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Petitioner: Messrs PORT SERVICES (PVT.) LTD. VS Respondent: PORT QASIM AUTHORITY
Court Name: Sindh High Court Judge(s): Aqeel Ahmed Abbasi, Muhammad Junaid Ghaffar Title: Messrs PORT SERVICES (PVT.) LTD. vs PORT QASIM AUTHORITY Case No.: H.C.A. No.49 of 2012 Date of Judgment:2014-11-13 Reported As: 2016 MLD 506 Result: Intra Court Appeal allowed
JUDGMENT
JUDGMENT ' MUHAMMAD JUNAID GHAFFAR, J.---Through instant Appeal filed under section 39 of the Arbitration Act, 1940 the appellant has impugned judgment and decree dated 10.1.2012 passed by a learned Single Judge in Suit No.535 of 2008, whereby the objections filed by the respondent have been sustained and the Award dated 5-4-2008 passed by the Sole Arbitrator in favour of the appellant has been set aside. 2. Briefly, the facts of the case are that the appellant is engaged in Maritime business including rendering Dredging services in the Port Area. It is further stated that the respondent awarded a contract for Channel Maintenance Dredging Works at Port Qasim through letter of intent dated 1.4.1993, whereafter, the appellant commenced dredging operations from 7.4.1993 and formal contract to this effect was signed between the parties on 15.5.1993. It has been further stated that after completion of the Dredging Works, the appellant submitted six bills to the respondent, whereas the respondent terminated the contract in terms of clause 63 of the Contract, prematurely on 4.5.1994, though it was valid up to 30.6.1994. The respondent thereafter refused to settle the bills issued by the appellant, which compelled the appellant to file a Suit bearing No. 1156 of 2003 for Declaration, Injunction, Recovery of Money and Damages against the respondent. Subsequently, an application under Section 34 of the Arbitration Act, 1940 was filed in Suit No. 1156 of 2003 and by a consent order dated 5.4.2005, a Sole Arbitrator was appointed, before whom the parties filed their claims and the learned Sole Arbitrator passed his Award on 5.4.2008, whereby an amount of Rs. 23.84 million along with interest at the rate of 2% above Bank rate from the date of award till the decree was awarded in favour of the appellant. The said award was filed before a learned Single Judge of this Court pursuant to Section 14 of the Arbitration Act, 1940, before whom
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the respondent also filed their objections under Sections 30 and 33 of the Arbitration Act, 1940, whereas, the appellant filed an application under Section 15(b) of the Arbitration Act 1940, for modification and correction of the Award. The learned Single Judge vide impugned order dated 10.1.2012 has been pleased to uphold the objection raised on behalf of the respondent with regard to limitation and by holding that the claim of the appellant was time barred, has set aside the award, which has now been assailed by the appellant through instant appeal. 3. Mr. Khalid Mahmood Siddiqui learned Counsel for the appellant, contended that the award of the Sole Arbitrator was unexceptional, whereas the learned Single Judge has sat in appeal over the award, which is not legally permissible under the law. Learned Counsel further contended that the learned Single Judge has given its findings; issue wise, like an Appellate Court and instead of making the award rule of the Court; the learned Single Judge has set aside the same on the ground of limitation, holding therein that the claim of the appellant was time barred. Learned Counsel further contended that the documents placed before the learned Sole Arbitrator, clearly established that the claim of the appellant was within time, as the respondent No. 1 had acknowledged such claim from time to time which falls within the provisions of Section 19 of the Limitation Act, 1908; hence, the claim of the appellant cannot be held to be time barred. Learned Counsel also submitted that in the alternative, the claim of the appellant was covered under Section 25(3) of the Contract Act, 1872 as the respondent had categorically asked the appellant, not to initiate any further legal proceedings, which amounts to an implied promise to pay the claim of the appellant. In support of his contention, the learned Counsel relied upon the case of Abdul Halim v. Faizunnessa Bibi alias Sarada and others (PLD 1969 Dacca 670). 