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Official Citation: 2024 CLD 301
Court / Jurisdiction: Islamabad High Court
Year of Decision: 2023
Decision Date: 2023-12-31
Parties: Messrs, SGEC-AMC JV through Authorized Officer vs National Highway JUDGMENT
Ruling Summary: This decision was rendered by the Islamabad High Court on 2023-12-31, officially reported as 2024 CLD 301. In this matter between Messrs, SGEC-AMC JV through Authorized Officer and National Highway JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 CLD 301
Court Name: Islamabad High Court Judge(s): Arbab Muhammad Tahir Title:Messrs, SGEC-AMC JV through Authorized Officer vs National Highway
JUDGMENT
Reported As: 2024 CLD 301 Result: Appeal dismissed Judgment
JUDGMENT ARBAB MUHAMMAD TAHIR, J. Through the present appeal under section 39 of the Arbitration Act, 1940 (hereinafter referred to as "the Act") the appellant, Messrs SGEC-AMC Joint Venture, calls in question the order dated 06.11.2020, passed by the Court of the learned Additional District Judge- West, Islamabad, whereby the application filed by the respondent/National Highway Authority ("hereinafter referred to as "the NHA") under section 34 of the Act, was allowed and the proceedings in the suit for Specific Performance, Declaration, Permanent, Mandatory and Temporary Injunction instituted by the appellant, were stayed. Additionally, an ad-interim injunctive order already issued on 04.08.2020 directing status quo to be maintained, was also vacated through the said impugned order. 2. Succinctly the facts forming the background of the present appeal is that the appellants being in Joint Venture between a Chinese company by the name and style of "Sichuan Province Geological Engineering Complex" and "Messrs A.M. and Company" duly registered with Pakistan Engineering Council. In response to the advertisement issued by the NHA inviting bids for the project namely, Construction of Additional Carriageway from Petaro to Sehwan N-55 Section-I (64 KM) Package-1C (KM 40+000 to KM 64+000) (hereinafter referred to as "the Project"), the appellant submitted its technical and financial bids. In the evaluation process, the appellant emerged as a successful bidder and it furnished performance guarantee as well as maintenance bonds amounting to Rs.358,863,772/- and Rs. 179,431,886/-, respectively. Having satisfied all the prerequisites, the Contract in question was awarded to the appellant. A Contract Agreement was executed between
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the appellant and the NHA on 19.11.2019. Clause 67.1 of the General Conditions (Part-I) (hereinafter to be referred to as the "General Conditions") set out in the said Contract Agreement provided a comprehensive mechanism for resolution of the contractual disputes/differences between the said parties through reference to arbitration. After certain disputes and differences developed between the appellant and the NHA, the appellant on 04.08.2020 instituted a suit for Specific Performance, Declaration, Permanent, Mandatory and Temporary Injunction against the NHA before the Court of the learned District Judge, Islamabad, with the following prayer:- "It is therefore respectfully prayed that a decree to the following effects may kindly be passed in favor of the Plaintiff and against the Defendant with costs: i. A declaration to the effect that the Plaintiff is entitled to payment under the Contract Agreement dated 19.11.2019. ii. A declaration that the Defendants are not entitled to wrongful and illegal termination of the Contract Agreement dated 19.11.2019 and that no adverse order be passed by Defendants against Plaintiff. iii. Mandatory injunction to the effect that the Defendant may kindly be directed to provide all the necessary materials including design/construction drawings traverse data, clearance of construction site etc in order for the work to progress. iv. Any acts done under political influence and collusion with others be declared illegal. v. Be permanent restrained from wrongful or illegal termination and/or adverse action against the Plaintiff. vi. Any other relief which this Hon'ble Court may deem fit and proper be also awarded to the Plaintiffs." 3. The said suit was later on entrusted to the Court of the learned Additional District Judge-West Islamabad for adjudication. The trial Court while issuing a status-quo order dated 04.08.2020, restrained the NHA from terminating the contract in question. Simultaneously, the learned trial Court vide order of even date, appointed a Local Commission with the mandate to inspect the site in order to ascertain the actual position at the site and submit a report before the Court on the next date of hearing. On 13.08.2020, Vakalatnama (power of attorney) on behalf of the NHA was filed. Along with the said power of attorney, an application under section 34 of the Act was also filed with the following prayer:- "In view of the above submissions and response, it is respectfully prayed that on account of having agreed for settlement of disputes by way of arbitration, the proceedings pending vide the instant Suit may kindly be stayed in accordance within the meaning, scope and effect of section 34 of the Arbitration Act, 1940." 