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Petitioner: MUHAMMAD ATHER HAFEEZ KHAN VS Respondent: Messrs SSANGYONG & USMANI JV
Court Name: Sindh High Court Judge(s): Munib Akhtar Title: MUHAMMAD ATHER HAFEEZ KHAN vs Messrs SSANGYONG & USMANI JV Case No.: Suit No,305 of 2010 and C.M.As. Nos. 902, 5597 of 2011 Date of Judgment:2011-07-15 Reported As: PLD 2011 Karachi 605 Result: Applications dismissed
Judgment ORDER ' MUNIB AKHTAR, J.---By means of C.M.A. 902 of 2011, the plaintiff seeks attachment before judgment of certain amounts belonging to the defendant, and lying with the Karachi Port Trust ("KPT"). The second application, C.M.A. 5597 of 2011, is an application seeking amendment in the relief sought in the first application, by the addition thereto of relief by way of interim injunction. These applications arise in the following circumstances. On or about 17-6-2008, a contract was entered into between the plaintiff and the defendant. The defendant is a joint venture of a Korean engineering company, and it is common ground that for purposes of the present applications, it can be treated as a foreign defendant, i,e,, as having its domicile outside of Pakistan. In essence, the agreement was for the plaintiff to provide certain consultancy and other services to the defendant, of which the most important were services by way of assistance in obtaining tax rebates or otherwise helping to reduce the defendant's tax burden in Pakistan on account of its business activities in this country. It was the plaintiff's case that he did provide the contractual services and as a result thereof, the defendant did receive, or became entitled to receive, the benefits referred to in the agreement, and thus he became entitled to certain payments from the defendant in terms as stated therein. The defendant denied this claim, and since the agreement contained an arbitration clause, the matter was eventually referred to arbitration before a sole arbitrator, where the dispute is pending adjudication on the merits. (It may be noted that the suit out of which the two applications under consideration arise was filed by way of an application under section 20 of the Arbifration Act, 1940.) Obviously, I am not concerned with the merits of the dispute, which shall be adjudicated upon by the learned arbitrator, and any award made by him shall thereafter be dealt with in accordance with law. It appears that the defendant is the contractor in a construction project at Karachi Port
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and in connection therewith, according to the plaintiff, it has become entitled to certain payments from KPT. It is these monies that the plaintiff seeks to have attached before judgment and/or otherwise injuncted by means of the present applications. 2. Learned counsel for the plaintiff submitted that the point to be noted regarding the agreement was that for the services to be rendered by him, the plaintiff was entitled to receive a certain percentage of the tax benefits that were obtained by the defendant. He submitted that the defendant had received specific and ascertained amounts by, way of tax benefits and thus the amount being claimed by the plaintiff was a determined amount, and not merely a general claim by way of unliquidated damages. A categorical averment had been made in this regard in the plaintiffs affidavit. Learned counsel submitted that section 41 of the Arbitration Act read with the Second Schedule thereto gave the court ample power to make interlocutory orders while the reference was pending in order to safeguard the interests of either one or the other of the disputants and/or to otherwise protect the subject matter of the reference. The plaintiff s case was that KPT had retained certain sums by way of retention money on running bills submitted by the defendant, and payable by KPT. As specifically averred in the plaintiffs affidavit, the defendant had now claimed and become entitled to the retained amounts. Learned counsel further submitted that to these specific and categorical averments, only pro forma and vague denials had been made in the counter-affidavit. Learned counsel put his case for interim orders both in terms of Order XXXVIII and also the inherent jurisdiction of the Court under section 151, C.P.C. Learned counsel also, with reference to the inherent jurisdiction, relied on the power of the court to issue the well known Mareva injunction, as invented and developed by the English courts. In support of his submissions, he referred to Mohiuddin Molla v. Province of East Pakistan and other PLD 1962 SC 119, and also two Division Bench judgments of this Court reported as Nazar Muhammad v. Akbar PLD 1989 Kar. 635 and Balagamwala Oil Mills (Pvt.) Ltd. v. Shakarchi Trading AG and others PLD 1990 Kar. .1. Learned counsel also submitted, with reference to the Mareva injunction, that. Order XXXIX, Rule 1(b), C.P.C. Achieved much the same result and submitted that it was in part for this reason that the second C.M.A. Had been moved for amendment to