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Petitioner: M.S. PORT SERVICES (PVT.) LTD. VS Respondent: PORT QASIM AUTHORITY
Court Name: Sindh High Court Judge(s): Munib Akhtar Title: M.S. PORT SERVICES (PVT.) LTD. vs PORT QASIM AUTHORITY Case No.: Suit No. 535 and C.M.A. No. 4243 of 2008 Date of Judgment:2012-01-10 Reported As: PLJ 2012 Karachi 152 Result: Suit dismissed
Judgment ORDER These proceedings are by way of an award dated 5-4-2008 made by a learned single arbitrator, which has been filed pursuant to Section 14 of the Arbitration Act, 1940. The learned arbitrator has awarded a sum of Rs. 23.847 million along with interest against the defendant in this suit, which is the Port Qasim Authority (hereinafter referred to as "PQA"). Notices were issued and PQA has filed its objections to the award and it is these objections that fall for consideration. Briefly stated, the award arises out of the following circumstances. On or about 15.5.1993, PQA awarded a contract for dredging services to be provided in order to clean up the port area. It appears that sometime in 1994 the contract was terminated and it was claimed by the service provider that a large sum of money was due and payable by PQA in respect of the dredging services. The contract provided for recourse to arbitration and it seems that these provisions were in fact invoked sometime in 1994. However it appears that no progress was made and the arbitration proceedings were abandoned. Thereafter the matter lingered for several years until finally a recovery suit was filed in this Court against PQA, being Suit No 1156 of 2003. PQA filed an application, being C.M.A. 1015 of 2004, under Section 34 of. the Arbitration Act. For reasons that will presently become clear this application will have to be considered in some detail in this decision. For present purposes, it suffices to note that by order dated 5-4-2005 the application was allowed by consent and the dispute referred to arbitration before a learned single arbitrator. That reference culminated in the award hereinabove mentioned. 2. The learned arbitrator framed three substantive issues that had to be decided by him and it will be convenient to take up these issues in seriatim and to consider the objections taken by learned counsel for PQA along with each issue as decided by the learned arbitrator. It may be noted that all
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three issues were decided against PQA. The issues as framed were as follows:-- (1)Whether the PSL is M.S. Port Services (Pvt.) Ltd. or Port Services (Pvt.) Ltd., If is former, is there any privity of contract with the PQA. (2)Whether the Claim made in the Statement of Claim is barred under Section 3 of Limitation Act. (3)Whether any payment under the Contract dated 15-5-1993 is due from the PQA to the PSL, if so to what extent. (4)What should the Award be? 3. The first issue, which is rather unusual, arose in the following circumstances. The dredging contract referred to above on the face of it stated that it had been entered into between PQA and a company by name Port Services (Pvt.) Ltd. (hereinafter referred to as "PSL"). All the relevant correspondence between PQA in relation to the dredging contract is addressed to PSL. PQA's case is that it subsequently discovered, after having communicated with the Securities and Exchange Commission of Pakistan (SECP), that in fact, as relevant for its contract, there was no such entity as PSL which had been registered by and with SECP under the Companies Ordinance 1984. It will be recalled that registration under the Companies Ordinance is by way of a certificate of incorporation issued thereunder and it is this certificate that legally establishes and, as it were, brings to life a corporate entity under the Companies Ordinance. SECP did indicate that there was a company registered with it under the name Port Services (Pvt.) Ltd., but it is clear from the record that that company (which was registered with the Registrar of Companies at Lahore and has its offices at Sialkot), could not possibly be the company relevant for present purposes. Thus, PQA's case is that there was no legal entity with which it had entered into the dredging contract. 4. Now, the claimant before the learned arbitrator, which was the plaintiff in the aforesaid Suit 1156 of 2003, was a company registered under the Companies Ordinance under the name M.S. Port Services (Pvt.) Ltd. (hereinafter "MSPSL"). The award that has been made by the learned arbitrator is in favour of this entity and this is the entity that is the plaintiff in the present suit. Learned counsel for this entity states that this is the very same entity that entered into the dredging contract with PQA, provided all the services thereunder and is therefore entitled to payment of the amounts due and payable under the contract. Thus, the case put forward by learned counsel for this claimant is that whatever the record, including the dredging contract itself, may appear or purport to show or state, MSPSL and PSL are but one