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Petitioner: PAKISTAN STEEL MILLS CORPORATION (PRIVATE) LIMITED VS Respondent: KARACHI WATER AND SEWERAGE BOARD through Chief Executive and 2 others
Court Name: Sindh High Court Judge(s): Munib Akhtar Title:PAKISTAN STEEL MILLS CORPORATION (PRIVATE) LIMITED vs KARACHI WATER
AND SEWERAGE BOARD through Chief Executive and 2 others Case No.:Suit No, 146 and C.M.A. No:9360 of 2007 C.M.A. No:9360 of 2007 M.A. No:9360 of 2007 Date of Judgment:2011-12-02 Reported As: 2012 CLD 396 Result: Order accordingly Judgment ORDER MUNIB AKHTAR, J.---By means of this application, the plaintiff seeks interim injunctive relief in the following circumstances. The plaintiff is a public sector entity, which owns and operates what is by far the largest steel mill in the country. For purposes of its operations, the plaintiff needs huge quantities of water on a daily basis (running into millions of gallons per day), for which it is billed by the defendant No,1, the Karachi Water and Sewerage Board. The plaintiffs basic contention is that the water being supplied to it comes from, or belongs to, the defendant No,3, the Province of Sindh, and that therefore the defendant No,1 is not entitled to charge for the same. In addition to the water charges claimed by it, the defendant No,1 also charges for sewerage and conservancy, and for fire fighting purposes. Thus, the bills raised and demands made from time to time by the defendant No, 1 have four distinct elements. The plaintiffs case is that (for the various reasons stated in more detail herein below) it is not liable to make payment to the defendant No,1 in respect of any of these charges. At the same time, the plaintiff claims that it is entitled to the continued supply of water. Thus, the interim relief sought by it is that its water supply should not be disrupted for any alleged non-payment of the billed amounts. 2. Learned counsel for the plaintiff submitted that the defendant No,1 (or for that matter, any of the other defendants) were not providing the plaintiff with any fire fighting or sewerage/conservancy services or facilities. He submitted that the plaintiff had an extensive fire fighting system on its own premises, including a proper fire brigade, which was of course necessitated by the very nature of the industrial plant and complex owned and operated by it. He submitted that the plaintiff also had
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its own sewerage arrangements, and did not make use of any such services from the defendants. He therefore contended that the plaintiff was not liable to be charged for sewerage, conservancy and fire fighting, and that these components in the defendant No, l's billing were entirely improper and unlawful. Insofar as the water charges were concerned, learned counsel submitted that water was being provided to the plaintiff from the Keenjhar-Gujjo canal, for which funding had been provided by the plaintiff itself. The defendant No, 1 had made no contribution towards this scheme. Thus, learned counsel contended, the plaintiff was not liable to be charged for the water being supplied to it, or at any rate, the defendant No,1 was not entitled to make any such demand. In any case, the water belonged to the defendant No,3 (i,e,, the Province). An agreement had been entered into between the plaintiff and the defendant No,1 on or about 11-12-1994, in terms whereof the parties had agreed upon the rates at which the plaintiff was to be charged for water. Learned counsel submitted that this agreement was liable to be cancelled, as it was void by reason of a failure of consideration. Learned counsel submitted that the plaintiff had repeatedly raised these issues with the Province and also the, defendant No,1, but to no avail. In this regard, he referred to the correspondence annexed to the plaint. It appears that the final bill issued by the defendant No,1 (i,e,, up to the filing of the suit) amounted to billions of Rupees (inclusive of alleged arrears). Learned counsel submitted that the plaintiff was not liable for these amounts, but also emphasized that notwithstanding its position regarding the water charges, the plaintiff had in fact been making regular payments with regard to this component of the bills. Despite this, the defendant No,1 unlawfully stopped, or attempted to block, the supply of water to the plaintiff on the pretext of the unpaid amounts. Learned counsel submitted that had this attempt succeeded, it would very rapidly have led to an exceedingly dangerous situation developing at the plaintiffs complex with catastrophic consequences. It was this attempt that was the immediate cause for the filing of the suit and the seeking of interim relief. He pointed out that in terms of the interim arrangement made by the Court, the plaintiff was being supplied water for which it was making payment, 'and in addition, the plaintiff had deposited a sum of Rs, 200 million in Court, which had been withdrawn by the defendant No, 1. Learned counsel also relied on certain case law, which I will consider later. 