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Petitioner: CHINA INTERNATIONAL WATER AND ELECTRIC CORPORATION VS Respondent: PAKISTAN JUDGMENT
Court Name: Sindh High Court Judge(s): Muhammad Junaid Ghaffar Title:CHINA INTERNATIONAL WATER AND ELECTRIC CORPORATION vs PAKISTAN
JUDGMENT
Reported As: 2018 CLC 188 Result: Award set aside Judgment JUDGMENT MUHAMMAD JUNAID GHAFFAR, J.--- This is a Suit in respect of an Award passed by the learned Sole Arbitrator dated 23.07.1999 and through this Judgment the objections raised on behalf of Defendant under Sections 30 and 33 of the Arbitration Act, 1940 against the validity of the said Award are being decided. 2. Precisely, the facts as stated appear to be that a Tender was floated by Pakistan Water and Power Development Authority (Defendant) for the construction of Rato Dero Pump Station (Project), wherein, the bid of China International Water and Electric Corporation (Plaintiff) was accepted. The contract price was Rs.108,668,800/- and the period of contract was 15 months from 28.06.1996 to 28.09.1997. After the Award of the Contract, some dispute arose between the Plaintiff and Defendant and for the present purposes it is only the dispute regarding running Bill No.5 dated 31.01.1997, and therefore, the facts are confined to that extent only. The said running bill was verified by the Engineer on 08.03.1997 but payment was not made within the required period, therefore, the dispute arose. Thereafter the Plaintiff on 04.07.1997 filed an Application under Section 20 of the Arbitration Act, 1940, which was registered as Suit No.875/1997 and the same was decided vide order dated 21.10.1997 and the matter was referred to the learned Sole Arbitrator. Subsequently the Award was passed against which objections were filed by the Plaintiff as well as the Defendant. The said objections were decided by the learned Single Judge of this Court in this Suit vide Judgment dated 01.06.2005 and though the validity of the Award in favour of the Plaintiff was accepted but it was held that the Award was passed on an invalid Reference dated 21.10.1997, therefore, the Arbitrator had no jurisdiction to decide the dispute and pass the Award. The said order was
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challenged by the Plaintiff through High Court Appeal No.173/2005 and vide Order dated 26.03.2009, the Judgment of the learned Single judge was set-side and the matter was remanded for decision afresh after taking into consideration the objections raised by the Defendant in its Application under Section 30 of the Arbitration Act, 1940. The Defendant being aggrieved preferred a Civil Appeal No.133-K/2009 before the Honourable Supreme Court, which was dismissed vide Order dated 03.09.2012 and the order of Appellate Court was upheld. Under these circumstances, the matter is now before this Court for deciding the objections of the Defendant against the said Award only. 3. The learned Counsel appearing on behalf of the Defendant has contended that the Interim Payment Certificate ("IPC") regarding running Bill No.5 was certified by the Consultant on 08.03.1997 and was delivered on the same date, whereas, the payment was required to be made within 45 days as provided in Conditions of Contract ("COC") Part-II, Clause 60(5)(a). He has further submitted that such period stood extended for further 60 days in terms of Clause-69(1)(d) of the COC and the consequence thereof is that if the payment is not made within-45+60 days then the Plaintiff was entitled to terminate the contract; but only after giving 14 days prior notice, which per learned Counsel was never issued and considered. He has further contended that for calculation of the period of 45 days and thereafter 60 days, the date of the IPC is to be excluded, however, the learned Sole Arbitrator has not taken into consideration such factual position. According to the Defendant, 45 days expired on 22.04.1997 and thereafter the 60 days' period was to end on 21.06.1997 and 21.06.1997 was a declared local holiday in view of Urs of Hazrat Shah Abdul Lateef Bhitai being 14th Safar and the next date, which is 22.06.1997, was Sunday. Whereas, the cheque dispatched on 20.06.1997 was received by the Plaintiff on 23.06.1997, which was encashed on 24.06.1997, therefore, there was no default on the part of the Defendant. He has further contended that without prejudice to this, the Plaintiff never complied with the terms of COC by issuing a proper legal notice for the alleged termination of the Contract and giving a 14 days' time to the Defendant, and therefore, all such acts done by the Plaintiff including stoppage of work etc. was in violation of the Contract for which the Plaintiff is not entitled for any of the relief(s) so granted in the Award. According to the learned Counsel even if the matter was referred for Arbitration as per the Contract, the work should not have been stopped; rather should have been continued, however the Plaintiff had no intention to carry out the second part of the Contract, which apparently was of less profit percentage, and