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Petitioner: TAISEI CORPORATION VS Respondent: A.M. CONSTRUCTION COMPANY (PVT.) LTD.--
Court Name: Lahore High Court Judge(s): Nasir Saeed Sheikh Title: TAISEI CORPORATION vs A.M. CONSTRUCTION COMPANY (PVT.) LTD.-- Case No.: Civil Revision No1691 of 2012 Date of Judgment:2012-04-27 Reported As: PLD 2012 Lahore 455 Result: Revision dismissed
JUDGMENT
JUDGMENT ' NASIR SAEED SHEIKH, J.---The petitioner Taisei Corporation is stated to be a Japan based company and acquired a project for carrying out the improvement works of Kararo-Wadh section of National Highway N-25 in the Province of Balochistan. The subcontract dated 19-5-2007 was executed between .The petitioner and the respondent No,1 whereby the petitioner entrusted this project to the respondent No,1 upon the terms and conditions incorporated in the sub-contract. An arbitration clause regarding the settlement of disputes between the parties was incorporated in para-19 of the subcontract according to which the parties agreed to get any controversy under the sub- contract resolved through the arbitration of an Arbitrator to be appointed by International Chamber of Commerce and the place of the arbitration was further agreed to be at Singapore. The sub-contract executed between the parties contained a special condition 3.4 which reads as follows:-- "The priority of sub-contract documents is:-- (a) The Contractor's Letter of Acceptance, (b) Special Conditions of Subcontract, (c) General Conditions of Subcontract, (d) Subcontract Specifications, (e) Subcontract Drawings (f) The Subcontract Bill of Quantities (included in the (a)) (g) Correspondences"
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' Further the documents enumerated above were treated as part of the Subcontract Agreement as per clause 2 of the Sub-contract dated 19-5-2007. Both the parties agreed upon the general conditions detailed from paras 1 to 22 of the sub-contract and also upon special conditions attached with the main sub-contract. The main sub-contract contained clause 3.2 as follows:,
"Governing Law:--The law to which the Subcontract is to be subject and according to which the. Subcontract is to be construed shall be as specified in Special Conditions of the Subcontract."
' The Special conditions contain clause 3.2 which reads as follows:- "3.2. The Governing Law shall be the law in force at the time in Pakistan."
2. Certain disputes arose between the parties which -could not be resolved amicably. Resultantly the respondent No,1 forwarded a request dated 17-12-2008 for arbitration along with the statement of claims to the Secretariat of International Court of Arbitration and the respondent No,2 was appointed as the sole Arbitrator. The arbitration proceedings were undertaken by the Arbitrator with the participation of both the parties at Singapore. On 9-9-2011 the Arbitrator delivered an Award the intimation of which was conveyed to the respondent at Lahore through a letter dated 9- 9-2011 addressed by the Secretariat International Court of Arbitration. . The Arbitrator in the award while passing award rejected all the claims as raised by the respondent No,1 except one and at the same time allowed certain counter claims raised by the petitioner against the respondent No,1. A direction was issued in the award to the respondent No,1 to pay', a sum of Rs,158,135,576/-. The award also held the respondent No,1 liable to pay costs of the arbitration to the tune of Rs,23,073,952.50 as well as the costs of the arbitration proceedings comprising fee and expenses of the Arbitrator as well as the International Court of Arbitration administrative expenses (US $ 42500). 3. The respondent moved an application under section '14 of the Arbitration Act 1940 before the learned Civil Judge at Lahore in order to challenge the award and prayed for issuance of a direction to the arbitrator to file the Award in the Court so that the objections in this regard can be raised before the Court as per the Act of 1940. Para-9 of the application moved by the respondent No,1 contained the following grounds for moving the application:--
"9 That the Applicant intends to challenge the Award and to file its objections in this regard. It is the Applicant's position that the Arbitrator has misconducted herself as well as the arbitration proceedings, that the Award is invalid, contrary to the laws and public policy of Pakistan, unenforceable and merits to be set aside, and that the matter deserves to be remitted/ referred to arbitration for reconsideration. The applicant reserves the right to initiate and file all appropriate proceedings in this regard, once the award and the entire record of the arbitration proceedings is submitted before this court as prayed hereunder. The instant application is therefore being filed without prejudice to the rights of the. Applicant to challenge the arbitration proceedings and the Award and seeking all appropriate reliefs. "
