IN
THE HIGH COURT OF SINDH AT KARACHI
Suit No. 404 of 2002
Dates
of hearing 21st, 28th and 29th of
August, 2007.
Date of Judgment .
. 0 . 2 0 0 7 .
Plaintiff : M/s
Hyderi Construction Company Limited through Mr. Bilal A. Khawaja, Advocates
Defendants : State
Engineering Corporation Limited, through Mr. Asad Munir, Advocate.
J U D G M E N T
MUNIB
AHMED KHAN. J, The dispute is in respect to a Construction
Contract, executed on 09.01.1990. Both the parties, after litigating for their
alleged rights under the contract took the matter to the High Court and
thereafter to the Hon’ble Supreme Court through CPLA No. 204 of 1998 wherein
parties came to an understanding which was recorded hence the Petition was
converted into Appeal bearing No. 748 of 1998. The consent order dated
13.05.1998, recorded by the Hon’ble Supreme Court is as follows:
“Learned counsel for the parties had made
yesterday preliminary submission and during the hearing a consensus emerged to
have the suits/disputes pending between the parties resolved through
arbitration. The parties were therefore granted time to submit in writing their
request to refer the disputes/suits to arbitration. learned counsel for the
petitioner, and Mr. Habeebullah Habeeb Managing Director of respondent company
have submitted the application agreeing to refer the disputes/suits pending
/existing between the parties arising out of agreement dated 09.01.1990 to a
penal of three arbitrators. Each party has nominated its arbitrator while the
court has been asked to nominate the Chairman. It is also agreed that the venue
of the arbitration proceedings shall be decided by the arbitrators according to
the requirement of the case but the Award shall be filed in the High Court of
Sindh, Karachi. The request to refer the disputes/suits to penal of three
arbitrators as advances the cause of Justice is accepted.
Mr. Justice (Retd) Muhammad Afzal Lone is
appointed Chairman of the penal of Arbitration. Rupees four lacs is fixed as
fee. The fee of Mr. Justice (Retd) G. H. Malik is fixed at Rs. three lac while
Mr. L. K. Sehraee, Dy General Manager of the heavy electrical Complex shall be
paid two lacs. The parties will pay the fee of Arbitrators nominated by them.
The fee of the Chairman shall be paid in equal shares by the parties. The
expenses of the Arbitration shall be shared by the parties equally. a sum of
Rs. one lac shall be deposited towards expenses in equal shares with the
chairman initially at the present.
The Petition is converted into an appeal,
and disposed of in the terms noted above.”
After
the order of the Hon’ble Supreme Court, the parties filed their claims and
counter claims. The applicant (HCCL) claimed a sum of Rs.60 Million but lateron
it was allowed to add its claim for Rs. 45 Million and Rs.31,777,687/-. On the
other hand, respondent State Engineering Corporation Limited (SECL) submitted a
counter claim of Rs.82,127,159/-.
The
main dispute involved in the matter is commencement date of the work under the
contract as well as expiry date. According to HCCL the commencement date was 10th
February 1990 and keeping in view one year duration of the contract completion
date was 10th February 1991, while according to SECL date of
commencement was not 10th February 1991 nor it was material but the
expiry date was 30th June 1991, which was agreed to between the
parties, in a meeting held between the parties. There are minutes of meeting
dated 20th august 1990, which are signed by both the parties. The
HCCL taking the date of commencement and expiry, according to its own, as
mentioned above, abandoned the work, on the ground that respondent SECL failed
to supply required material and the facilities without which completion of the
contract was not possible and since that was a breach of contract, therefore,
all responsibilities in this regard fall upon SECL, hence it has to compensate
HCCL towards losses it suffered due to its non-completion of work,
notwithstanding the facts, that it materialized all its work force, machinery
and time.
On
the other hand, SECL has stated that the commencement date was to be taken from
the point, when certain initial preparation are to be made by it as it has to
arrange for electricity and water etc. but even otherwise, the completion date,
which was agreed to as 30th June 1991 was more material, which was
agreed to in a meeting of 20th August, 1990 and that all
preparations were made accordingly with the calculation that work is to be
completed by 30th June 1991. It is also alleged by SECL that HCCL
were lacking in technical, managerial capabilities as well as organizational
set up and were not having adequate manpower, construction material and
functioning tool etc.
Learned Arbitrators, on the basis
of above contentions of the parties recorded following issues:
1.
Which of the parties committed breach of the contract and in what
respect, to what extent and with what effect?
2.
Whether the plaintiff company is entitled to damages / compensation?
If so, to what extent?
3.
Whether the defendant corporation is entitled to damages/compensation?
If so, to what extent?
4.
Whether the encashment of performance guarantee by the defendant
corporation was illegal? If so, with what effect?
5.
Whether the defendant corporation is entitled to refund of mobilization
advance amounting to Rs.45,00,000/-? If so, whether with mark up, at what rate
and for what period?
