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Petitioner: BOARD OF TRUSTEES OF PORT OF KARACHI VS Respondent: MESSRS NATIONAL
Court Name: Sindh High Court Judge(s): Naimuddin Ahmed Title:BOARD OF TRUSTEES OF PORT OF KARACHI vs MESSRS NATIONAL
JUDGMENT
Reported As: PLD 1981 Karachi 377 Result: Order accordingly Judgment JUDGMENT This is an application under sections 5, 9, 11 and 33 of the Arbitration Act, 1940. The facts giving rise to this application briefly stated, are as follows :- On 23rd October, 1975 the Board of Trustees of the Port of Karachi (hereinafter called the applicants) entered into a building contract with Messrs National Construction Company (Pak.) Limited in joint venture with Messrs Christiani and Nielsen A./S. Copenhagen (hereinafter referred to as the contractors) for construction of the Napier Mole Road Bridge over the Chinna Creek, Karachi (hereinafter referred to as the works) on the terms and conditions mentioned in the contract documents. The contract also contains an arbitration clause which provides settlement of disputes through arbitration and I shall refer to this clause in detail later on. According to the applicants the works under the contract were to be completed by 7th of March, 1980 under the supervision of Messrs Scott Wilson Kirkpatrick and Partners, Consulting Engineers of U. K., in technical association with Messrs Indus Associated Consultants Limited of Pakistan (hereinafter referred to as the Engineer), who has appointed a full time Chief Resident Engineer on Site at Karachi. According to the applicants, the works were and are still in progress and in support of this allegation, the applicants rely on two letters dated 23-12-19 79 and 27-12-1979 from the contractors with completion Programme Analysis which, according to the applicants, show that as per Contractors, own assessm ent the works can at the earliest, be completed by 31st May. 1980. The Contractors submitted to the Chief Resident Engineer various state--ments of price variation on certain materials listed in the Contract which, according to the applicants, were examined and
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the amount payable under the contract ascertained. The Contractors did not accept the Chief Resident Engineer's valuation of the Material Price Variation Orders Nos. 2 to 12. The Contractors by their letter dated 3-4-1979, referred the matter to the Engineer for a decision under the relevant clause for settlement of dispute. The Engineer, according to the Appellants, fairly examined each of the above Material Price Variation Orders and gave his decision on 13-6-1979. The Contractors in their letter dated 7-i0-1979, did not agree with the Engineer's decision and intimated their intention to refer the matter to arbitration. But the Engineer by his letter dated 26-10-1979, informed the Contractors that their letter conveying their intention to refer the matter to arbitration was not received before 90 days period and therefore the Engineer's decision had become final and binding. However, the Contractors did not accept the Engineer's stand and the decision and on 6-1- 1980, sent an arbitration notice to the Engineer, and the applicants thereby intimating their nomination of Mr. Justice Muhammad Yaqoob A.I (retired Chief Justice of Pakistan) as their arbitrator and calling upon the applicants to nominate their arbitrator within 15 days from the date of receipt of the notice. Applicants acknowledged the receipt of the notice and on 19-1-1980 sent a reply referring to the previous correspondence and confirming the contents of the Engineer's letter dated 26-10-1979 that the Contractors' request for arbitration was time-barred under the contract. Thereafter, the Contractors sent another letter dated 27-1-1980, to the Engineer, the applicants, and the Chief Resident Engineer informing them that since the applicants have neglected to appoint their arbitrator, the arbitrator appointed by them should be deemed to be the sole arbitrator for adjudication of the dispute. Three days after this letter, the applicants received a notice dated 29- 1-1980, from the sole arbitrator informing the applicants that he had entered upon the arbitration proceedings in the dispute between the parties to this application and requiring the applicants to depute their authorised representative to appear before him on 25-2-1980, at 10-30 a. m. At the premises of the Sind Club, Karachi and further informing that the procedure for. The conduct of the arbitration proceedings would be settled at the meeting, and thereafter a date would be fixed for filing of formal statement of claim by the Contractors and for filing of applicants' reply thereto. This notice has caused the applicants to move the application under consideration containing the following prayers- "(a) to declare the reference to arbitration as invalid ; (b) to set aside the appointment of respondent : 2. Mr. Justice (Retd.) Muhammad Yaqoob A.I as sole-arbitrator ; (c) to restrain the respondents from proceeding with the arbitration ; (d) to determine the effect/import of arbitration agreement ; (e) to hold that the arbitration is premature ; (f) to pass such other orders as the Court may deem fit and expedient including the grant of permission to the applicants to appoint their own arbitrator if deemed necessary within reasonable time; and (g) award costs." The contractors have filed their written statement inter alia, pleading that the application is misconceived, not maintainable in law and is event frivolous and vexatious in nature and relying on clauses 3.48 and 3.67 of the Contract, have further pleaded that the total works covered by the contract comprise of (a) bridge works (pre-casting, erection of fasting unit and couping unit), (b) North approach & (e) South approach, and that the contract contemplate the said three works collectively as well as individually all of which, according to the contractors, are covered by the definition of works as contained in the contract and that the bridge works have been completed or, have been substantially completed. It is further pleaded that the report given by the contractors to the applicants clearly indicated that the works relating to North and South approaches are in
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progress and would be completed by 31st of May, 1980 while the bridge had been completed in February, 1980. 1 have beard Mr. A.I Ahmad Fazeel, Advocate on behalf of the applicants and Mr. Liaquat Merchant Advocate on behalf of the contractors. Mr. A.I Ahmed Fazeel has urged the following grounds in support of the application :- (a) The decision of the Engineer as to the valuation of Material Price variation Orders Nos. 2 to 12 had become final and the same could not be referred to arbitration as arbitration in respect thereof had become barred by time; (b) the arbitration agreement has been invoked by Mr. S. M. Naqvi, Acting Project Manager of the contractors who is not authorised to invoke the same ; (c) that works on the date of reference were and still are incomplete and therefore, the arbitrator could not enter upon the reference; (d) that in any case, on the facts and circumstances of this case the appointment of Mr. Justice (Retd.) Muhammad Yaqoob A.I as sole arbitrator is liable to be set aside and the applicants are entitled to appoint their own arbitrator. The definition of the word `works' provided in the clause 3.1 (f) of the contract is as follows :- . "(f) Works means all supplier and performances, which are to be executed by the Contractor in concurrence with the Contract. In so far as to be understood from the working of the text. Works also means the entirety of all or individual structures, which are to be constructed and maintained the scope of the Contract. Clause 3.67, sub-clause (2) provides settlement of dispute by arbitration in the following manner :- (2) If any dispute or difference of any kind whatsoever shall arise between the KPT or the Engineer and the Contractor in connection with or arising out of the Contract or the carrying out of the Works (whether during the progress of the works or after their completion and whether before or after the termination, abandonement or breach of the Con--tract), it shall in the first place be referred to and settled by the Engineer, who within a period of 90 days after being requested to do so, shall give written notice of his decision to the Contractor. Save as hereinafter provided, such decision in respect of every matter so referred shall be final and binding upon the Contractor until the comp--letion of the works and shall forthwith be given effect to by the Contractor, who shall proceed with the Works with all due diligence, whether he requires arbitration as hereinafter provided or not. If the Engineer has given written notice of his decision to the Contractor and no claim to arbitration has been communicated to him by the Contractor within a period of 90 days from receipt of such notice, the said decision shall remain full and binding upon the Contractor. If the Engineer shall fail to give notice of his decision as aforesaid within a period of 90 days after being requested as aforesaid. Or if, the Contractor should be dissatisfied with any decision. Then the Con--tractor may within 90 days after receiving notice of such decision, or within 90 days after the expiration of the first named period of 90 days (as the case may be) require that the matters in dispute be referred to arbitration as hereinafter provided. All disputes and differences, for which the eventual decision. Of the Engineer is not, as aforesaid, final and binding, shall be finally settled by the arbitrator/umpires named under this provision. The said arbitrators/umpires shall have full power to open up, review and revise any decision, opinion, direction, certificate or valuation of the Engineer. Neither party shall be limited in the proceedings before such Courts of arbitration, to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision. No decision given by the Engineer in accordance with the foregoing provisions, shall disqualify him from being called as a witness and giving evidence before the Court of arbitration on any matter what--soever relevant to the dispute or difference referred to the Court of arbitration as aforesaid.
