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Petitioner: China Harbour Engineering Company (CHEC) & PEMCON GEO Engineering (Pvt) Ltd (PGEL) Joint Venture VS Respondent: Karachi Port Trust
Court Name: Sindh High Court Judge(s): Muhammad Junaid Ghaffar Title:China Harbour Engineering Company (CHEC) & PEMCON GEO Engineering
(Pvt) Ltd (PGEL) Joint Venture vs Karachi Port Trust Case No.: SUIT No. 2338 / 2015 Date of Judgment:2019-05-06 Reported As: 2019 SHC 126 Result: N/A Judgment Muhammad Junaid Ghaffar , J. Through this judgment the objections to the Award of Umpire dated 28.11.2015 under Section 30 of the Arbitration Act, 1940 are being decided as to whether the objections are to be sustained or the Award is to be made as Rule of the Court. The Award in question has been passed by the Umpire on a Reference dated 23.4.2015 addressed to him by the two Arbitrators appointed by the Plaintiff and Defendant as they had differed in their awards. For ease of reference the Contractor (claimant) is referred to as "Plaintiff" whereas, the Employer (Respondent) as "Defendant". 2. Precise facts are that Defendant floated a tender for marine protection work at Pakistan Deep Water Container Port (PDWCP) in the year 2009. In response to this tender notice, four companies participated and the Plaintif f as a joint venture was found to be the lowest and the Engineer in question issued notice dated 6.2.2010 to the Plaintif f to commence work which was to be completed within a period of 130 weeks. In the said project execution Core Locs of various sizes were to be used, whereas, after commencement of the work and award Letter dated 8.4.2010, the Chief Resident Engineer informed the Plaintif f about change in drawings and the bill of quantities (BOQ). The present dispute is in respect of one of the Core Locs i.e. 6.2 m for which initially the quantity in the contract was 378, but was revised insofar as its design and quantity is concerned to 9923. The gist of the dispute between the parties is the price of these Core Locs. The contract price for 378 units of the original design was Rs. 1,55,562.97, whereas, after the change in design and quantity , the Plaintif f had claimed the same price, whereas, it is the case of the Defendant that the revised price determined by the Engineer was Rs. 118,737.62. In between the process of negotiations it appears that the Plaintif f had agreed to a price of Rs.123,865.59, from which they subsequently withdrew; however , the Umpire has agreed with the above price of the Plaintif f and now the Defendant is aggrieved by this award of the Umpire.3
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3. Learned Counsel for the Defendant while objecting to the Award has contended that the learned Umpire has misconducted the proceedings inasmuch as he has travelled beyond the Referen ce and dispute referred to him; that the leaned Umpire has failed to appreciate the relevant clauses of the Contract governing the issue in hand including Clauses 51.1, 51.2, 52.1 and 52.2; that the Defendant 's Engineer never approved the claimed price of the Plaintif f for the revised Core Locs; that the Engineer only approved Rs.118,737.62 pursuant to clause 67.1 of the general conditions of the Contract which could not have been altered by the Umpire and determine a new price of his own; that the learned Umpire has failed to appreciate the admitted documents on record and has drawn an adverse inference by misreading that there is some categorical offer and acceptance on record which could be termed as an agreement in respect of the revised price of Core Locs; hence, the findings are perverse, arbitrary and liable to be set aside; that even the factual position of the continuing work pursuant to the Contract have also been mis-appreciated and mis interpreted by the learned Umpire rendering the Award as a nullity; that as per the terms of the Contract the price determined by the Engineer is final and is not subje ct to any amendment or for that matter negotiations; hence, could not have been altered through the Award of the Umpire; that the finding to the effect of non-commencement of work without Engineer's certification regarding variation order is also incorrect which resultantly renders the Award as invalid; that reliance on some correspond ence including purported emails between the parties cannot be termed as a Contract, whereas, the Plaintif f itself after offering a certain price, withdrew from it which has been termed as an agreement by the learned Umpire, which finding is not only perverse; but is misreading of facts as well as law; that the learned Umpire was only required to appreciate the two different opinions of the Arbitrators on which they had differed and not beyond that; that an offer which admittedly was withdrawn by the Plaintiff cannot be termed and called as a new or valid contract between the parties, whereas, the reference to the learned Umpire did not require him to give his decision and arrive at a new price or rate which he has done; therefore, the Award is without