The applicant, HCCL examined three
witness while the respondent SECP examined five witnesses. The penal of
Arbitrators, after going through the documents on record, as well as evidence
of the witnesses, through the majority award rejected the claim of applicant
HCCL while awarded a sum of Rs.1,318,000 to the respondent SECP by an Award
dated 26.01.2002.
After filing of the Award in Court,
the HCCL has filed objection under section 30/33 of the Arbitration Act, on
several grounds but the basic grounds are that Arbitrators overlooked clauses
of the contract and have failed to decide Reference strictly in the light of
issues raised before it and that the conclusion of the Arbitrators regarding
extension of time for completion of contract till 30th June 1991 is
contrary to the spirit of the contract and specifically to its clause 42, as
instead of interpreting clauses of the contract in this respect, they inferred
material from other documents e.g. meeting between the parties notwithstanding
the fact that according to contract, time was essence of the Contract. It has
further been submitted in the objection and arguments by the learned counsel
for the applicant that delay on the part of SECL towards supply of electricity
and water as well as certain tools and other material was given no importance,
as the performance of the work was dependent on that and errors on the part of
respondent, although notice by the Arbitrators, were ignored, terming them as
minor issues. It has also been stated that some material including
members/columns were very material but admittedly they were not supplied even
by the time when the contract was abandoned but even when no serious notice was
taken by the learned Arbitrators and that Arbitrators have not applied their
independent mind and one has relied upon the findings of the others and in that
way, they have given unnecessary reasoning which amounts to misconduct. Learned
counsel for the applicant has further stated that Arbitrators have applied
therein mythology and ignored settled basic principle applicable in the
construction contract. Learned counsel Mr. Bilal A. Khawaja has relied upon,
PLD 1999 KAR 112, GCP v. Broken Hill Proprietary Company Ltd., 1991 CLC 66,
Province of Sindh v. Waseem Construction Co, 2003 YLR 2494, WAPDA v. M/s. Ice
Pak International Consulting Engineers of Pakistan, 1991 MLD 422 (DB), Govt.
of NWFP v. Azizur Rehman, PLD 1979 Karachi 744, Pakistan v. M/s. Rizvi &
Company, 1988 CLC 430, M/s. Orient Builders v. The Chief Engineer Highways,
1980 CLC 470, M/s. Bari Sons Pak v. Pakistan through Secretary Ministry of
Industries, PLD 1978 Karachi 585, M/s. Jaffer Bros Ltd v. Islamic Republic of
Pakistan and Ors, 1987 MLD 3036, M/s. Bawany Sugar Mills Ltd v. M/s. Karachi
Trading Agency, PLD 1978 Karachi 827, Govt. of Pakistan v. M/s National
Agencies Karachi, PLD 1971 AJK 127, Ghulam Rasool Lone v. AJK Govt.
On the
other hand, the respondent has also filed objection against the Award of Single
Arbitrator while they have supported the majority Award. In their objection, as
well as through the arguments of Mr. Asad Munir, the learned counsel for
respondent has been asserted that factual position and documents have rightly
been appreciated by the Arbitrators and majority award is binding, fit and
proper award while reasoning given by the third empire is not proper. They have
requested that majority award be accepted. He has relied upon PLD 2006 S C 169,
Mian Corporation v. M/s Lever Brothers, 2006 SCMR 1657, Muhammad Farooq Shah v.
Shakirullah, PLD 2005 Karachi. 670, China International v. WAPDA, 2004 SCMR
590, President of Pakistan v. Syed Tasneem Hussain Naqvi, PLD 2003 SC 301,
Pakistan Steel Mills v. Mustafa Sons, 1999 CLC 1777, M/s. Quality Builders v.
Karachi Metropolitan Corporation, 1999 CLC 1698, GMK Enterprises v. Shaheen
Builders, 1998 CLC 1671 M/s. Khan Brothers v. Director General, Food, PLD 1976
Karachi. 458, Province of West Pakistan v. Gammon’s Pakistan, 1999 MLD 1600,
Transocean Asia Ltd. v. Rice Export Corporation of Pakistan, PLD 1995 Karachi
301, Kashmir Corporation Ltd. v. Pakistan International Airlines, PLD 1985 SC
69, M/s Aslam Saeed & Co v. M/s. Trading Corporation of Pakistan, 1981 CLC
999, Trading Corporation of Pakistan v. M/s. Al-Ehsan Trading Co, PLD 1971 SC
743, Syed Sibte Raza etc. v. Habib Bank Limited, PLD 1971 Karachi 899, M/s.
Moosa Oomar & Co. Ltd v. M/s. Haji E. Dossa & Sons.
