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Petitioner: Pakistan Petroleum Ltd. Through authorized attorney and others VS Respondent: Spec JUDGMENT
Court Name: Sindh High Court Judge(s): Syed Hassan Azhar Rizvi Title:Pakistan Petroleum Ltd. Through authorized attorney and others vs Spec
JUDGMENT
Reported As: 2022 CLC 1412 Result: Order accordingly Judgment JUDGMENT SYED HASAN AZHAR RIZVI, J. By this common Order I intend to dispose of CMA No.6224/2020, under Order XXXIX, Rules 1 and 2 read with Section 151, C.P.C. and C.M.A. No.6225/2020, under Section 94, C.P.C., filed in Suit No.914/2020 by SPEC Energy DMCC (hereinafter referred to as 'Plaintiff/SPEC') and C.M.A. No.5148/2020, under Order XXXIX, Rules 1 and 2 read with section 151, C.P.C. and C.M.A. No.6116/2020, under Section 151, C.P.C., filed in Suit No.321/2020 by Pakistan Petroleum Limited (hereinafter referred to as `defendant/PPL'). 2. C.M.A. No.6224/2020 filed by the plaintiff/SPEC seeking a restraining order qua the finalization and creation of third party rights during the subsisting lis including the invitation to bid through Tender No. PD/P&SF/ PQ/12340/2020, letter of Award dated 21.4.2020 and letter of credit issued in respect of various purchase orders as detailed in Annexure Y to T-3 of the plaint in respect of the project. C.M.A. No.6225/2020 praying that the Official Assignee be directed to conduct a technical audit of entire Project including site, defendant's manufacturing facility in Dubai and the vendors by an international engineering company, as consented upon by -the parties through meeting held on 04.2.2019. 3. C.M.A. No.5148/2020 filed by the defendant/PPL seeking to restrain the defendant from directly or indirectly interfering with any work commenced by plaintiff and from visiting and inspecting the site and equipment thereon and from brining in or taking away their own equipment and materials and from using the equipment already on site in relation to and for the purpose of completing the project. C.M.A. No.6116/2020 filed by the plaintiff praying that the Official Assignee be directed to include defendant's factory in Dubai within the scope of the inspection ordered on 10.7.2020.
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4. Counter-affidavits and affidavits-in-rejoinders to the above noted applications were filed and exchanged by the respective parties. 5. Brief facts of the case are that plaintiff/SPEC is a company registered under the laws of the UAE. Defendant/PPL is a public listed company incorporated under the Companies Act, 2017. Defendant/PPL operates a gas field at Gambat South, District Sanghar. The gas extracted from this field has to be processed before it can be sold. For this purpose defendant/PPL floated a tender for establishing a gas processing facility at this gas field. The tender was awarded to plaintiff/SPEC. Defendant/PPL issued a Letter of Award on 06.04.2016. On 09.05.2016, defendant/ PPL and plaintiff/SPEC entered into the Contract for the Project. The relevant features of the Contract are mentioned below: Lump sum fixed price of US$ 63,000,764/- and Rs.811,800,027/-. Payments were to be made under the Contract against completion of specific milestones and not against the delivery of specific equipment; Plaintiff/SPEC had to deposit a Performance Guarantee equivalent to 10% of the contract value and two Advance Payment Guarantees, the first for 10% of the US$ component of the price and the second for 10% of the price; Plaintiff/SPEC had to pay liquidated damages for each week of delay in completion of the Project; Contract could be terminated by PPL with or without cause; Any disputes between the Parties were to be referred to arbitration; and Project had to be completed by 05.10.2017 within 18 months from the date of issue of the Letter of Award. 6. The land/site on which the Project is to be established has been leased by defendant/PPL from local landowners. Defendant/PPL is the lessee. Plaintiff/SPEC has no title, lease or license for the said land. The site is under the control and possession of defendant/PPL. On 02.05.2019, defendant/PPL wrote to plaintiff/ SPEC stating that its personnel would require gate passes from defendant/PPL for the outward movement of any equipment or material from the Site. The gas reservoir underneath defendant/PPL's field extends across adjacent fields. Those fields are being exploited by other companies. Until the Project is completed, defendant/ PPL cannot produce gas from its field. The reservoir, however, is being depleted by other companies extracting gas from their fields. The early completion of the Project is, therefore, essential. Each day of delay in completion leaves less gas for defendant/PPL to produce. From the very inception, however, the Project was delayed on account of plaintiff/SPEC, therefore defendant/PPL terminated the contract on 10.5.2019. 7. I have heard M/s. Khawaja Shamsul Islam, Shahzada Mazhar, Muhammad Jawwad, learned counsel for the plaintiff/SPEC and M/s. Makhdoom Ali Khan and Ali Almani, learned counsel for the defendant/ PPL. 8. Learned counsel for the plaintiff has argued that plaintiff and defendant entered into a contract dated 09.05.2016 for the engineering, procurement, construction and commissioning of a gas processing facility at Gambat, District Sanghar Sindh. He has submitted that under EPCC a contractor is obliged to deliver a complete facility to the developer who need only turn a key to start operating the facility. He has also submitted that an EPCC contract includes preparation of designs, plans and technical specifications of equipment, preparation of performance standards, maintenance and training manuals, designing and planning layout, documenting delivery schedules of equipment, instructions for erection, and includes construction including erection, commissioning, testing and completion of the facility and correction of defects. He has submitted that with regards to procurement it includes provision of equipment, procurement from third parties, clearing of goods at ports, delivery to site and provision of spare parts amongst others from approved vendors under the Contract. He has contended that the instant Contract is also an