the first or primary miscellaneous application. He submitted that the plaintiff had made out a clear case for interim orders by way of either attachment before judgment of the amount to be released by KPT to the defendant, or any suitable restraining order in relation thereto 3. Learned counsel for the defendant strongly opposed both the applications. He submitted that it was an established practice in construction projects, which was duly reflected in the relevant contract between the defendant and KPT, that a certain sum of money was deducted and retained by the project owner (i,e,, KPT) from the running bills submitted from time to time by the contractor (i,e,, the defendant). The retention money was kept by the project owner in order to ensure full and timely completion by the contractor of his obligations under the construction contract. Learned counsel submitted that the retention money could not be regarded as belonging to the contractor and that therefore Order XXXVIII had no application, since it applied only in respect of the defendant's "property". Learned counsel further submitted, with reference to Rule 5 of the aforesaid Order, that it was also a necessary condition that the defendant should be "about" to take any of the actions stated therein. He submitted that this word necessarily implied a certain immediacy or imminence, which was completely lacking in the present case. Elaborating this point, learned counsel submitted that the construction contract was a multiyear project, which was nowhere near completion and therefore it was not conceivable that the release of any funds or amounts to the defendant by KPT was imminent. Thus, learned counsel submitted, Order XXXVIII, C.P.C. Had no application in the circumstances of the present case. Learned counsel further submitted that the plaintiff had made only bald assertions with regard to the retention monies in a pro forma manner, by essentially reproducing the relevant language of Order XXXVIII. Furthermore, nothing had been
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placed on record which would establish that the defendant had the necessary "intent" to delay, defeat or otherwise frustrate the execution of any decree that may, if at all, be eventually made against it. In this context, learned counsel emphasized that the fact that the defendant was a foreign entity was not sufficient, in and of itself, to make Order XXXVIII applicable or indeed, to entitle the plaintiff to any interim orders in respect of any amount that may be payable to the defendant by a third party. Learned counsel also-relied on certain decisions to which I will presently refer, but drew attention in particular to Uzin Export Import Enterprises for Foreign Trade v. Asia Steel Industrial Aids Ltd. And others 1986 M LD 1356, a Division Bench judgment of this Court, to contend that the subsequent Division Bench judgment in respect of the Mareva injunction, the Balagamwala case (supra), was in conflict therewith and therefore, and to the extent of the conflict, could not be regarded as good authority. Learned counsel contended that since the plaintiff had failed to make out any case whatsoever, the applications under consideration ought to be dismissed. 4. Exercising his right of reply, learned counsel for the plaintiff placed on record a letter dated 17-3- 2011, written by the defendant to the project engineer appointed for the project, whereby the defendant had specifically sought a sum of Rs, 82,732,603.00 from the retention monies lying with KPT and submitted that this letter clearly established that the release of the retention monies, or at least a part thereof, was imminent. Learned counsel submitted that the retention monies were in law, the property of the contractor, i,e,, the defendant, and that therefore, they could be made the subject of interim orders by the Court. 5. I have heard learned counsel for the parties, perused the record with their assistance and considered the case-law relied on by them. The case put forward by learned counsel for the plaintiff may conveniently be considered firstly, in terms of Order XXXVIII and secondly, in terms of the inherent jurisdiction of the Court under section 151 and/or its powers under Order XXXIX, Rule 1(b). In respect of attachment before judgment under Order XXXVIII, Rule 5 thereof provides, as presently relevant, in its sub-rule (1) as follows:-- " (1) Where at any stage of a suit, the Court is satisfied, by affidavit or otherwise, that the defendant with intent to obstruct or delay the execution of any decree that may be passed against him, - (a) is about to dispose of the whole or any part of his property, or (b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court, the court may direct the defendant...." Procedurally of course, the court must first require the defendant to show cause why he ought not to furnish security, and it is only if he fails to properly show cause or does not furnish the security that may be ordered that Rule 6 provides for the attachment of his property (although a conditional order of attachment may be made under Rule 5(3). However, since the substantive question that almost invariably arises, and was raised and argued in the present case, is in relation to Rule 5(1), it is necessary only to consider this provision. 