
have the effect of either determined. In the case of Pakistan Steel 
Mills Corporation, Karachi Vs. Messrs Mustafa Sons (Pvt.) Ltd 
(PLD 2003 SC 301), while interpreting the word “misconduct” with 
reference to arbitration proceedings it was held that it (misconduct) 
is not akin to fraud, but it means neglect of duties and 
responsibilities of the Arbitrator. In the case of President of the 
Islamic Republic of Pakistan Vs. Syed Tasneem Hussain Naqvi 
and others (2004 SCMR 590), this Court observed that the award 
could be challenged only on the grounds mentioned in section 30 
of the Arbitration Act i.e. if the Arbitrator had misconducted 
himself in the proceedings and not on merits. The Court while 
hearing objections against the award could not sit as a Court of 
appeal against the award and interfere with it on merits. In the 
case of Sh. Saleem Ali Vs. 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. 
CAs 539/03 etc 
-: 20 :-
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 
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.” 
In the case of Province of Punjab Vs. Messrs Sufi Construction 
Company (2005 SCMR 1724), the award was upheld when the 
allegations against the arbitrators were vague and nebulous. In the 
case of Mian Brothers Vs. Lever Brothers of Pakistan Ltd (PLD 
2006 SC 169) it was observed that the arbitrator acts in a quasi-
judicial manner and his decision is entitled to the utmost respect 
and weight, unless the misconduct is not only alleged, but also 
proved against him to the satisfaction of the Court. 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 the Court cannot undertake the reappraisal 
of evidence recorded by an arbitrator in order to discover the error 
or infirmity in the award. In the case of Allah Din & Company Vs. 
Trading Corporation of Pakistan (2006 SCMR 614) this Court 
held that it is true that the trial Court does not sit in appeal upon 
CAs 539/03 etc 
-: 21 :-
the finding of the arbitrator but at the same time the Court is 
empowered to reverse the finding of the arbitrator on any issue if it 
does not find support from the evidence. The very incorporation of 
Section 26-A of the Arbitration Act requiring the arbitrator to 
furnish reasons for his finding was to enable the Court to examine 
the soundness of the reasons. In the case of Muhammad Farooq 
Shah Vs. Shakirullah (2006 SCMR 1657), this Court observed 
that where an Umpire has applied his mind honestly and arrived at 
a decision to the best of his ability, the fact that a Judge might 
take a different view is not a ground for holding the award illegal. 
In the case of Premier Insurance Company and others Vs. 
Attock Textile Mills Ltd. (PLD 2006 Lahore 534), it was 
observed by the Court that the Court while considering the validity 
of the award should not sit as a Court of appeal; trying to fish or 
dig out the latent errors in the proceedings or the award, but 
should only confine itself to examining the award by ascertaining, 
if there is any error, factual or legal, which floats on the surface of 
the award or the record and further, if such an error is allowed to 
remain, grave injustice would be done to the aggrieved party. The 
award of an arbitrator, who is the Judge selected by the parties 
themselves, should not be lightly interfered with until and unless 
as earlier held that it is established that the error committed by 
him is so glaring that if it is overlooked, it would lead to 
miscarriage of justice. But certainly the award cannot be 
intercepted on the ground that on the reading of the evidence, a 
conclusion other than that arrived at by the arbitrator, is/was 
possible. In the case of Federation of Pakistan Vs. Joint Venture 
Kocks K.G / Rist (PLD 2011 SC 506) it was observed that while 
CAs 539/03 etc 
-: 22 :-
considering the objections under Sections 30 and 33 of the 
Arbitration Act 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. In the case of A. Qutubuddin Khan Vs. CHEC Mill Wala 
Dredging Co. Pvt. Ltd. (2014 SCMR 1268), in the unanimous 
opinion given by Mr. Justice Sh. Azmat Saeed, J. it was observed 
that 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. Mr. Justice Khilji Arif Hussain,  in his separate 
opinion observed that while hearing the objections and examining 
the award, the Court cannot sit as a Court of appeal on the award 
rendered by the arbitrator and substitute its own view for the one 
taken by the arbitrator. It is a settled principle of law that the 
award of the arbitrator who is chosen as Judge of facts and of law, 
between the parties, cannot be set aside unless the error is 
apparent on the face of the award or from the award it can be 
inferred that the arbitrator has misconducted himself under 
Sections 30 and 33 of the Arbitration Act. While making an award 
the Rule of the Court, in case parties have not filed objections, the 
Court is not supposed to act in a mechanical manner, like the post 
office and put its seal on it but has to look into the award and if it 
finds patent illegality on the face of the award, it can remit the 
award or any of the matter(s) referred to arbitrator for 
reconsideration or set aside the same. However, while doing so, the 
Court will not try to find out patent irregularity, and only if any 
CAs 539/03 etc 
-: 23 :-
patent irregularities can be seen on the face of award/arbitration 
proceedings like the award is beyond the scope of the reference or 
the agreement of arbitration was a void agreement, or the 
arbitrator awarded damages on black market price, which is 
prohibited by law, or the award was given after superseding of the 
arbitration, etc., can the same be set aside. 
 