lawful authority and jurisdiction and must be set aside by this Court. In support of his contention he has relied upon the cases reported as Muhammad Farooq Shah V. Shakirullah (2006 PSC 1708), Messrs Millat Tractors Ltd. V. Messrs Millat Tractor House, A partnership Firm, Registered under the partnership Act Kutchery Road, Sargodha (1999 YLR 295), Messrs Barisons (Pak) Ltd. Karachi V. Pakistan through Secretary Ministry of Industries and Natural Sources and another (1980 CLC 470), Fauji Foundation V. Messrs Chanan Din and Sons and others (PLD 2014 LAHORE 424), Water & Power Development Authority and another V. Messrs Ice Pak International Consulting Engineers of Pakistan and another (2003 YLR 2494), House Building Finance Corporation V. Shahinshah Humayun Cooperative House Building Society and others (1992 SCMR 19), Ghulam Abbas V. Trustees of the Port of Karachi (PLD 1987 SC 393), Province of Sindh and 4 others V. Waseem Construction Co. (1991 CLC 66) and A. Qutubuddin Khan V. Chec Millwala Dredging Co. (Pvt.) Limited (2014 SCMR 1268). 4. On the other hand, Learned Counsel for the Plaintif f has contended that the rate to be paid to the Plaintiff in respect of the variation order is the crux of the matter in this case inasmuch as the rate of the Plaintiff was Rs. 155,562.97 which stands reduced to Rs. 123,865.59 by the Award of the Umpire and the Plaintiff as a gesture of goodwill, by not filing any objection to such determination of the price has reluctantly accepted the Award of the Umpire, and therefore, no case is made out by the Defendant; that the meeting held on 14.11.2011 discussed the entire issue between the parties and the rate was agreed upon after consensus; therefore, no objection could be raised now by the Defendant; that in the Award of the learned Umpire there is nothing which could be called and termed as misconduct within the meaning of the Arbitration Act, 1940; hence the objections under Section 30 ibid are liable to be dismissed; that the Award is proper and perfect, whereas, no error is on the face of the Award which could warrant any interference or correction by this Court; that the issues framed in the matter have been discussed properly and decided and there is no reason compelling this Court to modify and or set aside the Award; that the learned Umpire has gone through the entire proceedings and the conflicting Award of the two Arbitrators; that both parties had agreed not to lead any evidence and had proceeded in the matter on the basis of admissible documents; hence, there could not be any case of misreading of the evidence or conducting the proceedings in any illegal manner; hence, the Award be made Rule of the Court by dismissing the objections of
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the Defendant. In support he has relied upon the case reported as Messrs Hafiz Construction Company V. Messrs Javedan Cement Ltd. (1989 CLC 885). 5. I have heard both the learned Counsel and perused the record. The facts have been briefly stated hereinabove and it appears that the Contract in question was awarded to the Plaintif f who was directed to commence work, whereas, thereafter , according to the Chief Resident Engineer some changes were required in drawings and so also in BOQ ?s. These facts are not in dispute and for the present purposes, the dispute is in respect of one of the items i.e. Core Locs 6.2 m, for which the initial quantity required was 378; but was thereafter , increased to 9923 along with some changes in the design. The Plaintif f at the time of filing its bid had quoted an amount of Rs.1,55,562.97 for this item and when the design was changed along with the quantity , a dispute arose in respect of the value of this item. The claim of the Plaintif f was that there is no provision for change in the price and it will remain the same as quoted at the time of filing the bid and award of the tender . Record further reflects that after various negotiations the Plaintif f had offered an amount of Rs.123,865.59, whereas, according to the Engineer the price of this item should be Rs. 118,737.62 . Insofar as the price offered by the Plaintif f after change in design and quantity is concerned; firstly it is an admitted fact that it was withdrawn subsequently; whereas, it is the case of the Defendant that it was never accepted by them. It further appears that pursuant to Clause 67.3 of the conditions of the Contract both parties appointed one Arbitrator each and matter was referred for Arbitration. It further appears that the Plaintif f opted not to lead any evidence except placing reliance on admitted documents already available and exchanged between the parties. After conclusion of the Arbitration proceedings, one of the Arbitrator gave his Award in favour of the Plaintiff to the extent that the terms and conditions of the Contract never permitted any revision in the price; notwithstanding the increase in the quantity and came to the conclusion that Plaintiff is entitled to be paid the original price of Rs.1,55,562.97 as per the original