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Petitioner: Messrs SYED BHAIS (PVT.) LTD. through Director VS Respondent: GOVERNMENT OF PUNJAB JUDGMENT
Court Name: Lahore High Court Judge(s): Muhammad Ameer Bhatti Title:Messrs SYED BHAIS (PVT.) LTD. through Director vs GOVERNMENT OF PUNJAB
JUDGMENT
Reported As: 2012 CLD 298 Result: Petitions dismissed Judgment JUDGMENT ' MUHAMMAD. AMEER BHATTI, J.---By this single judgment I propose to dispose of W.Ps.Nos.10703 of 2011, 10823 of 2011 and W.P.No,10945 of 2011 all of whom involve common issues of law and fact. 2. Through this writ petition the petitioner has challenged the letter dated 14-5-2011 issued to respondent No,4 by respondent No,3 whereby he has made the request for the encashment of bank guarantee and subsequent letter dated 16-5-2011 issued by respondent No,4 to the present petitioners through which he has asked the present petitioners to make the arrangement of the funds for the payment in accordance with the encashment letters/notices of respondent No,3. 3. The brief facts necessary for the disposal of these writ petitions are that the petitioners were awarded a contract for design, supply, installation, operation and management of water filtration plants in the area specified as packet given 3-A Central Punjab-I. There is no dispute between the parties about the terms and conditions of the said contract. Likewise, there exists no controversy that the petitioners received the advance amount. (W.P.No,10703 of 2011) of Rs,314,483,355 (W.P.No,10945 of 2011) Rs,692,441,694 (W.P.No,10823 of 2011) Rs,200,200069 and according to the settlement of the parties the petitioners were to provide the bank guarantees equal to the advance money for the use of said advance to be solely used for the purposes of the contracts. 4. It is the case of the petitioners that according to the contract, they have utilized this advance for the purpose of establishment of infrastructure, mobilization of personnel and installation of equipment along with other necessary facilities and services. Besides they have installed 24 (W. P. No, 10703) , 60 (W.P. No, 10945) , 29 (W. P.No, 10823 of 2011) water filtration plants till May 2010 and for
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that matter, they have placed on record the copies of the contract, terms and conditions, copies of the guarantee and many other documents/letters issued on behalf of the respondent and the petitioners. However, the respondents decided for the encashment of the guarantee probably being dissatisfied with the work of the petitioners and the letters of encashment have been impugned on many grounds, inter alia, the letters have not been issued by the competent authority as the language of letters show "in view of the decision of the competent authority" meaning thereby that the condition/requirement of the guarantee has not been fulfilled before placing it for encashment. 5. However, this court vide order dated 18-5-2011 directed the respondents to file report and parawise comments and in response thereto, the petitioners also filed rejoinder. The case was fixed for arguments and learned counsel of all the parties have addressed this court on dates mentioned in the order sheets. The case has been heard at length to the satisfaction of the learned counsel. According to the arguments advanced by the learned counsel for the petitioners, the impugned letters have not been issued by the competent authority as the words of this letter plainly show that it has been issued on the direction of the competent authority. Since no document/order/letter issued by the competent authority has been placed on record by the respondents, the letters impugned are unsustainable in the eye of law. 6. It is further contended that no officer except the competent authority is vested with the power to issue these letters, who can issue these letters/orders for the encashment, hence .The bank is not bound to comply with such orders/letters which have not been issued by the competent authority. As such, the letters issued by the incompetent person or officer has no validity in the eye of law as these are void orders/letters. Reliance has been placed on 2007 SCMR 1328, PLD 2010 SC 759 and PLD 1997 SC 351. On the basis of these judgments, the learned counsel contends that the Hon'ble Supreme Court has laid down the dictum that the order which has been issued by an incompetent person is void and need not to be implemented and consequently there will be no violation of those orders/letters. As a matter of fact, the letters have been issued by the incompetent person as it is ostensibly evident from its text that the competent person is someone else, but the letters impugned neither disclosed any order of the competent authority nor the competent personality has been made known, hence there is no justification for its issuance. Further contends that these letters also do not fulfil the requirements/conditions mentioned in the guarantee as it is the pre- requisite of the