Full Judgment Text & Judicial Ruling

P L D 2026 Islamabad 85 Before Khadim Hussain Soomro and Inaam Ameen Minhas, JJ CAPITAL DEVELOPMENT AUTHORITY (CDA) through Chairman---Appellant Versus HABIB RAFIQUE (PRIVATE) LIMITED through Chief Executive Officer ---Respondent F.A.O. No. 07 of 2022, decided on 23rd June, 2025. (a) Arbitration Act (X of 1940)--- ----S.17---Arbitration award---Award made rule of court merely on the ground that objections against it were barred by time---Duty of court to examine award on its own motion regardless of whether any objections or time-barred objections were filed or not---Scope---Court must ensure that award is free from any patent illegality, material irregularity or jurisdictional error---Facts of the matter in brevity were that the appellant/Capital Development Authority (CDA) awarded a construction contract to respondent company---Various disputes between the parties led them to arbitration---The sole arbitrator awarded Rs. 640 million to the respondent company---The appellant/CDA filed objections beyond the statutory limitation period which the Trial Court dismissed solely on grounds of delay and made the award rule of the court---The significant questions requiring determination by the High Court were as to (i) Whether the objections filed against the arbitration award were rightly dismissed as time-barred without a substantive examination of the award itself? and; (ii) Whether the grounds raised for setting aside the award in appeal merit consideration despite the dismissal of objections on the ground of limitation? ---Held: While deciding the objections filed to the award Trial Court failed to appreciate the true import of the statutory mandate under S. 17 of the 1940 Act---Record demonstrated that the Trial Court failed to fulfill its legal obligation under S. 17 of the 1940 Act---Trial Court made the award rule of the court solely on the ground that the objections filed by the appellant/CDA were time-barred---Record clearly revealed that the Trial Court did not undertake the essential judicial scrutiny of the award as required by law under S. 17 of the Act 1940---It failed to assess the contents, fairness or legality of the award and did not determine whether the award was within the bounds of the arbitrator s authority or in violation of any provision of law, instead, the court dismissed the objections on the ground of limitation and proceeded to make the award rule of the court without applying the standards mandated by law---This failure constituted a miscarriage of justice and a deviation from the fundamental principles of due process and procedural fairness---Trial Court made the award rule of court simply because the appellant/CDA had filed time barred objections to the award---Impugned order did not show any application of judicious mind to the contents of the award so as to determine whether any provision of law was violated or whether there was any reason to remit the award for reconsideration---This failure on the part of the Trial Court rendered the impugned order unlawful and against the law---Trial Court while relying on the question of time barred objections failed to discharge its statutory duty and hastily proceeded to make the award rule of the court, thereby compromising the sanctity of the judicial process envisaged under S. 17 of the 1940 Act---It was not open to the court to bypass the scrutiny as established in S.17 of the 1940 Act on the ground of time-barred objections---Impugned order and decree were set-aside and the matter was remanded to the Trial Court to decide the same afresh in accordance with the law---Present appeal was disposed of, in circumstances. Pakistan Through General Manager, Pakistan Railway v. Messrs Q.M.R. Expert Consultants PLD 1990 SC 800 and Ameen General Enterprises v. Azad Jammu and Kashmir Government PLD 2010 SC (AJ&K) 1 rel. National Logistic Cell (NLC) v. Hakas (Pvt.) Ltd. 2010 YLR 1448 and Rashida Begum v. Ch. Muhammad Anwar PLD 2003 Lah. 522 ref. (b) Arbitration Act (X of 1940)--- ----S.17---Arbitration award---Court to examine award on its own motion regardless of whether any objections or time-barred objections were filed or not---Scope---Court must ensure that award is free from any patent illegality, material irregularity or jurisdictional error---Duties and role of court in examining the award before making it the rule of court stated---Section 17 imposes a direct and mandatory obligation upon the Court once an award is submitted for making it a rule of Court---The statutory language does not envisage the Court acting as a mere conduit for converting the award into a decree rather, the Court is required to perform an active judicial function---It mandates that the Court must examine the award to determine whether there exists any ground