therefore, they made out this unjustified reason for the alleged termination. Learned Counsel has further contended that the learned Arbitrator has not appreciated the material placed before him including the WAPDA Manual, which provides for the terms of payment and its procedure, whereas, the established practice, whereby, the Plaintiff used to collect their cheques on the due date, has not been considered and rather ignored without any plausible justification. Per learned Counsel it is a settled proposition that while calculating the limitation period first day is to be excluded and for that learned Counsel has also referred to Section 9 of the General Clauses Act, 1897. Learned Counsel has also raised an objection that various payments including damages have been awarded to the Plaintiff by the learned Sole Arbitrator, however, there is no certification to all these payments as required under the Contract, and therefore, non-certification by the Engineer, is in violation of Clause 65(8) of the COC, hence invalid. Per learned Counsel learned Sole Arbitrator while granting various payments, including damages has also failed to consider the material facts as well as the evidence on record and has in fact passed his Award on presumption, which is impermissible in law. In the circumstances, learned Counsel has prayed to set-aside the Award in favour of the Defendant. In support of his contention he has relied upon the cases reported as PLD 1959 Daaca 551 (Dhirendra Nath Datta Roy and others v. Sundhindra Chandra Chakraborti), 2002 CLD 1071 (Shaukat Ali Mian v. Trust Leasing Corporation Ltd. through Chief Executive and 4 others), AIR 1952 Travancore-Cochin 181
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(Krishnan Neelakandhan v. Kerala Gilt Edged Security Life Assurance Co., Ltd. and others), AIR 1954 S.C. 236 (Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram and others), AIR (23) 1947 Madras 122 (Hairoon Bibi v. The United India Life Insurance Co. Ltd., Madras), 2001 YLR 2191 (China International Water and Electric Corporation and another v. Pakistan Water and Power Development Authority and another), AIR 1965 Orissa 71 (Padma Charan Mohapatra v. Superintendent of Police, cum Taxing authority of Phulbani), AIR 1953 Madras 602 (In re Messrs N M. Husain & Co. by Janab S.D. Ranguwalla), 2011 CLD 995 (Kar) (Messrs Shahi Textiles and 3 others v. Askari Bank Limited through President), 1996 SCMR 1646 (Muhamad Aslam and another v. Muhammad Amin), 2002 SCMR 1903 (Messrs Tribal Friends Co. v. Province of Balochistan), AIR 1957 Madhya Bharat 83 (Indore Iron and Steel Registered Stock-holders Association Ltd. Indore v. State of Madhya Bharat and others), AIR 1957 Madhya Bharat 90 (DB) (W.P Horsburgh and another v. Chandroji Sambajirao and another), AIR 1989 SC 1553 (K. Saraswathy alias K. Kalpana (dead) by LRs. v. P.S.S. Somasundaram Chettiar), PLD 1969 Karachi 176 (Sarfaraz Khan v. Muhammad Abdul Rauf), PLD 1983 Quetta 36 (Messrs Mahmood Ahmed & Sons v. M.A. Marker), AIR 1954 SC 429 (Commr. of Income tax, Bombay South, Bombay v. Messrs Ogale Glass Works Ltd., Ogale Wadi), AIR 1936 Patna 96 (Deo Narain Singh v. Mt. Lila Kuer), PLD 1977 SC 237 (Brooke Bond (Pakistan) Ltd. v. Conciliator appointed by the Government of Sindh and 6 others), PLD 1978 Karachi 585 (DB) (Messrs Jaffer Bros. Ltd. v. Islamic Republic of Pakistan and another), PLD 1974 Karachi 155 (DB) (Pakistan through Secretary, Ministry of Industries v. Messrs Asian Associated Agencies), AIR 1999 SC 2262 (Grid Corporation of Orissa Ltd. and another v. Balasore Technical School), 1991 CLC 66 (DB) (Kar.) (Province of Sindh and 4 others v. Waseem Construction Co.), 1988 CLC 430 (Kar.) (Messrs Orient Builders v. The Chief Engineer Highways and another), PLD 1999 Karachi 112 (Ghee Corporation of Pakistan (Pvt.) Limited v. Broken Hill Proprietary (Pvt.) Limited v. Broken Hill Proprietary Company Limited through their Local Agents), 1992 SCMR 65 (M/s. Awan Industries Ltd. v. The Executive Engineer, Lined Channel Division and another). 4. On the other, learned Counsel for the Plaintiff at the very outset has raised an objection to the effect that this Court is not sitting in Appeal against the Award and is not required to fish latent errors. Per learned Counsel it is only the misconduct of the learned Sole Arbitrator, which can be looked into but even if a different conclusion is to be arrived at, even then, the reasoning of the learned Sole Arbitrator cannot be interfered with. Learned Counsel has contended that in the first round vide Judgment dated 01.06.2005 all the points on merits were upheld in favour of the Plaintiff and there can be no exception to such finding. He has further contended that the first day could not have been excluded as it remained practice between the parties to include the first day while calculating the limitation, and therefore, the last date according to the Plaintiff was 20.06.1997. Whereas, 21.06.1997 was not a Federal Government holiday, therefore, no benefit can be taken by the Defendant, being a Federal Government