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The arbitrators/umpires shall not enter on the reference until after the completion or alleged completion of the works, unless with the written consent of the KPT and the Contractor, provided always- (a) that such reference may be opened before such completion or alleged completion in respect of the withholding by the Engineer of any certificate, or the withholding of any portion of the Retention Money to which the Contractor claims in accordance with the conditions set out in this Contract to be entitled, or in respect of the exercise of the Engineer's power to give a certificate under clause 3.63 (1) of these Conditions. (b) that the giving of a certificate of completion under clause 3.48 hereof shall not be a condition precedent to the opening of any such reference. Work under this Contract, which has nothing to do with such a dispute, question or difference, shall be continued without any delay during the course of arbitration. The same is valid for the disputed portion of the works, in so far as the dispute does not extend to essential questions of the technical solution to be selected. Clause 3.48 provides issuance of certificate of completion of works in the following words :- "3.48. Certificate of Completion of Works .-As soon as in the opinion of the Engineer, the works shall have been substantially completed (vide also clause 3.49 (2) ), and shall have satisfactorily passed any final test that may be prescribed by the Contract, the Engineer shall on receiving a written undertaking by the Contractor to finish any outstanding work during the first 28 days of the period of maintenance, issue a certificate of Completion (also named "Final Acceptance Certificate' elsewhere :n the Contract) with the concurrence of KPT, in respect of the Works. The Period of Maintenance for the Works shall commence from the date of such a certificate. The Engineer may give such a certificate of Completion with respect to each of the four Berths or the two Sheds before the completion of the whole of the works upon written application of the Contractor, provided these parts of the structures have been completed to the satisfaction of the Engineer. A Certificate of completion given in accordance with the foregoing provision, shall not be deemed to certify completion of any ground or surfaces require re-instatement, unless such certificate shall, expressly so state." Now, I would take up the grounds urged by Mr. A.I Ahmed Fazeel. The first ground is that the decision of the Engineer as to valuation of the Material Price Variation Orders Nos. 2 to 12 had become final and the same could not be referred to arbitration. It is the case of the petitioner that the Contractors submitted to the thief Resident Engineer statements of price variations of certain materials listed in the contract which were examined and the amount payable under the contract ascertained. The Contractors did not accept the Chief Resident Engineer's valuation of Material Price Variation Orders Nos. 2 to 12. Therefore, the Contractors by their letter dated 3-4-1979, referred the claims to the Engineer for decision. The Engineer after examining the same rejected the claims and communicated the decision by his letter dated 13-6-1979. It is claimed that thereafter, the Contractors had some discussions with the Chief Resident Engineer and in consequences thereof submitted their revised calculations to the Engineer by letter No. 178, dated 21-8-1979, addressed to the Engineer. This latter was followed by another letter of the Contractors dated 7-10-1979, the material contents whereof read as follows :- .. "NAPIER MOLE ROAD BRIDGE-- MATERIAL PRICE VARIATION ORDERS Nos. 2 to 12. This has reference to your letter No. DGW/MDJ/74010 dated June 13, 1979. Subsequently after receipt of your above letter we had extensive discussions with the CRE, on the subject. In consequence of those discussions we submitted revised calculations to him vide our letter No. 178 dated August 21, 1979. We have, however, not received, as yet, the CRE's consent to our submissions.