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 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 
CAs 539/03 etc 
-: 24 :-
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. 
CAs 539/03 etc 
-: 25 :-
(12) 
Where two views are possible, the Court cannot 
interfere with the award by adopting its own 
interpretation. 
(13) 
Reasonableness of an award is not a matter for 
the Court to consider unless the award is 
preposterous or absurd. 
(14) 
An award is not invalid if by a process of 
reasoning it may be demonstrated that the 
arbitrator has committed some mistake in 
arriving at his conclusion. 
(15) 
The only exceptions to the above rule are those 
cases where the award is the result of corruption 
or fraud, and where the question of law 
necessarily arises on the face of the award, 
which one can say is erroneous. 
(16) 
It is not open to the Court to speculate, where 
no reasons are given by the arbitrator, as to 
what impelled the arbitrator to arrive at his 
conclusion. 
(17) 
It is not open to the Court to attempt to probe 
the mental process by which the arbitrator has 
reached his conclusion where it is not disclosed 
by the terms of his award.  
(18) 
The Court does not sit in appeal over the award 
and should not try to fish or dig out the latent 
errors in the proceedings or the award. It can set 
aside the award only if it is apparent from the 
award that there is no evidence to support the 
conclusions or if the award is based upon any 
legal proposition which is incorrect.  
(19) 
The Court can set aside the award if there is any 
error, factual or legal, which floats on the 
surface of the award or the record. 
CAs 539/03 etc 
-: 26 :-
(20) 
The arbitrator is not a conciliator and cannot 
ignore the law or misapply it in order to do what 
he thinks is just and reasonable. The arbitrator 
is a tribunal selected by the parties to decide 
their disputes according to law and so is bound 
to follow and apply the law, and if he does not do 
so he can be set right by the Court provided the 
error committed by him appears on the face of 
the award. 
(21) 
There are two different and distinct grounds; one 
is the error apparent on the face of the award, 
and the other is that the arbitrator exceeded his 
jurisdiction. In the latter case, the Courts can 
look into the arbitration agreement but in the 
former, it cannot, unless the agreement was 
incorporated or recited in the award.  
(22) 
An error in law on the face of the award means 
that one can find in the award some legal 
proposition which is the basis of the award and 
which you can then say is erroneous. 
(23) 
A contract is not frustrated merely because the 
circumstances in which the contract was made 
are altered. 
(24) 
Even in the absence of objections, the Award 
may be set aside and not made a Rule of the 
Court if it is a nullity or is prima facie illegal or 
for any other reason, not fit to be maintained; or 
suffers from an invalidity which is self-evident or 
apparent on the face of the record. The 
adjudicatory process is limited to the aforesaid 
extent only. 
(25) 
While making an award rule of the Court, in 
case parties have not filed objections, the Court 
is not supposed to act in a mechanical manner, 
CAs 539/03 etc 
-: 27 :-
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 
CAs 539/03 etc 
-: 28 :-
in fact been included in the agreement or 
reference;  
(iii)  
if 
the 
award 
is 
inconsistent, 
or 
is 
uncertain or ambiguous; or even if there is 
some mistake of fact, although in that 
case the mistake must be either admitted 
or at least clear beyond any reasonable 
doubt; and 
(iv) 
if there has been irregularity in the 
proceedings. 
(30) 
Misconduct is not akin to fraud, but it means 
neglect of duties and responsibilities of the 
Arbitrator. 
9. 
 