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EPCC contract, as established through the definition of the term "Project" as per Clause 4.2 (e) as meaning all such work including both permanent and temporary works with supply of goods / material as is required to be done by the contractor hereunder for design, engineering, supply, fabrication, construction, installation, testing, commissioning, start up. He has also contended that admittedly being an EPCC contract, the inventory simpliciter cannot calculate the engineering or procurement part therefore in order to measure the complete work done the court is required to carry out the audit of the whole project. Since the contract is an engineering, procurement, construction and commissioning contract and not merely a construction contract. He has contended that construction in fact is only one of the four aspects of the contract as explained above, and thus to resolve the controversy between the parties fairly, it is essential that an evaluation of all the four aspects be done to ascertain the factual position between the parties. 9. Learned counsel for the plaintiff has further argued that the task of inventory preparation on the other hand is insufficient in the present circumstances of the case, as an inventory of the site relates only to appraisal of equipment provided in a supply contract. He has argued that any adjudication by this Court can best be done after the true ascertainment of the work completion under the contract and the additional works performed by the plaintiff on the behest of the defendant through the conduct of technical audit as it is an admitted fact that the defendant has to-date USD 42,588,516, out of a total contract price of USD 63,000,764 for the foreign component which works, out for approximate 70% completion of the project, this is admitted in para-09 of C.M.A. No.5148/2020 in Suit No.321 of 2020. If the unpaid work at site and factory premises is accounted for, the plaintiff's work completion is almost 80% of the total work, making the plaintiff the best party to complete the project at present even. He has contended that in any case the conduct of technical audit is not to hamper the interests of either partsy. 10. Learned counsel for the plaintiff has next argued that the possession of the site is with the plaintiff and in this regard he has submitted that as per the EPCC contract and Clauses 3.73, 3.76 and 3.7.10 of the terms and conditions of the Contract, the possession of the plaintiff is reflected clearly. He has submitted that further the plaintiff was entirely responsible for all the aspects of the project and responsible for handing over a complete facility to the defendant. Thus, until completion of the project, the possession of the site lay with the plaintiff and continues till date. He further submitted that the possession of the Plaintiff is further established by order dated 13.05.2019 passed in Suit 851 of 2019 filed after the illegal termination of the Contract, wherein, this Court was pleased to restrain the Defendant from taking over the site and ordered to maintain status quo to that extent. The Defendant had not challenged this order, which has attained finality and the Defendant cannot claim possession of the site. by illegally by passing the order without getting it set aside. He has also contended that possession also evident from visit of official assignee, which visit was arranged by Plaintiff at site. He, therefore, has contended that the defendant has made mala fide and wrong assertion regarding possession of the site. He, however, has argued that the issue pertaining to Gate Pass of the site the defendant by mala fide design had sought the issuance of gate pass for the first time through email dated 02.05.2019 after the illegal encashment of guarantees on 30.04.2019. This was duly replied vide email dated 04.05.2019. Even after the illegal termination of the Contract on 10.05.2019, the Defendant unsuccessfully tried to assert its possession through emails which were rebutted by emails dated 11.05.2019, 12.05.2019 and afterwards by the Plaintiff. He has urged that once the contention regarding the possession of site is rebutted from the facts, orders of this Court, site inspection by Official Assignee, and the Contract itself the entire superstructure of Suit No 321 or 2020 falls as this is a feeble attempt by the defendant to bypass the logical conclusion of the already pending litigation, which can be resolved now simply by the conduct of a technical audit and the passage of restraining order against the defendant regarding creation of third party rights.