for remitting it back to the arbitrator for reconsideration or for setting it aside---Only if the Court finds no legal flaw or procedural irregularity in the award, and after the expiry of the prescribed period for filing objections or upon lawful rejection of any objections filed, may the Court pronounce judgment in accordance with the award, thereby rendering it executable as a decree of the Court---Importantly, the Court s duty of judicial scrutiny is not contingent upon the filing of objections by either party, nor it is negated by the expiry of the limitation period for such objections---Even in the absence of objections or where objections are barred by time, the court remains under a legal obligation to examine the award on its own motion---The absence of objections does not absolve the Court from its responsibility to ensure that the award is not tainted by any apparent illegality, procedural irregularity, or violation of law---The Court s role under S. 17 of the 1940 Act is not that of a mere post office, mechanically endorsing the award upon the expiry of the limitation period for objections rather the Court must exercise its independent judicial mind to ensure that the award is free from any patent illegality, material irregularity or jurisdictional error---While making an award rule of the Court, in case parties have not filed objections, the Court is not supposed to act in a mechanical manner, like a post office but must subject the award to its judicial scrutiny---This however does not mean that a Court will sit in appeal over the award and try to fish or dig out the latent errors in the proceedings of the award---It only means that even in the absence of objections or time barred 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 Court s role is thus not purely procedural rather it involves a measure of judicial scrutiny to ensure that the award does not suffer from any fundamental legal infirmities---The Court s obligation to examine the legality and enforceability of the award before making it a rule of the Court is inherent in the statutory scheme governing arbitral proceedings---Section 17 of the 1940 Act, casts a positive duty upon the Court to independently examine whether there exists any cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award---This duty is not contingent upon the filing of objections within limitation but is inherent in the judicial function prescribed by the statute---No derogation can be made from this duty, as it forms a foundational safeguard within the arbitration process to prevent the enforcement of awards that are patently illegal, unenforceable or contrary to law---The Court s power to scrutinize an arbitral award is limited to patent illegality or error apparent on the face of the award and does not extend to reappraisal of evidence or merits---The arbitrator is the final judge of facts and law and his findings are to be respected unless there is a manifest error or misconduct. Gerry's International (Pvt.) Ltd v. Aeroflot Russian International Airline 2018 SCMR 662; A. Qutubuddin Khan v. Chec Millwala Dredging Co. (Pvt.) Limited 2014 SCMR 1268; Mian Corporation through Managing Partner v. Messrs Lever Brothers of Pakistan Ltd. through General Sales Manager PLD 2006 SC 169 and Pakistan Steel Mills Corporation Karachi v. Messrs Mustafa Sons (Pvt.) Ltd. PLD 2003 SC 301 rel. Federal Government Employees Housing Foundation v. Javaid Iqbal and others 2020 YLR 2306 and Capital Development Authority through its Chairman v. Messrs Signage Security Systems (Pvt.) Ltd. through Accounts and Administrative Manager 2021 YLR 194 ref. Kashif Ali Malik, Amir Latif Gill and Qaisar Abbas Gondal for Appellant. Mashooq Ali Sheikh, Director Works, CDA. Muhammad Masood Khan, Muhammad Zeeshan Younas and Syed Faisal Hussain Shah for Respondent. Assisted by: Muhammad Yahya Khan Niazi, Judicial Law Clerk. Date of hearing: 25th March, 2025. JUDGMENT INAAM AMEEN MINHAS, J.---Through the instant appeal, the appellant/Capital Development Authority ("appellant CDA") impugns the Arbitration Award dated 20.08.2018 and the order and decree dated 18.12.2021 ("Impugned Order") passed by the learned Civil Judge 1st Class Islamabad (West) ("Trial Court"), whereby the objections filed by the appellant CDA were dismissed and the arbitration Award was made rule of the Court in terms of the findings of the learned Sole Arbitrator. 