3. Learned counsel for the defendant No, 1 opposed the grant of interim relief. His case was that the said defendant was entitled to charge the plaintiff for each of the four elements that constituted the billing, and that the latter was a defaulter whose arrears ran into billions of rupees. Learned counsel' submitted that the plaintiff was a commercial organization, which could charge such prices as it liked for its products, whereas the defendant No,1 was a public utility engaged in providing public services in relation to water and sanitation. By refusing to pay its bills, the plaintiff had contributed significantly to the huge losses being sustained by the defendant No, 1. Learned counsel submitted that it was entirely irrelevant whether any sewerage or fire fighting services were, or were not, , being provided to the plaintiff (although his case was that in fact, such services were being provided or made available) because the nature of the demands being made in this connection was that of a tax and not a fee. The importance of the distinction was of course, that in the case of a tax it was not relevant that a specific service was not being provided to the particular ratepayer from whom the tax was being demanded. He submitted that sewerage and conservancy, as also fire fighting, services were provided generally to the ratepayers of any given area, and were available for and in the area of the plaintiffs operations. It was therefore no answer to the demand raised by the defendant No,1 that the plaintiff did not avail these services. Learned counsel relied on various provisions of the Karachi Water and Sewerage Board Act, 1996 ("1996 Act") in support of his case, including in particular section 9 thereof, and I will refer to these subsequently. He also relied on the 1994 agreement referred to above and submitted that in terms thereof, the plaintiff was being charged for water at a reduced rate precisely for the reason that it had contributed financially to the scheme whereby the water was being supplied. He therefore
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contended that the principal point raised by the plaintiff was expressly factored into the agreement, which was lawful and binding. He submitted also that the defendant No, 1, in the exercise of the powers conferred upon it by the 1996 Act, was entitled to vary the water rates from time to time, and the plaintiff was obliged to make payment in terms thereof. He also referred to certain cases, which I will presently consider. 4. Exercising his right of reply, learned counsel for the plaintiff referred to various notifications issued from time to time, and also referred to certain provisions of the Sindh Local Government Ordinance, 2001 to contend that the defendant No,1 did not, and indeed could not, in particular charge for firefighting services. These matters will also be considered in detail below. 5. I have heard learned counsel, examined the record with their assistance and considered the case-law relied upon. As noted above, the impugned demand comprises of four distinct elements. The bills served on the plaintiff by the defendant No, 1 are each titled "Bulk Consumer Bill", and the four elements are listed therein as "water", "sewerage", "conservancy" and "fire". Since the plaintiff denies liability to make any payment in respect of each of these elements, it will be necessary to consider the legal nature of each component. The aforementioned agreement of 11-12-1994 ("the 1994 Agreement") will also have to be examined closely, in particular in light of the plaintfff s objection that it is void by reason of a failure of consideration. A number of statutory provisions will also need to be considered. 6. For reasons that will presently become clear, the analysis must begin with the Sindh Local Government Ordinance, 1979 ("the 1979 Ordinance"). That Ordinance set up different types of local government bodies known as "councils", which included "metropolitan corporations", of which the most important and the one relevant for present purposes was the Karachi Metropolitan Corporation ("KMC"). Section 60(1) enabled councils to levy taxes, rates, tolls and fees, as mentioned in Schedule V. Section 64(1) provided that "unless otherwise provided, all taxes, rates, tolls and fees levied under this Ordinance shall be collected in the prescribed manner by the persons authorized for such collection...." As originally enacted, ' Schedule V provided as follows (insofar as is presently relevant): "PART I- TAXES, RATES, TOLLS AND FEES TO BE LEVIED BY KARACHI METROPOLITAN CORPORATION (2) Drainage Tax. (3) Development tax for specified public benefit or public utility projects. (4) Rates for the bulk supply of water. PART II- TAXES, RATES, TOLLS AND FEES WHICH MAY BE LEVIED BY A CORPORATION INCLUDING THE METROPOLITAN CORPORATION, MUNICIPAL COMMITTEES AND TOWN COMMITTEES (12) Lighting rate and fire rate. (13)Conservancy rate. (15) Rate for