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Under the above circumstances we beg to inform you that if the submis--sions vide our letter, referred to above, are not consented by the CRE, we intend to refer the matter to Arbitration, as per provisions of the Contract Clause No. 3.67 (2)." On receipt of the above letter the Engineer by the letter dated 26-10-1979, informed the Contractors that since the claim for reference to arbitration was received beyond the period of 90 days from the date of his decision, the same had become barred by time and the decision had become final and binding upon them. It is clear that the request for reference of the dispute to arbitration was made 24 days beyond the prescribed period as the Engineer's decision was communicated to the Contractors vide letter dated 13-6-1979 (Annexure 5 to the application) and the Contractors required the reference of the dispute to arbitration- vide letter dated 7-10-1979, reproduced hereinbefore. Therefore. Under clause 3,67, sub-clause (2) of the contract the Engineer's decision had become final and binding on the Contractor. However, it was submitted by Mr. Liaquat Merchant that under clause 3.68 (1) of the Contract notices were required to be given to the Contractors by sending the same to the Contractor's Head Office as well as to their local office by registered post, but the letter dated 13-6- 1979 containing the decision of the Engineer was sent to the site office of the Contractors and not to the Head Office. There--fore, it was contended that the decision of the Engineer could not be deemed to be a decision as envisaged under the relevant clause of the contract. However, the receipt of the letter is not denied and the same was acknow--ledged by the letter of 7-10-1979, without any complaint that the same was not duly sent or addressed or that it should have been sent on both addresses. It was submitted by Mr. A.I Ahmed Fazeel that the letter was addressed at the address mentioned in the letter-head of the Contractors, i.e. Moulvi Tamizuddin Khan Road, Karachi from where alt the correspondence was carried on. The correctness of submission is borne out by the copies of the letters of the Contractors placed on record by both parties showing only one address. The Contract mentions the address of the Head Office as :- "Karim Chambers, Mere weather Road, Karachi." It is the case of the Contractors as stated in their written statement that the office at PECHS Drigh Road, Karachi remained Site Office until the com--pletion of the site office at Moulvi Tamizuddin Khan Road and the Head Office remained as specified in' the contract documents. However, it i: admitted in paragraph 6 of the written statement that the Head Office was much before the date of the impugned letter containing the decision of the Engineer, was shifted to 10-E Building, 177!2, Napier Barracks, Drigh Road. It is alleged that the applicants were, at all material times, fully aware of the change in the address of the Head Office. However, no documents whatever, have been placed on record to support the allegation that the applicants were aware of any such change. Mr. Fazeel also submitted that even if it is held that due notice of the decision was not given even then the claim is barred by time for in that case no decision would be deemed to have been communicated to the Contractors and in such case the Contractors should have required the applicants to refer the dispute within 180 days from the date of rejection of their claims. It is admitted position that the .Claims were preferred to the Engineer by the Contractors by their letter dated 3-4-1979. And, for the first time, the Con--tractors required the reference of the claims to arbitration by their letter dated 7-10-1979. Therefore, request for arbitration was clearly made beyond 180 days and thus the decision of the Engineer had become final and binding in any view of the matter. It was however, submitted by Mr. Liaquat Merchant that the Contractors had submitted their revised claims alongwith their letter dated 21-g-1979, therefore, the reference of the claims by the letter. Dated 7-10-1979 was within time. It was further submitted that the question of mitation could be decided by the Arbitrators. Lastly, it was submitted by Mr. Liaquat Merchant that under section
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37(4) of the Arbitration Act, 1940 the Court has power to extend the time provided for referring the disputes to arbitration. There is no doubt that under section 37(1) of the Arbitration Act, 1940, whenever a question as to limitation is raised before arbitrators they are bound to decide the same. However, Court can also decide the same under the provisions of section 33 of the Arbitration Act if determination of such ,4 question does not depend on disputed facts which under the terms of arbitration agreement have to be gone into by the arbitrators. As regards the submission relating to revised claims suffice it would be to say that they are not before me as only copy of the letter dated 21-8-1979 has been filed and not its enclosures and that they are yet to be submitted before the arbitrator. Whenever such claims are submitted before the arbitrators they %ill first have to decide the question of limitation if the revised claims include the : ejected claims. I would therefore, hold that the claims regarding