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Petitioner: Messrs CATALYST COMMUNICATION (PVT.) LTD. VS Respondent: Messrs NATIONAL JUDGMENT
Court Name: Islamabad High Court Judge(s): Miangul Hassan Aurangzeb Title:Messrs CATALYST COMMUNICATION (PVT.) LTD. vs Messrs NATIONAL
JUDGMENT
Reported As: 2017 CLC 466 Result: Application allowed Judgment JUDGMENT MIANGUL HASSAN AURANGZEB, J.--- Through the instant petition under Section 20 of the Arbitration Act, 1940 ("the 1940 Act"), the petitioner, M/s. Catalyst Communications (Pvt.) Limited, prays for inter-alia the reference of disputes between the petitioner and the respondent (M/s. Telecommunication Corporation) to arbitration. The petitioner also seeks the appointment of an arbitrator. 2. The record shows that on 22.04.2002, the petitioner and the respondent entered into a contract ("the Contract"), whereby the petitioner agreed to set up, operate, market and maintain Prepaid Calling Card Service and International Gateway Exchanges on behalf of the respondent. The Contract had a validity period of ten years (clause 9), which could be extended for an additional period of five years with the mutual consent of the parties (clause 10). Under clause 17.2 of the Contract, the petitioner agreed to install, test and commission, entirely at its own cost and expense, the platforms/equipments for Prepaid Calling Cards ("PCCs"), International Gateway Exchanges ("IGEs") and Payphones within the periods stipulated in the Contract. The petitioner was to develop at least three IGEs, one each in Islamabad, Lahore and Karachi. All destinations of the world were required to be connected through the IGEs either directly or through the petitioner's switching arrangements at U.S.A., U.K. And U.A.E. For outbound international traffic, the petitioner's share in the revenue was agreed to be 30%, whereas the respondent's share was 70%. 3. On 15.01.2003, the Law, Justice and Human Rights Division, Government of Pakistan, confirmed that the Contract had been examined, and that it suffered from no legal infirmity. Clause 32 of the Contract is reproduced herein below:-
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"Settlement of Disputes 32. The provisions contained in this Clause shall survive the termination and/or expiration of this Agreement. Arbitration under this Clause shall be a condition precedent to any other action under law. The Parties shall use their best efforts to settle amicably all disputes arising out of or in connection with this Agreement or its interpretation. Any dispute between the Parties as to matters arising under this Agreement which cannot be settled amicably within thirty (30) days after receipt by one Party of the other Party's request for amicable settlement may be submitted by either Party to arbitration in accordance with the provisions set out below. The arbitration proceedings shall be conducted in accordance with the Arbitration Act, 1940 or any amendment or reenactment thereof and the rules made there under. As sole arbitrator appointed by the Parties who shall be a retired judge of the Supreme Court of Pakistan shall hear each dispute submitted by a Party to arbitration. Arbitration proceedings shall, unless otherwise agreed by the Parties, be held in Islamabad. In any arbitration proceedings under this Agreement the decision of the arbitrator shall be final and binding and shall be enforceable in any court of competent jurisdiction, and each of the Parties waives any objections to or claims to immunity in respect of the enforcement of the claim." 4. In compliance with its obligations under the Contract, the petitioner installed some equipment and made a request to the respondent for testing it so as to overcome any deficiency. The trial and testing commenced on 01.11.2002 for incoming traffic, but the respondent, on 09.01.2003, directed the petitioner to stop the process. This resulted in disputes and differences being developed between the parties. Consequently, the petitioner filed an application under Section 8 of the Arbitration Act, 1940, before the Court of learned Civil Judge, Islamabad, praying for the appointment of an arbitrator and the reference of the disputes to arbitration. The Hon'ble Mr. Justice (Retd.) Khan Khalil-ur-Rehman, was appointed as the sole arbitrator, who entered upon reference. During the pendency of the arbitration proceedings, the contesting parties negotiated a settlement. The deed of settlement was placed before the learned sole arbitrator, and an arbitration award in terms thereof was rendered on 03.12.2003. A significant feature of the settlement was that the parties agreed that the Contract was to terminate on the date falling on the fifth anniversary of the effective date, which was' agreed to be 13.11.2003. Hence, the contract was to terminate on 13.11.2008. 