4. By contesting the said application, apparently, on 01.09.2020, the appellant filed a reply to the NHA's said application under section 34 of the Act. In the said reply, the appellant took a plea to the effect that "the defendant has no intention of going into the arbitration, they simply intend to award the contract to their own blue eyed, this can be further seen from the fact that even though the Stay has been granted by this Honourable Court, the Defendant is not letting Plaintiff to perform on the Contract." Furthermore, it was pleaded in the said reply that "in case the Stay is vacated, the subject matter of the Suit will be lost, contract shall be terminated; the guarantees shall be encashed and further actions shall be taken against the Plaintiff to malign its legacy and cause irreparable damage."(Underline is mine for emphasis) 5. Moreover, in reply to Para-6 of the said, application, the appellant goes on to say as under:- "That the content of Para 6 are denied vehemently, the Plaintiff has approached this Honourable Court as there was no other efficacious remedy available, the Defendant being an Authority are forcing the Plaintiff out of business, instead of following the clauses mentioned above, and trying to resolve the matter amicably or to resolve the dispute between the parties, they have
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issued a notice of termination, they have made several attempts to seize the work site, they have used their powers as an Authority and used the local police to coerce the Plaintiff's workers and staff officers, even made Illegal arrests without a complaint/FIR/Charge, etc. and that is after the Plaintiff was able to secure a Restraining Order from this Honourable Court. Therefore, when the conduct of the Defendant is so toxic, discriminatory, unfair and illegal, the Plaintiff had no other option but to approach this Honourable Court for the redressal of their grievance. Even now the conduct of the Defendant can be seen from the fact that even though the Defendant filed an application under section 34 of the Act for the stay of proceedings, on the last date of hearing i.e. 13.08.2020, their entire arguments revolved around only one notice i.e. to get the stay vacated in order for them to terminate the contract and award it to someone else. With such conduct, how can the Plaintiff even have an into of hope that the Defendant would try to resolve the matter amicably etc." (Underline is mine for emphasis) 6. The learned trial Court while allowing the NHA's said application, stayed the proceedings in the suit instituted by the appellant vide order dated 06.11.2020 and vacated the ad interim injunctive order dated 04.08.2020. Furthermore, the learned trial court directed the NHA to preserve the subject matter of the suit till 16.11.2020 and it was further observed that in the meantime, the aggrieved party may approach to the concerned forum by referring the matter to the arbitration, if so needed. The said order dated 06.11.2020 has been assailed by the appellant in the present appeal. (Underline is mine for emphasis) 7. Mr. Saad M. Buttar, Advocate, learned counsel appearing on behalf of the appellant after narrating the facts leading to the filing of the present appeal, contended that the NHA through an illegal and discriminatory act, trying to terminate the contract in question; that it is the NHA, which caused the delaying in the commencement of the construction work; that the NHA has violated various provisions of the Contract in order to cause delay in the performance of the contract; that the learned trial Court has fell in error by not appreciating the fact that the appellant commenced the construction work according to the commencement order on 17.02.2019, but due to province- wise Covid-19 pandemic's lockdown, the same got delayed; that the NHA addressed letter to the appellant expressing its intention to terminate the contract; that the appellant just got two months to work on the project, whereas the contractual period of one year has not come to an end; that the learned trial Court has overlooked the fact that the appellant has not opposed the initiation of arbitration proceedings, however, it has requested the protection of the subject matter of the arbitration which is a pivotal aspect for stay of the proceedings under section 34 of the Act; that the arguments advanced by the learned counsel for the appellant were not taken into account by the learned Court below while passing the impugned order dated 06.11.2020; that the learned trial Court has also ignored the report submitted by the Local Commission, which was based on ground realities; that since overlapping issues of law and fact were involved in the matter, arbitration was not the proper mode for the resolution of disputes; that-under section 34 of the Act, the