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Petitioner: PETROSIN CORPORATION PVT. LTD. and 2 others VS Respondent: OIL AND GAS DEVELOPMENT COMPANY LTD. through Managing Director
Court Name: Lahore High Court Judge(s): Abdul Shakoor Paracha Title:PETROSIN CORPORATION PVT. LTD. and 2 others vs OIL AND GAS
DEVELOPMENT COMPANY LTD. through Managing Director Case No.: Writ Petitions Nos.2055 and 2056 of 2006 Date of Judgment:2006-09-27 Reported As: 2007 CLD 578 Result: Petitions dismissed Judgment ORDER ABDUL SHAKOOR PARACHA , J.---This order shall dispose of this writ petition as well as Writ Petition No.2056 of 2006 (Petrosin Corporation Pvt. Ltd. Etc.) as similar questions of law and facts are involved in both of them. Through these writ petitions the petitioners challenge the vires of the letter dated 16-8-2006 to scrap the award of the contract for Tando Allah Yar Project (Natural Gas) Development Project (hereinafter referred to TAY Project) and Sinjhoro Project (Natural Gas) Development Project and seeks declaration that issuance of the "Notification of Intent to Award" dated 19-4-2006, in favour of the petitioners followed the submission of a performance bond, constitutes a valid, concluded and enforceable contract between the parties and that the petitioners are entitled to execute and complete the said contract. 2. In Writ Petition No.2055 of 2006, brief facts are that petitioner No. 1/Petrosin Corporation Pvt. Ltd. Singapore is a Company incorporated under the laws of Singapore, and is engaged in the business of contracting and installing plants for the Oil and Gas Industry internationally and has undertaken with success many projects in Pakistan. Petitioner No.2 is a company incorporated under the laws of Pakistan and is the project management arm of petitioner No.1 in Pakistan. Petitioner No.3 is also a company incorporated under the laws of Pakistan and was purchased by petitioner No.1, in the process of privatization from the Government of Pakistan and is the fabrication/manufacturing arm of petitioner No.1 in Pakistan. 3. The respondent wanted to develop the Tando Allah Yar (Natural Gas) Development Project which involves setting up of Surface and Gas Processing Facilities adjacent to the respondent's existing
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Kunnar LPG Plant. To achieve the above objective the respondent invited nine companies to participate in the tender for design, engineering, procurement (supply), construction, installation/erection, pre-commissioning, start up and commissioning of the TAY Project. Following Companies were invited to participate in the tender:-- (i) Messrs CPECC, China (ii) Messrs Petrosin Engineering Pvt. Ltd. (iii) Messrs Presson Descon International Ltd. (PDIL . (iv) Messrs Akbar Associates Group (Messrs Hanoverm). (v) Messrs Oil and Gas Engineering Company SPA, China. (vi) Messrs Tu-Ha Petroleum Exploration and Development Corporation, China. (vii) Messrs Descon Engineering Ltd., Pakistan. (viii) Messrs XPAB, China. (ix) Messrs Techno Consult, Venezuela (A.J. & Co.). 4.. It is stated that vide letter dated 21-11-2005 the respondent requested the petitioner No.2 to collect the lump sum Turnkey Tender. Documents for the TAY Project, and to submit its bids for the said project to the respondent's Procurement Department on or before 23-12-2005. However, this was subsequently extended by the respondent to 25-1-2006. After collecting the tender documents the petitioner commenced preparation of the technical and commercial bids. According to the petitioner, clause 6.2 of the I-TB the bid for the TAY Project was to comprise of two separate proposals, i.e. "Technical Bid" and "Commercial Bid", that further under the provisions of the ITB the technical bids submitted by the bidders were to be opened in the presence of all the bidders and subsequently evaluated and examined by the respondent. Once the respondent had carried out the evaluation of the technical bids, the commercial bids of only those bidders who had been considered technically qualified were to be opened. This procedure, being the outcome and product of the application conscious and objective application of the mind of the competent authority was sacrosanct and binding on the respondent and could not be varied or deviated from and/or amended save in accordance with law and procedural propriety. According to the petitioners, the respondent permitted the bidders to form consortiums and submit their bids in the name of the consortiums as the scope of the works for the TAY Project was very wide. Accordingly, all the petitioners (who have an inter se connection and relationship) formed themselves into a consortium called the Petrosin Consortium, and in this regard a Memorandum of Understanding was executed among the petitioners on 19-1-2006. Under the terms of the said Memorandum of Understanding Major General (Retd.) Saeed Ahmad Wahla was authorized to complete, sign and submit the bid documents with respect to the TAY Project to the respondent on behalf of the petitioners (Consortium). Technical and Commercial Bid strictly in accordance with the requirement of the ITB was submitted on 25-1-2006. Three Consortium Companies submitted Technical and Commercial Bids for TAY Project. All the three bidders were consortium of companies. The first being Messrs CPECC Consortium, consisting of Messrs CPECC, Messrs Techno Engineering and Messrs Hanoverm, and the second being Messrs OPDIL Consortium, consisting of Messrs PDIL, Messrs Enerflex and Messrs Descon Engineering and the third being Messrs Petrosin Consortium, consisting of the petitioners. After evaluating and examining the technical bids submitted by the three bidders, the respondent found the technical bids submitted by all the three consortiums to be technically responsive, therefore, the respondent vide letter dated 7-3-2006 called upon the petitioners to ensure the presence of their representative during the opening of the commercial bids, which was scheduled to be held on 8-3-2006. On 8-3-2006, the commercial bids of the three bidders were opened by the respondent in presence of the bidders' representatives. The commercial bids of the three bidders were as under:--
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Sr. No. Bidders Name Bid Amount. (1) Petrosin Consortium US$ 54,140,398.00 (2) CPECC Consortium US$ 117, 692,495.67 (3) PDIL Consortium US$ 162,201,582.17 It is stated that the bidding results were placed before the Board of Directors of the respondent in its 74th meeting held on 10-4-2006 wherein it was decided to approve the TAY Project as recommended by the management. Furthermore, the Board of Directors approved the foreign and local currency component of the TAY Project to be awarded to the petitioner's Consortium, which was technically responsive and the lowest bidder. Consequently on 19-4-2006 the respondent issued to the petitioners a Notification of Intent to Award under Clause 9.3 of the ITB for the award of the contract on lump sum turnkey basis for the TAY Project at the cost of US$ 38,499,408.00 and Pak Rs.938,459,377. The petitioners were inter alia required to submit a performance bond for an amount equivalent to 10% of the contract price in the shape of a bank guarantee within a period of seven days from the issuance of "Notification of Intent to Award" in compliance with clause 9.5 of the ITB. Clause 9.5 of the ITB requires the performance guarantee to be furnished within seven days of the receipt of the notification of intent to award the contract for the faithful performance of the contract. This performance guarantee is required to be valid upto 12 months from the date of Taking Over Certificate (after completion of the contract) issued under the contract. Performance bond was provided by the respondent. In compliance to the requirement of the respondent, the petitioners furnished a performance Guarantee No.2006 of 2007 dated 19-4-2006 for an amount of Pak Rs.325,000,000, which is equivalent to 10% of the contract price. In this way the parties had already acted in part performance of the contract for the TAY Project between the petitioners and the respondent. The performance bond is valid until 18-10-2008 and the bank charges already paid by the petitioners with respect to the same are in the region of US $ 200,000. - The petitioner vide letter dated 20-4-2006 expressed their readiness to sign the contract for the TAY Project. The respondent apparently. For no reason slept over the matter and caused loss to the National interest and public due to the delay in execution of the contract for the TAY Project. The petitioner requested the respondent vide letter dated 3-8-2006 to execute the contract for TAY Project; the respondent did not even bother to reply the said letter; then suddenly thereafter vide the impugned Letter No.ED(F)/3115/2006 dated 16-82006 the respondent conveyed its decision to re-advertise the tender. For the TAY Project and returned to the petitioners the performance guarantee and bond. 5. Writ Petition No.2056 of 2006. The facts of this writ petition are almost identical and same as mentioned in Writ Petition No.2055 of 2006, except that commercial bids of the three bidders were different, which were as under:-- Sr. No. Bidders Name Bid Amount. (1) Petrosin .Consortium US$ 88,409,653.98 (2) CPECC Consortium US$ 152, 252,982.11 (3) PDIL Consortium US$ 235,326,264.73 6. On 19-4-2006 the respondent issued to the petitioners a "Notification of Intent to Award" under clause 9.3 of the ITB for the award of the contract on lump sum turnkey basis for the Sinjhoro project at the cost of US$ 61,023,189 and Pak Rs.1,643,187,892. The petitioners were; inter alia required to submit a performance bond for an amount equivalent to 10% of the contract price in the shape of a bank guarantee within a period of seven days from the issuance of "Notification of Intent to Award" in compliance with clause 9.5 of the ITB. Clause 9.5 of the ITB requires the performance guarantee to be .Furnished "within seven (7) days of the receipt of the notification of intent to award the contract" for the faithful performance of the contract. This performance guarantee is required to be valid up to 12 months from the date of taking over certificate (after completion of the