4. Mr. M. A. Issani, learned Counsel for the respondent contended that the contract was terminated by the respondent on 4.5.1994 before its expiry with 14 days notice, and the period of limitation for the claim to be within time or not would start after 14 days i.e. From 18.5.1994, whereas the Suit was filed on 20.10.2003 by the appellant which was time barred as it was filed after 9 years and 5 months of the relevant date. Learned Counsel further contended that the learned Sole Arbitrator had fallen in error, by considering and relying upon Certain documents which were obtained by the appellant unlawfully, which had no official sanction; hence they cannot be termed as an acknowledgement within the meaning of Section 19 of the Limitation Act, 1908. Learned Counsel further contended that the learned Sole Arbitrator has also relied upon the minutes of the meeting of respondent, which is in fact an internal matter of the respondent and could not have been considered by the learned Sole Arbitrator, while deciding the question of limitation. Learned Counsel further contended that the issue in hand is required to be governed by the provisions of Section 65 of the Port Qasim Act, 1973 which provides a limitation period of six months; hence, in view of Section 29 of the Limitation Act, Section 19 is not applicable in the instant matter. Learned Counsel further contended that since the appellant had abandoned the proceedings on its own, therefore, the learned Single Judge has correctly held that the claim was time barred. 5. We have heard both the learned Counsel and perused the entire record including the R&P of the proceedings at the forums below. By consent instant High Court Appeal is being finally decided at Katcha peshi stage. 6. It appears that the respondent awarded a contract for Channel Maintenance Dredging Works on or about 15.5.1993 to the appellant in order to maintain the Channel at Port Qasim, which was valid up to 30.6.1994; however, the same was prematurely terminated on 4.5.1994. The appellant thereafter submitted six invoices/bills to the respondent in accordance with the terms of the Contract for payment of services rendered for Dredging works before termination of the contract. The total amount being claimed through these invoices was to the extent of US$ 16,08,239.92 out of which the respondent paid an amount US$ 184,327.06. It further appears that thereafter, the matter was referred to Arbitration as the contract itself provided for the same, however, no further
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progress was made and the arbitration proceedings were abandoned. Thereafter, the matter lingered on for several years between the parties until finally a recovery Suit was filed by the appellant being Suit No. 1156 of 2003 on 20.10.2003 before a learned Single Judge of this Court on its original side, in which the respondent filed an application under Section 34 of the Arbitration Act, 1940 for referring the matter to Arbitration. A learned Single Judge of this Court vide order dated 5.4.2005' allowed the application by consent of the parties and the dispute was referred to the learned Sole Arbitrator. The learned Sole Arbitrator framed three issues that were required to be decided by him and vide its award dated 5.4.2008, all the issues have 'been decided against the respondent, whereby the award has been made in favour of the appellant for an amount of Rs. 23.847 Million along with interest at the rate of 2% above the Bank rate from the date of award till the decree, thereafter, the matter was placed before a learned Single Judge of this Court pursuant to Section 14 of the Arbitration Act, 1940, wherein, the respondent filed its objections against the award and the appellant also filed an application under Section 15(b) of the Arbitration Act, 1940 for modification and correction in the award. The learned Single Judge after a detailed examination of the award has upheld the objection in respect of limitation raised on behalf of the respondent and has set aside the award vide judgment dated 10.1.2012 by holding that the claim of the appellant was barred by limitation. 7. The learned Sole Arbitrator had formulated the following issues while deciding the award which are being reproduced for the sake of convenience:-- 1. Whether the PSL is M.S. Port Services (Pvt.) Ltd. Or Port Services (Pvt.) Ltd, if it is former, is there any privity of contract with the PQA? 2. Whether the claim made in the Statement of Claim is barred under Section 3 of Limitation Act? 3. Whether any payment under the Contract dated 15.5.1993 is due from the PQA to the PSL, if so to what extent? 4, What should the Award be? 8. Insofar as issue No.I is concerned, the same was decided against the respondent by the learned Sole Arbitrator, whereas, the objection raised in this regard by the respondent before the learned Single Judge, has also been decided against the respondent, though with its own reasoning, as the learned Single Judge did not agree with the reasoning of the learned Sole Arbitrator in this regard. It is pertinent to note that the respondent has not filed any appeal against such findings of the learned Signal Judge, insofar, as Issue No.1 is concerned, therefore, the same has attained finality. Though the learned Counsel appearing on behalf of the respondent attempted to argue the case on this issue as well, however, since no appeal has been preferred by the respondent against such findings of the learned Single Judge, as such, the same cannot be entertained by this Court in instant appeal. The core issue which needs to be decided by this Court in the instant appeal is issue No. 2, that is, as to whether; the claim of the appellant was barred under Section 3 of the Limitation Act, 1908. This issue was decided in favour of the appellant by the learned Sole Arbitrator, whereas, the learned single Judge has overruled the same by deciding it in favour of respondent. 