bid, whereas, the other learned Arbitrator gave his award in favour of the Defendant to the extent that the Engineer has already determined a fair price Rs.118,737.62 which is in conformity with the terms and conditions of the Contract; hence the claim of the Plaintiff was dismissed. Thereafter, matter was referred to the learned Umpire who in fact has not agreed with either of the two Awards of the learned Arbitrators; but has come to the conclusion that the offered / revised price quoted by the Plaintiff (Rs.123,865.59) was impliedly accepted by the Defendant; hence, the Plaintiff is entitled for the difference of the amount on pro rata basis for the enhanced quantity. It is an admitted position that insofar as Plaintiff is concerned, they were not aggrieved by the Award of the Umpire, which in essence and substance, has modified and reduced the Award given in their favour by one of the learned Co-Arbitrators. It is only the Defendant who is aggrieved by the Award of the Umpire and has filed its objection to the said Award under Section 30 and 33 of the Arbitration Act, 1940. 6. During the Arbitration proceedings there were 8 issues which were framed on 26.06.2013 by consent of the parties. The first two issues i.e. Issues No. 1 & 2 were in fact in respect of the status of the Plaintif f which is a joint venture to carry out construction business in question or not and whether the concerned person was duly authorized to act on behalf of the said joint venture and both these issues have been decided by one of the Co- Arbitrators and the learned Umpire in favour of the Plaintif f, whereas, Counsel for Defendant has not pressed these two issues; therefore, no further discussion is required. Insofar as the other issues are concerned, the same read as under:- "3. Whether the Claimant unconditionally complied with the instructions issued by the Engineer under clause 51.1 (Variations) and clause 51.2 (Instructions for Variations) for General Conditions of Contract (GCC) and participated in the process of due consultation by the Engineer with the Respondent / Employer and the Claimant / Contractor, as provided Clause 52.1 (Valuation of Variations) and Clause 52.2 (Power of the Engineer to fix Rate), before fixing the rate of carried work of 6.2 cubic meter Core Loc Units, if so its effect? 4. What is effect of Claimant offer to the Engineer and the Respondent in Dubai meeting dated 12.11.2011 to fix rate of Rs. 1,23,865/- per unit of varied works of 6.2 cubic meter Core Loc Units, confirming the said offer through E-mail dated 14.11.2011 & later on withdrawing the same? 5. Whether due to increase in quantity, the Engineer can change a rate of 6.2 m3 Core-loc Units having same specification and the price already fixed in the Contract BoQ duly accepted by the contracting parties?3
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6. Whether the Engineer ever elaborated the reason / character / condition which prompted him to reduce the Contract BoC rate of 6.2 m3 Core-loc Units as inappropriate and inapplicable other than the increase of the quantity of the aforesaid item? 7. Whether the Engineer is under obligation to issue notice stating his intention to reduce the Contract BOQ rates of 6.2 m3 Core-loc Units vide Clause 52.2 of the Contract? 8. What should be the Award?" 7. The crux of the matter before this Court is twofold. The first and foremost is to the effect that can the Umpire pass his award independently and without considering the essence of the Reference made to him after difference of opinion had arisen amongst the two Arbitrators appointed by the parties. And secondly , that whether an offer whereby Plaintif f had quoted a revised rate, which was subsequently withdrawn, can be termed as duly accepted and amounts to an agreement. Learned Counsel for the Defendant has vehemently argued that this was beyond the mandate of the learned Umpire and he was only required to give his Award on the reference as well as the difference of opinion amongst the two Co-Arbitrators. And his argument is based on the fact that since one of the leaned Co-Arbitrators came to the concl usion that the terms and conditions of the contract do not provide any provision and authority to the Engineer to determine a revised price after award of the contract; and consequently the learned Co-Arbitrator awarded the original price quoted by the Plaintif f in respect of the amended quantity as well. The said learned Arbitrator also came to the conclusion that in fact there was no change in the design of the Core Locs and it was only in respect of increased quantity . Insofar as issue No.3 is concerned, the learned Co- Arbitrator who gave his Award in favour of the Plaintif f came to the conclusion that though the claimant i.e. Plaintif f had participated in the process of consultation by the Engineer; but the Plaintif f never agreed to the rate fixed by the Engineer . Insofar as issue No.4 is concerned, which perhaps, is the crux of the matter , the said Co-Arbitrator came to the conclusion that the offer (of the Plaintif