2. The facts, in brief, leading to the filing of the instant appeal are that pursuant to a Letter of Acceptance dated 09.05.2011, the respondent/Claimant i.e. M/s Habib Rafiq Pvt. Ltd. ("respondent") was awarded a contract by the appellant CDA for the construction of 104 family suites for members of the Parliament, including 500 servant quarters, at an agreed contract price of Rs.2,728,451,079/-, with a stipulated completion period of 910 days commencing from 23.05.2011 and ending on 18.11.2013, as formalized by an agreement dated 23.10.2011. Following commencement of the work, various disputes arose between the parties, inter alia, withholding of mobilization advance, extension of time, delayed issuance of drawings, belated valuation of variations, unauthorized instructions, imposition of liquidated damages, termination of contract and encashment of guarantees, which culminated in the filing of a civil suit by the respondent and the grant of interim relief by the learned Trial Court. Subsequently, the parties executed a Deed of Settlement dated 22.05.2015, agreeing to refer eight specific disputes, as detailed in paragraphs B and H of the Settlement Deed, to arbitration under Clause 67.3 of the Conditions of Contract, with the appointment of Mr. Justice Nasir Aslam Zahid (Retired) as Sole Arbitrator by mutual consent. The arbitration proceedings were duly conducted, evidence was led and the learned Sole Arbitrator rendered his award on 20.08.2018, which was filed before the learned Trial Court on 11.09.2018. On the same day, notices were issued to the parties. The notice was served upon the appellant CDA on 12.09.2018, however, no objections were filed within the statutory period of 30 days as prescribed by Article 158 of the First Schedule to the Limitation Act, 1908; instead, objections were filed belatedly on 30.10.2018, accompanied by an application for condonation of delay on the ground of non-availability of essential documents. After the filing of the objections, the filing of the award remained the subject of extensive litigation up till the Honorable Supreme Court (it is appropriate to state that the award was initially filed before the learned Trial Court by the respondent's counsel rather than the arbitrator, leading to a series of applications and orders regarding the validity of filing, with the matter ultimately being regularized after the arbitrator's covering letter was placed on record). The Honourable Supreme Court upheld the order of the learned Trial Court dated 22.11.2019 vide order dated 25.03.2021 in Civil Petitions Nos. 3148 and 3149/2020. Therefore, the matter of filing of award was settled by the Honorable Supreme Court under the facts and circumstances of the case and the relevant law and subsequently the calculation for limitation from the initial day of filing of Award was also settled. 3. The learned counsel for the appellant CDA contended that the learned sole arbitrator erred in permitting CW-1, Mr. Shahid Rafiq, to introduce a substantial financial cost claim of Rs.1,280,355,958/- at the evidence stage, which was not part of the original statement of claim filed on 01.04.2016 and that the tribunal, without proper verification, computation or establishing contractual entitlement, proceeded to award Rs.640,177,979/- (plus Rs.3 million as costs) on the basis of this unpleaded claim. He further contended that the arbitrator improperly rejected the appellant CDA's counter-claim on technical grounds, holding it had not passed through the requisite contractual stages and failed to address the merits of disputes 7 and 8, despite the existence of engineer's decisions on record. Procedurally, the learned counsel for the appellant CDA highlighted that the award was initially filed before the learned Trial Court by the respondent's counsel rather than the arbitrator, leading to a series of applications and orders regarding the validity of filing of the award, with the matter ultimately being regularized after the arbitrator's covering letter was placed on record. The learned counsel maintains that the Civil Court, in its Impugned Order, dismissed the appellant's objections solely on the ground of limitation without examining the award for patent illegality or inconsistency with the contract, contrary to settled law, which requires judicial scrutiny of arbitral awards even in the absence of timely objections. It was further submitted that the sole arbitrator exceeded its jurisdiction by entertaining and awarding a claim not referred to arbitration under the settlement deed, failed to provide adequate reasoning or basis for the quantum awarded and disregarded the engineer's findings and the appellant's evidence, thereby rendering the award unsustainable in law. 4. Conversely, the learned counsel for the respondent contended that the objections filed by the appellant CDA against the arbitral award are not only time-barred under Article 158 of the Limitation Act, 1908 but also lack substantive merit; that the statutory period for filing objections is mandatory and cannot be extended by the Court, as consistently held in authoritative precedents and that the appellant's application for condonation of delay