Entity. Learned Counsel has further contended that since the cheque was not received by 20.06.1997, therefore, in terms of Clause 69(1)(d) of the COC, the Plaintiff was within its rights to terminate the Contract and for such purposes the intimation given to the Defendant was a valid Legal. Notice as the same also stands approved by the findings of the learned Sole Arbitrator. Per learned Counsel the Award of the learned Sole Arbitrator has given all the reasoning, and therefore, it is unexceptionable and must not be interfered with. In support of his contention he has relied upon the cases reported as PLD 2011 Supreme Court 506 (Federation of Pakistan through Secretary, Ministry of Food, Islamabad and others v. Messrs Joint Venture Kocks K.G./Rist), PLD 2006 Supreme Court 169 (Mian Corporation through Managing Partner v. Messrs Lever Brothers of Pakistan Ltd. through General Sales Manager, Karachi), PLD 1996 Supreme Court 108 (M/s. Joint Venture KG/Rist through D.P. Giesler G.M. Bongard Strasse 3, 4000, Disseldorf-30, Federal Republic of Germany, C/o 15-Shah Charagh Chambers, Lahore and 2 others v. Federation of Pakistan, through Secretary Food, Agricultural & Coop:and another), 2014 CLC 1519
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(Managing Director, Karachi Fish Harbour Authority v. Messrs Hussain (Pvt.) Ltd., 2016 MLD 506 (Sindh) (Messrs Port Services (Pvt.) Ltd. v. Port Qasim Authority), 2001 CLD 289 (Messrs Alpha Insurance Co. Limited v. Messrs Ch. Nizam Din & Sons and another), 2013 CLD 1438 (Communication and Works Department, Azad Government of the State of Jammu and Kashmir through Chief Engineer EEAP AJK v. Messrs Design and Engineering System and 4 others), 2001 MLD 99 (Karachi) (The Federation of Pakistan, Chambers of Commerce and Industry, Karachi v. Messrs AlFaroog Builders), PLD 1998 Karachi 79 (Turner Morrison Garahams Group of Companies, London v. Rice Export Corporation Pakistan Ltd.), PLD 2014 Lahore 424 (Fauji Foundation through General Manager (Engineering) v. Mesrs Chanan Din and sons through Attorney and others), 1999 MLD 2617 (Karachi) Messrs Ghee Corporation of Pakistan Ltd. v. Messrs KUOK Oils and Grains (Pvt.) Ltd. through Local Agents M/s. Tradeswift), PLD 1995 Karachi 301 (Kashmir Corporation Ltd. v. Pakistan International, Airlines), 2004 SCMR 590 (President of Islamic Republic of Pakistan v. Syed Tasneem Hussain Naqvi and others), PLD 2003 Supreme Court 301 (Pakistan Steel Mills Corporation, Karachi v. Messrs Mustafa Sons (PVT.) Ltd. Karachi), PLD 1982 Quetta 52 (Province of Baluchistan and another v. Malik Haji Gul Hassan), 1990 MLD 261 (Karachi) (Messrs Design Group of Pakistan v. Clifton Cantonment Board), 1980 SCMR 394 (Haji Mushtaq Ahmad v. Mst. Hajra Bi and another), PLD 1974 Karachi 155 (Pakistan Through Secretary, Ministry of Industries v. Messrs Asian Auspicated Agencies) 2014 SCMR 1268 (A. Qutubuddin Khan v. CHEC Millwala Dredging Co. (Pvt.) Limited). 5. I have heard both the learned Counsel and perused the record. First I would like to deal with the objection raised by the learned Counsel for the Plaintiff that this Court cannot set-aside an Award on the ground that a different conclusion can be drawn. To this, I am of the view that there is no cavil and it is settled law that while hearing objections to the Award under Sections 30 and 33 of the Arbitration Act, 1940 this Court does not sit as a Court of appeal nor it is required to undertake reappraisal of evidence recorded by the Arbitrator in order to discover the error or infirmity in the award. However, there is an exception to this rule as well. If the error or infirmity in the award rendering it invalid is appearing on the face of the award and is discoverable by reading the award itself, then the same can be looked into for either setting aside or modifying it. It can also be interfered with in certain exceptional circumstances when the finding of the Arbitrator is not based on the evidence on record Reference may be made to the case reported as Joint Venture KG/Rist v. Federation of Pakistan-PLD 1996 SC 108, Ghee Corporation of Pakistan (Pvt.) Limited v. Broken Hill Proprietary Company Limited (PLD 1999 Karachi 112) and J.F.C. Gollaher v. Samad Khan (1993 MLD 726). 6. In the case of Allah Din & Company v. Trading Corporation of Pakistan (2006 SCMR 614) the Hon'ble Supreme Court has been pleased to observe as under; The learned Division Bench in the impugned judgment had aptly rejected the above claim on the ground that compensation for loss of goodwill or reputation is generally not awarded, particularly in the absence of tangible evidence showing additional loss and further that since the purchaser was already awarded Rs.1 million by the arbitrator as compensation for the anticipated loss of profit further compensation on account of loss of goodwill and reputation was not justified. We find ourselves in agreement with the reasoning of the learned Division Bench. The learned counsel appearing for the purchaser was unable to show any discussion by the arbitrator in the award regarding the loss suffered by the purchaser on account of reputation or goodwill. Apart from a bare claim of the purchaser, the learned counsel could not even refer to any evidence produced by the purchaser before the arbitrator on this issue. The finding of the arbitrator on the issue reproduced above indicates the absence of such evidence as he had awarded compensation on the item simply on the ground that the purchaser was not questioned on behalf of the Food Department on the issue. Such failure by the department does not go to prove the loss caused to the purchaser. It was the burden to the purchaser to have produced independent evidence of the