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contract) issued under the contract. The format of the performance bond was .Provided by the respondent. 7. In compliance to the requirement of the respondent, the petitioners furnished a performance Guarantee No.2006 of 2006 dated 19-4-2006 for an amount of Pak Rs.531,000,000 which is equivalent to 10% of the contract price. ,In this way, the parties had already acted in the part performance of the contract for the Sinjhoro Project between the petitioners and the respondent. The respondent's bankers confirmed the existence and validity of the 'said performance bond from the petitioner's bankers. This performance bond is valid upto 18-10-2008 and the bank charges already paid by the petitioners with respect to the same are in the region of US$ 300,000. 8. The petitioners vide letter dated 3-8-200( again requested the respondent to execute the contract for the Sinjhoro Project. The respondent did not even bother to send any reply to the said letter. Suddenly thereafter vide letter No.ED(F)/3117/2006 dated 16-8-2006 the respondent informed the petitioners of its decision to withdraw the Sinjhoro Project tender. The respondent also conveyed its decision to re-advertise the tender for the said Project. Furthermore, the respondent returned to the petitioners the performance guarantee and bid bond. 9. The learned counsel for the petitioners contends that the petitioners were the lowest and most responsible bidder s for the contract for TAY Project, but the Notification of intent to award was issued to the petitioners under clause 9.3 of the ITB, As all the form and conditions of the contract contained in the tender documents supplied by the respondent were unconditionally accepted by the petitioners, a concluded contract was created between the parties, hence the respondent cannot unilaterally renege on its obligation to the petitioners; that a vested and valuable legal right had accrued to the petitioners as well as legitimate expectation that the respondent would fulfil its legal and constitutional obligation and execute the contract for the project with the petitioners; that the petitioners in compliance with the requirement of the respondent furnished a performance bond for an amount equal to 10% of the contract price towards the fulfilment of their obligations under the contract the respondent is estopped from scrapping the lowest and most responsive bid of the petitioners particularly since the contract between the parties has been partly perform et the representation made by the respondent in issuing to the petitioner the notification of intent to award the contract and calling upon the petitioners to submit the 'performance guarantee was not prohibited by or against the law or statute and hence fully binding on the respondent, particularly as the petitioners acted upon the same and altered their position to their detriment; that the impugned letter is completely devoid of any reasons and therefore, is violation of the respondent's statutory obligations under section 24-A of the General C lauses Act; that issuance of the impugned letter is in absolute contravention of the principles of natural justice, requirement of procedural propriety and the duty to act fairly and reasonably as the petitioners have not been given any opportunity of hearing before the issuance of the impugned letter, which attempts to vitiate the petitioner's rights under Articles 4, 18, 23 and 24 of the Constitution; that the respondent is a public sector organization and is under legal and constitutional obligation to act fairly. 10. On 7-9-2006 notice was issued to the respondent for 8-9-2006, Messrs Khaliq-uz-Zaman and Shah Khawar, Advocates entered appearance. The learned counsel for the respondent contends that the writ petition is not maintainable; that the writ petition raises a serious factual controversy which cannot be adjudicated upon by this Court in writ jurisdiction; that no concluded contract exists between the petitioner and the respondent and that the letters of intent expressly state that no contracts or 'vested right accrued and that any contract between the parties will come into existence only after negotiations and agreement upon the terms and conditions of the contracts when such agreed terms and conditions are incorporated in written contracts which have been