After
hearing the learned counsel it was observed that Mr. Bilal A. Khawaja was even
not satisfied with the manners in which Award has been filed in this court, as
according to him it would have been filed in terms of section 14(2) of the
Arbitration Act 1940 but when his attention was invited to the consent order,
passed by the Hon’ble Supreme Court, whereby the matter was referred to
Arbitrators, thereafter he did not press the said objection, therefore,
objections on that ground are being ignored.
The
first four authorities cited by Mr. Bilal A. Khawaja, learned counsel for
applicant, are in respect to the situation when evidence on record has been
ignored or the reasoning given by Arbitrators was contrary to the evidence,
while PLD 1979 KAR 744 and 1988 CLC 430 have been cited by the learned counsel
on the point, when terms of contract have not properly been construed while
other authorities are more or less on the point when there was no sufficient
evidence for Arbitrators to reach the findings given in the Award or the
evidence has been ignored or legal error was apparent from the face of the
Award.
On the
other hand, authorities cited by Mr. Asad Munir, learned counsel for
respondent, are on the point that Arbitrator is a final Judge on question of
law and facts and decision is to be treated with utmost respect unless
misconduct is proved and in this respect he has relied upon PLD 2006 SC 169.
The theme coming out of 2006 SCMR 165 is that the Court with all reasonable
intending should favour the Award rather vitiating it. The principle laid down
in PLD 2005 KAR 670 is that the court’s function was only supervisory and not
like an appellate court hence it was not requirement of law that Award be
rejected on the ground that different conclusion was possible from the evidence
and material available on record. The gist coming out from 2004 SCMR 5908 is
that Award can be challenged on specific ground, in terms of section 30 of the
Arbitration Act which provides that the court hearing objection against Award
cannot sit as a court of appeal. In PLD 2003 SC 301, 1999 CLC 1698 and 1998 CLC
1671, it has been observed that court cannot undertake reappraisal of evidence
in order to discover error or infirmity in the Award. The error must be
apparent on the face of award and should be noticed by reading the Award
itself. The other authorities cited by the learned counsel are more or less on
the above points and by declaring that the Court, before which a Award is
filed, cannot reassess the evidence while hearing the objections.
After
hearing the learned counsel and perusing the citation, quoted by them, I am of
the opinion that Award can only be challenged in terms of section 30 which
specifically provides ground for it setting aside which includes mis conduct on
the part of Arbitrators or by him in the proceedings or the award has been
passed contrary to the order of the court or it has been improperly procured or
is invalid. In the case in hands, the applicant has only assailed the Award on
the ground that Arbitrators have mis-conducted the proceedings.
The
record shows that Arbitrators have followed the routine procedures. The parties
have filed their claims and all the relevant documents. The applicant HCCL was
even allowed to file their additional claim. The parties examined their
witnesses and no complaint has been made that the party was not allowed to
present its case in any respect before the Arbitrators. From the majority
award, it appears that each and every factual position, as well as contention
of the parties have been taken into account and learned Arbitrators have taken
care of all the material available with them while giving the Award. The
contention of Mr. Bilal A. Khawaja that learned Arbitrators have not given
proper Award on the basis of documents and evidence brought before them is not
tenable as it is prerogative of the Arbitrators to reach a finding on the basis
of material brought before them according to their own judgment which judgement
should normally be respected as the Arbitrators are chosen or consented by the
parties themselves, keeping in mind the issues involved in a dispute viz a viz
capability of an Arbitrator proposed for that purpose. The Arbitrator acts in a
quasi judicial manner, therefore, reach the conclusion much earlier than court
do, leaving aside the technicalities of law therefore, until there is a
misconduct on the part of the Arbitrators, apparent from the award itself by
its reading, till then Award cannot be interfered. It may be possible that
Arbitrators have not appreciated the evidence in a way the parties have desired
but that cannot be a ground for misconduct. The very crucial point in the
dispute in hands was extension of date of completion of the contract which has
been declared by the Arbitrators as 30th June 1991, keeping in view
undisputed meeting on 20.08.1990 of which minutes were brought on record.
According to the same meeting expiry date was fixed as 30.06.1991. Therefore,
all development and performance of work as well as obligation upon the parties
to be assessed keeping in view the duration of time expiring on 30.06.1991
which factor has properly been scrutinized and discussed by the Arbitrators and
I too do not find any fault in it. The unilateral action of HCCL to abandon the
work on the pretext that time expired on 09.02.1991 and obligation upon the
parties to be assessed keeping this date in mind it not justified as HCCL
participated in the meeting, agreed for extension of time to 30.06.1991 and
thereafter continued working after the said meeting held on 20.08.1990 which
shows its consent to the minutes of meeting.
In
the circumstances, I do not find any force in the objections filed by the
applicant/plaintiff HCCL against the majority Award which is given by Mr.
Justice (Retd) Mohammad Afzal Lone and Mr. L. K. Sarahee and reject them while
pronouncing the judgment in terms of the Award, filed in this Court on
31.01.2002 make it rule of the court. Decree to follow, accordingly.
J U D
G E
Samie