4. In paragraphs Nos.10 and 11 of the application following contentions were raised for invoking the jurisdiction of the Civil Courts at Lahore and these paragraphs are reproduced below:--
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"10 That the cause of action for this application arose in favour of the applicant and against the respondents when the applicant learnt that the Award had been made through the letter dated 9th September 2011. The instant application is being made within the limitation period prescribed by law. 11. That the applicant has its registered office within the territorial jurisdiction of this court; the letter dated 9th September 2011 regarding the rendering of the Award by the arbitrator was also received within the territorial jurisdiction of this court, which even otherwise has jurisdiction over the subject matter of the reference as a part of the cause of action arose in Lahore (e.g. Through receipt of correspondence, negotiations, meeting etc.) Accordingly, this court has jurisdiction in the matter. "
' The application moved by' the respondent No,1 thus contained the following prayer:-
"In the light of the foregoing, it is most respectfully prayed that the respondent No,2, the Arbitrator, be directed to file the Award or a signed copy thereof together with the entire record of the arbitration proceedings, including but not limited to all depositions, witness statements, expert reports and documents filed or produced before the Arbitrator, and orders passed or directions issued by the Arbitrator, in this court. "
'It is an admitted position by the parties that on 22-9-2011 when the application under section 14 of the Arbitration Act 1940 was moved by the respondent No,1 before the Civil Courts at Lahore neither the petitioner nor the Arbitrator has initiated any proceedings for the enforcement of the award in question in any court in Pakistan.
5. The petitioner appeared in the Civil Court at Lahore with an application under Order VII, Rule 10 of C.P.C. Supported by an affidavit dated 27-10-2011. The petitioner raised two objections upon the jurisdiction of the Civil Court at Lahore one on the ground that the Courts at Lahore lack territorial jurisdiction to entertain the application under section 14 of the Arbitration Act 1940 moved by the respondent No,1 and secondly that the award as announced by the Arbitrator is a "foreign award" regarding which exclusive statutory jurisdiction under the Recognition and Enforcement of Arbitration Agreement and Foreign Arbitral Award Act, 2011 (the 2011 Act) is conferred upon a High Court. The petitioner contended in para-5 of the affidavit that the honourable High Court of Sindh at Karachi had the territorial jurisdiction to entertain this matter and the petitioner intends to invoke the jurisdiction of the honourable High Court of Sindh at Karachi by filing award in the said Court.
6. It would be advantageous to reproduced paragraphs Nos.3, 4 & 5 of the affidavit dated 27-10- 2011 submitted by the petitioner in support of the application under Qrder VII, Rule 10 of C.P.C. Praying that the plaint as instituted before the Civil Court at Lahore be returned on the above grounds:--
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"3. That no cause of action has arisen at Lahore. The respondents do not reside or carry on business in Lahore. The Sub-Contract Agreement between the parties was not executed at Lahore and neither has any breach occurred in Lahore. Therefore, this Hon'ble Court has no territorial jurisdiction to adjudicate this matter. 4. The respondent No,1 has its regional office in Karachi. The Sub-contract Agreement between the applicant and the respondent No,1 was executed at Karachi. Since the respondent No,1 does not reside or carry on its business in Lahore neither has any cause of action accrued at Lahore, therefore the applicant has wrongly invoked the jurisdiction of this Hon'ble Court. 5. That the Award is a 'foreign award' under section 2(e) of the Recognition and Enforcement of Arbitration Agreement and Foreign Arbitral Award Act, 2011 (the 2011 Act) therefore jurisdiction to adjudicate matters in relation thereto, as per section 3 of the 2011 Act, has been vested in a High Court. Accordingly, the Hon'ble High Court of Sindh at Karachi has territorial jurisdiction to entertain this matter. The respondent No,1 intends to invoke the jurisdiction of the Hon'ble High Court of Sindh at Karachi by filing the Award in Court."