and the-same entity. In other words, wherever in the record the name PSL appears, that should be read as meaning and indicating MSPSL. As to this claim learned counsel for PQA contended that MSPSL was a separate and distinct legal entity in its own right and that the record, which admittedly did not at all refer to this entity, had to be read and applied as its stood, namely as referring to PSL and not MSPSL. Thus, his case was that whoever, may have provided dredging services and therefore may (or may not) be entitled to payments in respect thereof, that person or entity was definitely not MSPSL and that therefore, the award made by the learned arbitrator was a nullity and could not be given effect to. 5. Now the record indicates that PQA was aware of the foregoing position by the time that it made its application under Section 34 of the Arbitration Act in Suit 1156 of 2003. That suit showed MSPSL as the plaintiff in the title. The question that naturally arises is why did PQA make an application at all seeking to refer the matter to arbitration when its view was that there was not, as such, any legal entry which had entered into the dredging contract, and hence the arbitration agreement as embodied in the arbitration clause thereof? As to this, learned counsel for PQA drew attention to the manner in which the application under Section 34 was framed, which was as follows:-- "It is humbly submitted on behalf of the defendant that the plaintiff above named has no privity of contract with the Agreement dated 15-5-1993. The distinction between the name of the plaintiff and the party entering into the Agreement dated 15-5-1993 is legally significant. Notwithstanding the above, Condition 67 of the Conditions of Contract in the Agreement dated 15-
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5-1993, relied upon by the plaintiff contains an arbitration clause and it is therefore prayed that this Suit may be stayed and the parties be directed to proceed to arbitration." Learned counsel contended that PQA had reserved its right to contest MSPSL making any claim of any nature whatsoever in respect of the dredging contract or any amount payable thereunder. 6. The learned arbitrator disposed of the issue that had been framed on this point (i.e., Issue No. 1) as follows:-- "In the present proceedings, it is the PQA who had applied for stay of the suit and the reference to the arbitration the PSL has agreed for reference, the direction has been given and the arbitrator has been appointed by the Court. In these circumstances, the PQA cannot dispute the identity of the PSL. Merely by pleading that the Application was subject to proof of identity, such plea has no force. Once a party has acted on the assertion of the other party then such party cannot be back out from its assertion on the principle of estoppel. Secondly, the PQA's contention was that Port Services Limited is a registered Company with SECP at its Lahore office and not at Karachi address. The PSL had provided the Letter of Incorporation as well as Memorandum and Articles of Association. Such documents are admitted by the PQA through statement of admission and denial dated 11th November 2004. Sections 32 and 33 of Companies Ordinance make the certificate of registration of a company as conclusive proof of incorporation of the Company. In my view, confusion has been created by the use of the words "M.S" and "M/s" during the correspondence. Certificate of incorporation is on record and it is "M.S Port Services (Pvt) Ltd", the PSL is incorporated by said name, perhaps the PQA while corresponding addressed the PSL instead of "M.S" by "M/S". At the most it could be a case of registration of two Companies in the same name. It could have been rectified even by Registrar in terms of Section 38 of Companies Ordinance but two Companies are separate legal entity having separate registered office. None has come forward till date to claim any interest in the dredging work contract, the PSL was paid part of the contract money. Right from the day of prequalification till filing the objections no such plea was even raised. The arbitration clause was previously invoked by PSL and Mr. Abdul Kalam and Mr. S.T. Ghani were appointed arbitrators respectively by the parties. It is unfortunate that the arbitrators failed to enter the reference in spite of substitution of the arbitrator by the PQA themselves, no plea with regard to the PSL identity or absence of privity of contract was raised, therefore, I am of the view that the identity plea has no force and, therefore it is decided in favour of the PSL. 7. Learned counsel for PQA contended that the learned arbitrator had erred materially and come to a conclusion contrary to law. He submitted that no representation within the meaning of Article 114 of the Qanun-e-Shahadat Order 1984 had been made, such as could constitute an estoppel against PQA. He submitted that the manner in which the Section 34 application had been framed clearly indicated that PQA had not given up its right to challenge and dispute