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executed by the parties after obtaining all approvals from the respondents management and the concerned authorities; the express terms of the letter of intent must be given proper weight; that the petitioners have admitted that they have done nothing whatsoever for performing any services for respondent. There is nothing on the record or otherwise which raises the possibility that any contract or other binding relation exists between the parties petitioner's submission of performance of bond is not a discharge of obligation under any contract between the parties; there was an obligation of the petitioners to participate in the bidding process; the respondent reserved complete right to annul the bidding process; there has been no action taken which would prejudice the petitioner to participate in any future bidding process for the projects; in the absence of any concluded contracts between the parties, the respondent had no obligation to give reasons for annulment of the bidding process or to hear the petitioners; the respondent was incorporated under the Companies Ordinance, 1984 and not under any statute and therefore, it is not bound by section 24-A of the General Clauses Act as it does not come under any enactment; the petitioners through the instant writ petition seek declaration of the contract, the terms and conditions of which have yet to be negotiated and agreed between the parties; the effect of this would be to require the Court to contract on behalf of the parties or to demand that the parties enter into negotiations to agree on the terms and conditions of the contract, which is not the proper function of writ jurisdiction; that since as per assertion of the petitioners that the contract exists, therefore, the proper remedy for them in the circumstances is to file a civil suit for breach or enforcement of a contract. 11. I have heard the arguments of the learned counsel for the parties and perused the record with their assistance. Before I proceed to resolve the controversy between the parties regarding concluding of the contract on the basis of the Letter of Intent dated 19-4-2006, I would firstly advert to the objection of the respondent regarding maintainability of the writ petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, against the Oil and Gas Development Company Limited (respondent). 12. Clause (2) of Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, is relevant, which reads as under:- "Subject to the Constitution, the right to move a High Court for the enforcement of any of the Fundamental Rights conferred by Chapter 1 of Part-II shall not be abridged. Subject to the Constitution, a High Court may, if it is satisfied that no other adequate remedy is provided by law:- - (a) On the application of any aggrieved party, make an order:-- (i) Directing a person performing, within the territorial jurisdiction of the Court, functions in connection with the affairs of the Federation, a Province or a local authority, to refrain from doing anything he is not permitted by law to do, or to do anything he is rquired by law to do; or (ii) Declaring that any act done or proceeding taken within the territorial jurisdiction of the Court by a person performing functions in connection with the affairs of the Federation, a Province or a local authority, has been done or taken without lawful authority, and is of no legal effect. Clause (5) of this Article defines a "person" as including "anybody, politic or corporate, any authority of or under the control of a Provincial Government" and any Court or Tribunal, other than the Supreme Court, a High Court or a Court or Tribunal established under a law relating to the Defence Services of Pakistan. 13. It will be seen that the power conferred on the High Court under sub-clauses (a) (i) and (a) (ii) of clause (2) of Article 199 of the Constitution can be exercised only in respect of a person performing, within the territorial jurisdiction of the Court, functions in connection with the affairs of the Federation, a Province or a local authority. If the person whose acts, actions or proceedings are
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challenged before the High Court, does not fall within any of the specified categories, then he would clearly not be amenable to this extraordinary jurisdiction. 14. The term 'person' having been defined in clause (5) of the Article itself, and also in the General Clauses Act, does not present much difficulty; nor does the term 'local authority'. As observed by the Honourable Supreme Court in Deputy Managing Director, National Bank of Pakistan v. Ataul Haq PLD 1965 SC 201. Now what is meant by the phrase "performing functions in connection with the affairs of the Federation or a Province". It is clear that the reference to Governmental or State functions, involving, in one form or another, an element of exercise of public power. In the case Salahuddin and 2 others v. Frontier Sugar Mills and Distillery Ltd. Tokht Bhai and 10 others PLD 1975 SC 244, the Honourable Supreme Court while interpreting the phrase "performing functions in connection with the affairs of the Federation or a Province" had observed that, "The primary test must always be whether the functions entrusted to the organization or person concerned are indeed functions of the State involving some exercise of sovereign or public power; whether the control of the organization vests in a substantial manner in the hands of Government; and whether the bulk of the funds is provided by the State. If these conditions are fulfilled, then the person, including a body politic or body corporate, may indeed be regarded as a person performing functions in connection with the affairs of the Federation or a Province, otherwise not". 