Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: CORPORATION ENGINEERING (PVT.) LIMITED VS Respondent: PAK ARAB REFINERY LIMITED
Court Name: Sindh High Court Judge(s): Ghulam Nabi Soomro, Muhammad Mujeebullah Siddiqui Title: CORPORATION ENGINEERING (PVT.) LIMITED vs PAK ARAB REFINERY LIMITED Case No.: High Court Appeal No,323 of 1999 Date of Judgment:2002-02-04 Reported As: 2002 CLC 836 Result: Appeal dismissed
JUDGMENT
JUDGMENT ' MUHAMMAD MUJEEBULLAH SIDDIQUI, J.--- This High Court Appeal is directed against the order, dated 22-9-1999, by learned Single Judge of this Court in Judicial Miscellaneous No,4 of 1996. ' This case has chequered history and it would be appropriate to marshal the entire facts in order to arrive at the proper conclusion. ' The appellant, is an Engineering Company and the respondent is a company carrying on work of transporting oil. The appellant and the respondent entered into an agreement on 16-12-1979 for the construction of 20" transfer line from oil terminal at Keamari to the pumping station No,l. Another agreement for construction of three 8" "spur line" from refineries to Pumping Station No,1 was entered into between appellant and the respondent in December, 1978. According to the facts, stated by the appellant, in Judicial Miscellaneous Application No,4 of 1996, Annexure "B" with the memo. Of this appeal, the two contracts were entirely independent of one another. The work on the contract for construction of 20" transfer line was to commence in April, 1980 and was to be completed by July, 1980. The termination notice of 20" dia transfer line contract was given by the respondent vide letter, dated 4th May, 1980 and the possession of the site was taken on 11th May, 1980. According to the appellant the respondent seized possession of all material, stores, tools, machinery and vehicles lying at the site in the absence of the appellant or its representative and in the process the respondent also took possession of all equipment and material including his asphalt enamel and 20" dia line pipe lying at the work site which was in premises of respondent's Cafe Noman Store Yard. The said stores were issued to the appellant by the respondent for use in the project and were lying at the work site under the supervision, control and security
---
## Page 2
arrangements of the respondent. According to appellant, he was not authorized to handle this store without proper authority from the respondent officials. ' It is alleged that subsequently the very same contract was collusively handed over to Messrs Marathan Construction Co. Limited. According to appellant the contract was terminated for the reason of "delay or negligence". It is further averred that the contract was concluded by Messrs Marathan Construction Co. Limited, in year 1981, which proves the mala fide of the respondent, who did not allow the appellant to complete the contract by July, 1980. ' The appellant has alleged that finally, in September, 1980, parties came to an amicable settlement as follows:-- (a) That respondent would not enforce the performance bond in respect of 20" Transfer Line. (b) That the petitioner would withdraw the Suit No,475 of 1980, which was so withdrawn on 15-9- 1980. (c) Neither party would claim against the other in respect of the' claims arising out of the termination of the contract for 20" Transfer Lines. (d) That the 8" spur line contract would continue to be enforced and implemented irrespective of mutual decision regarding the contract for the construction ofthe 20" Transfer Line. ' Subsequently, the project of 8" spur line was completed to the entire satisfaction of the respondent. According to appellant, they were harassed and pressurized by the respondent by withholding the payment of their final bill for Rs,13,57,989.96 so that the appellant may concede to the illegal and unjust demand of the respondent to pay the cost of store issued against 20" dia transfer line project. The appellant has submitted that it was being done, in spite of the fact that both the parties to the contract had relinquished project. It is alleged that the appellant, in fact, suffered substantial damages because the contract for 20" dia transfer line project was relinquished in consideration of respondent's agreement not to press for encashment of performance bond or raise any claim in respect of said 20" dia Transfer Line Project. It is further contended by the appellant that in any case, the two contracts were entirely independent of one another and the respondent had no jurisdiction to deduct the cost of stores issued under 20" Transfer Line Contract against 8" Spur Line Contract. The appellant complained against the respondent to the Federal Ombudsman, but the Federal Ombudsman refused to exercise jurisdiction in the matter. Thereafter, appellant issued notice dated 17-4-1984 through its Advocate to the respondent to refer the matter to arbitration, and nominated Mr. Kazim Hasan, Bar-at-Law, as its Arbitrator. In