Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: QUINN CORPORATION and others VS Respondent: COTTON EXPORT CORPORATION and JUDGMENT
Court Name: Sindh High Court Judge(s): Amir Hani Muslim Title:QUINN CORPORATION and others vs COTTON EXPORT CORPORATION and
JUDGMENT
Reported As: 2004 CLD 1040 Result: Suit decreed Judgment JUDGMENT ' Through this common judgment I intend to dispose of Suits Nos.731, 1583 of 1998, 275 of 1999 and 343 of 2000, as the common questions of law are involved in these four suits though facts in each suit are somewhat distinct but still will have no material bearing for the purposes of deciding these four suits through common judgment. FACTS Suit No,731 of 1998 2. The Facts as it appears from the pleadings of the parties are that the plaintiff and defendant executed different contracts which were nine in number during the period commencing from 7-1- 1993 to 29-6-1993 whereunder the defendant , which is a Government organization, was to supply 25515 bales of Pakistani raw cotton to the plaintiff. The terms of the contracts provided that out of total bales of the Pakistani raw cotton referred to hereinabove, the defendant was required to supply to the plaintiff 14765 bales of cotton from 1991-1992 crop while the remaining 10750 bales were to be supplied from the 1993-1994 crop. 3. The said contracts were reduced in writing on the defendant's standard contract form. The terms of the contract provided that the parties would be subject to the rules and regulations of the Liverpool Cotton Association Limited. It appears from record that the plaintiff established letters of credit in terms of the contracts.' Out of the total 14765 bales of 1991-1992 cotton crop. The defendant only supplied 9012 bales by December, 1993. The defendant did not supply any amount of cotton from the 1993-1994 crop. It further appears from the pleadings that on failing of the defendant to supply the remaining consignments, correspondence were exchanged between the parties. The
---
## Page 2
plaintiff appears to have requested the defendant to consider invoicing back at par but the defendant insisted on performance of the contracts. The plaintiff on nonperformance of the defendants obligations under the contract invoked the Arbitration Clause and referred the matter for arbitration on 16-6-1994 at Liverpool. United Kingdom, under the Rules of Liverpool Cotton Association Limited which provides that each party to the Arbitration wa3 to appoint its own Arbitrator. 4. The learned Arbitrators conducted the arbitration proceedings and gave their award on 9-12- 1994 by awarding the plaintiff an aggregate sum of US $ 1,963,266.64. The defendant challenged the award before the Technical Appeal Committee of Liverpool Cotton Association Limited on 5-1- 1995 which appeal was disposed of on 1-6-1996 with the modification that the plaintiff was awarded a sum of US $ 1,802,344.95 by reducing the carrying charges. 5. The plaintiff made an application under section 5 of the Arbitration (Protocol and Convention) Act, 1937, in this Court on 3-4-1998 seeking the award to be made rule of the Court, which application was numbered as Suit No,731 of 1998 and notices were ordered. 6. The defendant filed their objections to the application denying and disputing the validity of the award on various grounds. 7. Mr. Mamnoon Hasan, learned counsel for the defendant in Suit No,731 of 1998 has, inter alia, raised following objections to the award:- (i) The award sought to be made rule of the Court was invalid as the Arbitrators as well as the Appellate Authority has overlooked the fact that the LCs were not opened by the plaintiff within the time stipulated in terms of the different contracts agreed to between the parties. (ii) The Arbitrators did not have jurisdiction to decide the issues referred to by the plaintiff as there was no dispute to be referred to the ArbitratoRs, (iii) The award was hit by doctrine of frustration as at the relevant time, on account of the ban imposed by the Federal Government, the defendant was unable to supply/export the cotton to the plaintiff under different contracts. (iv) Both the Arbitrators and the Appellate Forum have wrongly awarded interest on each contract while making the award as the agreed terms of the contracts prohibited the parties from claiming interest. (v) The plaintiff has not paid the stamp duty on the power of attorney which were filed through different attorneys of the plaintiff in violation of Article 48 and section 35 of the Stamp Act. (vi) The award has been filed without payment of stamp duty. 8. Mr. Mamnoon Hasan, thereafter, has taken me through different provisions of the Arbitration (Protocol and Convention) Act, 1937 (hereinafter referred to as "the Act of 1937") and submitted that the plaintiff has made an application under section 5 of the said Act in violation of the provisions of sections 7 and 8 of the Act of 1937 and Rule 297 of the Sindh Chief Court Rules (O.S) by submitting that the original award was not filed in Court and the copy of the award was not made in terms of Rule 298(2) of the Sindh Chief Court Rules (O.S) by swearing an affidavit in support of the application under section 5 of the Act of 1937. 9. It was submitted by the learned counsel that Article 48 of the Stamp Act deals with the power of attorney which requires payment of stamp duty. Section 18 of the Stamp Act provides every instrument other than a bill of exchange, or promissory note, is required to be stamped within three months after it has been first received in Pakistan which includes power of attorney. He submitted that the power of attorney is invalid in view of the non-payment of stamp duty on it in terms of section 18 of the Stamp Act and, therefore, was inadmissible in evidence under section 35 of the Stamp Act 1899. In support of his contention he has relied upon the case of Succession of Certificate of MRs, Parveen Akhtar reported in PLD 1993 Karachi 280 at page 286.
