ORDER SHEET
IN THE HIGH COURT OF SINDH AT KARACHI
Suit No.1216 of 2016
Jamshoro Joint Venture Limited
Versus
Sui Southern Gas Company Limited
|
Date |
Order with signature of Judge |
For hearing of CMA 7995/2016
Date of hearing: 14.10.2016, 24.10.2016, 27.10.2016, 09.11.2016
Mr. Anwar Mansoor Khan along with Ms. Ummemah Mansoor Khan for plaintiff.
Mr. Sajid Zahid for defendant.
-.-.-
Mohammad Shafi Siddiqui, J.- Plaintiff has filed this suit for declaration and injunction against the defendant. The subject matter of this suit are four Memorandum of Understanding pertaining to LPG and NGL extraction for Kunnar & Pasakhi Deep (KPD) Gas Field, Sinjhoro Gas Field and Naimat Basal Gas Field dated 26.05.2014 and Bobi Gas Field dated 02.09.2012 and an interim arrangement in relation to Badin Gas Field. These are five gas fields in all regarding which the plaintiff seeks restraining orders against the defendant to the extent that the termination notices in relation to the aforesaid fields be suspended till decision of the present suit.
It is the contention of Mr. Anwar Mansoor Khan, learned counsel for the plaintiff, that the dispute having been referred to the Arbitrator would preclude defendant from terminating the subject contracts and/or Memorandum of Understanding or any interim arrangement for the extraction of LPG and NGL.
Mr. Anwar Mansoor Khan, learned counsel for the plaintiff, submitted that there are four agreements executed in relation to four gas fields whereas for Badin Gas Field the interim arrangement continued in view of observations of the Hon'ble Supreme Court. The Implementation Agreement of Badin Gas processing between plaintiff/ Jamshoro Joint Venture Limited (JJVL) and SSGCL, which arrived at in the year 2003, involved some serious questions and Hon’ble Supreme Court has eventually invalidated the implementation agreement with the observation that since the LPG is being supplied by the plaintiff/JJVL to a large number of users therefore it is a matter of public importance and which should continue unabated. It is contended by the plaintiff's counsel that the dispute between them was then referred to Arbitrator before the situation got worse. It is urged by the learned counsel that the defendant malafidely and in the presence of the agreement that the dispute to be resolved and settled by arbitrator, has resolved in its meeting as claimed to have been recommended by the Board of Directors, to have terminated the agreement on the ground and issues which are referable to the Arbitrator. It was claim to have been malafidely resolved that all Memorandum of Understanding stands terminated and fresh tenders be floated for the same gas fields.
Learned counsel while relying on the language of one such Memorandum of Understanding submitted that the termination even otherwise was dependent on the events referred in Para 1 and 2 of Article 1 of MoU. He further submitted that Article 6 of this MoU in relation to KPD Gas Field in particular has paragraph (c) which is dependent upon and to be read with Para 1 and 2 of Article 1 hence there cannot be a unilateral termination of the contract and/or MoU without assigning any reason. He further submitted that in some of the contracts/MoU there is no clause 6(c) in them. So far as the interim arrangement of Badin Gas Field is concerned though the implementation agreement was invalidated however interim arrangement continued on the same understanding and hence any termination would be in defiance of such observations and directions. Relying on Chitty’s principles he argued that specific performance may be ordered on grounds unconnected with the question whether the claimant has suffered or is likely to suffer material or financial loss.
Learned counsel for the plaintiff has heavily relied upon the judgment of Hon'ble Supreme Court in the case of Khawaja Muhammad Asif v. Federation of Pakistan reported in PLD 2014 SC 206 whereby the implementation agreement of Badin Gas Field was invalidated. He submitted that the contracts and/or MoU are such which could be enforced under section 56 of the Specific Relief Act.
In relation to the competence of the defendant in issuing termination notice while the arbitration proceedings were pending, learned counsel has relied upon the case of Asadullah Khan v. Karachi Shipyard reported in 1979 CLC 625, Ch. Abdur Rauf v. Mrs. Zubeda Kaleem reported in 2001 CLC 664, Island Textile Mills Limited v. Technoexpert & another reported in 1979 CLC 307, Orix Leasing Pak Ltd. v. Zahid Industries reported in NLR 1992 CLJ 693, Qasim International Containers v. Qasim Freight Station 2002 MLD 171 and Societe Generale D Surveillance S.A v. Pakistan 2002 SCMR 1694.