guarantee that notice for default be issued. However, neither any notice of default was issued nor any reason has been assigned in the letters impugned, thus it is violation of section 24-A of General Clauses Act as well as the violation of section 129-A of the Contract Act. 7. Learned counsel keeping in view the objection raised in the report and parawise comments by the respondents also contends that the objection of the respondents that the writ petitions are not competent against the encashment of guarantee, is untenable in the light of judgments PLD 2004 SC 935, PLD -2003 SC 191 and PLD 1976 Kar. 644, asserts that the writ petitions are very much maintainable where the conditions mentioned in the guarantee have not been followed or complied with. Being a conditional guarantee, if the conditions have not been fulfilled, fundamental right accrues to the petitioners to agitate the matter through constitutional petitions when their rights safeguarded through the conditions have been jeopardized by the government functionaries not by the private persons. Contends that inviolable rights of the citizens cannot be allowed to be usurped by the government functionaries. Further contends that there is an arbitration clause provided in the contract. Since the present dispute is too ticklish to be referred to the arbitrator, the objections raised by the respondents through their report and parawise comments are not defensible. Further contends that the arbitration is not an expeditious remedy after seeking the encashment of guarantee while relying on 1998 CLC 1178, 2004 SCMR 1587 and 1998 SCMR 2268 and 2278. Referring to the clause of the contracts wherein both the parties have
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been bound down for some obligations which have been extended to each other prior to contract, so notice of default was a sine qua non before issuing the impugned letters while referring to clause 45.1 of the Contract which is as under:-- 45.1. If the contractor is not executing the works in accordance with the contract or is neglecting to perform his performance his obligation thereunder so as seriously to effect the carrying out of the works the Engineer may give notice to the contractor requiring him to make good such failure or neglect. 8. The contention of the learned counsel that since the notice of default has been defined and clarified in the contract so it can be safely gathered from that clause that the notice must have been issued about any default committed by the petitioners about the contract before issuing the impugned letter, hence the letter impugned is illegal and unlawful. The learned counsel for the petitioners contends that the document/guarantee can only be encashed if it has been presented according to the requirement of the guarantee. 9. He has referred to the book, Documentary Credits and Related Transactions:-- Chapter 6 of representation of documents. The UCP contains detailed rules relating to the documents which are presented under the credit. Those rules are technical and detailed and it is not possible to accord specific treatment to them here. This section is therefore concerned with the strict compliance principle and the duties of the banks which process the documents. (1). Strict compliance. The only real difficulty which arises in the otherwise enviable position of a beneficiary under a confirmed irrevocable letter of credit is that he must take great care in presentation of documents under the credit. The doctrine of strict compliance has been referred to above. Article 13(a) of the UCP sets out the standard for examination of documents by banks. Strict compliance is a requirement of along with a provision that "documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of credit". 10. Referring to this cardinal principle contends that the bank has every right to refuse the guarantee if the letter of encashment does not tally with the guarantee. Learned counsel for the petitioners further referred to:- Uniform Rules for demands guarantees ICC published No,458. ' Article 10: a. A Guarantor shall have a reasonable time within which to examine a demand under a guarantee and to decide whether to pay or to refuse the demand. b. If the guarantor decides to refuse a demand, he shall immediately give notice thereof to the Beneficiary by teletransmission, or, if that is not possible, by other expeditious means. Any documents presented under the Guarantee shall be held at the disposal of the Beneficiary. ' Article 11: Guarantors and Instructing Parties assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification, or legal effect of any document presented to them or for the general and/or particular statements made therein, nor for the good faith' or acts or omissions of any person whomsoever. 11. He further refers to the Articles 10 and 11 of the ICC Uniform Rules for demands guarantees ICC publication No,458 and to establish his arguments that the law requires the fulfilment of all the obligations mentioned in the guarantee whereas the fulfilment of conditions is lacking as mentioned in the guarantee, so the bank is not bound to encash the guarantee and obligated to refuse it till fulfilment of the terms of the guarantee. He adds that the document/guarantee is tripartite agreement between the banker, the beneficiary and the persons at whose instance it is issued by the bank and if any of the other two parties perform any act without the knowledge of the petitioner, it will be prejudicial to the rights of the petitioners and in that case, they are