the issue of the legal entity (if any) which was entitled to press the claim under the dredging contract and invoke and sustain any sort of proceedings in this regard, whether by way of a civil suit or arbitration proceedings. Learned counsel further contended that assuming without conceding that an estoppel did arise in the facts and circumstances of the present case, the question of whether the entity referred to in the record as PSL was in fact the entity registered under the Companies Ordinance as MSPSL was a matter of the legal status of the entity concerned. He contended that an issue of status could not be decided by means of an estoppel. He relied on Gadigeppa Bhimappa Meti v. Balagowda Bhimangowda AIR 1931 Bombay 561 to contend that legal status or capacity of a person was a matter of substantive law. If such status did not or could not exist as a matter of substantive law, the position could not be altered by sheltering behind a representation, even if it amounted to an estoppel. Learned counsel contended that if at all MSPSL could have any rights against PQA that could only be by way of novation of the dredging contract but such novation never came about. He contended that the mere filing of the Section 34 application was not fatal to
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the stand taken by PQA and submitted that in any case, the substantive rights in dispute could not be decided by any such application. In this regard he placed reliance on Asiatic Shipping Co. (Pvt.) Ltd. v. P.N. Djakarta Lloyd and another MR 1969 Calcutta 374 and submitted that the objection taken in this regard by PQA was very much alive before the learned arbitrator, who had however decided it erroneously. 8. Learned counsel for MSPSL strongly contested the various grounds taken by learned counsel for PQA in respect of Issue No. 1 and supported the conclusion arrived at by the learned arbitrator. He submitted that at no stage prior to the proceedings before the learned arbitrator had PQA raised such an objection. He submitted that PQA had accepted at all material times that PSL was a legal entity that was validly in existence and this was demonstrated by the entire record that had been placed before the learned arbitrator by the parties. The dredging contract itself had been duly entered into, correspondence had been addressed and even payments had been made to PSL by PQA without any objection, protest or demur whatsoever. Thus it was not permissible for PQA to raise any belated objection in this regard. Learned counsel contented, as noted above, that MSPSL and PSL were in fact one and the same entity. He submitted that the certificate of incorporation that had been issued in this regard by the Registrar of Companies showed that MSPSL had come into existence sometime in 1992, i.e., before the dredging contract had been entered into and that therefore there could be no doubt whatsoever that that contract had been entered into by a duly constituted legal entity. As to the discrepancy between the name appearing on the record, i.e. PSL, and the actual name of the entity concerned, i.e. MSPSL, learned counsel submitted that it had been the practice and want of MSPSL to use an abbreviated form of its full name, and the shortened version was of course, PSL. This was the reason why the name PSL appeared on the record instead of MSPSL. Learned counsel contended that this practice even ex, ded to MSPSL using a company stamp that showed the abbreviated name and this was the reason why the stamp used to execute the dredging contract referred to PSL. He further contended that this was in fact the trade name of MSPSL and that therefore it was entitled to use the same. Learned counsel also referred to F. Goldsmith (Sicklemere) Ltd. v. Baxter [1970] Ch 85, a decision of the English High Court. In that case, the real and correct name of the company concerned was F.Goldsmith (Sicklesmere) Ltd., but the name that appeared on the relevant contract was Goldsmith Coaches (Sicklesmere) Ltd. When the company sought to enforce the contract, the other party claimed that it had no obligation thereunder since admittedly there was no such entity by the latter name, which had entered into the contract. This objection was overruled by the High Court which held as follows (the findings of the High Court being in my view, accurately stated in the head note reproduced below):-- "Held, that applying the rule that a contract was to be construed by reference to the surrounding circumstances or in the light of the known facts, it was clear that Goldsmith Coaches (Sicklesmere) Ltd. was an inaccurate description of the plaintiff company; that a limited company, like a natural person, had characteristics other than its name, such as a business, a place of business, shareholders and directors, by which it could be identified; and that it was not essential to the validity of a contract made on behalf of a limited company that the company should be described with precision. Accordingly, the plaintiff company was entitled to an order for specific performance." Learned counsel for MSPSL contended that his case came squarely within the law laid down in the aforesaid decision. The entire record indicated that PSL was at best an inaccurate description of MSPSL and since all the relevant characteristics of MSPSL were the same as those attributed to PSL, in law it was MSPSL that had entered into the dredging contract and was entitled to the benefit thereof and to raise the claim thereunder. 9. I have carefully considered the reasoning that found favour with the learned arbitrator on the