7.. The respondent No,1 contested this application by controverting the contents of paragraphs No,3, 4 and 5 of the affidavit specifically. It was vehemently reasserted in the reply by the present respondent No,1 that the Civil Court at Lahore has the jurisdiction because the subcontract was partly concluded in Lahore through exchange of correspondences which included communication of the acceptance of the offer. It was further reasserted in the reply by the respondent No,1 that the cause of action with respect to the dispute under the sub-contract also arose in Lahore, numerous meetings were held at Lahore to settle the controversy raised between the parties. The respondent No,1 also alleged that the breaches of the sub-contract by the petitioner caused hiss and injury to the respondent No,1 at Lahore. Regarding the objection raised by the petitioner of lack of jurisdiction of the civil court at Lahore on statutory grounds the respondent No,1 reiterated in reply to para-5 of the affidavit that the award announced by the Arbitrator is not a "foreign award" as alleged. It was reiterated by the respondent No,1 that it is a "domestic award" and the sub-contract agreement between the parties specified the governing law to be the law of Pakistan. It was also contended by the respondent No,1 in reply to para-5 of the affidavit that the Act of 2011 was not in field in December 2008 when the arbitration proceedings in the matter were initiated and that the respondent No,1 have vested rights to challenge the award in question on, the grounds set out in the Arbitration Act 1940 which provisions of the Arbitration Act of 1940 have no parallel /corresponding provisions in the Act of 2011 as well. It was also pleaded by the respondent No,1 that the rights available to the respondent No,1 under the Arbitration Act 1940 remain intact and available to the respondent No,1 particularly because of the fact that the Act of 2011 has not repealed the Arbitration Act of 1940. The vesting of the statutory jurisdiction with the High Court of Sindh at Karachi was also specifically denied by the respondent No, 1 . It was further contended by the respondent No,1 that although the High Court of Sindh at Karachi does not have the jurisdiction to adjudicate upon the matter yet mere intention to invoke the jurisdiction of the High Court of Sindh at Karachi cannot divest the civil court at Lahore of its jurisdiction to take cognizance of the matter at the instance of a prior application moved by the respondent No, 1. The petitioner submitted a rejoinder to the reply of the respondent No,1 by controverting the contentions raised by the respondent No, 1.
8. The learned Civil Judge Lahore after hearing the arguments of both the parties rejected the application moved by the petitioner under Order VII, Rule 10 of C.P.C. Vide order dated 28-1-2012.
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The learned Civil Judge in the impugned order held that the cause of action in favour of the respondent No,1 to move the application under section 14 of the Arbitration Act 1940 has partly arisen in Lahore. It was further held by the learned Civil Judge that the award in question is a domestic award and it was not a foreign award and that the civil court at Lahore has the jurisdiction to entertain the objections upon such an award as it is governed by the provisions of Arbitration Act 1940. The learned Civil Judge also held that mere subsequent institution of application under section 6 of the Act 2011 before the High Court of Sindh at Karachi as claimed by the petitioner in the rejoinder dated 10-12-2011 does not require the civil court to stop the further proceedings at Lahore.
9. Through the instant Civil Revision the petitioner who is the respondent No,1 in the application under section 14 of the Arbitration Act 1940 moved before the civil court has assailed the order dated 28-1-2012 passed by the learned Civil Judge rejecting the application under Order VII, Rule 10 of C.P.C. As moved by the petitioner for the return of the above application under Section 14 of the Act of 1940.
10. Notice was issued to the respondent No,1 in this matter by this Court.
11. The petitioner through C . M . No . 3-C of 2012 dated 14-4-2012 requested for placing on record the documents annexed with the C.M. Which are part of the record of the learned trial court Lahore which C.M. Was allowed by this Court subject to all just and legal exceptions vide order dated 17-4- 2012.
12. It is contended by the learned counsel for the petitioner that the sub-contract dated 19-5-2007 was executed at Karachi which contained an arbitration clause that arbitration proceedings were agreed to be conducted at Singapore; the place of work to be undertaken by the respondent' No,1 under the sub-contract is located at Balochistan therefore the courts at Lahore do not have any territorial jurisdiction. The learned counsel relied upon the provisions of the Recognition and Enforcement of Arbitration Agreement and Foreign Arbitral Award Act, 2011 (the 2011 Act) to argue that the special statutory jurisdiction has been created by the above Act of 2011 in the matter which is conferred upon the High Court and the petitioner has invoked the jurisdiction of the honourable High Court of Sindh at Karachi therefore the proceedings as initiated by the respondent No,1 through moving application under section 14 of the Arbitration Act 1940 are coram non judice, without lawful authority and the application moved by the respondent No,1 was liable to be returned. The learned counsel contended that the impugned order passed by the learned Civil Judge rejecting the application of the petitioner under Order VII, Rule 10 of C.P.C. Be declared illegal.