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aggrieved persons as they will suffer an irreparable loss. He further relying on judgment 2000 'CLC 451 and 1995 CLC 105, drew the attention of this court as to how to interpret the agreements. 12. On the other hand learned counsel for the respondents Mr. Shakil-ur-Rehman Khan Additional Advocate-General raised preliminary objections that the writ petitions have been filed by unauthorized persons, hence are not competent while referring to about Annexure-A. The authorization given by the Board of Directors to Masroor Ahmad Khan (W.P.No,10703 of 2011) and Tauseef Anjum (W.P.No,10945 of 2011) who have filed these writ petitions and challenged the order dated 14-5-2011 but the letter of authority attached with these writ petitions transpires that it has been issued to challenge the order dated 11-3-2011, so this petition has been filed by incompetent person without the permission to assail the order/letter dated 14-5-2011 and is not maintainable and liable to be dismissed on this solitary ground. He has placed reliance on PLD 1966 SC 684:-- (b) Company-suit on behalf of Company by a person (Director-in-Incharge of Company)---Not competent unless he is so authorized by a resolution passed by Company's Board of Directors- Meeting of Directors not duly convened unless due notice of it given to all Directors. ' 2008 CLD 239: Civil Procedure Code (V of 1908)---Suit on behalf of private limited 'company was to be filed by an authorized person who was duly authorized in accordance with Memorandum and Articles of Association of the company---In order to determine whether suit was instituted by a person duly authorized to do so, reference would have to be made to Articles of the Company-Burden to show that suit had been filed by authorized person was upon plaintiff who failed to discharge the burden by not producing Boards' Resolution and Memorandum and Articles of Association of Company--- If there was a defect in institution of proceedings, such defect was incurable---Suit was instituted by unauthorized persons and plaint was rejected by the court---Application was allowed accordingly. ' 2006 CLD 85: Companies Ordinance (XLVII of 1984), S.29---Civil Procedure Code (V of 1908), O.XXIX, R.1--- Institution of a suit by a company---Authorization of a person, requirement of---Business of a corporation or company was to be carried on under its Articles of Association---Under the law the suit on behalf of a corporation Dr company was to be filed by an officer authorized under the Articles of Association or through a resolution passed by the Board of Directors---Where the plaintiffs, in order to prove that the authorized officer had instituted the suit, had not filed such documents, it was established beyond doubt that an unauthorized person had filed the suit on behalf of the plaintiffs, who also could not have signed or verified the plaint as required under O.XXIX, R.1 of the Civil Procedure Code, 1908. ' PLD 1999 Karachi 260: Civil Procedure Code (V of 1908), O.XXIX, R.1---Person authorized to file suit on behalf of a body corporate---Burden to prove maintainability of such suit---Suits were filed by authorized officers on behalf of plaintiff Banks---Authorized attorneys were not examined as witnesses---Burden to show that the suits had been filed by authorized attorneys was upon the plaintiffs---Mere existence of clause in the powers of attorneys empowering the attorneys was to initiate proceedings in the absence of Articles of Association and exercise of authority in terms thereof was not sufficient---Suits instituted by the plaintiffs were not maintainable in circumstances. ' Administration of justice---Proceedings found to be not maintainable---Effect---Judgment or decree, even on admission of defendant, cannot be granted in the proceedings which are found not maintainable---Position of Court, in relation to proceedings, found not maintainable is synonymous with action taken without jurisdiction and, therefore, no effective relief could be granted. ' 1993 CLC 66