---
## Page 3
10. It was contended by the learned counsel for the defendant that neither in the award nor the decision of the Appellate Forum had discussed the evidence on the basis of which the market value of cotton was determined in the award. ' 11. He further argued that both the Arbitrators and the Appellate Forum were in error in awarding interest to the plaintiff on their claims as interest was payable on the amount of claim in terms of the contracts agreed to between the parties. 12. Mr. Mamnoon Hasan has submitted that the LCs were opened after the expiry of the period stipulated under the contracts and, therefore, since the defendant failed to open the LCs within time provided under the contracts the default cannot be said to have been committed by the defendant. 13. Mr. Mamnoon Hasan is also appearing for the defendant in Suit No,1583 of 1998 and Suit No,343 of 2000 and material facts in each suit is incorporated hereinabove which, however, will have no bearing on the common points of law, I, therefore, deal with the material facts of each suit separately before adverting to the arguments of the learned counsel for the defendants on these common issues. Suit No,1583 of 1998 14. The parties executed three different contracts on 28-11-1993 in respect of supply of 5000, 5000 and 2500 bales of Pakistani Raw Cotton to the plaintiff. The contracts were subject to the rules and regulations of the Liverpool Cotton Association Limited with the Arbitration Clause. The defendant failed to perform the contracts resulting the plaintiff's invoking arbitration clause. The parties appointed their Arbitrators and on 19-12-1994 the Arbitrators gave award to the tune of US $ 1,358, 584.75 with interest of US $ 60,745.49 against which appeal was preferred by the defendant and in appeal the Appellate Forum modified the amount of award by deducting the carrying charges awarded by the ArbitratoRs, The plaintiff made an application under section 5 of the Act of 1937 in this Court seeking the award to be made rule of the Court on 8-8-1998, to which the defendant filed their reply disputing and denying the validity of award on the common objections raised by the defendant in Suit No,731 of 1998 which objections have already been incorporated by me hereinabove in Suit No,731 of 1998. Suit No,343 of 2000. 15. The parties have executed twenty one (21) contracts on different dates which contracts were subject to the Rules and Regulations of Liverpool Cotton Association Limited. Out of the said 21 contracts, 18 contracts were fulfilled whereas the dispute before the Umpire was confined to and/or referred to in regard to only three (3) contracts. The Umpire on 19-5-1995 had given award, which was challenged by both the parties before the Technical Appellate Committee, which Committee has modified the amount of the award, which is sought to be made rule of the Court in these proceedings. On 7-3-2000 the plaintiff made an application under section 5 of the Act of 1937 in this Court. 16. The defendant has raised common objections to the application which I have already incorporated hereinabove in Suit No,731 of 1998. Suit No,275 of 1999. 17. As it appears from the pleadings of the parties the facts that the two contracts one for 3000 bales and the other for 750 bales of Pakistani raw cotton were executed between the parties in which the defendants were required to supply the cotton bales to the plaintiff. The contracts were subject to the Rules and Regulations of the Liverpool Cotton Association Limited. The LCs were opened but on account of nonperformance of the contract by the defendant the plaintiff invoked the Arbitration Clause. Both the parties appointed Arbitrators, who gave award against the defendants against which the defendants preferred appeal which appeal was finally decided by the Appellate Forum modifying the amount in the original award to the extent of reducing the percentage of interest awarded by the ArbitratoRs, On 14-1-1999 the plaintiff made an application
---
