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Petitioner: GOVERNMENT OF SIND VS Respondent: SIND FINE TEXTILE MILLS
Court Name: Sindh High Court Judge(s): Abdul Hayee Qureshi Title: GOVERNMENT OF SIND vs SIND FINE TEXTILE MILLS Case No.: Miscellaneous Appeal No, 96 of 1979 Date of Judgment:1982-09-26 Reported As: PLD 1983 Karachi 134 Result: Order accordingly
JUDGMENT
JUDGMENT ' This is an appeal by the Government of Sind under section 18 ( f ) of the Defence of Pakistan Ordinance, 1971, to challenge an award made by Mr. Justice (Retired) Kadir Nawaz Awan, who was appointed as an arbitrator under section 18 (b) of the said Ordinance in respect of compensation in connection with the requisition of Sind Fine Textile Mills, Shikarpur, ' The brief facts of the case are that, in October 1973. Sind Fine Textile Mills, located at Shikarpur, was requisitioned under the orders of the District Magistrate, Sukkur, under the provisions of section 19 of the Defence of Pakistan Ordinance. It may straightaway be pointed out that, although section 19 of the Defence of Pakistan Ordinance confers the power of acquisition and requisition of property on the Central Government, section 4 of the same Ordinance provides for a power of the Central Government to direct that any power, or, duty under the Rules may be exercised, or, discharged by any Provincial Government, or, by an Officer, or, authority subordinate to such Government. It appears that the Mill was requisitioned by the District Magistrate in exercise of such powers, which the Central Government has delegated. It is case of the appellant that the Mill was requisitioned, because public safety and prevailing labour unrest required the taking of such action. After the requisition, the Mill was actually put in the care of one Khair Muhammad Khatian as Controller for the purpose of running the Mill. The Mill was de-requisitioned in April 1974, and a notification to that effect was issued by the Cabinet Division of the Government of Pakistan on 13-4-1974. It seems that the owners of the Mill believed that damage had been caused, so that they did not take possession of the Mill, and wanted to have an inventory made in regard to the machinery etc. And the condition of the same, as also the stocks. The owners asked the Provincial Government as well as the federal Government for a joint survey of the Mill. However, the case, a has been set up before
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me by counsel appearing for the appellant, is, that the Government had not appointed any Surveyor. I will advert to his aspect of the matter in a latter part of the judgment. However, a joint survey was made by Mr. P. K. Shahani and Mr. Mooraj. A Survey Report was prepared by the two Surveyors on 24-5-1974. According to the Point Survey Report, the owners of the Mill were entitled to a compensation of Rs, 83.25 lakhs on account of the difference in the position of the Mill at the time of taking over and return. Besides this amount, the Sur eyors also came to the opinion that the owners of the Mill were entitled to a further sum of Rs, 14.82 lakhs on account of damage to fixed assets an depreciation by reason of rough handling. Such Survey Report was signed both the Surveyors. ' It seems the owners of the Mill were station during the People's Party Govern August 1977, a letter was written by Mr Director of the Mill, stating that, on accused Haji Moula Bux Soomro, the Chairman of the Mill had been requisitioned. Such let by the learned Additional Advocate-Gener Anwar also referred to this letter for show that the action of requisition of the Mill malice on account of political differences Mr. Rahim Bux Soomro and Mr. Illahi Bux People's Party on the other. In this letter, t sought the following reliefs :- "Firstly, the Banks should be directed from 1972 up-to-date. A precede Messrs Synthetic Chemical Indust charges for the last five years on to were written off by Messrs United B Bank Limited. Able to obtain any competent. However, on the 9th of Iftikhar Soomro, the Managing t of political differences between he Mill, and the People's Party, has been placed on the record 1, who referred to it. Mr. Khalid jog, besides other facts, the fact as a mala fide act, actuated by between Haji Moula Bux Soomro, oomro on the one hand, and the ' Managing Director of the Mill o write off the interest charged for this exists in the case of ies Limited where the interest rowings of about Rs 3 crores Ltd. And Muslim Commercial. ' Secondly, the Banks should be directed not to press for repayment and to sanction additional amounts at concessional rates of interest to allow the Mill to function. ' Thirdly, Government Agencies such as WAPDA, Sind Social Security Institution. Education Cess etc. Should be directed not to press us for payments for the next two years. ' Fourthly, compensation should be paid to us for the damages caused in accordance with the enclosed Survey Report." Action was taken by the Secretary, Ministry of Industries, Government