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' Constitutional petition filed on behalf of a company/ companies---Essentials---Constitutional petition filed on behalf of company/companies should be accompanied by the Memorandum/Articles of Association and the resolution of the Board of Directors containing names of Directors who had participated in the meeting and such meeting should also authorize a specific person for filing Constitutional petition---Constitutional petition not accompanied by such essential documents would be incompetent and deemed to have been filed without any authority of law---Petitions were dismissed in circumstances: ' PLD 1991 Lab. 381: When a company institutes a suit, it has to establish that the suit has been competently and authorized instituted on its behalf---Even person in charge of the affairs of the company unless specifically authorized in this regard is not considered competent to institute proceedings on behalf of the corporate entity. ' PLD 1997 Kar 276: Pre-emption suit---Such suit filed on behalf of corporation/ company without reference to any resolution authorizing any of the plaintiffs to file suit for pre-emption---Cause of action for filing such suit arose in favour of plaintiffs on 23.4.1994 when they received information about sale of property in question---Resolution of Company passed earlier on 1980, could not be treated as special resolution authorizing plaintiffs to file suit for pre-emption on behalf of company in 1994--- Suit being incompetent, plaint was barred by provisions of O. VII, R.11, C.P.C. Plaint was rejected in circumstances. ' 2005 CLD 1208: Companies Ordinance {XLVII of 1984), 5.196-- Contract Act (IX of 1872), Ss. 196, 197, 198 & 199---Civil Procedure Code (V of 1908), O.XXIX, R.I---Constitution of Pakistan (1973), Art. 199- -- Constitutional petition---Powers of Directors of company to conduct proceedings---Scope---Powers of ratification of wrong and illegal act---Board of Directors of a company could confer authority/power on Director or officer or Secretary of a private limited company in pursuance of resolution of Board of Directors in a meeting duly convened with prospective effect, but such power/authority could not be conferred retrospectively nor there was any provision in law which could enable the Board of Directors to confer such authority/power retrospectively and also to ratify the acts, wrongfully or illegally done, by Director/Principal Officer/Secretary of a private limited company---Provision of ratification as envisaged in the Contract Act, 1872, were not attracted in the present case as in Contract Act, 1872, the power of ratification had to be specifically conferred on a principal by virtue of which he could ratify act of his duly authorized agent which at the time of performance the agent was not empowered or authorized to undertake or perform---Ratification essentially presupposed the existence of relationship of principal and agent and no such relationship existed between petitioner-Company and its Director---Action of ratification of Board of Directors in ratifying the acts of its Director in filing Constitutional petition without authority/power would have no basis unless it would be established that Director had been empowered or authorized by Articles of Association of Company to ratify illegal or unauthorized act of Director, Secretary or Principal Officer---When law required the doing of a thing in a particular manner of doing such an act could be resorted. ' Companies Ordinance (Companies Ordinance XLVII) of 1984---S. 196--- Civil Procedure Code (V of 1908) O.XXIX, R.1--- Constitution of Pakistan (1973), Art.199--- Constitutional petition--- Maintainability---Constitutional petition was filed by a person who was not authorized/empowered to file same on behalf of petitioner Company as he was not duly authorized/ empowered by means of a Resolution of the Board of Directors passed in a proper meeting of Board of Directors---Illegal/unauthorized act of Director of petitioner-Company in filing/instituting petition without authority or power, could not be ratified or clothed with legality by
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a subsequent Resolution by the Board of Directors conferring on him the authority to file/institute, defend, compound or abandon the legal proceedings. ' In the present case after the objection, the petitioner filed a C.M.No,2301 in W.P. No,10703 and C.M.No, 2 of 2011 in W.P.No,10823 of 2011 on 23-6-2011 through which the petitioners have placed on record other Resolutions of the Board of Directors passed in meetings of Board of their Directors and through these Resolutions conferring the authority to file/continue with petitions which are pending adjudication in this court. These C.Ms. Were opposed on the ground that according to the Memorandum and Articles of Association of the Company, the power is not available with the directors to ratify illegal or unauthorized act. So powers are not available with the Director under Articles of Association. Subsequent resolution is nullity in the eye of law. 13. I have considered the arguments of the parties it is correct and admitted position that these writ petitions have been filed on the basis of the resolutions which were issued for challenging some order dated 11-3-2011 issued by the authority/respondent. Filing of present C.M.No,2301 of 2011 in W.P.No,10703 of 2011, C.M.No, 2302 of 2011 in W.P.No,10823 of 2011 are admissions on behalf of the petitioners as they tried to rectify the illegal act of the petitioners. Since it is settled law that only competent person can file and initiate the legal proceedings and it is also settled law that act of ratification can only be availed if it empowers the Directors in the Articles of Association as A Law is clear by reported in 2005 CLD 1208. Hence, neither this application can be allowed nor the document/ Subsequent Resolution can be considered to be issued legitimately and writ petition is liable to be dismissed on this lone score. 