fails to establish any sufficient cause, particularly as the documents allegedly unavailable were always within the appellant's possession. On the merits, the learned counsel for the respondent maintained that the award was rendered after due consideration of the evidence and in accordance with the contract and the specific reference made pursuant to the settlement deed, which limited the scope of arbitration to eight defined disputes, thereby excluding the appellant's counter-claim, which was neither referred to the engineer nor included in the reference. He further submitted that the enhancement of the financial claim during the evidence stage was permissible, as it was neither objected to during arbitration nor precluded by law and that the arbitrator's assessment of compensation and overheads was based on the evidence and contractual provisions, with the arbitrator acting as the final judge of facts and law. He emphasized that the Court, in reviewing an arbitral award, is not to act as an appellate forum or reappraise evidence but is confined to examining whether there is an error apparent on the face of the award or misconduct, neither of which is present in this case. He also pointed out that the matter of the filling of Award has attained finality up to the Honourable Supreme Court and that the learned Trial Court was correct in making the award rule of the Court, as no patent illegality or jurisdictional error has been demonstrated by the appellant CDA. 5. We have given anxious consideration to the arguments of the learned counsel for the parties and perused the record with their able assistance. 6. The facts leading to the filing of the instant appeal have been set out in sufficient detail in paragraph No.2 above and need not be recapitulated. 7. While considering the background of the appeal and the grounds raised by the parties, it reveals that following significant questions need adjudication by this Court:- (i) Whether the objections filed against the arbitration Award were rightly dismissed as time-barred without a substantive examination of the award itself? (ii) Whether the grounds raised for setting aside the Award in appeal merit consideration despite the dismissal of objections on the ground of limitation? 8. Therefore, this Court will first examine, whether the objections filed against the arbitral award were rightly dismissed as time-barred without a substantive examination of the award itself. The statutory framework applicable for adjudicating this question is the Arbitration Act, 1940 ("The 1940 Act"), particularly section 17, which is reproduced hereunder for ease:- "17. Judgment in terms of award. Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award." 9. The above referred section 17 imposes a direct and mandatory obligation upon the Court once an Award is submitted for making it a rule of Court. The statutory language does not envisage the Court acting as a mere conduit for converting the Award into a decree rather, the Court is required to perform an active judicial function. It mandates that the Court must examine the Award to determine whether there exists any ground for remitting it back to the arbitrator for reconsideration or for setting it aside. Only if the Court finds no legal flaw or procedural irregularity in the award, and after the expiry of the prescribed period for filing objections or upon lawful rejection of any objections filed, may the Court pronounce judgment in accordance with the award, thereby rendering it executable as a decree of the Court. Importantly, the Court's duty of judicial scrutiny is not contingent upon the filing of objections by either party, nor it is negated by the expiry of the limitation period for such objections. Even in the absence of objections or where objections are barred by time, the court remains under a legal obligation to examine the award on its own motion. The absence of objections does not absolve the Court from its responsibility to ensure that the award is not tainted by any apparent illegality, procedural irregularity, or violation of law. While deciding the objections filed to the Award, the learned Trial Court failed to appreciate the true import of the statutory mandate under Section 17 of the 1940 Act. 10. In the present case, the record demonstrates that the learned Trial Court failed to fulfill its legal obligation under Section 17 of the 1940 Act. The learned Trial Court made the Award rule of the Court solely on the ground that the objections filed by the appellant CDA were time-barred. The relevant portion of the Impugned Order is reproduced hereunder:- "9. Learned counsel for objector/CDA argued that the court has to judge the matter on legal parameters even if the objections are not taken by the party. This court agrees with the submissions of learned counsel for the CDA but the fact remains that in the case in hand the submission of learned counsel for CDA/objector does not stand in consonance with available record because in this case objections have admittedly been filed by CDA. As such, it was necessary to have filed the objection petition within limitation period because the principle of law says that when a thing is required to be done in a certain way it is to be done in a certain way it is to be done in that way and in none other. 