15. Now, the OGDC is a Public Limited Company incorporated under the Companies Ordinance, 1984 (Company" Limited by shares). According to , its Memorandum of Association, one of the objectives of the Company is to acquire shares of the companies or interests of the Government of Pakistan in the existing and new petroleum joint ventures or Corporations. The authorized capital of the Company is Rs.25 billion into 2.5 billion ordinary shares of Rs.10 (Rupees ten). The Company can undertake any business in pursuance of the directives given by the Government. Subject to the provisions of the Ordinance and the directions given by the Government, the shares in the capital of the company for the time being remaining unissued, including any new shares resulting from an increase in the authorized share capital shall be under the control of the Board. But there is no dispute that the Federal Government still holds the provincial shares in the Company. According to Article 64 of the Articles of Association, the Government shall have the right to nominate all the Directors on the Board. The terms and conditions of the employment of the Chairman shall be decided by the Government. According to Articles 80 and 81, the Chairman and the Managing Director, as the case may be, shall receive such remuneration as may be determined by the Government. In these circumstances the Company obviously remained under the control of the Government. Though the company is not organized or corporation created by special statute, but the fact remains that the Company is financed and controlled by the Government. Such a Government control of commercial activities can be regarded as investing joint stock companies with the character of a person performing functions in connection with the affairs of the Federation. In the case reported as Federal Government Employees Housing Foundation through its Director-General Islamabad v. Muhammad Akram Alizai; Dy. Controller, PBC, Islamabad PLD 2002 SC 1079, while dealing with the question whether the Company incorporated under the Companies Ordinance is amenable to the writ jurisdiction of the High Court under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 or not, the Honourable Supreme Court held that, "The Federal Government Employees Housing Foundation despite being incorporated as a company under Companies Ordinance; 1984, while functioning under the contro of the Federal Government is recognized an official agency and not private body against which the remedy of writ petition cannot be availed by an aggrieved person". Therefore, I hold that the Oil and Gas Development Corporation registered under the Companies' Ordinance the action of the OGDC, orders of awarding contract is amenable to the
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issuance of writ under clause 2(a)(i) of Article 199 of the Constitution and the writ petition is maintainable. 16. Further, to resolve the controversy between the parties, reading of Letter of Intent bearing No.CE- 977/ :'006 dated 19-4-2006, issued from the respondent to the petitioner would be necessary, the relevant part of which is reproduced hereunder:-- "Subj:- Letter of Intent for LSTK Contract for Tando Allah Yar Development Project at cost of US $ 38,499,408.00 (US dollars thirty-eight million four hundred ninety nine thousand four hundred and eight only) and Pak rupees portion Rs.938,459,377.00 (Pak rupees nine hundred thirty-eight million four hundred fifty-nine thousand three hundred and seventy-seven only) as per your bid submitted against OGDCL Tender Enquiry No.OGDCL/PROJTS(LSTK) TAY/4073/05. Dear, sir, We are pleased to issue this Letter of Intent (LOI) in response to your bid submitted against the above cited enquiry subject to the following conditions:-- (i) This LOI shall in no way be construed as an award of contract as such no vested legal or contractual right shall accrue, in your favour, till such time, valid contract is executed in accordance with the terms and conditions, to be agreed between the parties. (ii) You are requested to submit Bank guarantee as 10% performance bond within seven (7) days from this Letter of Intent as per Clause 9.5 of ITB to M(Proc(F) with copy to M.D., OGDCL. (iii) Contract shall be executed; only after all necessary management/Government approvals have been obtained. (iv) Validity of your bid prices shall remain firm throughout Delivery Period as set forth in the tender documents. (v) L/C will be operative on receipt of valid Performance Bond. 2. Please convey your acceptance of terms and conditions stipulated hereinabove urgently but not later than seven (7) days of issuance of this Letter of Intent, failing which the LOI will stand cancelled and order will be…
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