Now we shall consider the facts of the instant case. 
The challenge has been thrown by the learned counsel for the 
appellant to the decree of the Court making the award the rule of 
the Court, mainly on the ground that it is vitiated because the GSA 
had 
been 
procured 
by 
the 
respondent 
through 
fraud, 
misrepresentation and concealment of facts. According to the 
learned counsel, in Clause 2 of the GSA, it is unequivocally 
mentioned that the appellant would be the exclusive general sales 
agent for inter alia the sale of the tickets on behalf of the 
respondent but it was not disclosed that the earlier bilateral 
agreement (dated 13.12.1963) executed between the respondent and 
the Pakistan International Airline (PIA) had not been terminated 
and hence, PIA was already working in the same capacity at the 
relevant point of time. In contrast, learned counsel for the 
respondent submitted that the GSA was unquestionably a valid 
agreement between the parties and the PIA was already an earlier 
agent of the appellant, thus to hold that the respondent had 
misrepresented 
this 
fact 
to 
the 
appellant 
is 
absolutely 
misconceived, even otherwise this issue was not taken up in 
CAs 539/03 etc 
-: 29 :-
defence by the appellant before the arbitration tribunal or if it was 
raised as a defence the same had been accurately and validly 
considered and discarded by the learned arbitrators. In order to 
decide this issue, recourse has to be made to Article 2 of GSA, 
which provides that “unless otherwise agreed between the parties, 
the principal shall not appoint any third party to carry out on its 
behalf service similar to those described in this agreement in the 
territory in which the General Sales Agent has undertaken the 
service”. From the language of above Article, it is abundantly clear 
that the respondent had bound down itself not to appoint any 
other person as its agent to carry out the same functions as were 
being done by the appellant, which commitment must be for the 
future and this is evident from the word “shall” used therein. At 
the time of entering into the agreement, it was the duty of the 
appellant to enquire and ensure that no other person had been 
granted such authority. It is the stance of the appellant before this 
Court that the GSA was a result of fraud and misrepresentation, as 
such, the award as well as the decree is vitiated on this score, 
however, the appellant itself filed a suit for specific performance 
not only relying upon the GSA but also for its specific performance 
and recovery of certain amounts thereunder. It is settled law that 
no one can be allowed to blow hot and cold in the same breath. 
Both the stances taken by the appellant are not just contradictory, 
rather they are self-destructive.  
10. 
 
It was also argued that the Court while considering the 
validity of the award is not supposed to go into the latent errors of 
the award but must simply confine itself to the patent illegalities 
on account of which merely by looking at the award it can be said 
CAs 539/03 etc 
-: 30 :-
that the same is vitiated or that there exist patent errors in the 
appreciation of the evidence or the arbitrators have gone wrong in 
the application of law. These factors were not involved in the 
present matter. Resultantly, the learned Courts below have rightly 
passed the impugned decree. 
11.   
It is submitted on behalf of the appellant that as no 
arbitrator had been appointed by the appellant, one should have 
been appointed by the learned Court as per the provisions of 
Sections 20 and 8 of the Arbitration Act, because according to the 
Article 15 of GSA the governing laws of the agreement were the 
laws of Pakistan, and thus, the IATA had no power in this regard. 
The learned counsel for the respondent has argued that the award 
has been passed by a competent arbitral forum which was 
appointed as per the terms of the GSA. We have considered the 
relevant provisions of GSA as well as the Arbitration Act. 
Undoubtedly, under Sections 8 and 20 of the Arbitration Act, in 
certain cases, the Court has the authority to appoint one or more 
arbitrators. However, with regard to the applicability of said 
provisions recourse has to be made to the relevant provisions of 
GSA. In this regard reliance has been placed by the learned 
counsel for the appellant on Article 15 of GSA, which provides that 
the agreement shall be interpreted and governed in all respects 
with the laws of the principle place of business of the agent. There 
is another Article i.e. 14.4, which deals with the appointment of 
the arbitrator in case of failure of a party to do so. It provides that 
“if a Party has notified the other Party of its appointment of an 
Arbitrator and the other Party fails to appoint an Arbitrator within 
fifteen/15 days of such notification the First Party may apply to the 
CAs 539/03 etc 
-: 31 :-
Director General of IATA who shall appoint the arbitrator on behalf 
of the Party which has failed to do so”. It is to be noted that Article 
15 of GSA is a general provision which deals with the 
interpretation of the GSA as a whole, whereas, Article 14.4 is a 
specific provision which deals explicitly with the appointment of 
the arbitrator. Thus, in the circumstances, the special provision 
shall take effect to the exclusion of the general provision. Further, 
the appellant did not take up any objection regarding the 
constitution of the arbitration tribunal and participated in the 
proceedings voluntarily. Consequently, we are inclined to hold that 
the arbitrator was validly appointed and the award cannot be 
vitiated on this score.  
12. 
 