5. The congeniality in the contractual relationship between the parties was not long-lived. Disputes and differences again developed between the parties. This time the parties opted for arbitration without the intervention of the Court. The petitioner, on 29.11.2005, filed a statement of claim before the learned sole arbitrator (the Hon'ble Mr. Justice (Retd.) Khan Khalil-ur-Rehman). The claim made by the petitioner against the respondent was for various amounts under the following heads:-- i. Loss suffered by the petitioner as a result of delay in the commencement of test and trial operations. Ii. Loss suffered by the petitioner as a result of the respondent's failure to maintain ASR at the level of 55% minimum for Incoming International Traffic. iii. Loss suffered by the petitioner as a result of the respondent's failure to release the petitioner's share of revenues. Iv. Loss suffered by the petitioner as a result of idle switching capacity. v. Loss suffered by the petitioner as a result of the delay in launching Payphone Project under the contract. Vi. Loss suffered by the petitioner as a result of the delay in launching Prepaid Calling Card Project under the contract. Vii. Loss suffered by the petitioner due to the application of Higher Settlement Rates by the respondent. 6. The respondent contested the said claim and also filed a counterclaim on 09.12.2005. The arbitration proceedings culminated in an arbitration award dated 15.08.2006. The said arbitration
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award was made a Rule of Court, and a judgment and decree dated 30.04.2007 was passed in terms thereof by the learned civil court. The learned Single Bench of this Court allowed an appeal against the said judgment and decree and the matter was remanded to the learned civil court with the direction to consider the objections to the award raised by the respondent. Thereafter the case was transmitted to this Court, because it was beyond the pecuniary jurisdiction of the learned civil court. This Court, vide judgment and decree dated 20.05.2013, made the arbitration award dated 15.08.2006 a Rule of Court, and a judgment and decree in terms thereof was passed. 7. A few weeks prior to the rendering of the arbitration award dated 15.08.2006, the Chairman, Pakistan Telecommunication Authority ("P.T.A."), in his letter dated 09.06.2006 to the respondent, observed that the Contract for setting up IGEs and provision of International Telephone Arrangement/Services had been entered into without a formal written approval of the P.T.A. Furthermore, the Chairman, P.T.A., took the position that the Contract was violative of inter alia, the provisions of Access Promotion Rules, 2004, and the Access Promotion Regulations, 2005. Consequently, the following directions were issued by the Chairman P.T.A. To the respondent:-- "4. Keeping in view the foregoing factors, the irresponsible attitude of the licensee towards the writ of the Authority, the very nature and extent of the agreements being violative of the provisions of the Act, the Rules and the Regulations, and to ensure level playing field in the market, the Authority hereby directs NTC: (a) to terminate all such arrangements including the aforementioned agreements with immediate effect i,e,, 9th June, 2006 and submit compliance within three days of this letter. (b) to furnish traffic data, details about CDRs and transactional data for the period and deposit outstanding dues to the Authority within 10 days of issuance of this letter. (c) non-compliance to the directions of the Authority as contained in Para 5(a), (b) supra by NTC may constrain the Authority to initiate legal action under section 23 of Act " 8. The respondent on the same very day (i,e, 09.06.2006), suspended the Contract. Vide letter dated 10.06.2006, the respondent informed the Chairman, P.T.A., that the Contract between the petitioner and the respondent had been examined by the Law Division, Government of Pakistan, and no legal infirmity had been pointed out. Furthermore, paragraph 3 of the said letter dated 10.06.2006 is reproduced herein below:--- "3. On the issue of the illegality of the said agreements, it is apprised that approval of the authority was not required when these agreements were signed. NTC entered into these Agreements with M/s. CATCOM and M/s. Zahra Communication on I 1th April 2002 by permission of Ministry of Science and Technology for setting up of International Gateway and provisioning of International telephony. ISI and PTA were represented in the meeting in which this permission was granted. In addition to that, the subject Agreement of NTC was duly amended with the approval of PTA. Reliance is placed on letter No,Dir(c)/PTA/68/98 dated 2nd January 2003 of PTA whereby DG (Law) duly vetted the existing amendment to these very Agreements of 1VTC." 9. The Chairman, P.T.A., was requested by the respondent to reconfirm the directions issued in its letter dated 09.06.2006 in the light of the information furnished by the 'respondent in its letter dated 10.06.2006. Vide letter dated 14.06.2006, P.T.A. Reconfirmed the directions contained in its letter dated 09.06.2006, and called upon the respondent to forthwith show compliance with the said directions. Consequently, vide letter dated 14.06.2006, the respondent terminated the Contract with immediate effect. 10. Aggrieved by the termination of the Contract, the petitioner invoked the constitutional jurisdiction of the Hon'ble Lahore High Court, Rawalpindi Bench, by filing W.P.No,2313/2006 against inter alia, the respondent and P.T.A. In the para-wise comments to the said writ petition, the respondent took a preliminary objection to the effect that "an equally adequate and efficacious remedy through a reference to the arbitration is available to the petitioner."
