Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: MUHAMMAD ATHER HAFEEZ KHAN VS Respondent: Messrs SSANGYONG AND USMANI J.V.--- Defendant
Court Name: Sindh High Court Judge(s): Aziz-ur-Rehman Title:MUHAMMAD ATHER HAFEEZ KHAN vs Messrs SSANGYONG AND USMANI J.V.---
Defendant Case No.: Suit No.278 of 2012 Date of Judgment:2013-04-01 Reported As: 2016 YLR 214 Result: Objection overruled Judgment ORDER AZIZ-UR-REHMAN, J.---By means of this order I intend to decide the preliminary objection raised by the plaintiff to the effect that the objections filed on behalf of: (i) Foreign JV Partner viz. M/s. Ssangyong Engineering and Construction Company Limited Korea of defendant through CMA No. 7871/12 under sections 30 and 33 of the Arbitration Act, 1940 on 17.4.2012 and; (ii) Local JV Partner viz. M/s Usman Associates of Pakistan of defendant through CMA No. 7872 of 2012 under Sections 30 and 33 of the Arbitration Act, 1940 filed on 17.4.2012 are time barred. 2. Briefly the necessary facts leading to the above objection are : 3. The plaintiff Muhammad Athar Hafeez Khan son of Abdul Hafeez Khan is running the business of fabrication and consultancy. Per assertion due to his efficiency, expertise and devotion, on various occasions he was employed by various firms and International Companies. 4. The defendant JV comprises of two well-known Companies viz M/s. Ssangyong Engineering and Construction Company Limited of Korea and M/s. Usmani Associates of Pakistan. Per averments both the companies have executed big projects in their respective countries and enjoy enviable business reputation in their respective fields. 5. The defendant, per assertions was awarded the contract for construction of births Nos. 10 to 14 at East Wharves,Karachi in March, 2008 [hereinafter referred to the 'said project'] by the Karachi Port Trust [KPT]. The contract price was US$ 515,426,875.00 inclusive of all applicable taxes, duties etc. 6. The defendant, per assertion, thereafter approached the plaintiff and elaborately discussed the possibility of getting exemption and concession in sale Tax, Custom duties and all other duties and
---
## Page 2
taxes in respect of the 'said project'. The plaintiff thereupon advised the defendant that they could get concession/benefit in terms of laws of sales tax, custom duty and Federal Excise Act. 7. Consequently the plaintiff and defendant after discussing the pros and cons of the matter entered into a consultancy agreement dated 17.6.2008. [Herein it is worth to mention the CONSULTANCY AGREEMENT dated 17.06.2008 has been actually executed between SSANGYONG + USMANI ASSOCIATES (JV), a joint venture Company of Ssangyong Engineering and Construction Co., Ltd, organized and existing under the laws of Democratic Republic of Korea and the plaintiff as being sole proprietor of PROGRESSIVE ENGINEERS]. Some of the relevant clauses i.e. 1 to 9 and 17 of Consultancy Agreement dated 07.06.2008 being relevant are reproduced herein : - (1) That the JV Company shall make procurement of goods from within Pakistan and from abroad for the construction of permanent works required under the contract. (2) That the said procurement of goods local or imported involve payment of following Federal Duties and taxes presently in force:- (i) Custom duty varying from 5% to 20%. (ii) Sales Tax varying from 15% to 17.5%. (iii) Federal Excise Duty (FED) Rs. 900/- per MT. (iv) Special Excise Duty (SED) @ Rs. 1%. (3) That the consultant through its professional skill/expertise and resource available in the above said taxation matters shall advise and assist the JV Company to obtain the savings and benefits as may be availed under permissible laws of Pakistan for which the JV Company is legally entitled to. (4) That the .IV Company shall authorize the consultant or its nominated person or persons to present and pursue the matters relating to duty and tax concessions before the competent authorities. (5) That the JV company shall make available all necessary documents as well as supporting letters from the employer and other organizations as required by the consultant to pursue the matter before the Central Excise, Sales Tax and Custom