6. As noted above, learned counsel for the defendant submitted firstly, that the retention monies were not the defendant's "property", and secondly, that there was nothing on record 'to show that the defendant was "about" to remove his property from the jurisdiction with "intent" to obstruct or delay any decree that may be made against it. As to the first point, I am of the view that the retention monies are the "property" of the defendant, being a debt owed to the defendant by KPT. The defendant, in its aforementioned letter dated 17-3-2011, has expressly spoken of the retention money in these terms. However, quite apart from that, even on the plane of principle, it seems that the retention money would (unless there was something to the contrary in the concerned contract) be regarded as belonging to the contractor. When a running bill is submitted to the project owner, he may accept or reject it, either in whole or in part. If he accepts it, then he has to make payment in respect thereof, as stipulated in the contract. The amount of the running bill is thus a debt owed
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by the project owner to the contractor. The fact that the contract also stipulates that the project owner may retain a portion thereof till fulfilment of certain specified tasks by the contractor does not make it any less a debt owed to the latter. The fact that the payment of the retained portion is conditional, and may never come about if the project owner can lawfully adjust it in terms of the contract, also does not detract from this position. Therefore, in my view, the retention monies lying with KPT are a debt owed by it to the defendant, and hence the latter's property within the meaning of Order 38. 7. For Rule 5(1) to be applicable, the plaintiff must show that the defendant has the necessary "intent", and that it is with this intent that he is "about" to remove his property from the jurisdiction of the court. Learned counsel for the defendant relied on Allied Industries Hub (Pvt.) Ltd. v. China National Metals and Mineral Import and Export Corporation and another 1989 M LD 2027, Balagamwala Oil Mills (Pvt.) Ltd. v. Shakarchi Trading AG and others 1991 CLC 2071 and Arrow Trading Company v. Hyosung Corporation and others 1997 M LD 55, all single Bench decisions of this Court, to submit that the mere fact that the defendant was a foreign corporation and had no permanent assets in the country was no ground to order attachment before judgment, especially if, as was the case at hand, the plaintiff was, and had all along been, aware of this position. (It may be noted that the Division Bench decision in the Balagamwala case (supra) was on appeal from the second mentioned case; however, nothing was said there as would affect the decision of the learned single Judge on the point now under consideration, and the appeal was in any case dismissed on the merits.) The fact that a foreign company may be doing business in Pakistan without having a permanent presence here, e.g., on a single project basis, would almost invariably mean that any payments received by it would be remitted abroad. The effect of such remittances may well be that a plaintiff may be unable to execute in Pakistan any decree made in his favour against such a defendant. However, it is not such an effect simpliciter that is caught by Order XXXVIII. It is only if such effect is brought about with the intent to delay or obstruct the decree that Order XXXVIII may be engaged. The mere fact therefore that in the present case, the defendant is a Korean entity is not of itself sufficient to attract Order XXXVIII, and standing alone, is not a factor that is of prime importance. 8. As noted above, learned counsel for the defendant submitted that the use of the word "about" necessarily meant that the removal of the property must be imminent or immediate. In my view, that sets the bar too high, and could well defeat the very purpose of an attachment before judgment (if a proper case for such an order is made out). This is especially so in present times, when the transfer of funds to a place outside the jurisdiction not merely of the court, but of the country, can be achieved almost instantaneously. Nor can the test as, in effect, proposed by learned counsel for the plaintiff be accepted, since that would bring virtually every removal within the ambit of Rule 5, thus essentially making the word "about" otiose. In my view, an appropriate test would be to determine if, in the given facts and circumstances, it can be reasonably expected that the property would be removed from the jurisdiction in the near future. If so, then the defendant may be regarded as "about" to remove his property from the jurisdiction of the court. As to what would constitute the near future would depend on the facts of each case. In some circumstances, it may mean only an immediate or imminent removal; in others, a longer timeframe may well be more appropriate. 