Court has discretion whether or not to stay the proceedings in the suit; the learned trial Court has acted against its vested discretion; that the respondent's application under section 34 of the Act was silent as to the disputes which were sought to be referred to arbitration; and that the law requires for such disputes to be set out with specificity in an application under section 34 of the Act. Learned counsel for the appellant, however, admitted the fact that the said agreement contained an arbitration clause, and that the disputes between the parties arise from and are related to the terms of the said agreement; that the learned trial Court has also erred by not appreciating the important fact that the NHA has not followed the steps mentioned in the Contract Agreement prior to the termination of the contract in question encompassing the appointment and decision of the Engineer, amicable settlement as well as arbitration; that there had been inordinate delays in the construction work caused in receiving the construction drawings from the NHA; that some of the
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drawings were received as late as 14.07.2020 while there are many others, which are yet to be received; that the delay in the construction of the work was caused by none others but the NHA; and that there may have been certain temporary delays on the appellant's part in the construction work, but those were due to the negligence and malicious conduct of the NHA. 8. Furthermore, it was contended that vide letter dated 11.06.2020, it was informed by the NHA that the Surveyor of NESPAK adjusted the traverse data from KM 40+000 to KM 43+000 during his stay at project site meaning thereby the original project had been amended/changed; that in the said letter, it was further stated that the remaining traverse data from KM 43+000 to KM 60+000 is required to be provided by the NESPAK's Surveyor at site; that at no material stage, was the said traverse data provided to the appellant; that without the traverse data i.e. construction plans having been provided for the construction of the carriageway, the work could not commence; that despite the said letter dated 11.06.2020, no progress was made in procuring the traverse data; that the Project Director of the NHA through reminder dated 14.07.2020, stating therein that due to the lockdown in the province of Sindh, another Surveyor could not be arranged; that the Project Director vide letter dated 17.07.2020 requested for the construction drawings, which was also a major factor in the delay of the completion of the project; that on certain construction sites, there were site encroachments by the locals including shops and houses, electricity polls, hotels, local kiosks and dhabas, which are the sole responsibility of the NHA to clear; that the delay caused in the construction work was beyond the control of the appellant; that despite all these impediments caused by the NHA as well as Covid 19 pandemic, the work is still being done at a good pace; that it is absolutely incorrect that the work is not being done on the site; that the learned trial Court has not appreciated that the value of the project has escalated exponentially and great difference in the value of the project occurred; that in the event, the contract in question is re-tendered it would cause massive losses to the Government exchequer; that the learned trial court has overlooked the fact that the ingredients of an injunction were fully satisfied; that the appellant being honest about its intention made several attempts to contact the NHA and to discuss the issues in hand in order to bring the contract agreement to its logical conclusion, but to no avail; that the NHA vide its letter dated 21.07.2020 showed its intention to terminate the contract agreement; that the NHA has failed to appreciate that the appellant has mobilized its manpower, equipment, machinery, material and site camp office etc. showing its willingness to complete the work in time, but served no useful purpose due to the non-cooperation by the NHA. While making his submissions, learned counsel for the appellant placed reliance on the judgments reported as "2019 YLR 427, PLD 2015 Sindh 319, 2013 MLD 1083, 2009 CLC 676, 2002 CLD 706, 1994 CLC 2000, PLD 1976 Karachi 644, 2011 CLC 157, 1990 CLC 609, 2003 CLD 407, 2016 CLC 1677, 2013 MLD 1499, 2020 CLC 1300 and 2020 CLC 1349. 9. On the other hand, Barrister Asghar Khan, Advocate, learned counsel appearing on behalf of the NHA while opposing the arguments advanced by the learned counsel for the appellant contended that the NHA floated an invitation seeking bids for construction of the project; that the appellant submitted its technical as well as financial bids and it was picked up as a successful bidder; that the appellant was issued a Letter of Acceptance of bid on 23.05.2018; that thereafter, the parties were entered into a Contract Agreement dated 19.11.2018; that there existed an arbitration clause in the General Condition of the said Contract Agreement; that Clause 67 whereof specifically provided for settlement of any disputes/differences between the parties to be first referred to the Engineer and in case of any further dispute and dissatisfaction, to be referred to arbitration; that if any dispute is raised with regard to inter alia the Agreement or in connection with the Agreement, with regard to the execution of the works, certificates, or any instructions etc. shall be settled by the procedure provided in Clause 67 of the General Conditions; that nonetheless it was in the knowledge of the appellant that all the disputes arising out of FIDIC scheme of contracts have this particular dispute resolution mechanism clause and the disputes or issues are resolved through