Learned counsel however insofar as interpretation of Para 1 and 2 of Article 1 and Para (c) of Article 6 are concerned, contended that if at all they stand against each other as contradictory, the interpretation of the documents and Statute should be such that entire context of the document be accomplished and that every attempt be made to save the document and that difference between the general statement and particular statement of the document be differentiated. On this he has relied upon the case of Saudi Pak Industrial & Agricultural Investment v. Allied Bank of Pakistan reported in 2003 CLD 596 and Muhammad Azam v. Muhammad Fazil reported in PLD 1977 Karachi 21.
Learned counsel further argued that monetary compensation is not an appropriate remedy under the facts and circumstances of the case when the agreement could be enforced in terms of Section 56 of the Specific Relief Act and relied upon the case of Euro Distributors Establishment v. Bank of Credit & Commerce International reported in 1982 CLC 2369 and Muzammilullah Khan v. Pakistan Steel Mills 1995 CLC 1003. He submitted that the observations of the Hon'ble Supreme Court in the referred judgment of Khawja Muhammad Asif is binding including its obiter dicta. In this regard learned counsel relied upon the case of Muhammad Ali Abbasi v. Pakistan Bar Council reported in PLD 2009 Karachi 392 and Hafeezuddin v. Badaruddin reported in PLD 2003 Karachi 444.
Mr. Sajid Zahid, learned counsel for defendant, on the other hand submitted that these MoUs/contracts are not enforceable under the law hence in order to avoid its breach an injunctive order cannot be passed. He submitted that the defendant has lawfully terminated the four MoUs in respect of Bobi, KPD, Naimat Basal, Sinjhoro and that as far as the arrangement in respect of Badin Gas Fields is concerned it is submitted that they were only on interim basis. These contracts/MoUs are not intended to be for an indefinite period. The commercial aspects of the matter prevailing all over the world have constrained the defendant to terminate the subject MoU and the interim arrangement as it is no more commercially and economically viable for it being a public sector company managing public funds. He submitted that the continuation of such arrangements would compel the defendant to increase the price of LPG which would ultimately burden the consumers as against international prices which are reducing.
Learned counsel for defendant further submitted that the plaintiff has no prima facie case. Neither balance of inconvenience is in its favour nor it would suffer any irreparable loss in case injunction, as prayed, is declined hence there is no question of granting any injunctive order of the nature as sought by the plaintiff. Learned counsel further contended that the plaintiff has not come with clean hands as it has pleaded its case by misrepresenting the actual facts. It is contended that it is not the decision of the Hon’ble Supreme Court that the interim arrangement should continue rather Hon’ble Supreme Court has left it to the choice of the Committee to suggest ways in which the supply of LPG should continue to consumers unabated and without disruption. This has wrongly been interpreted by the plaintiff's counsel that the LPG supply through the plaintiff should continue.
The counsel submitted that basic issue before this Court is whether termination notices in respect of MoU and interim arrangement could lawfully be issued. He contended that either party could terminate it without assigning reasons by giving 15 days’ time. Counsel further submitted that since March, 2016 defendant had negative margins which were also presented to the defendant Board where decision was taken to terminate MoU and Badin arrangement. The defendant did consulted with the plaintiff to reduce the process charges of LPG and NGL but of no avail. Hence, had no option but to exercise their right to terminate MoU and Badin arrangement.
Counsel further submitted that insofar as three Boby and Badin gas fields are concerned, the defendant has exercised its inherent right under the law whereas for the remaining fields Article 6(c) was invoked to terminate MoU and/or arrangements to avoid continuous losses as a public sector company. Without prejudice learned counsel contended that these arrangements, either through MoU or otherwise, did not create any vested right in favour of plaintiff. It is argued that the dispute in the instant suit and dispute before the arbitrator are separate and independent issues and an attempt to misguide the Court that the issues are common at both the forums was made. It is contended that while the plaintiff had always declined that it was ready and willing to arbitrate its dispute with the defendant, it did not follow up on the same and did not even sign the draft dispute resolution agreement sent by defendant's counsel to plaintiff's counsel.
He submitted that even if it is presumed that the intention of the Hon'ble Supreme Court was that this supply of LPG to the far flung areas may not be disturbed, the defendant has an alternate arrangement and the object could be achieved by import of PLG in the country and through other producers supplying LPG to different parts of the country on economically viable rates. In addition to the above learned counsel for defendant has made a categorical statement that OGDCL would be commissioning its own LPG & NGL Extraction plant and is expected to be completed at the end of this year. He thus concluded his arguments by stating that since these MoU and interim arrangement are not meant for an unlimited period and that as they are not enforceable under the law and in particular under section 56 and 57 of the Specific Relief Act, the injunction application is liable to be dismissed.
I have heard the learned counsel and perused the material available on record.