response to appellant's notice, the respondent nominated Mr. Justice (Retd.) Noorul-Arfin as its Arbitrator. The 'appellant filed statement of claim with the Arbitrator on 27-3- 1985 and the respondent filed reply statement on 7-11-1985. The appellant and the respondent filed documents, and admission and denial thereof were completed: Subsequently, the respondent filed application for amended reply statement which was granted by the Arbitrator and the respondent was directed to file amended reply statement, which was filed. In the process, the period of four months expired since the commencement of arbitration proceedings; hence necessity arose for filing application for extension of time. The appellant filed Judicial Miscellaneous No,30 of 1986 for enlargement of time, which was granted by the learned Single Judge of this Court on 26-8-1986. The time was .Extended for the period of four months from 26-8-1986. It is alleged that the appellant through its Advocate's letters, dated 13-9-1986 and 15-1-1987, requested the Arbitrators to appoint date of hearing but to no avail. Thereafter, the appellant by letter, dated 14-9-1987 requested the Umpire to enter upon reference as the Arbitrators failed to give award. The learned Umpire Mr. Justice (Retd.) Agha Ali Haider rejected the appellant's application by order, dated 24- 9-1987 and refused to enter upon the reference. The application before the Umpire was submitted under section 3 of the Arbitration Act read with rule 4 of the First Schedule to the Arbitration Act with the following prayer:--
---
## Page 3
"since the time allowed for making the award is expired, the learned Umpire may be pleased to enter on the reference in lieu of the learned Arbitrator and make the award." ' A detailed order was made by the Umpire disposing of the objections and contentions pertaining to the assumption of jurisdiction by him. We would not like to burden this judgment with the production of entire order. In short, the learned Umpire considered the conflicting rules and declined to assume jurisdiction. ' After rejection of the above application, the application through its Advocate's letter, dated 15-1- 1988, requested the Arbitrators to fix the date of hearing. The copy of letter was sent to the learned counsel for the respondent but the appellant was verbally informed on phone by Arbitrator to obtain consent from the learned counsel for the respondent, which was refused by the respondent. The appellant thereafter filed Judicial Miscellaneous No,53 of 1988 in this Court for enlargement of time for making award for further period of four months. The said application under section 28 of Arbitration Act, 1940 came for hearing on 12-2-1990. The learned counsel for the respondent opposed the application for the reason that the appellant has been lethargic itself protracting the proceedings. However, with the consent of learned counsel for the parties, the application was granted and the time was enlarged for making the award ' within a period of two months from 12- 2-1990. The then learned counsel for the appellant undertook to obtain copy of the order and inform the Arbitrator about it and thereafter to inform 'the Advocate for respondent about the date fixed by the Arbitrator. While granting the application for extension of time, it was specifically directed as under:- "In case the arbitration proceedings are not completed within the period of two months, granted in this case, no further extension of time will be granted." ' The counsel for the appellant intimated the Arbitrator regarding the extension of time by this Court for making award within a period of two months from the date of order, vide his letter, dated 13-2- 1990. The copy of the order was also forwarded. The Arbitrators were requested to fix the matter at their convenient. The copy of letter was forwarded to the Advocate for respondent. It appears that no action was taken and consequently, a reminder was issued by the Advocate for appellant to the Arbitrator on 8-3-1990. On the same date i,e, 8-3-1990, the appellant received a letter from Mr. Kazim Hasan, Bar-at-Law, the Arbitrator -nominated by the appellant, to the effect that there is no question of his acting as Arbitrator in the. Above matter until the additional arbitration fee was received by him in advance It is alleged by the appellant that the Arbitrator appointed by them was already paid the arbitration fee and, therefore, the question of additional fee never arose. The appellant contacted Mr. Kazim 'Hasan and informed that he has already received the fees settled by him, to which he did not agree. The appellant then agreed to pay additional arbitration fee upon conclusion of the arbitration proceedings. ' On 14-3-1990, the appellant received a letter from co-arbitrator Mr. Justice (Retd.) Noor-ul-Arfin, intimating counsel for appellant that in response to his letter, dated 8-3-1990, he had written a letter, dated .11-3-1990 to the counsel for the appellant