9. Inextricably linked to the issue treated in the last paragraph is of course, the requirement that the defendant must also have the necessary "intent", i,e,, to obstruct or delay execution of any decree against him. No hard and fast rule can be laid down as to what would constitute the necessary "intent" or how it would be determined, nor would it be desirable to do so. Much would depend on the facts and circumstances of the case. In some cases, the very facts constituting the removal (or proposed or attempted removal) may be such as lead irresistibly to such a conclusion-res ipsa
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loquitur, as it were. In others, something additional may need to be adduced by the plaintiff. However, one point is clear. An order of attachment before judgment obviously curtails the undoubted right of a person to deal with his property as he deems appropriate. The object of such an order is preventive and not punitive. The plaintiff must therefore make out a clear case that the ingredients of Rule 5 are applicable. If there is a doubt or ambiguity, then the benefit must go to the defendant. Thus, unless the necessary "intent" can be made out with reasonable clarity from the relevant facts objectively considered, an order of, attachment ought ordinarily to be regarded as inappropriate. 10. When the foregoing principles are applied to the facts and circumstances of the present case, I am clear that a case for attachment before judgment has not been made out. It may well be the case that the defendant will remit the retention money, e.g., as demanded by it in its letter of 17-3- 2011, out of the country. But that is only to be expected given that it is a foreign entity. The plaintiff has not, in my view, been able to show that such a remittance, even if made, would be with the necessary "intent", i,e,, in order to defeat or obstruct any decree (on the basis of any award) that the plaintiff may eventually obtain in his favour. The purpose behind Order XXXVIII is not to guarantee to a plaintiff that there will always be an asset available in the jurisdiction to satisfy his claim, should he ultimately succeed in his action. That is not the function or duty of a court of law. The purpose behind Order XXXVIII is to ensure that a defendant does not abuse the process of the court, in the sense that he is able, pending adjudication of the claim against him, to make himself judgment-proof; That his acts, undertaken in the normal course, may for all practical purposes have such an effect is also not sufficient; it must be shown that he acted with intent to bring about such an effect. The plaintiffs case, on the basis of the H record as presently available, does not reach the required threshold. Learned counsel for the defendant relied on Associated Drillers Ltd. v. Dirk Verstoop BV PLD 1979 Kar 734 (SB), where it was observed as follows:-- "Even if it is to be conceded that Rule 5 of Order XXXVIII, C.P.C. Is not exhaustive and the Court is competent to order attachment even in a case which does not strictly fall within the purview of the above, provision of law, but the question which remains to be considered is as to whether the basic requirement of the above provision, namely, that the Court should be satisfied that the defendant with intent to obstruct or to delay the execution of any decree which may be passed, has taken or is about to take any of the steps specified in clauses (a) and (b) of the aforesaid rule of the aforesaid order. In my view simpliciter the fact that the plaintiff will not be able to execute their decree if any passed in their favour is not sufficient to invoke the provisions of Order XXXVIII, Rule 5, C.P.C. If the above ground is to be accepted as a sufficient ground to order attachment before judgment, it will cause hardship to the foreign companies/organisations operating in Pakistan, as it will be open to any person to file a suit against a foreign contractor for an alleged claim on the eve of the winding of affairs in Pakistan on completion of the work, which was entrusted to him in Pakistan, and also to invoke the provisions of the. Order XXXVIII, Rule 5, C.P.C. On the ground that there would be no asset of the aforesaid foreign contractor to satisfy the decree if any passed in his favour after several years." (pg. 737, para 8) ' In reply, learned counsel for the plaintiff cited Muhammad Hanif v. Echard and Co. Marine GmbH and others PLD 1977 Kar. 609 (SB) but in that case (which concerned the arrest of a vessel), it was specifically held as follows:-- "Now coming to the averments made in the application it is clear from the affidavits of the plaintiff and the broker that the defendants are trying to dispose of the vessel at a rate less than the market rate and that the defendant No, 1 being a foreigner has no property in Pakistan: Mr. Zahid has contended that the fact that the defendant No. 1 is a foreigner having no property in Pakistan is not sufficient for grant of attachment before judgment. The contention is correct.- But in the present case, this is not the only ground for seeking attachment before judgment. This ground is