of Pakistan, who submitted a note to the Secretary-General-in-Chief (presumably Mr. Ghulam Ishaq Khan). By this note, certain directions of the Chief Martial Law Administrator were conveyed by the Secretary of Ministry of Industries. The relevant directions were in the following words :- "The CMLA directed the undersigned on 21st evening on telephone that :- (1) the Sind Government be told to settle without delay the damages/ compensation claim (because of requisitioning and later de-requisition) of the above-mentioned mill. The mills claim is of the order of Rs, 83 lakhs. (2) the Banks concerned be asked to waive interest on the mills borrowings on the analogy of existing precedents." ' The matter came up before the Sind Government, and, on 22-12-1977, the Secretary of Industries Department submitted a note to the Martial Law Administrator, Zone 'C' (Sind) regarding payment of compensation to the management of the Mills, and such note reads as follows :- "The Secretary, Ministry of Industries, Government of Pakistan, has communicated to me today morning over telephone the following orders of the Chief Martial Law Administrator : ' The Sind Fine Textile Mill, Shikarpur, which is a public limited company was taken over by the Sind Government in October, 1973, and returned to the owners in April, 1974. Their case regarding payment of compensation of Rs, 83.25 lakhs which is reported to have been assessed by the
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Survey Team appointed with the approval of the ex-Chief Minister, Sind, may be settled by the Sind Government urgently under intimation to him." ' Ultimately, on 6-4-1978, a summary was submitted by the Secretary of the Industries Department to the Chief Secretary, Sind Government. The last three paragraphs of the summary read as follows :- "7. From the foregoing following conclusions are made : (1) The Enquiry Report of Martial Law Authorities reveals that the mill was taken over on political grounds and otherwise one of the recommendations of the Investigation Officer is that the Management may be granted some genuine financial compensation by Government to keep the mill functioning. (2) The record of Home Department is silent about constitution of any Survey Team which assessed the amount of compensation to the tune of Rs, 83.25 lakh to be paid to the present management, against the damages to the Mill during the period it was requisitioned and operated by the Government. (3) The Mill was requisitioned under D. P. R. And was subsequently de-requisitioned by the Cabinet Division, Government of Pakistan. 8. In view of the above, a decision is to be taken - (i) whether the claim for payment of compensation is to be considered by the Provincial Government, or (ii) the Federal Government will have to decide the claim in view of the fact that the process of taking over the mill was started on the basis of the note (copy attached) by the former Prime Minister. 9. It is proposed that before the papers are submitted to the Martial Law Administrator, the opinion of the Law Department may be obtained, whether the Provincial Government or the Federal Government may consider payment of the claim in view of the orders of the Chief Martial Law Administrator mentioned in para. 1 above." ' Finally, on 2-5-1978, a summary was prepared for the Martial Law Administrator, Sind, by the Chief Secretary of the Province, and a decision was recorded by the Martial Law Administrator to the effect that the Federal Government may be requested to determine the compensation in accordance with the mechanism given in section 18 (1) (b) of the Defence of Pakistan Ordinance, 1971. It was also stated that Finance Department may be requested thereafter to make payment of compensation as determined by the Federal Government on behalf of the Provincial Government. By such an order of the Martial Law Administrator, the case was referred for arbitration. Mr. Justice (Retired) Kadir Nawaz Awan was appointed as the sole arbitrator. ' A claim for compensation was submitted by the Mills. In the said claim, the following particulars were mentioned :- (1) A sum of Rs, 14,82,000.00 on account of losses due to the damages to fixed assets and abnormal depreciation due to rough handling of the machinery. (2) A sum of Rs, 83.25 lakhs on account of reduction in current assets, increase in current liabilities, increase in long term liabilities and normal depreciation. In paragraph 9 of the claim, the facts, which have caused such losses, were enumerated as follows : "(a) Losses/damages caused to the equipment. (b) Delays in replacing damaged machinery due to reasons beyond the control of the claimants. (c) Deterioration in equipment leading to loss of production and loss of quality. (d) Losses due to loss of reputation arising out of poor quality yarn exported/sold in the local market during the period of requisitioning. (e) Losses due to unsuitable/inefficient and excessive labour engaged by the Government appointed management of the Mill.