13. The learned counsel for the respondent No, 1 has raised preliminary objection upon the maintainability of the instant Civil Revision by contending that it is instituted by one Liaqat Hussain s/o Ghulam Muhammad who does not appear to be a duly authorized person by Taisei Corporation the petitioner. The learned counsel in this respect referred to the power of attorney claimed by Liaqat Hussain a copy of which has been placed at page-88 of this Civil. Revision which power of attorney according to the learned counsel for the respondent No,1 is attributed to one
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Tsutomu Takayama posing as the General Manager of Taisei Corporation. The learned counsel for the respondent No,1 contended that this General Manager Tsutomu Takayama has himself produced Notarial certificate dated 14-10-2011 before .a Notary Public for creating an authority in his own favour from Taisei Corporation which is not apparently sufficient to prove the creation of a valid authority in favour of the said Tsutomu Takayama from the Taisei Corporation and further that on the basis of such a notarial certificate and the power of attorney attested by Notary Public no valid authority can be said to have been created in favour of Liaqat Hussain to institute the instant Civil Revision before this Court as the connection of the attorney holder Tsutomu Takayama with the petitioner Corporation was not legally and factually established.
14. The learned counsel for the respondent No,1 in order, to meet the arguments of the learned counsel for the petitioner as raised regarding the territorial as well as the statutory jurisdiction of the civil court at Lahore contended that the petitioner company is admittedly based in Lahore and the entire correspondence finally resulting into the, execution of the sub-contract was exchanged to and from Lahore by the responded No,1 company with the petitioner Corporation. It was further contended that part payment under the sub-contract was also received by the respondent No,1 from the petitioner at Lahore. The learned counsel contended that the correspondences exchanged between the parties under the sub-contract was agreed to be treated as part and parcel of the subcontract and therefore the cause of action has arisen partly at Lahore which was sufficient for conferment of the territorial jurisdiction upon the Lahore civil courts. Regarding the objection of lack of statutory jurisdiction the learned counsel for the respondent No,1 contended that the award in question was based upon a sub-contract which specifically provided an agreement between the parties regarding the governing law of the sub-contract to be the Pakistani law and applying above principle the award in question as announced by the Arbitrator was a domestic award and not a foreign award. The learned counsel for the respondent No,1 placed his reliance with emphasis in support of his above contention upon the judgment reported as HITACHI LIMITED AND ANOTHER v. RUPALI POLYESTER AND OTHERS (1998 SCMR 1618). The learned counsel for the respondent No,1 further contended that the Act of 2011 was enforced through a notification published in the official Gazette dated 19-7-2011 and its provisions cannot be allowed to be interpreted in the manner so as to jeopardize the vested rights available to the respondent No,1 under the laws of Pakistan particularly under the Arbitration Act 1940. The learned counsel in this respect referred to an Email addressed by the Arbitrator dated 26-11-2010 placed at page 229 of the C.M. No,3-C/2012 whereby it was communicated by the Arbitrator that the "award has to be rendered on or before 31st January 2011 as per ICC Secretariat letter dated 19th October 2010" (R/A). The learned counsel contends that the arbitration proceedings were closed on 12-1-2011 as per message sent through the Email dated 19-5-2011 placed at page-231 of the C.M. No,3-C/2012. (R/B). The learned counsel contends that on this date i,e, 31st January 2012 the Act of 2011 was not enforced and had the award been announced on time by the Arbitrator, the award must have been treated as an award under the domestic law of Pakistan as the Recognition and Enforcement of Arbitration Agreement and Foreign Arbitral Award Act, 2011 (the 2011. Act) was enforced on 19-7- 2011 as per notification placed on the record by Civil Revision petitioner itself in the bundle of documents at page 43. The learned counsel for the respondent No,1 contends that it is not the fault of the respondent No,1 that the announcement of the award has been delayed till 9-9-2011 by the Arbitrator and this late announcement of the award would not bring the award so announced to be governed by the provisions of the Act of 2011. It is further argued by the learned counsel for the respondent No,1 that the provisions of Arbitration Act, 1940 having not been specifically repealed by the Act of 2011 therefore the rights available to a party under an arbitration agreement itself agreed
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to be governed by. Pakistani law by the parties, cannot be said to have been lost merely because there was a provision in the Act of 2011 that the said Act applies retrospectively to the arbitration agreements made before, or after the date of enforcement of the Act of 2011. The learned counsel contended that it is settled proposition of law that the parties are to be governed in accordance with the law which is in force at the time the agreement between the parties forming subject matter of the controversy is executed. The learned counsel contended that the respondent No,1 rightly invoked the jurisdiction of the civil court at Lahore for enforcement of the vested right available to the respondent and the learned Civil Judge lawfully declined the acceptance of the application moved by the petitioner under Order VII, Rule 10 of C.P.C. Before the learned Civil Judge for the return of the application under section 14 of the Arbitration Act 1940.