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coupled with the fact that the plaintiff has made out a prima facie case for claiming damages and also that the defendants are trying to dispose of the vessel hurriedly at a price less than the market rate. From these facts it can be presumed that the defendants' intention is to dispose of the vessel so that they may be able to save themselves from the plaintiffs claim. In these circumstances if the defendant is a foreigner and has no other property except the property in suit or one sought to be attached, the Court will consider it as an important factor for exercising its discretion under Order XXXVIII, Rule 5, C.P.C. All such factors taken together if established make out a clear case for attachment before judgment. The defendants in their affidavit have not denied that they are not selling the vessel. It has been denied that they are selling it at a lower rate with intention to delay or defeat the decree. The defendants are admittedly selling the vessel. They have stated that it is in the normal course of their business, but have not produced on record an iota of evidence that they are engaged in the business of selling scrap vessels or that during the past how many vessels they have sold. They have stated that they are selling it but did not disclose with whom they are negotiating to sell the vessel. It is correct that if a party sells or disposes of any of its property in its normal course of business, then unless it is clearly established that the sale is with the intention to delay or defeat the decree, the Court will not make an order for attachment before judgment. But where the sale is admitted without establishing that it is in the normal course of business together with the facts that the defendants have no other property within the jurisdiction of this Court and sufficient evidence has been brought on record prima facie establishing incriminating intention of the defendants, mere statement that it is being sold in the normal course of business will not be sufficient to save the property from attachment." (pp. 612-13) ' The facts of this case were clearly different, and markedly so, from those at hand. Although the decision nicely illustrates some of the principles referred to in the paras supra, it does not, as such, further the plaintiffs case. Learned counsel for the plaintiff also laid emphasis on the point that the latter's claim was for an ascertained and specific sum, and not merely a general claim for unliquidated damages, which is the rock on which many an application for interim relief (and especially for a Mareva injunction) has foundered. While relevant, this fact cannot be regarded as decisive in and of itself. In my view, the plaintiff has been unable to make out a case under Order XXXVIII. 11. I turn therefore to consider the other limb of the plaintiff's case, namely, that quite apart from Order XXXVIII, it would be proper for the Court to exercise its inherent jurisdiction to make an appropriate order in the present case. In this context, learned counsel for the plaintiff relied in particular on the Mareva injunction, as invented by the English courts. The Mareva injunction does not seem to have found much favor with Pakistani courts, as attested by the fact that the only decision cited before me in this regard was the Division Bench judgment in the Balagamwala case (supra). In that case, the learned Division Bench was referred to the relevant English authorities in relation to the Mareva injunction. Two points decided by the learned Bench are relevant for present purposes. I will consider later what the learned Bench had to say regarding the Mareva injunction itself. First, it is necessary to consider the following observation (made while citing with approval an earlier single Bench decision of the Court reported as Mst. Salma Jawaid and others v. S.M Arshad and others PLD 1983 Kar. 303):-- "We are inclined to agree with Mr. Mansoor Ahmed Khan that in a fit case the Court may grant interim injunction even if the case does not fall within the four corners of the well-settled principles under Order XXXIX, Rules 1 and 2, C.P.C., if the facts of the case so demand, in order to foster the cause of justice." (PLD 1990 Kar. At p.6) ' Learned counsel for the defendant submitted that this observation was contrary to an earlier (1986) Division Bench judgment in the Uzin Export Import case (supra), and it is therefore necessary to first consider this point.
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12. The Uzin Export Import case was also one in which attachment before judgment was sought. Learned counsel for the defendant relied on the…
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