14. The second preliminary objection of the respondents is that the petitioner has approached this court with soiled hands and he is not entitled to seek the extraordinary constitutional jurisdiction of this court. To reinforce his arguments in his behalf, he contends that the commencement date for the contract was 24-9-2009 and according to contract it was to be completed within the period of 3 years and 9 months, nine months were for the completion of the entire work and 3 years for its operational maintenance. The total plants which were to be installed were 768 but the petitioner has installed 24 (in W.P.No,10703) and (in W.P.No,10945 of 2011) 611 required but installed 13(3 only commissioned), (W.P.No,10823 of 2011) 540 required but installed 29 uptill now and these figures are not disputed. Viewed in this perspective, the petitioners have not completed/performed their obligations within the stipulated period, hence they have no right to seek any remedy before this court for getting any relief against the encashment letter issued by the respondents as it was exclusively their own amount which was paid in advance for the completion of the work and the writ petitioners admittedly failed to do so, thus disentitled to any relief from this court. Reliance has been placed on PLD 2009 SC 28: ' Art.199---Constitutional jurisdiction of High Court--Scope---Constitutional jurisdiction is discretionary in character, and therefore, cannot be invoked by a person who had come to the court with unclean hands and likewise no one can be allowed to take advantage of his wrong. ' 2007 SCMR 1318: ' No one can be allowed to take advantage of his wrong act or fraud played by him. ' Arts.185(3) & 199---Party not approaching High Court and Supreme Court with clean hands--- Effect Such party would not be entitled to discretionary and equitable relief---Party seeking equity must have equities in his favour. 15. Learned counsel for the respondent contends that there is no document attached by the petitioners with the writ petitions according to the sub clause 33.1(ii) of the Contract which was to be issued by the Engineer of Employer in support of their case. Further contends that disputed questions of facts have been raised which cannot be resolved while exercising constitutional jurisdiction, rendering these writ petitions not maintainable. Further contends that the arbitration clause is provided in the contract in the presence of that clause, the writ petitioners have no right
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to invoke constitutional jurisdiction of this court and writ petitions are liable to be dismissed in the presence of alternate remedy provided with the consent of the parties. 16. The learned counsel contends the petitioners cannot get the benefit of section 24-A of General Clauses Act as this provision does not provide any opportunity of hearing for the violation of any provision of a contract. The General Clauses Act will be applicable where the statute confers a power to make any order or to give any direction to any authority, officer or person". He has relied on PLD 2010 SC 676. Pakistan International Airlines Corporation Act (XIX of 1956)---Ss.4, 5, 6, 8, 10 & 30---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability--Terms and conditions of service of employees of Pakistan International Airlines Corporation---Plea raised by Corporation was that constitutional petition before High Court was not maintainable and principle laid down by Supreme Court in Muhammad Mubeen-us-Salam's case reported as PLD 2006 SC 602 was applicable---Validity--Although the Corporation was discharging functions in connection with the affairs of Federation, yet aggrieved persons could not approach High Court by invoking its constitutional jurisdiction---If any adverse action was taken by employer in violation of statutory rules, only when such action should be amenable to constitutional jurisdiction but if such action had no backing of statutory rules then principle of "Master and servant" would be applicable and such employees had to seek remedy permissible before the court of competent jurisdiction--- Rules laid down in the judgments of Supreme Court in Muhammad Mubeen-usSalam's case, reported as PLD 2006 SC 602, would be applicable to ordinary person filing petition by invoking jurisdiction of High Court under Art.199…
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