It is also submitted that the appellant was not afforded 
sufficient opportunity to participate in the arbitration proceedings, 
inasmuch as, the witnesses of the respondent had not been 
permitted to be cross-examined by the appellant although in 
contrast the opportunity of cross-examination had been provided 
to the respondent. Reliance in this regard has been placed on the 
judgments reported as Khardah Company Ltd. Vs. Raymon & 
Co. (India) Private Ltd. (AIR 1962 SC 1810) and Waverly Jute 
Mills Co. Ltd. Vs. Rayfrom and Co. (India) Private Ltd. (AIR 
1963 SC 90). It was submitted by the learned counsel for the 
respondent that the appellant was provided full opportunity to 
participate in the arbitration proceedings, to cross-examine the 
witnesses produced by the respondent and to provide evidence in 
rebuttal. In this regard it is to be noted that in the award, the 
summary of proceedings before the arbitration tribunal has been 
provided, from the perusal whereof it is evident that the appellant 
CAs 539/03 etc 
-: 32 :-
was notified about each date of hearing and his counsel was 
present on almost all the dates but most of the time the appellant 
sought 
adjournment(s). 
The 
appellant 
was 
also 
provided 
opportunity to provide a list of its witnesses but not only did it fail 
to provide the same but also remained absent on many occasions, 
and as such was proceeded ex-parte. Another objection was raised 
to the validity of the award by claiming that heavy costs have been 
imposed by the arbitrators in the award which is absolutely 
unjustified. Besides, the fee of Dr. Parvez Hassan has been 
unilaterally and arbitrarily fixed.  
13. 
 
After considering the material available on record, we 
are of the view that no illegality has been committed in the 
arbitration proceedings. It is only on the basis of the factual 
conclusions drawn by the arbitrators on the basis of the material 
available on the record that the award has been pronounced. The 
award does not suffer from any illegality, either in law or fact, nor 
is there any misreading or non-reading of evidence. In view of the 
law highlighted above the Court considering the validity of the 
award could not sit in appeal; it had no power to re-examine and 
reappraise the evidence considered by the arbitrator to hold that 
the conclusion reached by the arbitrator was wrong or substitute 
its own view for the one taken by the arbitrator for the reason that 
another view was possible. It could only confine itself to find an 
error apparent on the face of the award, or determine the 
misconduct of the arbitrators in the course of the arbitration 
proceedings. In the instant case, we are of the view, that none of 
the said conditions existed. As such, the learned Trial Court rightly 
declined to interfere in the award and made the same Rule of the 
CAs 539/03 etc 
-: 33 :-
Court, which decision was rightly upheld by the learned Division 
Bench of the High Court in appeal.    
14. 
 
It was also argued by the learned counsel for the 
appellant that the suit filed by the respondent was not 
maintainable as the provisions of Sections 451 and 456 of the 
Companies Ordinance were not complied with. According to him, 
the respondent being a foreign company was not registered in 
Pakistan as required under the law, therefore, it was precluded 
and prohibited from initiating any legal proceedings against the 
appellant. It was further argued that this was an incurable defect, 
which could not be cured by the Court. Reliance in this regard has 
been placed on the judgments reported as Hala Spinning Mills 
Ltd. Vs. International Finance Corporation (2002 SCMR 450 at 
page 458), Maulana Abdul Haque Baloch Vs. Government of 
Balochistan 
through 
Secretary 
Industries 
and 
Mineral 
Development and others (PLD 2013 SC 641 at 714 and 715). 
The case of the appellant is that for the purpose of having a foreign 
company registered in terms of the Sections mentioned above, the 
limitation period is only 30 days from the date of establishment of 
place of business. When we questioned the learned counsel for the 
appellant whether the respondent had any office established in 
Pakistan and as to what was the time frame in this regard, he was 
not been able to provide any assistance on this point, because 
there is no material available on the record, except relying upon 
the plaint filed by the respondent wherein the address of the 
respondent is given as “Holiday Inn Crown Plaza Hotel, Shahrae 
Faisal, Karachi”.  
CAs 539/03 etc 
-: 34 :-
15. 
 