the provision of water works or the supply of water. (18) Fees for benefits derived from any works of public utility maintained by the council. (22) Fees for specific services rendered by the council." (emphasis supplied)" 7. In 1983, the 1979 Ordinance was amended by the addition of a new Chapter XVI, consisting of sections 121 through 148, and two Appendixes (herein after referred to as the "Chapter XVI provisions"). Section 121(1) provided as follows:-- "There shall be established a Board in the Karachi Metropolitan Corporation called the Karachi Water and Sewerage Board." ' This newly created Board (hereinafter referred to as the "old Board") was not a legal entity in its own right, distinct and separate from KMC, but rather something set up "in" the latter. However, section 148 did provide that the provisions of the newly added Chapter XVI would have effect notwithstanding anything to the contrary contained in the 1979 Ordinance. The old Board
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comprised of a Chairman and various members, and section 123(1) provided that the Chairman would have, in relation to the old Board, the same powers as were exercisable in relation to KMC by its Mayor. It may be noted that Rule 2 of the Sindh Councils (Contract) Rules, 1980 provided, inter alia, that all contracts to be entered into by KMC could be made on its behalf by the Mayor. Thus, the Chairman of the old Board was empowered to enter into contracts on its behalf. Section 124 specified the powers of the old Board, and needs to be set forth in full:-- "124. The Board shall-- (i) sanction in the manner and on payment of fees as may be prescribed by regulations: (a) *Tater connections, (b) water supply by tankers; and (c) sewerage connections; (ii) collect or recover rates, charges or fees for water supply and sewerage service, including arrears thereof; (iii) have the power to reduce, suspend or disconnect the water supply in the event of contravention of the provisions of this Ordinance or regulations; (iv) have the power to impose surcharge, not exceeding double the amount due, if rates, charges or fees for water supply or sewerage service or the arrears thereof are not paid within the time fixed by the Board; (v) have full financial powers within the budget grant; (vi) make regulations with the approval of the Karachi Metropolitan Corporation; (vii) undertake construction improvement, maintenance and operation of: (a) water works including wells and recharge facilities for collecting, purifying, pumping, storing and distributing water to all types of consumers; (b) Sewerage works for collecting, pumping, treating and disposing of sewerage and industrial waste; (viii) assess the position of water supply from time to time and regulate water supply; (ix) review the existing schemes or prepare new schemes relating to water works and sewerage work and undertake execution thereof with the approval of the Karachi Metropolitan Corporation; (x) regulate, control or inspect water connection, sewer lines and service lines including internal fittings; (xi) maintain accounts and records of the Board; (xii) prepare and submit to the Karachi Metropolitan Corporation schedule of water and sewerage tariff, rates, charges or fees to be levied by it; (xiii) prepare or revise schedule of posts for the Board and submit it to the Karachi Metropolitan Corporation for approval; (xiv) produce and supply potable water; (xv) place, maintain aqueducts, conduits, sewers etc." ' Thus, the position that emerged after the inclusion of Chapter XVI was that the powers of KMC, insofar as they related to charges, rates or fees in respect of water and sewerage were to be exercised by the old Board. It is however important to keep in mind that the old Board did not have any independent powers, exercisable in its own right, in this regard; it was simply that KMC would now exercise those powers through the old Board. However, the powers were still those of KMC itself. It is also important to note that the old Board had no power in relation to any "taxes" that could be imposed by KMC. Finally, it must also be noted that what Schedule V referred to as "conservancy" was, in Chapter XVI, known as "sewerage". These points emerge clearly from a sample notification placed before me by learned counsel, being a notification issued on 18-9-1995 (though published in the provincial Gazette on 13-3-1996). The notification was issued with reference to section 62(2) of the 1979 Ordinance. This provision (which contained a non obstante