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( f ) Other losses." ' A sum of Rs, 42 lakhs was claimed for loss of profits and a sum of Rs, 10 lakhs was claimed as damages due to loss of reputation in the local market. Other losses were also assessed at Rs, 10 lakhs. A total claim of Rs, 160.07 lakhs was submitted, and interest was claimed at the rate of 14 per cent. ' A reply was submitted by the appellant. The fact of requisitioning and de-requisitioning was admitted. It was denied that any joint survey was agreed to, or, conducted after the requisitioning. It was denied that any fixed assets were damaged on account of rough handling during the time the Mill was run by the Government. The Report of the Surveyors was stated to be not binding. The claim to loss of profits was refuted. Additional plea was taken that the damages, if any, were a consequence of labour unrest that prevailed before the Government took over the Mill, and that the Mill was returned to the owners in the same condition in which it was taken over. It was also averred that the reference to arbitrator was limited to the physical damages caused to the Mill, if any, and other items of claim, or, damage were beyond the scope of arbitration proceedings. ' On the pleadings before the arbitrator, evidence was led by both the parties. On behalf of the Government, the following witnesses were examined :- (1) Mr. Prem Shahani, Surveyor. (2) Mr. Muhammad Amir Khan Assistant Director, Labour. (3) Mr. Khair Muhammad Khatian, Government appointed Controller of the Mill. (4) Mr. Abdul Wahab, Deputy Commissioner, who requisitioned the Mill. (5) Mr. Abdul Jabbar Khan, Technical Officer, Pakistan Central Cotton Committee, Government of Pakistan. On behalf of the respondents, the following witnesses were examined : (1) Mr. Amir Abbasi, Managing Director, Sind Fine Textile Mills. (2) Mr. Afsar Mooraj, Joint Surveyor with Mr. P. K. Shahani. (3) Mr. Ibrahim Lahorewala, a Chartered Accountant, auditing accounts of the respondent/Mill. (4) Mr. Khalil-ur-Rehman, Textile Consultant. (5) Mr. Nayyar Masud, Textile Engineer. (6) Mr. Illahi Bux Soomro, Director of the respondent/Mill. ' Mr. Justice (Retired) Kadir Nawaz Awan by his decision, dated 18-4-1979, awarded a total sum of Rs, 1,40,07,000 to the respondents. He ordered that payment be made on, or, before 31-5-1979, and, in default, the appellant would also pay interest at the rate of ten per cent. (per annum). ' Aggrieved by the award of the arbitrator, the present appeal has been filed. I have heard Mr. A. Sattar G. Sheikh, Additional Advocate-General, in support of the appeal, and Mr. Khalid Anwar in support of the award. ' Before proceeding to determine the questions involved in this case, I think it necessary to state the law relating to proceedings of this nature. ' The Defence of Pakistan Ordinance was promulgated on 29th November 1971 in the wake of Indo- Pakistan War. As it is, the Ordinance envisages very wide powers to the Government, and such powers even extend to requisitioning, or, acquisition of immovable property, industrial, or commercial undertaking, or, any interest in such undertaking. Subsection (2) of section 3 confers and provides for a power to requisition any property, movable, or immovable, and such power includes taking possession thereof, and the issue of any orders in respect thereof. Reference may be made to clause (xxxii), appearing in subsection (2) of section 3. Jn any case, no contention has been raised before me to the effect that the power to requisition the property in this case does not exist. However, to put the record straight, reference may also be made to subsections (4) and (5) of section 3 of the Defence of Pakistan Ordinance, which provide for the Central Government
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making an order, or, rule to requisitioning of property. The relevant rule, in this context, is rule 121, sub-rule (1) whereof reads as follows :- "121. Requisitioning of property.-(1) If in the opinion of the Central Government it is necessary or expedient so to do for ensuring the security, the public safety or interest, or the Defence of Pakistan, or for securing the maintenance of public order or the efficient conduct of military operations or prosecution of war, or for maintaining supplies and services essential to the life of the community, it may by order in writing requisition any property, movable or immovable, and may make such further orders as appear to it to be necessary or expedient in connection with the requisitioning : ' Provided that no property used for the purpose of religious worship and no such property as is referred to in rule 111 or in rule 117 shall be requisitioned under this rule." ' Although the above rule envisages that the power to requisition property vests in the Central Government, yet subsection (4) of section 3 provides that the power could be exercised even by the Provincial Government, or, by any officers or authority subordinate to such Government. Subsection (5) of section 3 envisages full powers to