## Page 4
under section 5 of the Act of 1937 in this Court. The defendant filed their objections against the award in question through Mr. Noorullah A. Manji, Advocate. 18. Mr. Noorullah A. Manji, has adopted the arguments of Mr. Mamnoon Hasan, learned counsel for the defendant in the other suits and has submitted that the objections are identical in nature in these proceedings as well and .Therefore, he has - nothing to add. 19. Mr. Mamnoon Hasan, Advocate while opening his arguments has submitted that the awards objected to in these proceedings were invalid as the plaintiffs have not opened the LCs within the stipulated period contained under the terms of the contracts. He further submitted that even otherwise the defendant pleads that they were entitled to invoke 'Force Majeure' clause and as there was ban imposed by the Federal Government which restricted the defendant to supply and/or export the cotton bales within the time frame mentioned in the contracts and therefore, the contracts stood frustrated in terms of section 56 of the Contract Act, 1872. It was further argued by the learned counsel for the defendant that even provisions of rule 297 of the Sindh Chief Court Rules (O.S.) have not been complied with by the plaintiff as no separate/independent affidavit was filed in support of the application under section 5 of the Act of 1937. The plaintiff did not file the original award under rule 298(2) of the Sindh Chief Court Rules (O.S.). 20. He submitted that section 18 of Stamp Act required that power of attorney executed outside Pakistan to be stamped within three months after it has been first received in Pakistan. According to the learned counsel even this provision of section 18 has not been complied with as the power of attorney in Suit No,731 of 1998 on the basis of which the said suit has been filed by the plaintiff, was not duly stamped and, therefore, the same was inadmissible in evidence under the provisions of section 35 of the Stamp Act. In this context, the learned counsel has relied upon the judgment of this Court in the case of succession certificate of MRs, Parveen Akhtar reported in PLD 1993 Karachi 280 at page 286. Mr. Mamnoon Hasan referred to Rule 210 of Liverpool Cotton Association Limited and has submitted that the award given was unstamped. In support of his arguments on the question of stamping of the power of attorney he has relied upon the judgment of this Court in the case of Messrs Jugotekstil Impex v. Messrs Shams Textile Mills Ltd. Reported in 1986 CLC 879 at page 886, wherein a Single Judge of this Court has held that foreign award which is filed in these proceedings is required to be stamped before it was filed and made Rule of the Court. It was further observed in the said judgment that provisions of section 35 of the Stamp Act, 1899 are applicable to the foreign award. 21. The second leg of the arguments of Mr. Mamnoon Hasan was that both the Arbitrators were in error, in giving award, which award was upheld by the Appellate Court, without discussing the basis of market value determined by them. He submitted that such an award cannot be made Rule of the Court if the Arbitrators and or the Appellate Forum have not discussed the evidence and or the material, which led them in arriving at such a conclusion. He submitted that the evidence is necessary to be recorded to prove that the award is enforceable and has referred to section 8 of the Act of 1937 in support of his contentions. Mr. Mamnoon Hasan, relied upon the case of Messrs Barlas Bros. (Karachi) & Co. v. Messrs Yangtze (London) Ltd., reported in PLD 1959 West Pakistan (Karachi) 423 at page 436 in which case evidence was recorded after framing of the issues. He further submitted that his contentions are fortified by the judgment in the case of European Grain and Shipping Ltd. v. Messrs Sargroh Oil Industries Ltd., reported in 1994 SCMR 553. 22. It was argued by Mr. Mamnoon Hasan, that contracts executed between the parties stood frustrated under section 56 of the Contract Act, 1872 as the defendant was restricted to supply the cotton bales in view of the ban imposed by the Federal Government and, therefore, the defendant was protected under the 'Force Majeure' clause. He submitted that the plaintiff did not open the LCs within the time stipulated under the contracts and subsequent thereto ban was imposed by the Federal Government, which restricted the defendant from supplying/exporting the contract cotton.