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11. It appears that the petitioner had instituted W.P.No,1781/2005 before the Hon'ble Lahore High Court, Rawalpindi Bench, against the respondent and the Government, of Pakistan, praying for the following relief:-- "It is respectfully prayed that direction to the respondents to restrain from terminating international gateway operations of the petitioner company illegally, arbitrarily and discriminately in exercise of their administrative powers or otherwise. ' It is also prayed that the respondents may graciously be directed to refrain from causing illegal harassment to the petitioner in any manner whatsoever." 12. On 27.06.2005, the following ad-interim order (annexed at page 157 of Arbitration Petition No,03/2008) was passed by the Hon'ble High Court: - "In the meanwhile, no detrimental action contrary to the express provision of law shall be taken against the interest of the petitioner, subject to notice for an early date." 13. The petitioner had also instituted an appeal (F.A.O. No,112/2006) before the Hon'ble Lahore High Court, Rawalpindi Bench, against the respondent etc. Challenging the suspension order issued by the respondent without issuing any notice under Section 23 of the Pakistan Telecommunication (Reorganization) Act, 1996.-This appeal was admitted to regular hearing on 28.06.2006, whereon the Hon'ble High Court suspended the operation of the impugned order. 14. Yet another Writ Petition (bearing No,2313/2006) was instituted by the petitioner against the respondent and three others, before the Hon'ble Lahore High Court, Rawalpindi Bench. In this writ petition the following relief was prayed for:- "In view of the above, it is respectfully prayed that this Hon'ble Court may graciously be pleased to declare the directive dated 07 June, 2006 issued by the respondent No,3 to be manifestly illegal, void, contrary to the provisions of the Pakistan Telecommunication (Reorganization) Act, 1996 thus without lawful authority and of no legal effect based on mala fides and ulterior motives. It is further prayed that this Hon'ble Court may graciously be pleased to declare the orders dated 09.06.2006 and 14.06.2006 to be illegal acts, without lawful authority, based on mala fides and ulterior motives. The petitioner also prays for the costs and grant of any other relief to which it is found entitled by this Hon'ble Court in law justice and equity keeping in view the facts and circumstances of the case." 15. In this writ petition, adequate disclosure about W.P. No,1781/2005 and F.A.O.No,112/2006, was made with the request for all these cases to be connected. All these three cases were dismissed vide consolidated judgment dated 02.02.2016, by the learned Single. Bench of this Court. All the three cases were held to be not maintainable due to the availability of an alternative remedy. It is pertinent to reproduce herein below paragraph 20 of the said consolidated judgment:- "20. Even otherwise, under Clause 32 of the admitted agreement dated 22.04.2002 the disputes between the parties are required to be settled through arbitration proceedings conducted in accordance with Arbitration Act and petitioner had previously invoked jurisdiction of the said forum. Case of petitioner is distinguishable from the case laws cited because terms and conditions of agreement cannot be seen in isolation from subsequent legislative developments in shape of Access Promotion Rules, 2004. Access Promotion Regulation, 2005 and Pakistan Telecommunication Amendment Act, 2006. While the agreement itself has undergone period stipulated therein. Consequently the relief with regard to statutory obligations has become infructuous and at the most, petitioner retains remedy of demanding damages that also after the breach of contract is established, therefore, referred case law does not extend any help to the petitioner." 16. The petitioner had already, on 09.05.2008, filed a petition under Section 20 of the 1940 Act (Arbitration Petition No,06/2008, later renumbered as Arbitration Petition No,03/2008) praying for the appointment of an arbitrator, and a reference of the differences and disputes between the