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11. Learned counsel for the plaintiff has next argued that the actual ascertainment of an EPCC Contract as distinguished from conduct of inventory which has limited scope. He has urged that there are two inherently distinct concepts. Inventory relates to merely the stock of machinery and equipment at site, whereas technical audit is performed by an expert in the subject field who evaluates, deficiencies or areas of improvement in a process, system or proposal. Such an audit covers technical aspects of the projects implemented and for this requires a deep knowledge of development, design and security standards with latest algorithms updates. He has submitted that the defendant has not denied the fact that it has itself agreed for the conduct of the technical audit firstly through the issuance of unilateral tender for conducting of an audit which process was stayed through order dated 14.11.2019 passed in Suit No. 56 of 2019, subsequently through the minutes of meeting held on 04.02.2019 where it was agreed between the parties that a technical audit be conducted by an international engineering firm, further through withdrawal of Suit No. 56 of 2019. On 11.02.2019 in terms of minutes dated 04.02.2019, and through finalization of terms of reference for the conduct of technical audit. He has vehemently urged that the defendant cannot back out from it agreed commitments especially when it is a step towards the resolution of disputes. Thus, if Terms of references are finalized and a technical audit is confirmed, it would be beneficial for all parties since it would then expedite the resolution of disputes since factual position would be clarified before the Court. He has, therefore, submitted that audit is also necessary because the project is an EPCC contract and can only be reviewed / ascertained by a specialist in the Learned counsel has drawn attention of this Court to C.M.A. No. 8127/2019 filed in Suit No. 851 of 2019 moved by Defendant seeking to calculate the work done, which the Plaintiff's also wants. He has contended that according to the contract as well as the CMA and the counter affidavit filed to the said application, clearly shows that work on the project was not only done at project site at Gambat but also at factory premises of SEPC. Hence in order to measure the work done the inventory needs to be done of not only of the project site at Gambat but also the factory premises. He has further contended that defendant itself agreed to the same vide minutes of the meeting dated 04.02.2019 and thereafter parties exchanged correspondence to finalize Terms of reference for the same, however Defendant later reneged on its own agreed commitments. He has stated that it is important to mention that as per Clause 3.25 of terms and conditions of contract read with 4.15 of the Scope of the work an official of the defendant was present at the Plaintiff's Dubai factory site and was present there until the illegal termination of the contract by the defendant, and this fact was admitted by the defendant's counsel before this Court, since all the machinery and equipment for the project was prepared at the plaintiff's Dubai factory. He has stated that the defendant had in fact conducted an inspection of the project site itself and further a third-party inspection of the already prepared equipment lying at the Dubai Factory of the plaintiff was also conducted under the EPCC contract, which was duly inspected by the defendant whereby the same equipment was inspected and it was ascertained that the said equipment was ready for shipment and the same was approved by the third party and the defendant. Plaintiff only awaits for the payments by the defendant. He has urged that the plaintiff in terms of the Project has completed various works which the defendant is attempting to issue and invite bids for at a considerably higher price. 13. He has drawn attention of the Court to the price comparison chart available at Page Nos. 1337- 1371 of the Suit No.914 of 2020, which clearly shows the lack of transparency and accountability with which the defendant is proceeding with the use of public funds. The same also highlights that the defendant is deliberately misusing public funds by deliberately incurring additional costs to the tune of USD 30 million, whereas, the defendant is required to pay an additional USD 21 Million approximately for the completion of the entire project, majority of equipment which is ready for shipment at the Plaintiff's factory in Dubai. He has contended that this is intended solely for the