There are five gas sites which form subject matter of this suit, four sites are covered by Memorandum of Understandings whereas the fifth site i.e. Badin Gas Field is also subject matter of this suit as an interim arrangement. The contention of the plaintiff’s counsel is that these MoUs and the interim arrangement, based on the judgment of the Hon’ble Supreme Court in the case of Kh. Muhammad Asif (supra) could be enforced under section 56 of Specific Relief Act. It is in the light of this background that the MoUs and the judgment of the Hon’ble Supreme Court is to be seen.
Let us first see the judgment of the Hon’ble Supreme Court in the case of Kh. Muhammad Asif (Supra) on the touchstone that this interim arrangement is in fact in terms of the orders of the Hon’ble Supreme Court which would curtail the right of the defendant insofar as termination of the agreement/MoUs are concerned. The Hon’ble Supreme Court has held in paragraph 37 and 38 as under:-
“37. …..The cardinal principle which has been kept in mind of this Court is that waste, plunder or wanton and heedless use of public resources and funds must be prevented and public wealth wherever squandered must be recovered. The importance of fair, even handed and open competitive bidding has also been repeatedly emphasized by us while exercising our jurisdiction under Article 184(3) of the Constitution…..”
38. As noted above, people all over the country who cannot obtain natural gas rely on supply of LPG for many of their needs. The supply of LPG to a very large number of users, including those living in far-flung areas is a matter of public importance impacting their life as defined by this Court. Such supply, therefore, needs to continue unabated. This much has been accepted by the parties before us. In fact it was the contention of counsel on behalf of JJVL that the Implementation Agreement should not be terminated because LPG is so important to the people of Pakistan; and that termination of the said agreement would result in a highly detrimental disruption in the supply of LPG to a large body of consumers. Six LPG marketing companies who receive LPG from JJVL were also heard. Their counsel also emphatically stressed the importance of the continued supply of LPG to such consumers. These marketing companies do not have any privity of contract with SSGCL nor can they lawfully insist on supply of LPG to them in the event the Implementation Agreement comes to an end, but their submissions as to continued delivery of LPG to the end consumer have been taken into account by us.”
In paragraph 40 the Hon’ble Supreme Court has provided reasons for holding the implementation agreement dated 12.08.2003 as illegal and unlawful whereas in sub-para 7 of paragraph 40 the Hon’ble Supreme Court formed a Committee comprising of different individuals and entities, which apart from performing as required in terms of paragraphs 7(a) to 7(d), were also required to suggest ways in which the supply of LPG to end consumers continues unabated and without disruption. This matter/judgment pertains to Badin Field and perhaps the task was assigned by the Hon’ble Supreme Court to the Committee to suggest ways whereby the LPG should continue to be supplied unabated to the end consumers. Paragraph 38 talks about an unabated supply but not necessarily through plaintiff JJVL. It is thus only an interim arrangement that is being followed. Only supply of LPG/NGL was observed to continue but not necessarily through the courtesy of JJVL otherwise the purpose of invalidation of Agreement would be frustrated.
Three out of five interim arrangements are on the basis of MoU containing independent termination clauses without assigning any reason along with Para 1 and 2 of Article 1. The decision of the Hon’ble Supreme Court does not pertain to any of the remaining four gas fields hence to be seen independently. Three MoU talks about two events in the absence of which termination of contracts/MoUs cannot be effected. The paramount hurdle in terminating the contracts/MoUs, as claimed, is second event that if the SSGCL or OGDCL itself installs the LPG Extraction plant and is able to receive gas from such gas fields and process the same for extraction of LPG/NGL, the same can be terminated. These eventualities would not supersede Article 6(c) of the subject MoUs of Gas Field. Article 6(c) talks about termination of the MoU without assigning any reason thereto by giving 15 days’ notice in advance.
In order to understand the dominating factors of Articles 1(1) and 1(2) it is to be seen whether in terms of Section 56 of the Specific Relief Act the subject contracts are liable to be enforced under the law or not. Section 56 talks about an injunction which cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. Section 21 of the Specific Relief Act provides the categories of contracts which cannot be enforced specifically. Section 21 talks about a contract which in view of its nature is revocable. Such status cannot be assigned to these MoUs and/or arrangement as by nature these are revocable and are not be considered to be in perpetuity. These are business transactions and apart from other legal factors, the changed commercial conditions of the LPG market world over would entail the defendant from discontinuing such arrangement. The principal claimed that it is no longer commercially and economically viable. Under these circumstances the principal cannot be coerced to continue with such arrangement. The defendant being a public sector company managing the public funds had to deal with these issues as well as to what cost such necessities including LPG and NGL are being provided to the end consumers. The supply itself no doubt necessary but what is more important is at what rate and cost it is being supplied and who would be the ultimate beneficiary. I would conclude that in terms of Section 56(f) read with 21(d) of Specific Relief Act the nature of the agreement is such which cannot be specifically enforced. Once the status of revocability is assigned to these contracts the interpretation given by plaintiff’s counsel becomes redundant.