Authorities. (6) That the consultant shall look after the documentation and maintain the records required under the relevant taxation laws i.e., Sales Tax Act, 1990, Customs Act 1969 and Federal Excise Act 2005. The original files containing the aforesaid documentations shall remain with the JV Company whilea copy of it shall be maintained by the consultant. (7) That the consultant shall be entitled to 50% share of the monetary benefit obtained by the JV Company by way of concession availed in sales tax, custom duty, FED, SED over and above the prevalent rate of tax and duty in force at the time of procurement transaction. JV Company has the knowledge that prevalent rate of duties and taxes on the relevant goods at the time of signing of agreement is given as Annexure 'A' which shall constitute the part of this agreement. (8) That notwithstanding anything contained in the Customs Act 1969, Federal Excise Act 2005 and the Sales Tax Act 1990 or rules made there under regarding the availability or otherwise of tax concession, the consultant shall be entitled to 50% share out of statutory inherited tax savings and benefits or to be made available through the consultant. (9) That once a procedure to obtain concessions in Sales Tax, Custom duty, FED, SED has been processed by consultant and the same is accepted by the concerned tax authorities for availing of benefit by the JV company the consultant will be entitled to continue receiving its share of 50% from the benefits obtained till the completion of the project. (17). Both the parties agree toresolve their dispute/disputes, if any, mutually, failing which the first recourse shall be arbitration without any litigation and the arbitrator shall be appointed with mutual agreement of both the parties. In case of the failure of arbitration both the parties (JV
---
## Page 3
Company and the consultant) will be free to file their claim in court of law in Islamic Republic of Pakistan as per prevalent law. No suit of any nature will be filed outside Pakistan. 8. Pursuant to the aforesaid consultancy agreement entered into between the plaintiff as being sole proprietor of Progressive Engineers and Ssangyong and Usmani Associates (JV), per plaintiff version, he successfully discharged/performed his obligations and responsibilities strictly in accordance with terms and conditions of the consultancy agreement dated 17.6.1998 [Available at page 41 of the court file]. Thus an amount of refund of sales, out of total refund claim of Rs.151,190,000/- filed by the defendant upto tax period of October, 2010, Rs.102,680,000/- were received by the defendant. Besides as a result of approved DTRE [duty and tax remission for export], the defendant gained benefit in the sum of Rs. 593,664,795/-. 9. Per consultancy agreement of 17.06.2008 plaintiff had originally claimed to be entitled for a sum of Rs.322,851,818/- with the following break up:- S.NO. HEAD OF ACCOUNTAMOUNT/(PKR) 1. 50% refund of input tax26,019,421.00
(sales tax) paid on purchase up to March 2009. (details attached as annexure) 2.50% remission amount on296,832,397.00 account of DTRE approval. 3. Total 322,851,818.00 (Rupees three hundred twenty two million eight hundred fifty one thousand and eight hundred eighteen only)
---
## Page 4
10. The above claim and efforts made by the plaintiff were disputed to some extent by the defendant. Per defendant assertions despite repeated reminders/ requests, the plaintiff failed and/or ignored and/or unable to provide the agreed services in terms of consultancy agreement dated 17.06.2008. 