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issue under consideration. With respect, I am unable to agree with the same. Two points appear to have satisfied the learned arbitrator. One is that there was some confusion between the letters "M.S", which were an integral part of the name of entity, and "M/s", which of course is an abbreviated form of "Messrs". Messrs is simply the plural of "Mr.". The learned arbitrator appears to have concluded that the record indicated that either one or other of the parties (or both) had mistakenly used "M/s" instead of the letters "M.S', and this created the resulting confusion. However, it is clear from the record that "M/S" is not always used along with PSL. Most importantly, it is not used in the letterhead of the entity, which simply reads "Port Services (Pvt.) Ltd". It is also not used in the stamp affixed to the dredging contract or in the name of the entity as specified there (at the place where the parties have appended their signatures). Thus, it cannot simply be stated that the matter involved only confusion between "M.S." and "M/S". The other point that found favour with the learned arbitrator was that PQA was estopped from raising this issue since the other party had acted on its representation. I must confess, with respect, that during the course of the hearing, I was rather puzzled as to the representation that PQA was supposed to have made, which would allow an estoppel to be raised against it, and having gone through the record both with the assistance of learned counsel for the parties as also on my own after the hearing, my puzzlement has not abated. Learned counsel for MSPSL contended that the representation was to the effect that there was a contract in existence and that in terms thereof, PQA had itself filed an application under Section 34 and had agreed to arbitrate the matter. I may note that in the award the learned arbitrator does not state with specificity as to what was the nature of the representation that, according to him, raised the estoppel. I am unable to agree with learned counsel for MSPSL that there was any representation of the nature as contended by him I n my view, learned counsel for PQA is correct in asserting that the legal existence or otherwise of a corporate entity like a company in a matter of status which cannot be grounded in any estoppel. Either a company exists (or existed at the material time) or it does not. Simply because a person thinks or agrees that it exists or represented at the material time that it existed or acts in a manner that is only consistent with his believing that the company exists (or existed) when in fact it did not cannot alter the position and, as it were, conjure up a company which does not or did not exist. The fact therefore that PQA entered into the dredging contract believing that there was such an entity as PSL, corresponded with this entity, issued cheques which were apparently encashed by someone, and even entered into arbitration proceedings on the basis of such a contract, cannot create an entity if it did not otherwise exist. I must therefore, with respect, conclude that the reasoning that found favour with the learned arbitrator cannot be sustained in law. 10.Nonetheless, after having considered the matter at some length, I am of the view that the conclusion arrived at by the learned arbitrator in deciding Issue No. 1 against PQA was correct. This is so because of the decision of the English High Court cited by learned counsel for MSPSL referred to above. Cases where a company, though in existence, has been wrongly identified in the record, including the contract in question are described as cases of misnomer. It appears to me that when the record is examined in its entirety, it is quite obvious that PQA regarded itself as having contracted with someone, who performed under the dredging contract and provided the services required thereunder. Payments were being made by it to this entity. Thus, the only conclusion possible is that PQA regarded itself as being in a contractual relationship with someone. PQA asserts that that some one could not possibly be PSL since there was no such entity and that therefore, whoever may have been the other party, it was not MSPSL. However, in my view this stand has negated a matter of law by the decision cited by learned counsel for MSPSL. In my view, there was only one entity that could possibly have been the person with whom PQA could have contracted, and it is amply clear from the record that that entity could only be MSPSL. While I do not find the other submissions made by learned counsel for MSPSL, such as the use of an abbreviated