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clause overriding the other provisions of the Ordinance) enabled the Provincial Government to direct any council to levy any tax, rate, toll or fee which that council was competent to levy. The notification itself was issued by the Municipal Commissioner of KMC, and related to water charges and "consequential conservancy (sewerage) rates", and provided that the revenue obtained would in its entirety go to the old Board as regards the water charges, but be shared equally between KMC and the old Board as regards the sewerage charges. 8. In 1987-88, Part I of Schedule V was substituted such that (as presently relevant) KMC could now also levy a "fire tax". No corresponding change was however, made in Chapter XVI. 9. The foregoing was thus the statutory framework when the 1994 Agreement came to be executed, and it is now necessary to consider it, in some detail. The first point to note is that the agreement was entered into between the old Board through its Chairman on the one hand, and the plaintiff through its Chairman on the other. The presence of the Additional Chief Secretary (Dev.) of the Provincial Government as a "mediator" was expressly noted, and he in fact also signed the agreement. The agreement expressly noted that the old Board and the plaintiff had remained in dispute with regard to the issue of rates, for the resolution of which there had been a number of meetings mediated by the Additional Chief Secretary. The 1994 Agreement was the culmination of those efforts. It is to be noted that the agreement was confined exclusively to the issue of water rates. Clause (i) expressly noted that although the plaintiff was liable to pay for the supply of water "on industrial rates", it would be charged at a concessidnal rate on account of the fact that it was being "supplied raw water from a system laid down by Pakistan Steel itself. Clause (i) set forth the agreed upon rate, and then the all-important clause (ii) provided as follows:-- "In case of change in water rates, Pakistan Steel would be charged the revised METERED DOMESTIC Water Rate for BULK CONSUMERS less a rebate of 23.50%... From the date the revised water rates are made effective by KWSB, the last such revision having been made effective 1st November, 1994." ' Clause (iii) provided that the agreed upon water charges would be notified by the KMC Municipal Commissioner, and it appears that this was done, and the rates were duly notified as per the 1994 Agreement. 10. It will be recalled that Part I of Schedule V of the 1979 Ordinance empowered KMC to establish bulk rates for the supply of water, and the Chapter XVI provisions provided that the water charges would be collected by the old Board. As noted above, the Chairman of the old Board was duly empowered to execute contracts on its behalf. (Whether the 1994 Agreement was to be regarded as a contract entered into by the old Board for itself or for KMC, given that the former did not as such have any separate legal existence, is, as will presently become clear, now a moot point.) In my view, prima facie, the 1994 Agreement was a lawful agreement, duly entered into by the parties thereto and it lawfully set the rates at which, charges for the bulk supply of water were to be paid by the plaintiff, those rates being duly notified by KMC pursuant to the 1979 Ordinance. As provided in clause (ii), the charges were as a specified percentage of the water rates being charged from time to time from bulk consumers at the metered domestic water rate. The stage is therefore set for consideration of the plaintiff's main grievance with regard to the 1994 Agreement, namely that it is void on account of a failure of consideration. 11. Learned counsel for the plaintiff took two points in this regard. Firstly, he contended that the scheme or system by which water was being provided (the Keenjhar-Gujjo canal) had been financed by the plaintiff itself. This point is without merit. The plaintiffs position in this regard was expressly noted and acknowledged in the agreement itself, and it was for that very reason that the plaintiff was to be charged for water at a concessional rate. Furthermore and in any case, even if the plaintiff had financed the system whereby water was to be supplied to it that did not in and of itself mean that the plaintiff did not have to pay for the water. Such a result could only come about by reason of some statutory provision or legally binding agreement, representation or
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commitment, and none was relied upon or shown in this regard. Secondly, learned counsel contended that the water being supplied did not come from a source owned or controlled by the old Board (or the defendant No,1); the water belonged to the Province. It was this supply that the defendant No,1 had attempted to block and which had led to the filing of the suit. For either of these reasons, there was a failure of consideration. In my view, even if the defendant No,1 did attempt to block the water supply, that would not amount to a failure of consideration. It would, at best, amount to a breach of the terms of the 1994 Agreement. ' Equally, the fact (if indeed, such be the case) that the water being supplied belonged to the Province, and not to the old Board or the defendant No,1, that would not amount to a failure of consideration. The water was, after all, being supplied. Rather, it could at best be regarded as being contrary to another aspect