It is however categorically asserted that OGDCL will be commissioning its own LPG/NGL Extraction Plant which is expected to be completed by end of December, 2016 and any adverse impact of supply of LPG to the consumers will not take place. This is somehow an assurance of an unabated supply of LPG/NGL to the end consumers which is highlighted in the case of Khawaja Muhammad Asif (Supra), although it only relates to a particular gas filed.
I am, therefore of the view that these Articles 1(1) and 1(2) cannot be read in isolation of either of an independent right of the principal to terminate the contract or Article 6(c) which otherwise is available in some of the contracts. Under these categories of contracts the right to terminate, even if it does not form part of the MoUs or contracts, cannot be taken away. These rights are guaranteed under the law, as referred above, and in particular Section 21(d) and 56 of Specific Relief Act and hence irrespective of the fact that Article 6(c) does not form part of other MoUs, the plaintiff would gain nothing.
The other contention of learned counsel for the plaintiff is in relation to an arbitration clause and it is claimed that since the dispute between the parties has been referred to the Arbitrator therefore such termination letters/notices are misconceived and without any authority and powers. In this regard the dispute resolution article is very essential. In fact all MoUs, no matter which gas fields it relates to, have the capacity to answer the question. Such powers under dispute resolution article only relates to the first stage where parties were obliged to resolve dispute by mutual discussion, during which period the parties were required to faithfully continue to perform their respective obligations under the MoUs however in the event the dispute/ difference or questions could not be settled amicably or satisfactorily after resorting to mutual discussion, as above, it was likely to be referred for mediation before KCDRs accredited Mediator at Karachi Center for Dispute Resolution (KCDR) for mediation proceedings. The second phrase of this dispute resolution article does not restrict the defendant from terminating the contract nor the defendant was obliged to continue to perform its respective obligations as it (defendant) was in the first phrase of this dispute resolution article. So the proposition and interpretation of the plaintiff that right of termination could only be exercised by the Arbitrator or the Mediator has no force. With this interpretation, plaintiff’s own arguments would fall that on happening of any of the two events, referred in Article 1, the defendant may oblige to terminate the contract.
In the case of M.A. Naser v. Chairman, Pakistan Eastern Railways reported in PLD 1965 Supreme Court 83, the Hon’ble Supreme Court has held that:
“Thus this being a revocable license, the revocation thereof cannot be prevented by injunction. In a case like this the licensee is entitled to a reasonable notice in accordance with the provisions of section 63 of the Easements Act. If however, the license is revoked without reasonable notice the remedy of the licensee is by way of damages and not by way of an injunction.
It may also be pointed out that as this contract cannot be specifically enforced, clause (f) of section 56 of the Specific Relief Act will operate as a bar to the grant of injunction. …”
Similarly in the case of Lahore Stock Exchange Limited v. Hassan Associates reported in 2010 MLD 800 it has been observed as under:-
“….The agreement pertained to and was dependent upon the personal professional qualification of the respondents and ran into minute and numerous details qua designing and planning, which could never be over seen by any Court of law. Such elemental principle in this behalf is enunciated in section 21 of the Specific Relief Act, 1877 and, therefore, in view of section 56(f) of the Specific Relief Act no injunction could be grated to restrain the breach thereof. It has been noticed with great dismay that the impugned judgment has been passed in violation of the clear unequivocal, ancient and settled elemental principle of law. In this view of the matter the impugned judgment for grant of injunction is not sustainable in law.”
In the case of Universal Business Equipment v. Kokusai Commerce Inc. reported in 1995 MLD 384 it is held as under:-
“….Under clause (d) of section 21 of the Specific Relief Act (I of 1877), contract being revocable cannot be specifically enforced and clause (I) of section 56 of the said Act provides that inunction cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. In view of the above, the injunction sought by the plaintiff is not warranted.”
The issue in hand is in relation to the termination of MoUs and Badin arrangement. The MoUs allow the parties to terminate it under the law which was effectively done either by invoking Article 6(c) or by exercise of their inherent right to terminate such category of contracts/ MoUs.
Hence, in view of the above, I do not see any force in the arguments of learned counsel for the plaintiff. Plaintiff has not been able to make out a prima facie case for injunction. Neither it will suffer any irreparable loss in case injunction, as prayed, is refused nor balance of inconvenience lies in its favour. Accordingly, the application is dismissed.
Dated: 05.12.2016 Judge