11. In view of the aforesaid scenario/existence of Arbitration Clause the matter in dispute was referred to the Sole Arbitrator/Mr. Justice (Retd.) .Nazim Hussain Siddiqui, vide order dated 12 10.2010, passed on [CMA No.9628/10] in Suit No. 305/2010. [Muhammad Ather Hafeez Khan v. M/s Ssangyong and Usmani JV]. Order dated 12.10.2010 reads as under:- "For hearing of CMA No.9628/10(under section 151 C.P.C.) 12.10.2010 Mr. Mansoorul Arfin, Advocate for Plaintiff Mr. Balal A. Khawaja, Advocate for defendants. -x-x-x-x ' Through this application the plaintiff has prayed for appointment of sole arbitrator in pursuance of order dated 31.08.2010, whereby this court has been pleased to grant the application for appointment of sole arbitrator. The application is granted. Would, therefore, appoint Mr. Justice (Retd) Nazim Hussain Siddiqui as the sole arbitrator. The learned arbitrator shall himself determine his fee after perusal of record of the case." 12. For ready reference the operative part of order dated 31.08.2010 are also reproduced hereinbelow: "23. In view of the above discussion, I am of the view that from perusal of clause 17 of the agreement dated 17.6.200, it is crystal clear that the parties are ad idem with reference to the essential terms of the contract with regard to referring the dispute/disputes, which may not be resolved mutually, to arbitration. 24. The upshot of the above discussion is that this suit is allowed. The parties are called upon to submit the name of their chosen arbitrator so that the matter may be referred to any one of them. 25. In view of the above order, Suit No.200 of 2010, filed by the defendant herein, shall also stand disposed of as the defendant would be at liberty to file its claim before the arbitrator." 13. Before the learned Arbitrator on 23.10.2011 when the matter came up the following issues were settled:-- (a) Who committed breach of consultancy agreement if so, to what effect? (b) Is the registration of therespondents as importer,manufacturer and also as exporter was due to the efforts of the claimant? (c) Whether the claimant failed to procure any refund of sales tax in respect of the case/applications filed by the claimants before the relevant authorities. If so, of how much amount and its legal effects? (d) If the refund claims regarding Sales tax of Rs. 32,798,588/- is still stuck up. If so who is responsible for the same? (e) To what amount if any the claimant is entitled? 14. Thereafter various documents were brought on record through evidence. Finally, after hearing of arguments, the learned arbitrator gave his award on 15.3.2012 by allowing the claim of the plaintiff in sum of Rs.315,213,837/-. Para 61 of the award reads as under :- "61. Issue No.5: ' After deduction of Rs.7,637,981/- as withholding tax, the net amountdue on account of DTRE comes to Rs.289,194,416/-. The amount due to the claimant on account of refund of sales tax is Rs. 26,019,421/-. Thus total claim of claimant which he is entitled comes to Rs.315,213,837/-, as shown in para 58 of this award. Accordingly, the claim of claimant is allowed to the extent of Rs.315,213,837/-.
---
## Page 5
' In compliance of Section 14 of the Arbitration Act, the award duly signed together with deposition and documents produced by the parties are sent to the Registrar High Court Sindh Karachi for placing the same before the Hon'ble Chief Justice for passing orders himself or referring the matter to any other judge for making award rule of court. Copies of this award within a couple of days will be dispatched to the contesting parties. "[underlining is mine]. 15. The award so given by the learned Sole Arbitrator was sent to the Registrar of this court under covering letter dated 15.3.12 (available at page 85 of the court file.). Upon presentation/filing of the award on 15.3.2012 it was allotted Suit Number and thereafter on 16.3.2012, [on back side of the stamp paper of award], Additional Registrar passed the following order:- "Issue notice of Award to the parties in Form 12-C of Appendix-A of SCCR. Office is directed to consign the original documents forthwith". 16. The diary sheet of 15.03.2012 speaks about return of process for 20.4.2012. The diary of 15.03.2012 beingprior to 16.03.2012 is surprising one. Nonetheless, pursuant to order dated 16.03.2012 notice, signed by Assistant Registrar (OS-II) on 19.03.2012 was issued to the parties for 20.4.12. The notices thus issued to the parties were received on behalf of Foreign JV Partner and local JV Partner of defendant on 19.03.2012 and 20.03.2012 respectively. [Copy of notice duly served and acknowledged is available on court file]. From the record, however, it transpires that before expiry period of 30 days both JV partners [foreign and local], on 17.04.2012 had filed their respective objections. 