---
## Page 5
In support of his contentions he has relied upon the judgment of the Honourable Supreme Court in the case of Messrs Mansukhdas Bodaram v. Hussain Brothers Ltd. Reported in PLD 1980 SC 122 at page 132 and in the case of Messrs Jaffer Bros. Ltd., v. Islamic Republic of Pakistan of this Court reported in PLD 1978 Karachi 585 at page 590, wherein the Honourable Supreme Court as well as this Court have interpreted the provisions of section 56 of the Contract Act, 1872 propounding the doctrine of frustration of Contract. 23. Mr. Mamnoon Hasan, has further submitted that the contract in view of the fact that the Government has imposed ban on export of cotton stood frustrated, therefore, the Arbitrators and the Appellate Authority erroneously gave award in favour of the plaintiff overlooking the effect of frustration of contracts. 24. Mr. Mamnoon Hasan further objected to the Award, inter alia, on the ground that both the forums while giving Award had overlooked the agreed terms of the contract by granting interests on the award to the plaintiffs. He submitted that the terms of the contracts executed between the parties clearly provided that the parties shall not claim interest whereas the Arbitrators and the Appellate Authority had granted interest on award to the plaintiffs travelling beyond the contracts and, therefore, the Award on this score was invalid. Mr. Mamnoon Hasan in this respect has relied upon section 29 of the Arbitration Act, 1940 which empowers the forum to grant interest on awards whereas according to him the terms of the contract agreed to between the parties excludes such interest. Mr. Mamnoon Hasan has relied upon the judgments of Messrs A. Z. Company v. Messrs S. Maula Buskhsh Muhammad Bashir, reported in PLD 1965 SC 505 at pages 514 and 518. Ghulam Abbas v. Trustees of the Port of Karachi reported in PLD 1987 SC 393 and Messrs Millat Tractors Ltd. v. Millat Tractor House reported in 1999 YLR 295, in support of his contentions that Arbitrators and/or the Appellate Forum had erroneously granted interest on award against the defendant. 25. Mr. Mamnoon Hasan stated at bar that there are three judgments of this Court which has taken contrary view to his submissions while interpreting the scope of section 7 of the Act of 1937 which are the cases of Conticotton S.A. Co. v. Farooq Corporation reported in 1999 CLC 1018; A. Meredith Jones & Co. v. Usman Textile Mills Ltd. Reported in 2002 CLD 1121 and Alfred C. Toepfer International GmbH v. Pakistan Molesis Company reported in 2003 CLD 1666. Mr. Mamnoon Hasan has argued that all these three judgments are distinguishable as the issues raised before this Court by him were not raised before the said benches and, therefore, the conclusion reached in the said judgments in regard to the scope of section 7 of the Act of 1937 was not correct. 26. Mr. Anjum Ghani, learned counsel for the plaintiff in Suit No,731 of 1998 in reply to the objections/arguments of the learned counsel of the defendant, has submitted that it was matter of record that the defendant insisted on performance of contract though the plaintiff has requested invoicing back at par in terms of rule 300 of the Liverpool Cotton Association Limited. In this regard he has referred to two different fax messages besides a letter which reflect that the defendant insisted upon performance of the contract. 27. He further argued that provisions of Stamp Act do not apply to the foreign award and has relied upon the judgment in the case of Nan Fung Textiles Ltd. v. Sadiq Traders Ltd. Reported in PLD 1982 Karachi 619 at page 626; Ralli Brothers and Coney Ltd. v. Muhammad Amin Muhammad Bashir Ltd., reported in 1987 CLC 83 at page 87 and Petrocon (Pvt.) Ltd. v. Hyderabad Development Authority, Hyderabad reported in 1990 MLD 1675 at page 1680. 28. He further submitted that the power of attorney filed by the plaintiff's attorney is duly stamped and was received in Pakistan in April, 1998 thereafter the same was presented before the Central Stamp Office Karachi which office on collection of requisite fee has stamped it by its endorsement dated 28-5-1998. 29. In reply to the grant of the interest by the Arbitrator in Award, he submitted that the contracts entered into between the parties were subject to the rules and regulations of Liverpool Cotton
---
## Page 6
Association Limited and rule 253(2) of the Liverpool Cotton Association Limited empowers the Arbitrators to award interests. In support of his contentions he has relied upon the case of Nan Fung Textiles Ltd. Hong Kong v. H. Pir Muhammad Shamasuddin reported in PLD 1979 Karachi 762 at page 765. 30. In reply to the arguments of Mr. Mamnoon Hasan that the contracts were frustrated in view of the ban imposed by the Federal Government restricting the defendant from supplying/exporting the raw cotton, the learned counsel for the plaintiff submitted that it was defendant who insisted upon performance of contract. He submitted that the contract does not stand frustrated nor could the defendant take this plea by referring to 'Force Majeure' clause of the contract as the Rules of Liverpool Cotton Association Limited provides the procedure by invoking the clause of invoicing back' and even otherwise the doctrine of frustration of the contract under the provisions of section 56 of the Contract Act, 1872 does not extend to cover the Foreign Arbitration which is governed under the laws of the countries in which the arbitration proceedings are conducted. In support of his contentions he has referred to the case of Conticotton S.A. Co. v. Farooq Corporation reported in 1999 CLC 1018 at 1019. 