9. The learned Single Judge while deciding the above issue against the appellant has examined various documents on the basis of which the chain of acknowledgement of liability had been decided in favour of the appellant by the learned Sole Arbitrator. The learned Single Judge has further observed that even if it is assumed that the learned Sole Arbitrator was correct in concluding that each of the four documents that constituted the chain, was an acknowledgement of liability in terms of Section 19 of the Limitation Act, the finding arrived at by the learned Sole Arbitrator cannot be sustained, as according to the learned Single Judge, the claim on the face of it, appears to be time barred. The learned Single Judge on his reasoning (to be discussed later on) has taken a contrary view to what has been held in the Award by the learned Sole Arbitrator, as according to the learned Single Judge this chain of acknowledgement broke at the very first link;
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hence the learned Single Judge came to the conclusion that the claim of the appellant on the basis of such broken link of chain, is barred by limitation. It would be advantageous to reproduce the details of all the four documents which have been relied upon by the learned Sole Arbitrator as well as by the learned Single Judge, which are as follows:-- i) Brief dated 15.6.1996 prepared by the General Manager (Engineering) which was forwarded to Ministry of Communication vide letter dated 12.03.1997 ii) Draft Alidit Report for the year 1997-98 along with covering letter dated 08.12.2000. Hi) Certificate dated 223,2001 issued by respondent. iv) Minutes of the 49th Board Meeting of the respondent held on 24.4.2003. 10. The first of these documents is a brief, dated 15.6.1996 that was prepared by the General Manager (Engineering) of the respondent with regard to the dispute concerning the dredging contract. This brief was apparently forwarded to the Secretary, Ministry of Communication, Government of Pakistan under cover of letter dated 12.3.1997. The learned Sole Arbitrator concluded that this document dated 15.6.1996 was anacknowledgment of liability by the respondent, within the meaning of Section 19 of the Limitation Act; hence a fresh period of limitation began from that date. The learned Single Judge while considering the chain of acknowledgement has accepted the findings of the learned Sole Arbitrator as correct and has observed that counting from 15.6.1996, the three years period of limitation ended on 14.6.1999. The learned Sole Arbitrator also concluded that there was, in between, another acknowledgment of liability in terms of the draft audit report which was prepared by the auditors of the respondent for the year 1997-98, i.e. The financial year ending on 30.6.1998, on the basis of which, the learned Sole Arbitrator, came to the conclusion that the period of limitation once again stood extended and would thus end on 29.6.2001. The learned Sole Arbitrator had then referred to a third document, which was a certificate dated 22.3.2001 issued by the respondent, and concluded that this certificate also amounted to an admission of liability in terms of Section 19 of the limitation Act. The learned Sole Arbitrator had further relied on a fourth document, being the minutes of the 49th meeting of the respondent Board dated 24.4.2003, which constituted yet another admission of liability in terms of Section 19 thereof, therefore, the claim made against the respondent was within time. Hence, on the basis of such conclusion, according to the learned Sole Arbitrator, yet another period of limitation started, whereas the plaint in Suit No. 1156 of 2003 was presented on 20.10.2003, hence the Suit for Recovery of the Amount was within time on such basis. However, though the learned Single Judge has taken into consideration all these four documents, but has come to the conclusion, that in fact, the link broke at the very first stage i.e. Starting from the date of brief i.e. 15.6.1996, as according to the learned Single Judge on the basis of this brief, the period of limitation ended on 14.6.1999 whereas according to the learned Single Judge, the learned Sole Arbitrator had erred in accepting the draft audit report for the year 1997-98, as an acknowledgment of liability in terms of Section 19 of the Limitation Act; hence the learned Single Judge concluded that reliance on any such document cannot be made basis for accepting that the claim was within time, as the limitation period stood expired on 14.06.1999 i.e. Much before all the subsequent documents. According to the learned Single Judge, this audit report of 1997-98 for the year ending on 30.6.1998, came into picture on 08.12.2000, when the Deputy General Manager (FA.) wrote to the General Manager (Engineering), with specific reference to the audit report being prepared for the year 1997-98 by the external auditors. The Deputy General Manager (F.A.) enclosed the extract from the draft audit report and asked the General Manager (Engineering) to provide the latest status of the matter, relating to the dredging contract. The learned Single Judge observed that on 8.12.2000, there was no audit report as such, that had been prepared for the year 1997-98, and observed that the learned Sole Arbitrator had confused two separate matters and dates. According to the learned Single Judge, there was no draft report on record; hence the same cannot be considered as an acknowledgment of liability and when on