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damage caused to his reputation and goodwill on account of non-performance of the contract by the Food Department. Bald statement of the petitioner, without more, that he had suffered loss on this account was not sufficient to establish the claim. In this view of the matter the purchaser was rightly denied damages for loss of goodwill and reputation. 6. The contention of the learned counsel for the purchaser that the Court is not entitled to disagree with the findings of the arbitrator is without force. It is true that the trial Court does not sit in appeal from the finding of the arbitrator but at the same time the Court is empowered to reverse the finding of the arbitrator on any issue if it does not find support from the evidence. The very incorporation of section 26-A of the Arbitration Act requiring the arbitrator to furnish reasons for his finding was to enable the Court to examine the soundness of the reasons. As already held the arbitrator in the case before us had granted damages for loss of reputation and goodwill without there being any evidence to that effect. The Court were, therefore, justified in denying this claim to the purchaser. 7. Similarly in the case of IBAD & Co v. Government of Pakistan (PLD 1981 Karachi 236) a learned Single Judge of this Court has been pleased to hold as under; 9. The third challenge of learned counsel for the defendant was that it was a case of no evidence. As observed earlier, the contention was that admittedly this was a case of damages but no evidence was adduced by the plaintiffs for proving any damage suffered by them. Counsel, in the circumstances, urged that the record be perused by the Court to determine whether there was evidence before the arbitrator that the plaintiff had suffered the damages which had been awarded by the Arbitrator. To the extent that where there is an allegation that the award is based on no evidence, the Court can, even in a case of non-speaking award, peruse the record including the evidence while considering the objections/application under sections 30 and 33 of the Arbitration Act, 1940 the contention of learned counsel is correct. And if the Court on such perusal finds the award is based on no evidence, will be lawfully exercising jurisdiction in setting aside the award .... However, it is also settled law that insufficiency of evidence or that on the evidence adduced before the arbitration the Court would have reached a different conclusion is not a ground for setting aside or interfering with the award. Keeping these principles of mind, I have perused the record of the arbitration proceedings in this case. 8. Even otherwise, in this matter the crux of the dispute is regarding interpretation of contract document and the period of limitation as to whether the cheque was issued within time and further that whether issuance of a cheque would amount to making of payment within the period of limitation or not. It further requires to be interpreted that whether the cheque, which was issued within the period of limitation but was encashed thereafter, would amount to discharge of liability within time or not. This is a pure legal question, which has been decided by learned Sole Arbitrator and merely for the fact and reasoning so advanced on behalf of the Plaintiff that ordinarily the Court must not interfere in the Award, which is given on the basis of appraisal of evidence, I am not inclined to agree with it as in my view this case is an exception inasmuch as it is to be looked into that whether inference drawn by the learned Sole Arbitrator is legal or otherwise. In fact this is not a case wherein only on appraisal of evidence some finding of fact is given, which ordinarily is not to be disturbed by the Court while hearing objections to the award; but a case wherein primarily a legal view has been taken by the learned Sole Arbitrator for passing of award in favor of the plaintiff. In such view of the matter, this Court needs to appraise the findings of learned Sole Arbitrator in this regard. Reliance in this regard may be placed on the case of Province of Sindh Waseem Construction Co. (1991 CLC 66) wherein a learned Division Bench of this Court has been pleased to hold that when the provisions of a contract document have not been properly appreciated by the Arbitrator, then it is a case of an error apparent on the face of the award, and therefore, can be interfered with.