Material Price Variation Orders had become final and bind--ing. Since however, the revised claims are not before me, I cannot say to what extent the same include the original claims and therefore leave the question to be decided by the arbitrator. As regards the condonation of the delay there is no proper application before me stating the facts or reasons on the consideration whereof the delay could be condoned. Here I may mention that Mr. A.I Ahmed Fazeel during the course of arguments referred to an English decision in F. E. Hockway & Co. Ltd. v. H. W. Hooper & Co. (1950) 2 All E R 842It is a very short decision. I may reproduce the same in extenso hereinbelow. It reads :- "Somervel, L. J., stated the facts and continued : Counsel for the buyers stresses the wording of section 16 (6) of the Arbitration Act, 1934, and submits that one has to consider solely the degree of hardship that may be caused. He says rightly that one factor in considering that is whether or not any hardship will fall on the seller. A seller who could say : "after all this time, it will be impossible to prove our case", would have a strong argument against the application being granted. The Seller here does not suggest that, but counsel for the buyers goes a stage further that I am prepared to go. He submits that, in con--sidering what is undue hardship, what I may call the negligence of the buyers in failing to take any steps to claim the arbitration as provided for by the agreement is irrelevant. I do not accept that submission. I think the man who can say : "I did everything I could to comply with this provision" would have a case of greater 'hardship' than a man who has to say : "I forgot all about this clause, and it is entirely my own fault that I am out of time." It is less hard on him that he should suffer the consequences of his own neglect that it would be on a man who has taken every reasonable step to comply with the provisions of the clause. Therefore, I think this is a relevant circum--stance. The inference I draw from the evidence is that the buyers forgot about this clause, and that is a factor which makes it difficult for them to show undue hardship. Dealing with the matter de novo, although it is near the line, I think that their application does not come within the section, and the appeal must be dismissed. Denning, L. J.; opined : If the delay was no fault of the buyers, it would no doubt, be an undue hardship on him to hold the clause against him but, if the delay is his own fault, the hardship may not be undue. It may be a hardship which it is due and proper that be should bear, because he may only have himself to thank for it. The delay is therefore, a relevant circumstance. Another relevant circumstance is that there is no evidence of any loss on any sub-contracts and no evidence of any claims by sub-buyers or any complaint by them. If there had been, the Court might have taken a lenient view of the delay and held that, notwithstanding it, there was undue hardship on the buyer, but in the absence of such evidence, I do not think this is a case where the discretion of the Court should be exercised." The above reasoning makes it clear that while considering the question of condonration of delay, Court has to consider the facts and circumstances of the case. Since there is no application
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containing facts on the basis of which the delay could be condoned, at this stage I cannot do so. But it will not preclude the contractors from making proper application which will be considered on its own merits. Now, I would take up the next ground. It is submitted that the arbitra--petition was invoked by an unauthorised person. The arbitration was invoked by S. M. Naqvi, the Acting Project Manager by the letter dated 6-1-1980. In my opinion the ground is without any substance. Under clause 7 of Appendix 9 to the Contract, the Management of the joint venture vests in the Executive Committee and the Project Manager, and under clause 8 (ibid) executive Committee is authorised to invoke arbitration and under clause 9 (ibid) the Project Manager has to carry out the directions of the Executive Committee. It is the case of the Contractors that the Executive Committee had decided to invoke arbitration and accordingly authorised the Project Manager to invoke the same. There is no denial of these facts. I therefore, hold that the arbitration has been properly invoked. I would consider the third ground urged by Mr. A.I Ahmed Fazeel. It will be seen from the arbitration clause that under it any dispute or difference of any kind whatsoever, between the applicants or the Engineer and the Contractors, in connection with or arising out of the contract or carrying out the works in the first place has to be referred to and settled by the Engineer within the period provided therein and such decision is made final and binding upon the Contractors until the completion of the works even if not acceptable to them in which case, the Contractors are required to give notice within the time provided in the clause that the matters in dispute be referred to arbitration. However, if the matter or matters in dispute are referred to arbitration as provided therein the arbitrators are prohibited from entering upon the reference until after the completion of the works…
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