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petitioner and the respondent to arbitration in terms of clause 32 of the Contract. The said petition was amended on 14.05.2009. The disputes and differences sought to be referred to arbitration were as follows:- "i. Illegal suspension of operation. Ii. Termination of the contract agreements on 09.06.2006 on the directive of PTA. iii. Non access of the technical and administrative personnel of the Petitioner into the premises of NTC where all the equipments of the Petitioner are installed in the room allocated as Switch room. Iv. The losses caused to the Petitioner for a period of June, 2006 to March, 2008 by termination of operation and termination of contract. v. Non-taking initiative by the Respondent on the request of the Petitioner for collection of receivables of Rs,143,728,946 resulting into loss of 25% share and interest accruing thereof. Vi. The losses due to termination of the contract agreement and suspension thereof." 17. Learned counsel for the petitioner submitted that all the prerequisites for making an order of reference to arbitration have been satisfied in this case; that the disputes and differences between the petitioner and the respondent arise from and are related to the terms of the Contract, which had been unlawfully terminated by the respondent; that the respondent had raised objections to the maintainability of the writ petition instituted by the petitioner to the effect that there exist an arbitration clause in the Contract between the parties, which clause can be invoked for the resolution of the disputes between the said parties; and that the petition under Section 20 of the 1940 Act has been filed within the limitation period. The learned counsel for the petitioner prayed for the petition under Section 20 of the 1940 Act to be allowed and a retired judge of the Superior Courts to be appointed as an arbitrator in terms of clause 32 of the Contract. 18. On the other hand, learned counsel for the respondent submitted that the petition under Section 20 of the 1940 Act is barred under the principles of res judicata as well as the principles underlying Order II, Rule 2 of the Code of Civil Procedure, 1908 ("C.P.C."); that on two earlier occasions, arbitration proceedings between the petitioner and the respondent had taken place the first arbitration proceedings culminated in a consent arbitration award dated 03.12.2003, whereas the second arbitration proceedings culminated in an arbitration award dated 15.08.2006, which was made a Rule of Court, vide judgment and decree dated 20.05.2013, passed by this Court; that successive arbitration proceedings are not permissible under the 1940 Act; that there is no dispute existing between the petitioner and the respondent which could be referred to arbitration; that the petitioner had challenged the termination of the Contract dated 22.04.2002 in F.A.O.No,112/2006 and W.P.No,2313/2006; that multiplicity of proceedings must be avoided; and that the respondent had terminated the Contact on the directions of the Chairman, P.T.A. Learned counsel for the respondent in making his submissions placed reliance on the law laid down in the cases of Pakistan Industrial Development Corporation (PIDC) v. Muhammad lqbal (2015 CLC 1066), and Industrial Fabrication Company through Managing Director v. Managing Director Pak American Fertilizer Limited (PLD 2015 Supreme Court 154). 19. I have heard the arguments of the learned counsel for the contesting parties and have perused the record with their able assistance. The facts leading to the filing of Arbitration Petition No,03/2008, have been set out in sufficient detail in paragraphs 1 to 10 above and need not be recapitulated. ' 20. The vital question that needs to be answered is whether in view of the earlier arbitration proceedings culminating in the arbitration award dated 15.08.2006, Arbitration Petition No,03/2008 between the same contesting parties is barred by the principle of constructive res judicata enumerated in Section 11 of the C.P.C. And the provision of Order II, Rule 2 of the C.P.C. 21. An arbitration agreement merely provides for an alternative forum for resolution of disputes. Thus, all disputes that the parties agree to resolve by arbitration are to be resolved by arbitration.