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reason that the defendant's intend to increase the cost of project which was won by the plaintiff for a cost of USD 70 Million, whereas an earlier GPF-11 Project was bid for. USD 153 Million while the capacity of GPF III is 60 mmscfd while GPF-11 is for the capacity of USD 50 mmscfd. He has, therefore, urged that a technical audit would not cause any delay to the project, a period of 6 weeks, is required for the report of the inventory of project site at Gambat. He has further submitted that in the meanwhile a visit to the Dubai factory along with a technical audit of the project site and Dubai factory can easily be arranged and would not consume a substantial amount of time. He has also urged that a technical audit also includes inventory thus there would be no disruption as to the schedule for which the plaintiff is ready to incur the costs for the inspection of Dubai factory. He has stated that if an audit of the project site and inspection of Dubai factory are completed the factual disputes between the parties would be resolved and then the various litigations pending can also reach their logical conclusion. He has stated that the scope of C.M.A. 6116/2020 is different from. C.M.A. No.6225/2020. C.M.A. No.6116/2020 has been filed only after order dated 10.07.2020 seeking inventory of Dubai factory to bring on record the ready equipment under the Contract, while the technical audit is the actual ascertainment of the entire project. He has submitted that the order dated 10.07.2020 passed by this Court in Suit No. 321 of 2020 goes beyond the prayer made therein. He made reference to the case reported in PLD 2019 Sindh 400, wherein it has been observed that discretion of public functionaries in awarding tenders and spending of public money required a vigilant and vibrant scrutiny by courts and such could not be used arbitrarily or with absolute discretion and such funds must be used with fairness and complete accountability and transparency. 14. Learned counsel for the plaintiff next contended that the time is not the essence of the Contract and the SPCC contract was only extended by actions of defendant. He has contended that admittedly the contract was for a period of 17 months, however Clause 3.20 of the Terms and Conditions of the Contract provided conditions for extension of time, whereby contract could be extended owing to default on pan of defendant as has been done in the existing scenario. He has also made reference to Clause 3.16 of Terms and Conditions of the Contract which calls for the issuance of change notices and orders in relation to the performance of 'additional works under the Contract. Even otherwise, the defendant had the right to invoke liquidated damages under Clause 3.30 of the Terms and Conditions of the Contract. He has further contended that defendant also executed the Contract Amendment Agreement dated 01.03.2018, which the defendant did not mention in Suit No.321 of 2020, with idea of concealment and misleading to this Court, which was executed after the expiry period of the Contract. He has, therefore, submitted that it is an established principle where Contract is postponed / extended then time is not the essence of the contract. In this regard, he has placed reliance upon the case reported in AIR 1993 SC 1742. Nonetheless, by issuing new request for quotations, inviting tenders and awarding contract, the project is likely to be extended even further, considering plaintiff has already procured and prepared the machinery and equipment for most of the remaining portion of the project, which would be released upon clearance of outstanding payments by the defendant. He has vehemently contended that the defendant itself withheld payments, thus extension was due to the default committed by it. He has further submitted that defendant admitted in the pleading that issuance of new tenders would incur cost of USD 30 million. He has, therefore, submitted that where party itself is responsible for extension of time, then it could not plead that time is essence of the contract. He has stated that defendant had intentionally breached the contract and the same is evident from the correspondence prior to termination on 10.5.2019 whereby it lodged false and frivolous excuses as to non-performance by the plaintiff, in complete contrast to the actual reality. He has also stated that defendant in fact planned the illegal breach, and now is attempting to seek relief on the basis of its own illegality by citing that since the contract is terminated it cannot be