the Provincial Government in such behalf. For the sake of convenience, subsections (4) and (5) of section 3 of the Defence of Pakistan Ordinance are reproduced below :- "(4) The Central Government may by order direct that any power or duty which by rules under subsection (1) is conferred or imposed upon the Central Government shall in such circumstances and under such conditions, if any, as may be specified in the direction be exercised or discharged- (a) by any officer or authority subordinate to the Central Government, or (b) by any Provincial Government or by any officer or authority subordinate to such Government, or (c) by any other authority. (5) A Provincial Government may by order direct that any power or duty which by rules made under subsection (1) is conferred or imposed upon it or which has been directed under subsection (4) to be exercised or discharged by it, shall, in such circumstances and under such conditions, if any, as may be specified in the direction, be exercised or discharged by any officer or authority, not being an officer or authority subordinate to the Central Government." ' The District Magistrate, Sukkur, passed an order on 23-10-1973, after he received a Report from the Assistant Director (Labour) and the Assistant Commissioner and Sub-Divisional Magistrate, Shikarpur, stating that the Mill in question had been closed, so that the production of yarn was suffering, and the workmen were not getting their wages. On such ground, an opinion was recorded that it was necessary and expedient for ensuring public safety and interest of Pakistan and also for maintaining the, supplies of yarn, which is essential to the life of the community, that the Mill in question should be requisitioned. Mr.-Khatian was appointed Controller, and he was given the following powers :- (1) The powers and functions of the Board of Directors under the Companies Act. (2) All powers and functions exercised by the owner/owners of the Mill. (3) The Controller was asked to take over the Mill with all the movable and immovable property, including building, open ground, machinery, furniture, fittings, vehicles, raw-material, finished goods, godowns, offices, stores, stocks and shares and cash in banks, and, in short, all other assets. The accounts of the Mill in the banks were frozen. ' It was also ordered that wages and arrears of wages to the labourers shall be paid even by taking overdrafts from banks on behalf of the said Mill. It would indicate that the taking over was complete and total. In fact, there is no dispute on that point. ' The other provisions that are relevant in this context are embodied in section 18 of the Ordinance. This section deals with the payment of compensation to the person whose industrial undertaking, or, interest in such undertaking is taken possession of. Subsection (1) of section 18 reads as follows :-
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"18. Compensation to be paid in accordance with certain principles for compulsory acquisition of immovable property, etc.-(1) Where under section 19 or by or under any rule made under this Ordinance any immovable property, or a commercial or industrial undertaking or any interest in such undertaking is compulsorily acquired or taken possession of for a public purpose, there shall be paid compensation, the amount of which shall be determined in the manner, and in accordance with the principles, hereinafter set out, that is to say- (a) where an amount of compensation can be fixed by agreement, it shall be paid in accordance with such agreement ; (b) where no such agreement can be reached, the Central Government shall appoint as arbitrator a person who has been, or is qualified for appointment as a Judge of a High Court ; (c) the Central Government may, in any particular case, nominate a person having expert knowledge as to the nature of the property acquired, to assist the arbitrator, and where such nomination is made, the person to be compensated may also nominate an assessor for the said purpose ; (d) at the commencement of the proceedings before the arbitrator, the Central Government and the person to be compensated shall state what in their respective opinions is a fair amount of compensation ; (e) the arbitrator is making his award shall have regard to- (i) the provisions of section 23 of the Land Acquisition Act, 1894 (I of 1894), so far as the same can be made applicable ; and (ii) whether the acquisition is of a permanent or temporary character : ' Provided that where any property requisitioned under any rule made under this Ordinance is subsequently acquired under section 19 or any such rule, the arbitrator in any proceedings in connection with such acquisition shall, for the purposes of the provisions of the said section 23, take into consideration the market value of the property at the date of its requisition as aforesaid and not at the date of the subsequent acquisition ; (f) an appeal shall lie to the High Court against any award of an arbitrator except in cases where the amount thereof does not exceed an amount