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the first time the draft audit report came on surface on 8.12.2000 the period of limitation had already long expired as acknowledgment of liability pursuant to Section 19 of the Limitation Act, was to be made within the period of limitation and not thereafter. The learned Single Judge also observed that the learned Counsel for the respondent had placed on record the actual audit accounts for the period 1995 to 2000, to show that there had not been any admission of liability at all, by the respondent in these audited accounts, and therefore, an extract from the draft audit report which was still under preparation, cannot be accepted in preference over the actual audited accounts for the relevant period. 11. On a careful examination of the impugned order, the award of the learned Sole Arbitrator, R & P of the case including that of the learned Sole Arbitrator and the four documents referred to herein above, it appears that issue of limitation has been decided by the learned Single Judge against the appellant primarily on the basis that the discussion / indirect acknowledgment in respect of the claim of the appellant in the draft audit report of the external auditors for the year 1997-98, was in fact based on a broken link of chain of acknowledgement through which the claim of the appellant was held to be within the limitation period by the learned Sole Arbitrator. Insofar as the authenticity of the documents relied upon by the learned Sole Arbitrator is concerned, the same have been observed not to have been disputed by the respondent except that these were not legally procured. The case of the respondent in this regard seems to be on the premise that since these documents were not procured officially, hence cannot be relied upon while deciding instant controversy. However, insofar as the genuineness of these docur ts is concerned, nothing has been said or argued or brought on record, to rebut these documents, therefore no exception can be taken at this stage of the proceedings. In fact the learned Single Judge while hearing the objections to the Award filed by the respondent, has also taken all such documents to be correct for the purposes of deciding the issue of chain of acknowledgement and their continuity, if any It is pertinent to note that the respondent, as already discussed herein above, has not challenged the findings of the learned Single Judge, either through any independent appeal or by filing any cross objections in the instant appeal. Therefore, the findings of facts so recorded by the learned Single Judge are concerned, the same have attained finality. Hence, it is in this context that we have to examine these documents on record and as discussed by the learned Sole Arbitrator and by the learned Single Judge. As noted hereinabove, the core issue before us in the instant appeal is that as to whether the chain of acknowledgement had broken at the first link or it continued thereafter without any such break in between. For this we need to examine the first two documents of the link threadbare. The first of these documents is the brief dated 15.6.1996 prepared by the General Manager (Engineering) and forwarded to the Secretary, Ministry of Communications, Government of Pakistan. The period of limitation for instituting a suit/claim of recovery, being three years, if counted from this brief would end on 14.6.1999. The second document which has been discussed is the draft audit report for the year 1997-98, which has been referred to, in the letter dated 8.12.2000 by the Deputy General Manager (F.A.) to General Manager (Engineering) with specific reference to the said audit report. Now, if the period of limitation is to be counted from 8.12.2000 without their being any continuity from the draft audit report for the year 1997-98 (i.e. 30.6.1998) by terming it to be an acknowledgment of liability in terms of Section 19 of the Limitation Act, the claim becomes time barred, however, if any weight age is to be given to the draft audit report for the year ending on 30.6.1998, or thereof, then the link would not break and the chain of acknowledgement would continue thereafter. For further clarity and for having an overall view of the issue in hand, it would be advantageous to refer to the contents of the letter dated 8.12.2000 which has been addressed to General Manager (Engineering) available at page 497 of instant appeal. The same is as under:-- "PQA/AG/5/45/2000