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9. Though the facts have already been stated hereinabove; but for recapitulating, the dispute appears to be in respect IPC No.5, which was certified by the Engineer on 08.03.1997. The period of 45 days after excluding 08.03.1997 would have ended on 22:04.1997 and further grace period of 60 days again excluding 22.04.1997 would have ended on 21.06.1997. Whereas, if 08.03.1997 is included then the period of 45 days would have ended on 21.04.1997 and similarly the period of 60 days if 22.04.1997 is included would have ended on 20.06.1997. The learned Sole Arbitrator had framed the following consent Issues available at Page-7:- (I) Whether the statement of claim was filed in these proceedings is covered by the reference made to the Sole Arbitrator and if so to what extent? (II) Whether the statement of claim as filed is maintainable particularly in view of clause 67 of the COC and if so to what extent? (III)Whether the claimants were justified in invoking clause 69 of the COC and if so to what extent and effect? (IV)Whether the claimants notice dated 21st June 1997 terminating the contract R.T.D-1 is contractually valid under the provision of clause 69(1) of COC? (IV)-(V) Whether the claimants are entitled to the sum of Rs.8,48,79,270/- as damages or any other amount due under the contract? (V) What the Award should be? 10. Insofar as Issues Nos. I and II are concerned no further deliberation is required inasmuch on the basis of Order dated 26.3.2009 passed in HCA No.173/2005 in the first round of litigation, it is only the objections of the Defendant, which are to be dealt with and decided; and therefore, both these Issues need not be discussed and decided. 11. Insofar as Issues Nos. III and IV are concerned these Issues are crucial Issues and if the answer to these Issues is given in favour of the Defendant then there would be no need to give any finding on Issues Nos.V and VI. As discussed hereinabove, the opinion through this Judgment revolves around above Issues Nos.III and IV and precisely it is to the effect that whether the first day is to be included or not; and secondly whether the Plaintiff was justified in terminating the Contract. Insofar as Issues Nos.III and IV are concerned the relevant finding of the learned Sole Arbitrator is as under:- "20. On the interpretation of clauses 60 and 69 COC, both the parties seem to be of the same view. The only difference is about the method of computation of the period. Clause 60(1)(a) provides that the Engineer can approve or amend the AIP and when the Engineer has determined the amount due to the contractor he shall issue to the employer and the contractor a certificate called Interim Payment Certificate certifying amount due to the contractor therefore on certification the amount becomes due to the contractor. Such interim payment certificates are proof of the amount due as certified by the Engineer. In sub-clause 5(a) payment is to be made within 45 days of such certificate being delivered to the employer. Under clause 69 as amended by Part II if the employer fails to pay the amount due under any certificate of the Engineer within 60 days after the same shall have become due under the terms of the contract the contractor shall be entitled to terminate his employment under the contract after giving 14 days prior notice to the employer. 21. The next question is whether the payment through cheque was made within the situated time. Admittedly the payment has been made through cheque dated 20th June, 1997. The Learned Counsel for the claimants has referred to the meaning of the word payment as defined in (I). the Lexicon by P. Ramanath Aiyar 1997 edition as discharge of an obligation by delivery of money or its equivalent and is generally made with the assent of both parties to the contract (2). In Black Law dictionary, it has been defined as "In a more restricted legal sense, payment is the performance of the duty, promise or obligation or discharge of a debtor liability by-the delivery of money." (3) In Ballantine's Law Dictionary "payment of cheque has been defined as:- "The act of the drawee bank in handing over money the amount in which the cheque is drawn, to a
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payee or endorse .... accepted unconditionally by the payee or endorsee." Reference has also been made to Negotiable Instrument Act by Bhashayam and Adiga (1997 Ed) Pagits Law of Banking (10th Ed) and AIR 1994 Cal. 459 (Borojender Coomar Banerji v. Shrish Chandra Chterjee). Relying on these definitions the Learned Counsel for the claimants has contended that as the cheque deposited in the account of the claimants which was credited on 24th June 1997 this should be treated as the date of payment. The Learned Counsel for the respondents contended that the date when the cheque was issued should be the date of payment. Reliance has…
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