asking to contact the co-Arbitrator and Advocate for Pak Arab Refinery and Mr. Ashiq Ali, Incharge of the Legal Department of Pak Arab Refinery personally. It was intimated that none of these persons have contacted the learned Arbitrator. The counsel for the appellant was further adVised to meet this ' gentleman and fix'a convenient date for hearing of the case. The learned counsel for the appellant was informed that it would have been more advisable to contact both Arbitrators personally for fixing a convenient date for hearing of the case. It was intimated that the learned Arbitrator could not fix the date unilaterally without the consent of the co-Arbitrator and without consulting the Advocate of Pak Arab Refinery for a convenient date. The learned counsel for the appellant was intimated that now it was for him to take action -on the lines suggested to him. Thereafter, on 29- 3-1990, the appellants' Advocate again requested the Arbitrator to, fix the hearing and forwarded
---
## Page 4
the copies of the letter to the Advocate for respondent and Incharge, Legal Department of respondent. Subsequently, Mr. Kazim Hasan, the Arbitrator nominated by the appellant, intimated the appellant through letter, dated 1-4-1990 that the appellant has not fulfilled, his demand of additional payment and, therefore, he was withdrawing his nomination as Arbitrator to appellant. He intimated that the appellant was free to nominate another Arbitrator in place of Mr. Kazim Hasan. ' In the above circumstances, the appellant filed an application under sectors 8, 9 and 28 of the Arbitration Act, 1940, being Judicial Miscellaneous No,29 of 1990 seeking enlargement of time for the arbitration award and appointment of another Arbitrator in place of Mr. Kazim Hasan, Advocate. It was suggested that Mr. Justice (Retd.) Abdul Hafeez Memon be placed in the vacancy of Arbitrator due to refusal of Mr. Kazim Hasan. Vide order, dated 14-2-1992, Mr. Justice (Retd.) Abdul Hafeez Memon was appointed co-Arbitrator in place of Mr. Kazim Hassn and the period for giving award was extended for four months as prayed in the application. During the pendency of the application, Mr. G.H. Malik, learned counsel for the respondent was elevated to the Bench of this Court and, therefore, the notice of the application was sent directly to the respondent. However, nobody appeared on the date of hearing and, therefore, the order. Dated 14-2-1991 was, made in the absence of respondent. ' No progress in the arbitration proceedings were made and according to appellant, it was due to pre-occupation of the Arbitrators, with the result that the time extended for making award again expired. Consequently, another application being Judicial Miscellaneous No,58 of 1991 Was submitted, seeking the extension in time. This application under section 28 of the Arbitration Act came for hearing on 23-11-1995. Prior to the hearing of application Mr. Justice (Retd.) Abdul Hafeez Memon was elevated as Judge of Supreme Court and was appointed as Acting Chief Justice of this Court. It was, therefore, held vide order dated 23-4-1995 with the consent of learned counsel for the parties that the miscellaneous application was rendered infructuous. The learned counsel for the appellant sought permission to file fresh proceedings for appointment of new Arbitrator. However, request was disposed of with the observation that any party may adopt any legal remedy available to him in law. After dismissal of the above application, the appellant submitted Judicial Miscellaneous No,4 of 1996 out of which the present appeal arises. The prayer was made for appointment of another co-Arbitrator in place of Mr. Justice (Retd.) Abdul Hafeez Memon and for extension of time for making award. ' The respondent filed objection to the application submitted by the appellant. It was contended on behalf of the respondent that the application amounts to abuse of process of law and Court. The respondent submitted that the arbitration proceedings were initiated in the year 1986 and in spite of lapse of about 10 years it was not concluded mainly due to negligence and evasive attitude of the appellant. According to respondent, several extensions were sought for completing the arbitration proceedings but due to negligence and/or inaction of the appellant the proceedings could not be concluded. It was urged that the arbitration proceedings should not be allowed to linger on any further as it would amount to negation of justice. The respondent submitted that initially four months' time was allowed for completion of arbitration proceedings and it was extended. On 26-8-1986 but from 26-8-1986 till 1988, the arbitration proceedings did not conclude chiefly on account of negligence/inaction on the part of the appellant. It was further alleged that after expiry of extended time, granted vide order, dated 12-2-1990, with specific direction that no further extension of time shall be granted, the appellant continued to be lethargic and submitted third application being Judicial Miscellaneous 29 of 1990. According to respondent, the appellant managed to obtain order, dated 14-12-1991 behind the back of respondent, whereby Mr. Justice (Retd.) Abdul Hafeez Memon was appointed co-Arbitrator, although the respondent had already filed counter-affidavit opposing the extension of time. It was farther contended that even after