f) had no legal effect, as it was withdrawn before it was acted upon or accepted. Insofar as issue No.5 is concerned, the said learned Co-Arbitrator , came to the conclusion that there is no provision in the agreement between the parties or the bid documents which could authorize the Engineer to change the rate of Core Locs 6.2 m on account of increase in quantity . Insofar as issue No.6 is concerned, again the said learned Co-Arb itrator decided the same in negative by holding that no valid reason was given by the Engineer for reduction of the rates. In respect of issue No.7 the learned Co-Arbitrator answered the same in affirmative, and finally in respect of issue No.8 as to what should the Award be, he came to the conclusion that the Engineer could not change the rate of item in question having same specification and the price having been already fixed in the Contract and duly accepted by the contracting parties. It may be of relevance to observe that first of all the Award of the said learn ed Co-Arbitrator is premised on the fact that it was only the change in the quantity of Core Locs which had occurred after Award of the contract; whereas, according to him there was no change in the specification. On the face of it, this observation appears to be incorrect as admittedly there was a change in the design as well. There is enough correspondence on record, including that initiated by the Plaintif f and addressed to the Engineer as well as the Defendant / Employer in respect of making changes in the design of this Core Locs; whereas, to arrive to a conclu sion that it was only a change in the quantity of the Core Locs, and not in respect of the design of the same, the learned co-Arbitrator has not dealt with or dilated upon any such material on record to substantiate and justify this assertion. In fact it appears from the bare reading of his Award that it was proceeded with the presumption that the issue is only in respect of the change in the quantity and not of design. I am afraid such findings of fact which is not supported by any material on record, and is so also in contrast to the finding of the other Co-Arbitrator as well as the Umpire, is not only perverse, but also amounts to misconduct. Moreover , it is also a matter of fact that no evidence was ever led by the Plaintif f; hence, even otherwise, the documents speak for itself and cannot be read in isolation or otherwise, in contrast to the actual facts and the happenings in reality . As to the award of the other learned Co-Arbitrator it may be observed that all issues including the issue of competence to proceed in the matter were answered in favor of the Defendant. However , since thereafter , the matter was referred to the learned Umpire, who has given the Award in favor of the Plaintif f (though somewhat different from the other Co-Arbitrator), no further discussion is necessitated as now it is the Award of the learned Umpire which is before the Court.3
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8. As to the objection of the learned Counsel for the Defendant regarding jurisdiction and authority of the learned Umpire that he could not have acted beyond the reference and the difference of opinion referred to him by the two Arbitrators is concerned, the same does not appear to be correct and justified. It is settled law that when an Umpire enters upon difference arising between Arbitrators, all matters referred to Arbitration should be decided save where Arbitrators have made Award on some matters and referred others on which they had disagreed. As a general rule, where an umpire enters upon the differences between the arbitrators, all the matters referred to arbitration are to be decided and not merely the matters on which the arbitrators have disagreed but there might well be cases where arbitrators might make an award on some matters and refer the others on which they have disagreed to the umpire. In such a case, the scope of the jurisdiction of the umpire will be confined to the matters, which have been referred to him. Here in this matter it is not so, as the two Arbitrators have differed on all issues and have thereafter made a reference to the learned Umpire for his decision; hence, the learned Umpire could have dealt with, and has done so, with the entire case and has given his Award on all matters before him. To this extent the objection being misconceived, as well as put to naught by the Hon ?ble Supreme Court, is therefore, overruled. 