17. To the objections i.e., [CMA No. 7871/12 and CMA No.7872/12], upon service thereof, the replies were also filed by the plaintiff wherein, inter alia the following identical preliminary submissions [objections] were raised:- "PRELIMINARY SUBMISSIONS (1) The objections are time barred. The learned Arbitrator had sent intimation in writing by TCS on 15.3.2012 to the parties that he has delivered the award and submitted the same to the High Court 'today' i.e., 15th March 2012. The Respondent took the copy of the award from the learned Arbitrator on 16th March, 2012. Since the Respondent had received written notice of the award and of the fact of it having been filed in the court, it should have filed the application within 30 days from 15th March 2012. However, the objections have been filed on 17thApril, 2012., The objections are time barred and are liable to be dismissed on this ground only." 18. Thereto, counter reply(ies) has/have also been filed wherein it has been denied that the objections filed on behalf of JV partners of defendant, are either time barred or otherwise, not maintainable in law. 19. On 01.03.2013, when the matter came up before the court inter alia for hearing of objections to the main award. Mr. Mansoor-ul-Arfin, learned counsel for the plaintiff forcefully submitted that in the 'first instance' arguments need to be heard on the 'point of limitation' viz-a-viz 'objections' filed by both the JV partners [foreign and local] without dilating upon merits of the case. Thus submissions of the learned counsel for the plaintiff were initially opposed by the learned counsel for the objectors/defendant [Foreign and Local Partners], however, thereafter they agreed keeping in view 'serious opposition' of the learned counsel for the plaintiff. 20. I have heard Mr. Mansoor-ul-Arfin learned counsel for the plaintiff/claimant, Mr. Kazim Hassan learned counsel for M/s. Ssangyong, foreign JV partner and Mr. Muhammad Masood Khan for M/s Usmani Associates local JV partner of defendant. 21. Mr. Mansoor-ul-Arfin learned counsel for the plaintiff vehemently argued that the 'objections' filed by the defendants' partner are time barred. According to the learned counsel since intimation in writing of 15.03.2012 [available at page 479 of the court file] has been sent through TCS by the learned Arbitrator to counsel for the parties which was duly received and duly acknowledged by
---
## Page 6
them, therefore, per learned counsel objections should have been filed within 30 days' from 15.03.2012. The letter of learned Arbitrator dated15.03.2012 being very much relevant is reproduced as under :- "NAZIM HUSSAIN SIDDIQUI EX-CHIEF JUSTICE OF PAKISTAN Dated 15.03.2012 SUB: AWARD DT: 15/03/2012 DELIVERED IN THIS MATTER OF ARBITRATION BETWEEN MR. MUHAMMAD ATHER HAFEEZ KHAN VERSUS MIS SSANGYONG USMANI JOINT VENTURE. (1) MR. MANSOOR-UL-ARFIN Advocate for the Claimant, Atfin & Company, 907-909, 9th floor, Tower -A, Samia Trade Towers, 1.1. Chundrigar Road, KARACHI. (Copy received by M.Athar Hafeez Khan on 16.03.2012) [Emphasis supplied] (2) MR. BILAL A. KHAWAJA, Advocate for the Respondents, Ahmed & Ahmed Advocates, Hameeda Markaz,106 C, Jami Commercial, Street No. 11,Off Khayaban-e-Ittehad, Phase VII, DHA, KARACHI. (Copy received by M. Asi. F. Advocate on 16.03.2012) (Emphasis supplied] In this matter, award has been delivered by the undersigned and has been submitted to the Honourable High Court of Sindh Karachi, today. You above named advocates are requested to collect a copy of the award free of cost from my office on any working day. [Underlining is mine]. Sd/- Justice Nazim Hussain Siddiqui (Sole Arbitrator)" 22. Per learned counsel, since the objections to the award filed on 17.04.2012, are beyond the statutory period of 30 days' hence merit no consideration and are liable to be rejected/thrown away on this score alone. Mr. Mansoor-ul-Arfin, learned counsel for the plaintiff emphatically further argued that 30 days' period under Article 158 of the Limitation Act 1908, for to set-aside an award or to get an award remitted for reconsideration under the Arbitration Act, 1940, is to commence from the date of service