---
## Page 5
obtaining the order, dated 14-2-1991 behind the back of respondent and without pointing out to the learned Single Judge that vide order, dated 12-2-1990, it was specifically directed that no further extension of time will be granted, the appellant took no steps towards the progress of arbitration proceedings. The appellant did not even care to intimate to the new co-Arbitrator about the order, dated 14-2-1991 and did not make request to him to enter into the arbitration proceedings. The appellant, thus allowed to expire third extension of time granted by this Court for completion of arbitration proceedings. The appellant, thereafter, in order to prolong arbitration proceedings and cause unnecessary harassm ent to the respondent submitted fourth application for enlargement of time Judicial Miscellaneous 58 of 1991. The responden, had filed counter-affidavit in January, 1992 but the appellant took no steps for hearing of application. Mr. Justice (Retd.) Abdul Hafeez Memon was appointed Judge of the Supreme Court of Pakistan in April, 1994 but the appellant did not take requisite steps to amend the proceedings until the dismissal of application on 23-11-1995 and thus the appellant wasted over four years in keeping Judicial Miscellaneous No,58 of 1991 pending, without taking serious steps to proceed with the matter. It was further contended that Judicial Miscellaneous 30 of 1986 was disposed of on 26-8-1986 whereby four months time was allowed and the second application being Judicial Miscellaneous 53 of 1988 was filed after 22 months of the said order and after 18 months of expiry of the time extended. In the meanwhile, the application to the Umpire was meaningless as the time for completion of arbitration proceedings had already expired and the second application for extension was submitted after 9 months of the rejection of the prayer for assumption of the arbitration was rejected by the Umpire. According to respondent all these facts abundantly demonstrate gross negligence on the part of the appellant and disentitle it for further indulgence. ' The Judicial Miscellaneous No,4 of 1996 was heard on 15-9-1999 by learned Single Judge of this Court and was disposed of by the impugned order, dated 22-9-1999. The learned Single Judge considered the entire facts and observed, that Mr. Justice (Retd.) Abdul Hafeez Memon was appointed as Arbitrator on 14-2-1991 but there is nothing on record to show that the appellant either approached the newly appointed Arbitrator or the co-Arbitrator Mr. Justice (Retd.) Noor- ulArfin for taking necessary proceedings; though the order was passed in the absence of respondent. He further observed that only contention of the appellant was that Mr. Justice (Retd.) Abdul Hafeez Memon did not proceed with the matter due to pre-occupation and thus time expired. However, the appellant failed to satisfy the Court that any steps were taken by them for conducting the arbitration proceedings since 14-2-1991 onwards. The learned Single Judge further observed that, "it is pertinent to note that it was on the plea of the petitioner that the arbitration proceedings were initiated in 1984, though the respondent was reluctant to join the same and respondent had in earlier petition also opposed the extension of time; but even then the conduct of the petitioner, right from the beginning and more particularly after February, 1991 shows that they have not been seriously interested to proceed with the matter, and therefore, the purpose of expeditious proceedings before the Arbitrator was absolutely frustrated". In the impugned order, it was held that while dealing with an application under section 28, judicial discretion is to be exercised looking into the facts and circumstances of the case, specifically, the conduct of the petitioner. It was held that the facts and circumstances do not favour the petitioner and do not call for the exercise of the discretion in their favour. In coming to the above conclusion, the learned Single Judge placed reliance on the following judgments, Pakistan v. Gayer & Co., Karachi PLD 1964 Kar. 9; (10) Civil Aviation Authority, Karachi v. Rist Consultants (Pvt.) Ltd. 1998 SCM R 2393 and Messrs Vaseem Construction Company v. Province of Sindh and 4 others 1985 M LD 397. ' For the foregoing reasons the learned Single Judge held that the appellant was not entitled for the relief claimed and dismissed the application;
---