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As long as the disputes that are covered under the arbitration agreement remain unresolved, the parties would be free to take recourse to arbitration for resolution of the said disputes and the other party would be contractually bound to submit the disputes to arbitration. With regard to the submission as to the applicability of the principles of res judicata as provided in Section 11, C.P.C. To arbitration proceedings, it may be appreciated That Section 41 of the 1940 Act provides that the provisions of C.P.C. Will apply to the arbitration proceedings. The provisions of res judicata are based on principles that there shall be no multiplicity of proceedings and there shall be finality of proceedings. This is applicable to the arbitration proceedings as well. Administration of justice would require that there should not be multiplicity of proceedings and the parties should not be permitted to raise disputes over and over again, once the disputes have been settled either by a pronouncement of a court of competent jurisdiction or by an award of an Arbitrator. 22. It may be recalled that the petitioner had filed the statement of claim in the earlier arbitration proceedings on 29.11.2005. The Contract had not been suspended/terminated by the respondent, when the said statement of claim was filed. The respondent, in these arbitration proceedings, had filed a counter-claim on 09.12.2005. By this stage also, the said Contract had not been suspended/terminated. The learned sole arbitrator in the arbitration award dated 11.08.2006, had given findings on each of the claims made by the petitioner, as well as the respondent's counter- claim. The Contract was suspended by the respondent on 09.06.2006, and terminated on 14.06.2006. By this stage, the petitioner's statement of claim, and the respondent's counter-claim in the second arbitration proceedings had already been filed. 23. The questions involved in the subsequently instituted arbitration petition (Arbitration Petition No,03/2008) primarily arise and flow from the suspension and termination of the Contract. As mentioned above, the suspension and termination of the Contract were subsequent to the filing of the statement of claim and the counter-claim in the earlier arbitration proceedings. When the earlier arbitration proceedings were instituted, the Contract had not been suspended/terminated by the respondent. Therefore, no claim regarding the termination of the Contract could have been raised in the earlier arbitration proceedings so as to attract the provisions of Explanation IV to Section 11, C.P.C. An arbitration award concludes questions which are actually referred to arbitration. The earlier arbitration award dated 15.08.2006, does not deal with the question of the termination of the Contract. The dispute regarding the termination of the Contract was not referred to the learned sole arbitrator in the earlier arbitration proceedings since the cause of action for the same was not available on such an occasion. Accordingly, the cause of action for the earlier referred dispute and the present dispute are different. Therefore, the analogy of constructive res judicata or the provision of Order II, Rule 2, C.P.C. Are not applicable to the present case. In view of the different causes of actions, the same petitioner had a right to file successive references for arbitration. Therefore, in my view an arbitration petition seeking reference to arbitration of disputes and differences which had not arisen prior to the institution of the earlier arbitration proceedings, are not barred under the principles of res judicata, and or Order II, Rule 2, C.P.C. 24. The claim made by the petitioner in the earlier arbitration proceedings may be considered in juxtaposition with the claim now being made by the petitioner against the respondent through Arbitration Petition No,03/2008, to see whether the petitioner is seeking to re-agitate the claims made earlier. Claims made by the petitioner in the earlier arbitration proceedingsClaims for which reference to arbitration is presently sought by the petitioner (i) Loss suffered by the petitioner as a result of delay in the commencement of test and trial operations.(i) Illegal suspension of operation; (ii) Termination of the contract agreements on 09.06.2006 on the directive of PTA.
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(ii) Loss suffered by the petitioner as a result Hof the respondent's failure to maintain ASR at the level of 55% minimum for Incoming International Traffic. (iii) Loss suffered by the petitioner as a result of the respondent's failure to release the petitioner's share of revenues. (iv) Loss suffered by the petitioner as a result of idle switching capacity. (v) Loss suffered by the petitioner as a result of the delay in launching Payphone Project under the contract. (vi) Loss suffered by the petitioner as a result of the delay in launching Prepaid Calling Card Project under the contract. (vii) Loss suffered by the petitioner due to the application of Higher Settlement Rates by the respondent.(iii) Non access of the technical and administrative personnel of the Petitioner into the premises of NTC where all the equipments of the Petitioner are installed in the room allocated as Switch room. (iv) The losses caused to the Petitioner for a period of June, 2006 to March, 2008 by termination of operation and termination of contract. (v) Non-taking initiative by the Respondent on the request of the Petitioner for collection of receivables of Rs,143,728,946 resulting into loss of 25% share and interest accruing thereof. (vi) The losses due to termination of the contract agreement and suspension thereof."
25. A glance at the petitioner's statement of claim and the respondent's defence and counter- claim in the earlier arbitration proceedings, and the pleadings in Arbitration Petition No,03/2008, shows that the issues/questions involved in both these cases are not substantially the same. Merely because an issue or two may have an overlap will not be a ground to dismiss…
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