of notice of filing of the award. In this regard learned counsel also referred to section 12 of the Limitation Act, 1908. [IX of 1908] which deals with/speaks about the exclusion of time in legal proceedings. It would be advantageous at this stage to reproduce the same herein: 23. Section 12: "12 Exclusion of time in legal proceedings. (1) In computing the period of limitation prescribed for any suit, appeal or application, the day from which such period is to be reckoned shall be excluded. (2) In computing the period of limitation prescribed for an appeal, an application for leave to appeal and an application for a review of judgment, the day on which the judgment complained of was pronounced, and the appealed fromor sought to be reviewed shall be excluded. (3) Where a decree is appealed from or sought to be reviewed, the time requisite for obtaining a copy of the judgment on which it is founded shall also be excluded,
---
## Page 7
(4) In computing the period of limitation prescribed for an application to set aside an award, the time requisite for obtaining a copy of the award shall be excluded. (5) For the purposes of subsections (2), (3) and (4) the time requisite for obtaining a copy of the decree, sentence, order, judgment or award shall be deemed to be the time intervening between the day on which an application for the copy is made and the day actually intimated to the applicant to be the day on which the copy will be ready for delivery." 24. Mr. Mansoor-ul-Arfin learned counsel for the plaintiff further contended that in view of knowledge of filing of award in court no further notice to the JV partners of defendant is/was necessary and if it was issued then date of service upon the defendant is not relevant as far a filing of objections to the award are concerned. In any event, per learned counsel, time of 30 days is to commence from the date of knowledge and not from the date of service issued by court. 25. Mr. Mansoor-ul-Arfin learned counsel for the plaintiff/claimant in support of his contention placed reliance on the following case laws:-- (i) Muhammad Mushtaq Sai gal Muhammad Wasi Saigal [Reported 2001 SCJ 96], (ii) Superintending Engineer, Communication and Works High Way Circle, Kohat v. Mian Faiz Muhammad and . Company [Reported PLD 1996 SC 797]. (iii) Ashfaq Ali Qureshi v. Municipal Corporation, Multan [Reported PLD 1985 SC 597]. (vi)M/s. Shaft Corporation Limited v. Government of Pakistan [Reported PLD 1994 Karachi 127]. (v)Mian Asmat Shah and another v.Mian Faiq Shah and others, [Reported PLD 2012 Peshawar 181]. 26. Conversely, learned counsel for foreign JV partner of defendant Mr. Kazim Hassan vehemently contended that objections filed on 17.4.2012 are well within time of 30 days' statutory period. Per learned counsel time limit starts running from the date of 'receipt of court notice' in respect of filing of award and not otherwise. Per learned counsel under Rule 281 SCCR (0.S.) an award shall so far as possible be in Form No.12-A in Appendix-A. In the instant case, per learned counsel, admittedly the award is not Form 12-A thus per learned counsel, in fact, there is no award. Additionally the learned counsel further submitted that the award is not in accordance with the provision of section 14 (2) of the Arbitration Act, 1940. In view of such position the award as filed is liable to be rejected. 27. Mr. Kazim Hassan further urged that in view of section 17 of the Arbitration Act, 1940, it is mandatory for this court to consider the contents of the award andthereafter passed a decree if award is found in accordance with law . Apart from the above, learned counsel also made reference to the events transpired during the arbitration proceedings which in brief are as follows:- - " (a) While the arbitration proceedings were pending, a show cause notice was issued to the defendant by the office of the Commissioner, Inland Revenue, Zone-1, Regional Tax Office II, Karachi. This notice, which is dated 19.5.2012, demanded a payment of PKR 351 , 684, 309/- together withpenalties under Section 33 and default surcharge under Sections 34 and 36 read with Section 11(2) of the Sales Tax Act, 1990. The