## Page 6
' Being aggrieved with the dismissal of the application under section 28 of the Arbitration Act, the appellant has preferred this appeal. It is contended in the memo. Of appeal that learned Single Judge has gravely erred in not applying his mind to the factual perception before him and did not appreciate the policy of dispensation of justice which contemplate freedom of pursuit of respective positions for the contesting parties in litigation subject to reasonable limitation in the public interest. According to appellant, the learned Single Judge has committed gross error by shutting the doors of justice upon the appellant. It is contended that with impugned order, the appellant is left without any remedy and such a situation is disapproved by the civilized judicial system and amounts to miscarriage of justice. It is further contended that most of the delay in the conduct of arbitration proceedings was on account of Arbitrators and that the learned Single Judge was not right in observing that there was lack of diligence on the part of the appellant in pursuing the case. It has been pleaded that the learned Single Judge has exercised discretion in unreasonable and arbitrary manner. It has been prayed that the impugned order may be set aside and the time for making award may be enlarged for four months. The appeal was fixed for admission before :a Division Bench of this Court comprising Sabihuddin Ahmed and Zahid Kurban Alvi, JJ., and the learned counsel for the respondent raised preliminary objection to the maintainability of this appeal. Vide order, dated 6-2-2001, authored by Sabihuddin Ahmed, J. The preliminary objection to the maintainability of the appeal was repelled and the appeal was admitted to regular hearing. It would be appropriate to reproduce the order, dated 6-2-2001, which reads as follows:-- 1. This, is an appeal against an order of a learned Single Judge, dated 22-9-1999, refusing to extend time to the Arbitrator for making an award upon an application made by the appeal ant under section 28 of the Arbitration Act. 2. Without going into the merit of the case it may be observe that Mr. H.A. Rehmani, learned counsel for the respondent raised a preliminary objection as to maintainability of this appeal on the ground that appeals against certain specified types of orders were maintainable under section 39 of the Arbitration Act and the impugned order did not fall within such specified categories. We treated this objection as a preliminary objection and decided to hear learned counsel at length because the entire appeal could be disposed of if this objection of fundamental nature was found sustainable. 3 . To appreciate the contention of the learned counsel it may be appropriate to reproduce section 39 which reads as under:-- 39. Appealable orders.---(1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order- ' An order (i) Superseding an arbitration; (ii) On an award stated in the form of a special case; (iii) Modifying or correcting an award; (iv) Filing or refusing to file an Arbitration Agreement; (v) Staying or refusing to stay legal proceedings where there is an Arbitration agreement. (vi) Setting aside or refusing to set aside an award; (2) no second. Appeal shall lie from an order passed in appeal under this section, but nothing shall not apply to any order passed by a Small Cause Court. ' Mr. Rehmani argued that the aforementioned section 39 only provided appeals against the types of orders mentioned therein and expressly stipulated that no appeal would lie against any other order. Since an order refusing to grant extension under section 28 did not fall within the described categories, the instant appeal was not maintainable. We requested learned counsel to satisfy us
---
## Page 7
on the question whether section 39 also barred appeals' preferred under section 15 of Ordinance 10 of' 1980, which enables a person to prefer an appeal against any order passed by a learned Single Judge exercising original civil jurisdiction of this Court to a Bench of two Judges and whether the impugned orders could not be treated as one superceding an arbitration under clause (i) of section 39(1) of the Arbitration Act. 5. As regards the first question M. Rehmani contended that the Arbitration Act was a special law and, therefore, the specific provisions of section 39 would prevail over those of C.P.C. Or any other general law. Moreover, he referred to the following observation of the Honourable Supreme Court in WAPDA and another v. Khanzada Muhammad Abdul Haq Khan & Company PLD 1990 SC 359:-- 15. Taking up the third contention that the cross-objections against non-award of interest by the decree passed by the learned Senior Civil Judge were incompetent, the argument was that an appeal as provided under section 39(1) of the Arbitration Act would lie only from the orders mentioned in that section and from no other orders. Therefore, no cross-objections, which are in the nature of cross-appeal, were maintainable. Under the Arbitration Act an appeal lies from the following orders- (i) An order superseding an arbitration;…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.