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Dated 8.12.2000 Manager (Engineering) (PQA) ' DRAFT AUIDT REPORT FOR THE YEAR 1997-98 FROM EXTERNAL AUDITORS ' An extract of draft audit report on the accounts of the Authority for the year 1997-98 is enclosed for ready reference. Please provide the latest status of the case against MIS Port Services regarding the work of Channel dredging amounting to Rs. 29.00 million which can be communicated to the auditors. Sd/- DY. GENERAL MANAGER (F.A.)" 12. The draft audit report was enclosed with this letter and the relevant observation in the draft audit report with regard to the claim of the appellant has been discussed in the following manner:- "Out of 62,728,350/- in 1993-94 PQA has withheld a payment of Rs. 29,000,000/- to M/S Port Services for channel dredging work. The matter has gone into litigation and remained undecided during the year. We would not see any comments from the legal advisor. This point is being repeatedly raised. The progress may kindly be communicated to us." (Emphasis supplied) 13. It could be seen from the above that insofar as the contents of the draft audit report for the year (1997-98) as prepared by the external auditors is concerned, the same acknowledges that the respondent has to make payment of Rs. 29.0 Million to the appellant and the auditors are seeking some explanation with regard to the amount payable to the appellant. The auditors have referred to a total amount of Rs.62,728,350/- for the year 1993-94 and have observed that out of this, an amount of Rs. 29.0 Million has been withheld for payment to Messrs Port Services (Private) Limited. It has been further observed that the matter has gone into litigation and remained undecided "during the year". It is pertinent to note that the External Auditors are referring to the accounts for the year 1997- 98 which reflects that a provision of Rs.29.0 Million has been provided in the annual accounts for payment to the appellant though in dispute. This is and must be an entry in the accounts as on 30.06.1998, the latest, hence in our view it would amount to acknowledging the liability in terms of Section 19 of the Limitation Act. However what is being disputed is and which has also prevailed upon the learned Single Judge in arriving at a conclusion other than what the learned Sole Arbitrator has awarded, is, that since this was a draft audit report, as such, the same cannot be relied upon, and further the same was brought on record for the first time on 08.12.2000 by which time the limitation stood expired. However, we are not inclined to agree with such findings of the learned Single Judge for the simple reason, that if such report is to be termed as a draft audit report and not being a true and correct reflection of the audited accounts for the same year, then one fails to understand, as to why on 8.12.2000, the Deputy General Manager (F.A.) is communicating with General Manager (Engineering), with regard to the contents of such observations of the external auditors in the draft report. If for the sake of arguments, it is assumed that it did not have any relevance, then how any reference could have been made to such report of the year 1997-98 in the year 2000. It would not be wrong to presume, that there was something pending with regard to the finalization of the external auditors report for that year, otherwise if audited accounts from 1995-2000 already stood finalized, as discussed in the impugned order by the learned Single Judge, then why would any reference be made by the Deputy General Manager (F.A.) to the General Manager (Engineering) to any such withholding of payments and objections of External Auditor. This observation of ours is further strengthened from the fact that the annual accounts of the respondent were not being audited timely, and for such purposes we had summoned the R&P of the proceedings before the lower forums. On scrutiny of the R&P, placed
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before the learned Sole Arbitrator, it further appears that the accounts of respondent were not being audited in time or immediately as required under the law or on the basis of well settled principles of Accounting. For example, the annual accounts for the year 1994-95, were audited on 30.01.1999 with a qualified report dated 28.4.1998 (not available on record), for the year 1995-96, on 5.6.1999 again with a qualified report dated 5.11.1998 (not available on record), for the year 1996-97, somewhere after 30.3.2000 as no date is mentioned on the covering letter of Auditors and finally for the year 1997-98 (in dispute) on 5.7.2001 again with a qualified report dated 29.5.2001, which again is not available as the same has not been produced in the record / evidence before the learned Sole Arbitrator. Further, even the audited accounts for the year 1995-2000 produced in evidence before the learned Sole Arbitrator,…
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