Subsection (1) of Section 451 of the Companies 
Ordinance requires that every foreign company which establishes a 
place of business in Pakistan shall, within thirty days of the 
establishment of the place of business, deliver to the registrar 
certain documents. Section 456 ibid which is a remedial clause, 
provides that any failure by a foreign company to comply with any 
of the requirements of Sections 451 or 452 ibid shall not affect the 
validity of any contract, dealing or transaction entered into by the 
company or its liability to be sued in respect thereof; but the 
company shall not be entitled to bring any suit, claim any set-off, 
make any counter-claim or institute any legal proceeding in 
respect of any such contract, dealing or transaction, until it has 
complied with the provisions of section 451 and section 452 ibid. 
Thus, the defect, of non-registration under Section 451 ibid, is not 
a fatal defect, rather, it is curable. The material was duly placed 
before the learned Judge to justify that valid registration of the 
respondent-company had taken place. This fact, thus, was taken 
into consideration, and was prudently and reasonably decided by 
the learned Judge.  
16. 
 
It is also submitted by the learned counsel for the 
appellant that the decree on the basis of which the winding up 
proceedings have been founded by the respondent, had not been 
executed by the respondent within the prescribed period of 
limitation, resultantly, such decree, now having been rendered 
inexecutable, could not be made the basis of the winding up 
proceedings. It is also submitted that the winding up proceedings 
cannot be used to coerce the company to make the payment to the 
creditors. There is a difference between a company in a running 
CAs 539/03 etc 
-: 35 :-
condition and a company not in a running condition, and the spirit 
of law is to save the institutions rather to destroy them by winding 
up. According to him, because the object of winding up is to 
determine the solvency or insolvency of the company, only a 
company which is found to be insolvent could be wound up. 
Reliance in this behalf has been made on the judgments reported 
as Hala Spinning Mills Ltd. (supra), M/s Metito Arabia 
Industries Limited Vs. M/s Gammon (Pakistan) Limited (1997 
CLC 230) and M/s Khyber Textile Mills Ltd. Vs. M/s Allied 
Textile Mills Ltd. (PLJ 1979 Kar 295).  It was however, 
submitted by the learned counsel for the respondent that as the 
appellant was unable to pay its debt on the basis of the decree 
which, after notice to the appellant under Section 305 of the 
Companies Ordinance, remained outstanding, therefore it should 
be presumed that the appellant-company is unable to pay its debt 
and therefore, the order for winding up was justified. Considering 
the submissions made by the learned counsel for the appellant, 
notwithstanding the merits of the case, we are inclined to provide 
an opportunity to the appellant to pay the decretal amount along 
with costs to the respondent. 
17. 
 
These are the reasons of our short order of even date, 
which reads as under: - 
“For the reasons to be recorded later, Civil Appeal 
No.1773/2016 is dismissed with costs of Rs.500,000/- 
(rupees five hundred thousand). However, as regards Civil 
Appeal No.539/2003 is concerned, which has been filed 
against the winding up order dated 19.3.2003 passed by the 
learned Single Judge of the Sindh High Court, an 
opportunity is provided to the appellant to pay the decretal 
amount involved in Civil Appeal No.1773/2016 along with 
CAs 539/03 etc 
-: 36 :-
the costs of Rs.500,000/- to the respondent within two 
months from today in order to avoid the winding up of the 
company. The learned counsel for the respondent has 
consented to the above order and stated that he would not 
press the winding up petition if the abovestated decretal 
amount and the costs are paid accordingly. Needless to 
observe that if such amount is not paid within the said 
period, this appeal shall also be deemed to have been 
dismissed.” 
 
 
 
 
 
CHIEF JUSTICE 
 
 
 
 
JUDGE 
 
 
 
 
JUDGE 
ISLAMABAD. 
1st January 2018. 
Approved for reporting 
Mudassar/ 

  
 