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means of arbitration; that the dispute raised by the appellant in the suit were related to and arising from the provisions of the Contract Agreement dated 19.11.2019; that although the appellant, in its suit, had levelled bald allegations qua delay in the completion of the project, but it failed to substantiate none of them; that the appellant, in its reply to the NHA's application under section 34 of the Act, did not plead or allege the commission of fraud by the respondent; that the NHA did not apply for an adjournment to file a written statement; that an application under section 34 of the Act was filed at an early stage of the suit; and that in the application under section 34 of the Act, it has clearly been mentioned that the dispute raised by the appellant in its suit is liable to be resolved through arbitration as contemplated by the provisions of the said Contract Agreement; that there was no dispute as to the execution of the Contract Agreement dated 19.11.2019 between the appellant and the NHA; that the term "arising out of or relating to the contract agreement" entered into between the parties is a term of wide import and encompasses all the disputes and differences developed between the parties, which, but for the said agreement, would not have arisen between the parties; that NHA is ready, willing and able to take all the necessary steps for proper conduct of the arbitration proceedings; that a Joint Venture Agreement signed between the appellant and AMC, was an un-registered JV; that section 69(2) of the Partnership Act, 1932 clearly provides that an unregistered IV cannot sue a third party; that the project in question had already expired; and that the learned trial Court correctly exercised its jurisdiction by allowing the NHA's application under Section 34 of the Act and staying the proceedings in the appellant's suit. Learned counsel for the NHA prayed for the appeal to be dismissed with costs. 10. I have heard the contentions of the learned counsel for the parties and have perused the record with their able assistance. The facts leading to the filing of the present appeal have been discussed in detail in the preceding paragraphs and need not be reiterated. 11. Perusal of the record reveals that in connection with the construction of the Additional Carriageway from Petaro to Sehwan N-55 Section-I (64 KM) Package-1C (Km 40+000 to KM 64+000), the appellant entered into a Contract Agreement on 19.11.2019 with the NHA regarding fulfillment of the various conditions settled between the parties. Clause 41.1 of the said Contract Agreement provided that the Contractor shall commence the works as soon as is reasonably possible after the receipt by him of notice to this effect from the Engineer. Time for completion of the said Project/term of the Contract was 365 days from the date of the receipt of the Engineer's Notice to Commence. On 30.12.2019, the Engineer notified the appellant to commence the work with effect from 14.01.2020 and to proceed with due expedition and without delay. 12. Under this Contract Agreement, a dispute arose between the parties ultimately prompting the appellant to file a suit for Specific Performance, Declaration, Permanent, Mandatory and Temporary Injunction against the NHA on 04.08.2020. In pursuance of the process issued by the learned trial Court, Vakalatnama (power of attorney) on behalf of the NHA was filed 13.08.2020. Before the written statement could be filed by the NHA on the next date of hearing, on the very same day i.e. 13.08.2020, an application was moved by the learned counsel for the NHA in terms of section 34 of the Act seeking reference of the dispute to arbitration in terms of Clause 67.3 of the aforesaid Contract Agreement dated 19.11.2019 which was contested by the appellant by filing a reply to the said application. The said Contract Agreement also contains a comprehensive mechanism viz Clause 67.1 of the General Conditions set out in the said Contract Agreement for settlement of any disputes, issues and differences arising out of and relating to the said Contract or the execution of the Works, whether during the execution of the works or after their completion and whether before or after repudiation or other termination of the contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer, the matter in dispute, shall at the first place, was to be referred in writing to the Engineer, with a copy to the other party. Such reference shall to state that it is made pursuant to the said clause. Furthermore, it was provided