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enforced or that injunction cannot be granted. In support of his submissions, learned counsel for the plaintiff has placed reliance upon the cases reported in 1995 SCMR 1431, 1983 SCMR 559, 2018 CLC Note 40, PLD 1990 SC 45 and 2020 SCMR 832. 15. Learned counsel for the plaintiff next contended that illegal termination of EPCC contract is not final since the matter is currently pending adjudication in Suit No.851/2019. He has urged that termination under clause 3.21.1 was subject to issuance of notice of default to plaintiff, which was never issued. He has urged that the question of default is currently pending adjudication before the arbitral tribunal, and any adverse action taken by the defendant is illegal to that extent. Therefore, he has urged that injunction can be sought as presently the termination of the contract is subject to the outcome of arbitration proceedings and Suit No.851 of 2019, and as such the termination of the contract is Lis pendens. The defendant's reliance that the injunction has been refused to the Plaintiff is vague, mala fide and ill founded, as the said application is still pending and has not been decided by this Court, contrarily, an order for continuance of possession has been made in favour of the plaintiff, thus, during the pendency of those proceedings, and in the presence of order dated 13.05.2019, new third party rights cannot be introduced in the instant lis. He has urged that defendant has also not challenged the order dated 13.05.2019 in Suit No. 851/2019, whereby it was restrained from interfering with plaintiff's possession, rather defendant is now pressing the matter through a fresh litigation which is barred under law. In this regard, he has placed reliance on the cases reported in 1995 CLC 1877 Lahore, 1997 MLD 2411 Karachi, PLD 1976 Karachi 644, 2019 CLD 1338 Karachi, 2018 CLD 203 SC and 2017 CLC 857 Lahore. 16. Learned counsel for the plaintiff has drawn attention of the Court to Public Procurement Regulatory Authority Ordinance, 2002 and Rules, 2004 which being violated. He has stated that defendant itself admitted in counter to CMA No.6225 of 2020 that no procedure has been followed in issuing tenders and has not denied the readiness of equipment at Dubai factory awaiting shipment. He has stated that plaintiff was to be paid USD 21 million for the remaining equipment, whereas, defendant is now issuing tenders for USD 30 million, and the cost may even extend beyond that. He has submitted that it was admitted by defendant themselves that the current project is almost USD 90 million less expensive than GPF-III, He has submitted that defendant also concealed the meeting of 04.02.2019 from the Court in Suit 321/2020. He has submitted that Government having 68% shares of defendant entails that defendant is utilizing public funds which it must do so reasonably and transparently. In this regard he has made reference to the cases reported in 2020 SCMR 513 SC and PLD 2019 Karachi 400. 17. Learned counsel for the plaintiff also argued that the goods being designed, procured and constructed by the plaintiff, supply thereof are also covered by the Sale of Goods Act, 1930, which provides for rights to the plaintiff as well, He has argued that plaintiff falls within the definition of Section 45 of the Sale of Goods Act, 1930 as an unpaid seller, as it has prepared various machinery and equipment for which it has not been paid. He has vehemently urged that monetary compensation is not adequate relief since the entire reputation of the plaintiff is on the line, where the contract is terminated, then plaintiff will presumably never be granted another contract in Pakistan and even suffer international disrepute, which would result in loss of future business that cannot be calculated. He has also urged that the contract itself is an EPCC contract and there are various designs and technical drawings etc. In this regard he has given example that where there is a painting by Picasso and the same is stolen, no monetary compensation would he adequate relief, the same is applicable on the designs and equipment prepared on the basis of those technical specifications and designs, which can only be used in the current project and would be regarded as scrap for all other projects or purposes. He has stated that the contract is not revocable, it is subject to the default of plaintiff, currently the question of default is pending adjudication before the arbitral tribunal whose decision shall be final. He has, therefore, submitted
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that the contract does not fall within the scope of Section 21 or Section 56 of the Specific Relief Act. Even if it is presumed that Specific Relief act applies, then the relevant applicable section would be Section 54(b) and (c), since monetary compensation would not be adequate relief for the damages that would be suffered by plaintiff. He has submitted that temporary injunction is governed by Order XXXIX, Rules 1 and 2, C.P.C. and not Specific Relief Act, since plaintiff's case is only for the resolution of disputes and a temporary injunction is sought to preserve…
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