31. Mr. Anjum Ghani further submitted that once the plaint in these proceedings filed is on oath, no separate affidavit is required to be sworn in terms of rules 298(2) of the Sindh Chief Court Rules (O.S.). He submitted that the original award was produced in the office of this Court and same was returned. The copy of the said has been filed alongwith the application under section 5 of the Act of 1937, each page of which bears the signatures of the counsel certifying it to be true copy. He submitted that, therefore, there is no violation of the rule 298(2) of the Sindh Chief Court Rules (O.S). He further argued that the proceedings under the Arbitration has attained finality and such fact has been pleaded and no material is brought on record in rebuttal to show that the said Arbitration proceeding are subjudiced before any forum in U.K. 32. Mr. Anjum Ghani, further submitted that the scope of section 7 of the Act of 1937 is very limited and this Court has to confine itself within the provisions of section 7(1) of the Act of 1937. He further submitted that this Court in making foreign awards as Rule of the Court would, not travel beyond the award in order to entertain different objections raised by the learned counsel for the defendant. In support of his contentions he has relied upon the cases of Messrs European Grain and Shipping Ltd., Messrs Polychem Company Ltd., reported in PLD 1990 Karachi 254; Meredith Jones & Co. Ltd. v. Quetta Textile Mills Ltd., reported in 2002 CLD 1191 and my own judgment in the case of Kunar Khalid Younus v. Federation of Pakistan reported in PLD 2003 Kar. 209. 33. Mr. Arshad Taybaly representing the plaintiffs in Suit No,343 of 2000 in reply to the arguments of Mr. Mamnoon Hasan, has submitted that issue of delay in opening the LCs was never raised by the defendant either before the Arbitrators or before the Appellate Forum. The power of attorney on the basis of which the suit has been filed in this Court, was duly stamped. To the argument in regard to the frustration of contract, he has submitted that rules 140 and 141 of the Liverpool Cotton Association Limited provides procedure in case the contracts are unfulfilled. According to the learned counsel, in such an eventuality, it is invoiced back to the seller for that purpose and rule 141 of the Liverpool Cotton Association Limited provides such procedure. There is no concept of frustration of contract as provided under section 56 of the Contract Act, 1872 in the Rules of Liverpool Cotton Association Limited. He submitted that the defendant has never invoked the rules 140 or the 141 of the Liverpool Cotton Association Limited, therefore, the objection raised by the defendant's counsel was misconceived. 34. To the other objections of the defendant's counsel, Mr. Arshad Tayebaly adopted the arguments of Mr. Anjum Ghani in addition he, however, submitted that the scope of section 7 of the Act of 1937 is limited and does not provide examination of the nature by this Court. He submitted that the
---
## Page 7
plaintiff has not violated any of the rules of the Sindh Chief Court Rules (0.S.) as has been argued by the other side. He submitted that the original award was not filed but a copy of the same was filed and has produced the original award before me during arguments. He further submitted that authentication that the award has become final by way of affidavit has already been done as it was specifically pleaded by the plaintiff and the plaint is on oath. 35. Thereafter, Mr. Arshad Tayebaly has referred to the question of applicability of the provisions of Stamp Act and has submitted that the provisions of Stamp Act do not apply to foreign award. In this regard he has relied upon the cases of Jugeotekstil Impex v. Shams Textile Mills Limited reported in 1990 MLD 857 at pages 865 and 866. Petrocon Pvt. Ltd. v. H.D.A. Reported in 1990 MLD 1675; European Grain and Shipping Ltd. v. Polychem Co. Ltd. Reported in PLD 1990 Karachi 254 at page 265. In support of his other argument that the frustration of the contract cannot be pleaded by the defendant Mr. Arshad Tayebaly has relied upon the judgment of this Court in the case of Conticotton S.A. Co. v. Farooq Corporation, reported in 1999 CLC 1018, wherein this Court has taken the view that any ban by the Federal Government would not entitle the defendants to invoke 'Force Majeure' clause and can only approach the plaintiff by invoking rules 140 and 141 of the Liverpool Cotton Association Limited. 36. On the issue of grant of interest in Award, the learned counsel for the plaintiff Mr. Arshad Tayebaly has submitted that the interest awarded on the claim by the Arbitrators affirmed by the Appellate Forum was justified as Rule 253 of the Liverpool Cotton Association Limited authorizes the Arbitrators to award such interest. It was submitted by the learned counsel that the party has not claimed interest but the award of interest by the…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.