hearing of this show cause notice was fixed on 26.5.2012. (b) Thereafter, there was a hearing before the concerned functionary. Order in original No. 10 of 2012 was passed on 28.8.2012. The said order held that the total amount of sales tax PKR 351,684,309/- is recoverable from the defendant, along with default surcharge. A penalty of 100% of the amount of tax involved was also imposed by the Commissioner. (c) The defendant appealed. The Commissioner, Inland Revenue,Appeals-II, Karachi, on19.11.2012 passed an order maintaining the order in original dated 28.8.2012. Judgment was pronounced in the following terms: "Under the facts and circumstances of the case and legal position enumerated through case law citedat bar, the order in original No. 10 of 2012 dated 28.8.2012 passed by the Additional
---
## Page 8
Commissioner IR-A, Zone-I, RTO-II, Karachi imposing tax at Rs. 703,368,618/- (Principal amount at Rs. 351,684,309/-, and 100% penalty amount at Rs. 351,684,309/-) is maintained." 28. Mr. Muhammad Masood Khan learned counsel for the local JV partner forcefully argued that the objections filed on 17.04.2012 are well within time. Per learned counsel it is mandatory for the court to 'give notice' to the parties of filing of the award. Per learned counsel limitation of 30 days' provided under Article 158 of the Limitation Act, 1908 is to run from the date when notice issued by court regarding filing of the award is 'served'. Mr. Muhammad Masood Khan further argued that under section 12(1) of Limitation Act, 1908, the 'day from which the period of limitation is to be reckoned is to be excluded. Mr. Muhammad Masood Khan strenuously contended that evidently in the case in hand notice issued to the parties/defendant served upon the foreign JV partner on 19.3.12 and local JV partner on 20.3.12. Under such circumstances the 'objections' filed on 17.4.12 are well within time. 29. Besides, per learned counsel M/s. Ssayang Yang and Usman Associates are two different and distinct parties/entities should have been sued separately. Per learned counsel the local JV partner has no 'privity of contract' with the plaintiff: Therefore, the award as far as local JV partner is concerned is void. Per learned counsel the JV agreement dated 8.11.2006 has been signed and executed by 'unregistered partnership, therefore, the suit initially filed by the plaintiff against the defendant is barred in view of section 69 of the Partnership Act. Per learned counsel the local JV partner of defendant No. 1 has neither hired services of the plaintiff nor signed the consultancy agreement dated 17.6.2008. In view of such position the award passed by the learned arbitrator besides illegal, unlawful is liable to be set-aside. In support of his contention learned counsel for the objector placed reliance on the following cases :- (i) Panoo Rain v. Nebh Raj [Reported AIR 1930 Lahore 228]. (ii)Kishanlal Malhothra v. Union of India [Reported in AIR 1961 Punjab 5 (V 48 C3) ] (iii)Pakistan through Genera Manager, Pakistan Railways v. Messrs Q.M.R. Expert Consultants 1991 SCMR 132. (iv)Harichand v. Lachman Das and others [Reported in AIR (35) 1948 East Punjab 11]. (v)Superintending Engineer, Communication and Works Highway Circle Kohat v. Faiz Muhammad and Co. [Reported in PLD 1996 SC 797]. 30. I have heard the learned counsel for the parties and also have minutely gone through the case laws cited at bar. 31, Before further proceeding at this stage it would be appropriate to mention herein that principle of 'fair trial' and 'due process' indeed all the time has been considered as golden principle for 'administration of justice' which, of course, covering both substantive and procedural due process. 32. Significantly after incorporation of Article 10-A in the Constitution of Islamic Republic of Pakistan, 1973 a 'fair trial' and 'due process' has now become a fundamental right. Any order passed or proceedings held in violation of 'fair trial' and 'due process' is null and void. In this regard reliance can be placed on the case of Babar Hussain Shah and another v. Mujeeb Ahmed Khan and another [Reported in 2012 SCMR…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.