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that if either the Employer (i.e. MIA) or the Contractor (the appellant) be dissatisfied with any decision of the Engineer or if the Engineer fails to give notice of his decision on or before the 84th day on which he received the reference, then either the Employer (i.e. NHA) or the Contractor (the appellant) on or before the seventieth day after the day on which he received notice of such decision, or on or before the seventieth day after the day on which the said period of 84 days expired, as the case may be, give notice to the other party, with a copy for information to the Engineer, of his intention to commence arbitration. It would be advantageous to reproduced Clauses 67.1, 67.2 and 67.3 in their entirety:- "Settlement of Disputes. 67.1. Engineer's Decision. If a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with, or arising out of, the Contract or the execution of the Works, whether during the execution of the Works or after their completion and whether before or after repudiation or other termination of the contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer, the matter in dispute shall, in the first place, be referred in writing to the Engineer, with a copy to the other party. Such reference shall state that it is made pursuant to this Clause. No later than the eighty-fourth day after the day on which he received such reference the Engineer shall give notice of his decision to the Employer and the Contractor. Such decision shall state that it is made pursuant to this Clause. Unless the Contractor has already been repudiated or terminated, the Contractor shall, in every case, continue to proceed with the Works with all due diligence and the Contractor and the Employer shall give effect forthwith to every such decision of the Engineer unless and until the same shall be revised, as hereinafter provided, in an amicable settlement or an arbitral award. If either the Employer or the Contractor be dissatisfied with any decision of the Engineer, or if the Engineer fails to give notice of his decision on or before the eighty-fourth day on which he received the reference, then either the Employer or the Contractor may, on or before the seventieth day after the day on which he received notice of such decision, or on or before the seventieth day after the day on which the said period of 84 days expired, as the case may be, give notice to the other party, with a copy for information to the Engineer, of his intention to commence arbitration, as hereinafter provided, as to the matter in dispute. Such notice shall establish the entitlement of the party giving the same to commence arbitration, as hereinafter provided, as to such dispute and, subject to Sub-Clause 67.4, no arbitration in respect thereof may be commenced unless such notice is given. If the Engineer has given notice of his decision as to a matter in dispute to the Employer and the Contractor and no notice of intention to commence arbitration as to such dispute has been given by either the Employer or the Contractor on or before the seventieth day after the day on which the parties received notice as to such decision from the Employer, the said decision shall become final and binding upon the Employer and the Contractor. 67.2 Amicable Settlement. Where notice of intention to commence arbitration as to a dispute has been given in accordance with Sub-Clause 57.1, the panics shall attempt to settle such dispute amicabley before the commencement of arbitration. Provided that, unless the parties otherwise agree, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made. 67.3 Arbitration. Any dispute in respect of which:-
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(a) The decision, if any, of the Engineer has not become final and binding pursuant to Sub-Clause 67.1, and (b) Amicable settlement has not been reached within the period stated in Sub-Clause 67.2, Shall be finally settled, unless otherwise specified in the Contract, under the Rules of Conciliation and Arbitration of the International chamber of commerce by one or more arbitrators appointed under such Rules. The said arbitrator shall have full power to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer related to the dispute. Neither party shall be limited in the proceedings before such arbitrator/s to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision pursuant to Sub- Clause 67.1. No such decision shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator/s or any matter whatsoever relevant to the dispute. Arbitration may be commenced prior to or after completion of the Works, provided that the obligations of the Employer, the Engineer and…
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