of the doctrine of consideration, namely, that the consideration must move from the promisee. While the 1994 Agreement imposed an obligation on the plaintiff to pay the old Board for the water being supplied, it did not as such state that the water supplied came, or was to come, from the latter. The plaintiff of course contends that the reason for this was that the water belonged to the Province. So, although the plaintiff was receiving water, it was not coming from the person to whom the plaintiff was obliged to make payment, i,e,, the old Board. In other words, the consideration had not moved from the promisee. Now, the foregoing objection would have considerable merit in English law. However, the position under the Contract Act, 1872 is different (even though our law of contract is based on English law). The definition of consideration given in section 2(d) differs in certain important respects from English law, as is clear from the words emphasized:- "When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise". Thus, the act (or omission) which serves as the consideration for the promise need not come from the promisee; it may move from "any other person". It is quite clear from the record, including the 1994 Agreement itself B that the Province (the putative owner of the water) is quite content to supply, and continue supplying, water to the plaintiff. As noted above, the Additional Chief Secretary not merely mediated the dispute between the parties, but was also a signatory to the 1994 Agreement. Nothing was stated at the bar at the time of the hearing of this application by learned A.A.-G. As would negate, refute or qualify this position. In my view therefore, prima facie, the 1994 Agreement is fully supported by lawful consideration and cannot therefore be faulted on this basis, nor can the plaintiff be permitted, at least at this stage, to raise the plea that the agreement has failed or is void on account of a failure of consideration. It follows therefore, that the 1994 Agreement was binding on the parties, and continues to remain so. It is this agreement which regulates matters insofar as the water charges are concerned. 12. I now move forward to 1996, in which year the 1996 Act came to be enacted. This Act received the Governor's assent on 23-4-1996. On the same date, the Governor also assented to the Sindh Local Government (Amendment) Act, 1996, which brought about important changes in the 1979 Ordinance, which are also relevant for present purposes. Taking up the latter statute first, it substituted Part I of Schedule V, which now read as follows (as presently relevant):-- "PART I- TAXES, RATES, TOLLS AND FEES TO BE LEVIED BY THE METROPOLITAN CORPORATION (2) Fire Tax. (3) Conservancy Tax. (4) Drainage Tax. ' In addition, the heading of Part II was substituted so that it now read as under (emphasis supplied):
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"PART II- TAXES, RATES, TOLLS AND FEES WHICH MAY BE LEVIED BY MUNICIPAL COMMITTEES AND TOWN COMMITTEES AND A CORPORATION EXCLUDING THE METROPOLITAN CORPORATION" ' It is to be noted that Part I now conferred a power to impose "taxes" in relation to the subjects enumerated therein. It will also be seen that the powers of KMC (being a metropolitan corporation) were restricted to those taxes which were provided for in. Part I since a metropolitan corporation now stood "excluded" from imposing any of the taxes, rates, etc. Specified in Part II. In particular, the earlier power to impose rates for the bulk supply of water (which had been included in Part I), and to impose "rates" for conservancy and fire, and generally for the supply of water (all included in Part II) were now outside KMC's purview. These changes came about, at least in part, as a result of the enactment of the 1996 Act, and it is this law which must now be examined. 13. The first point to note is that the defendant No,1 ("KW&SB") now came into existence as a separate and distinct legal entity in its own right: section 3(2) of the 1996 Act. Section 20(1) repealed sections 121 to 147 of Chapter XVI of 1979 Ordinance, which of course, had related to the old Board. When the Chapter XVI provisions are compared with those of the 1996 Act, it will be seen that the latter are in most respects the same as the former. In some cases, two or more sections of the Chanter XVI provisions have been amalgamated into one section in the 1996 Act without virtually any change in language. There are however, important differences. For example, all references to KMC have been substituted with the Provincial Government. Of particular relevance is section 7 of the 1996 Act, which relates to the powers and functions of KW&SB. When this section is compared with section 124 of the 1979 Ordinance (reproduced above), the two are found to be almost the same, but with certain important differences. The one most relevant for present purposes is that KW&SB (by virtue of clause (ii)) now has the power to…
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