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or trade name, convincing or satisfactory, in the end I conclude that when the record as a whole is examined, it does point conclusively in one direction alone, which is that the contracting party was MSPSL. Accordingly, though for reasons different from those that found favour with the learned arbitrator I would overrule the objections that have been raised by PQA with regard to issue No. 1. That issue was, in my view, correctly decided against PQA. 11.I now turn to consider the second issue that was before the learned arbitrator, which is that the claim was barred by limitation. As noted above, the learned arbitrator also decided this issue against PQA. Now, it appears to be common ground that the dredging contract was terminated on 18-5-1994 and that this is the starting point for computing limitation. Learned counsel for PQA referred to Section 65 of the Port Qasim Authority Act, 1973 ("1973 Act") to contend that that Act provided for its own period of limitation which was six months, and he contended on this basis that the suit was hopelessly barred by limitation. Learned counsel submitted in the alternative that while the learned arbitrator was of the view that the period of limitation was three years, his decision was not sustainable in law even on that basis. Learned counsel contended that the learned arbitrator had concluded that there were a series of acknowledgments of liability made by PQA by reason of which fresh periods of limitation had begun from time to time and that therefore, the claim was within limitation. Learned counsel submitted that the documents relied upon in this regard, and referred to by the learned arbitrator, had been improperly procured and/or stolen and could not therefore be considered. He contended that the learned arbitrator had erred materially in placing reliance on these documents. Insofar as learned counsel for MSPSL was concerned, he was content to rest his case on the findings as recorded by the learned arbitrator in relation to Issue No.2. 12.An examination of the award shows that the learned arbitrator relied on four documents to conclude that the claim was not barred by limitation. In the words of the learned arbitrator these documents were as follows: "In the present case the documents referred to above are before expiry of period of limitation i.e. brief dated 15-6-1996, draft audit report ending 30-6-1998, certificate of payment dated 22.3.2001 and minutes of Board meeting dated 24-4-2003 signed by the officer of the PQA and the contents thereof fulfilled the requirements of Section 19 of Limitation Act which extend the period limitation in terms of Section 19 from time to time." 13.After having carefully considered the submissions made by learned counsel as above and the findings recorded in the award, I have come to the conclusion that, with respect, the learned arbitrator has erred as a matter of law in concluding that the claim was within limitation. In my view, for the reasons hereinafter stated, the claim was time barred. I start with the common ground between the parties, namely that the dredging contract was terminated on 18-5-1994 and that therefore, time began to run from this date. Section 37 of the Arbitration Act, insofar as is presently relevant, provides as follows:-- "37. Limitation Act IX of 1908.--(1) All the provisions of the Limitation Act, 1908 shall apply to arbitrations as they apply to proceedings in Court. (2)... a cause of shall, for the purpose of limitation, be deemed to have accrued in respect of any ... matter at the time when it would have accrued (3) For the purposes of this section and of the Limitation Act, 1908, an arbitration shall be deemed to be commenced when one party to the arbitration agreement serves on the other parties thereto a notice requiring the appointment of an arbitrator, or where the arbitration agreement provides that the reference shall be to a person named or designated in the agreement, requiring that the difference be submitted to the person so named or designated." It will be seen that sub-section (1) makes all the provisions of the Limitation Act applicable to arbitration proceedings in the same manner as they apply to proceedings in Court. For purposes of
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computing limitation in a civil suit, the relevant date is the date on which the plaint is presented. If the suit is not barred by limitation as on that date, it is within time; otherwise it has to be dismissed under Section 3 regardless of whether limitation has been raised as a defense or not. The date equivalent to the foregoing (i.e., for purposes of determining whether the matter is time barred or not) in arbitration proceedings is set by Section 37(3) as the date on which notice is given by a party…
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