15. The learned counsel for the petitioner took further chance by arguing that not only the provisions of Act of 2011 gave retrospective effect to the Act in respect of the arbitration agreements executed prior to the enforcement date of the Act but also argued that the Act of 2011 was in fact a subsequent final statute legislated on the subject through an Act of Parliament whereas prior to that the same provisions as incorporated in the Act of 2011 were promulgated through Ordinances with successive intervals from the year 2005 onwards. The learned counsel for the petitioner contended that first of such Ordinances was enforced on 14-7-2005 therefore even at the time of the execution of the sub-contract agreement in question between the parties which admittedly took place on 19-5-2007 the same provisions as incorporated in the Act of 2011 stood legislated and enforced through successive Ordinances.
16. Arguments of the parties have been heard and record perused.
17. The preliminary objection raised by the respondent No,1 about the non-maintainability of the instant Civil Revision on the ground that it is not instituted by a duly authorized person on behalf of Taisei Corporation is a question which is not relevant before this forum. The petitioner moved an application under Order VII, Rule 10 of C.P.C. Before the learned Civil Judge through the'same attorney Liaqat Hussain s/o Ghulam Muhammad who claimed in his favour a due authorization from the petitioner Taisei Corporation. The learned Civil Judge rejected the application moved by the petitioner through the said attorney on merits vide impugned order dated 28-1-2012. The petitioner has assailed the impugned order dated 28-1-2012 through the instant Civil Revision instituted through the same attorney who moved the application before the learned Civil Judge under Order VII, Rule 10 of C.P.C. Any further objections regarding the status and authority of the said person can be raised before the learned Civil Judge by the respondent at a proper stage which objection shall be decided by the learned Civil Judge after framing the necessary issue on the point and allowing the parties to, produce their respective evidence on the controversy. This objection of the learned counsel for the respondent is presently repelled.
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18. After hearing the arguments of the learned counsel for the contesting parties on the other two points relating to the merits of the instant Civil Revision and also after perusal of the available record the following admitted facts are noticed:-
(i) The respondent No,1 was a sub-contractor for the project in question which sub-contract was executed between the parties at Karachi on 19-5-2007.
(ii) The project subject matter of the sub-contact was to be executed in the Province of Balochistan.
(iii) The petitioner is a Japan based company having Fits one of the offices at Karachi. The respondent No, 1 which is the subcontractor company has a permanent office at Lahore.
(iv) The execution of the sub-contract between petitioner and the respondent No,1 was preceded by numerous letters exchanged between the petitioner and the respondent No,1 from their respective offices ar 1 sub offices regarding the settlement of the terms and conditions of the sub- contract.
(v) The sub-contract was supplemented by special conditions incorporated in the document dated 1-5-2007 and its clause 3.4 enumerated the correspondences between the parties as one of the priority of sub-contract document agreed to be treated as part of the main sub-contract.
(vi) The governing law regulating the terms and conditions of the sub-contract executed between the parties was agreed to be the law of Pakistan.
(vii) The sub-contract contained the special arbitration clause in its para.
19.1 which clause envisaged the serving of a notice of any dispute arising between the parties of the sub-contract for amicable settlement and if…
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