9. Now adverting to the Award of the Umpire. It may be noted that it is primarily in respect of issue No. 4 on which a conclusion has been drawn by the learned Umpire that the purported revised rate of Rs. 123,865.59 per unit for the Core Locs offered by the Plaintif f at some point of time, amounts to an agreement as well as acceptance on the part of the Defendant; hence, entitling the Plaintif f to be compensated for the additional quantity of Core Locs. It is interesting to observe that insofar as offer and its acceptance is concerned, the learned Co-Arbitrator who gave his award in favour of the Plaintif f and came to the conclusion that in fact there was no such offer in field and it stood withdrawn. At the same time the learned Umpire has come to the conclusion that there was an offer which stood accepted by the Defendant and must be acted upon by awarding the said amount to the Plaintiff. Now it needs to be appreciated that insofar as the Plaintiff is concerned, they are not aggrieved by this finding of the learned Umpire, which is in fact has, modified the Award of the learned Co-Arbitrator given in their favour by virtue of which the Plaintiff was supposed to be entitled to the original price even in respect of increased quantity of the Core Locs. Therefore, the moot question (in absence of any evidence led by the Plaintiff) is to be decided on the basis of material on record and the conditions of the contract between the parties. It is the case of the Defendant that the learned Umpire has completely failed to appreciate the true intent as well as the consequence of the variation clause as mentioned in the conditions of the Contract duly signed and agreed by the Plaintiff. Hence, it would be advantageous to refer to the said provisions which reads as under:- Alteration, Additions and Omissions Variations 51.1 The Engineer shall make any variation of the form, quality or quantity of the Works or any part thereof that may, in his opinion, be necessary and for that purpose, or if for any other reason it shall, in his opinion, be appropriate, he shall have the authority to instruct the Contractor to do and the Contractor shall do any of the following: (a) increase or decrease the quantity of any work included in the Contract, (b) omit any such work (but not if the omitted work is to be carried out by the Employer or by another contractor), (c) change the character or quality or kind of any such work, (d) change the levels, lines, position and dimensions of any part of the W orks, (e) execute additional work of any kind necessary for the completion the Works, of (f) change any specified sequence or timing of construction of any part of the Works, No such variation shall in any way vitiate or invalidate the Contract, but the effect, if any, of all such variations shall be valued in accordance with Clause 52. Provided that where the issue of an instru ction to vary the Works is necessitated1
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by some default of or breach of contract by the Contractor or for which he is responsible, any additional cost attributable to such default shall be borne by the Contractor . Instructions for 51.2 V ariationsThe Contractor shall not make any such variation without an instruction of the Engineer , Provided that no instruction shall be required for increase or decrease in the quantity of any work where such increase or decrease is not the result of an instruction given under this Clause, but is the result of the quantities exceeding or being less than those stated in the Bill of Quantities. Valuation of 52.1 V ariationsAll variations referred to in Clause 51 and any additions to the Contract Price which are required to be determined in accordance with Clause 52. (for the purposes of this Clause referred to as "varied work"), shall be valued at the rates and prices set out in the Contract if, in the opinion of the Engineer , the same shall be applicable. If the contract does not contain any rates or prices applicable to the varied work, the rates and prices in the Contract shall be used as the basis for valuation so far as may be reasonable, failing which, after due consultation by the Engineer with the Employer and the contractor , suitable rates or prices shall be agreed upon between the Engineer and the Contractor . In the event of disagreement the Engineer shall fix such rates or prices as are, in his opinion, appropriate and shall notify the Contractor accordingly , with a copy to the Employer . Until such time as rates or prices are agreed or fixed, the Engineer shall determine provisional rates or prices to enable on account payment to be included in certificates issued in accordance with Clause 60. Power ofProvided that if the nature or amount of any varied work relative to the nature or amount of Engineerthe whole of the Works or to any part thereof, is such that, in the opinion of the Engineer , 52.2 to Fixthe rates or price contained in the contr act for any item of the Works is, by reason of such Ratesvaried work, rendered inappropriate or inapplicable, then, after due consultation by the Engineer with the Employer and the Contractor , a suitable rate or price shall be agreed upon between the Engineer and the Contractor . In the event of disagreement the Engineer shall fix such other rate or price as is, in his opinion appropriate and shall n notify the Contractor accordingly , with a copy to the Employer . Until such time as rates or prices are agreed or fixed, the Engineer shall determine provisional rates or prices to enable on account payments to be…
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