prescribed in this behalf by rule made by the Central Government ; (g) save as provided in this section and in any rules made thereunder, nothing in any law for the time being in force shall apply to arbitrations under this section." ' Again, rule 121 (4) contemplates the payment of compensation that the Central Government may determine. It would seem that such compensation could be determined by agreement, but, in case such an agreement cannot be reached, then an arbitrator has to be appointed, and only such a person could be appointed, who has been, or is qualified for appointment as a Judge of a High Court. Clause (f) of section 18 (1) provides for an appeal to the High Court against the award of an arbitrator, and, in this case, the appeal has been filed under that provision. Since the decision of an arbitrator is styled as an award, my attention has been engaged to the question of scope of interference by this Court with the award of the arbitrator. The point has engaged my attention solely for the reason, whether this Court, in dealing with appeals under section 18 (1) (f) of the Ordinance, is bound by such limitations as are prescribed in the Arbitration Act, when an award is challenged before the Civil Court. In ,my view, no such limitations exist, for the decision of the arbitrator, in spite of being styled as an award, is subject to an appeal before the High Court, and, since I am hearing an appeal, jurisdiction is such as is conferred on all appellate Courts which, I may clarify would extend to examining all the questions of law and fact. In fact, Mr. A. Sattar G. Shaikh has pointed out that this Court, in dealing with the appeals of this nature, is not disabled from substituting its own findings and decisions on matters of fact as well. I am in full agreement with him.
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' There is another aspect of the case, which may be dealt with before I proceed to examine the merits of the award. On 1-6-1982, Mr. A. Sattar G. Shaikh made a request for adjournment, and for calling of the record from the arbitrator. It was pointed out to him that he should have placed the record before the Court, or, in any case, made a request before the learned Judge, who admitted this appeal to regular hearing. Mr. A. Sattar G. Shaikh stated that such a request was made in the memo. Of appeal, but no order had been passed. The position, however, was that, in the meantime, Mr. Justice (Retired) Kadir Nawaz Awan had died. What is more that it is not known where the record is, and I was informed by the advocates that even the Begum Sahiba of Mr. Justice (Retired) Kadir Nawaz Awan was dead, and his only son was in the United States, so that the record could not be made available. However, on 2-6-1982, Mr. A. Sattar G. Shaikh made a statement that he had been able to obtain some documents, which he would like to place on record. He was permitted to place the same on record, and, on the same date, I had passed an order, allowing both the parties to produce all the documents on which they seek to rely. In fact, the entire record, which is relevant to the determination of the issues in this case, has been placed on record, and both the parties have referred to it. The step was in the nature of reconstitution of the record. I must state that no advocate made any grievance in regard to non-availability of the record. In fact, all the depositions, pleadings, and documents are now available. ' At this stage, it will be profitable to consider the evidence that was recorded by the arbitrator. The main piece of evidence in this case is furnished by the Survey Report jointly made by Mr. P. K. Shahani and Messrs Mahboob Mooraj & Co. Mr. P. K. Shahani has stated that, in the middle of March 1974, viz, after the return of the Mill, he was contacted by the Additional Secretary of Cabinet Division of the Federal Government, and asked if he would be prepared to carry out a survey in the interior of Sind. This witness was then informed and told that Messrs Mahboob Mooraj & Co. Had been nominated by the Fine Textile Mills as joint surveyor with Mr. P. K. Shahani. A survey of the Mill as well as the accounts was carried out. I must state that this witness has not been cross- examined at all. ' Mr. Afsar Mooraj on behalf of Messrs Mahboob Mooraj & Co., the joint surveyor, was also examined by the claimant, and, in cross-examination, he was only asked two questions, the answers to which were as follows :- "As far as I can remember over one week was taken to complete the survey. 1 he joint surveyor was Mr. P. K. Shahani and as far as I remember he was appointed by the Government." ' A faint argument has been raised before me that Mr. P. K. Shahani had not been appointed by the Government. It is difficult to assimilate such argument, because I have not been able to persuade myself to believe that this surveyor, who is a professional surveyor, would gratuitously proceed to Shikarpur in order to survey the Mill, which process must have consumed…
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