10. It further evinces from the record that this application for condonation of delay in Para No.2 thereof mentions that delay was caused due to unavailability of certain essential documents which were integral to current objection petition. This application, as such, does not specify which were those documents nor any such document is annexed with the objection petition/application for condonation of delay. Therefore, mere evasive submission in this regard without any specific supporting document cannot come to the rescue of the objector/CDA. The very filing of the application for condonation of delay, as a necessary corollary, contravenes the very argument of learned counsel for CDA that issue of Limitation is to be kept out of consideration. As such, this court cannot delve deep into the merits of the case because this court while taking the matter in the capacity of trial court cannot exercise of the powers of appellate court. Even otherwise, taking up the merits of the case and giving finding thereupon would be like taking the second step before taking the first i.e. crossing the threshold of limitation under Article 158 of First Schedule of Limitation Act, 1908. The matter must stop short here because the objector has failed to satisfy this court qua successfully crossing the bar of said Article 158 of First Schedule of Limitation Act, 1908. " 11. This approach is manifestly erroneous and contrary to the statutory framework, which confers a judicial, not ministerial, responsibility upon the Court. The Court's role under Section 17 of the 1940 Act is not that of a mere post office, mechanically endorsing the Award upon the expiry of the limitation period for objections rather the Court must exercise its independent judicial mind to ensure that the Award is free from any patent illegality, material irregularity or jurisdictional error. Even where no objections are filed, or objections are barred by limitation, the Court is still obligated to determine whether the award is legally sustainable, valid and free from manifest defects. In the instant matter, the record clearly reveals that the learned Trial Court did not undertake the essential judicial scrutiny required by law. It failed to assess the contents, fairness or legality of the award and did not determine whether the Award was within the bounds of the arbitrator's authority or in violation of any provision of law. Instead, the Court dismissed the objections on the ground of limitation and proceeded to make the Award rule of the Court without applying the standards mandated by law. This failure constitutes a miscarriage of justice and a deviation from the fundamental principles of due process and procedural fairness. For example, had the arbitrator awarded relief exceeding the contractual limits or involving a question beyond the scope of reference, such defect would have remained unaddressed due to the Court's inaction. 12. It is a settled principle in arbitration that while making an Award rule of the Court, in case parties have not filed objections, the Court is not supposed to act in a mechanical manner, like a post office but must subject the award to its judicial scrutiny. This however does not mean that a Court will sit in appeal over the Award and try to fish or dig out the latent errors in the proceedings or the Award. It only means that even in the absence of objections or time barred 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 Court's role is thus not purely procedural rather it involves a measure of judicial scrutiny to ensure that the Award does not suffer from any fundamental legal infirmities. This requirement is not merely a matter of judicial prudence but is rooted in statutory mandate. The Court's obligation to examine the legality and enforceability of the Award before making it a rule of the Court is inherent in the statutory scheme governing arbitral proceedings. 13. The grounds / parameters for setting aside of an arbitration Award have been laid down by the Honourable Supreme Court in the case of Gerry's International (Pvt.) Ltd v. Aeroflot Russian International Airline (2018 SCMR 662), which also includes this principle of judicial scrutiny. The relevant portion is reproduced hereunder:-…

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