ORDER SHEET
IN THE HIGH COURT OF SINDH AT KARACHI
Suit No.1106 of 2014
Habib University Foundation
Versus
Mecatch (Pvt.) Limited
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Date |
Order with signature of Judge |
For hearing of CMA 9204/14
Date of hearing 21.11.2016:
Mr. Aminuddin for plaintiff.
Mr. Bilal A. Khawaja for defendant.
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Mohammad Shafi Siddiqui, J.- Plaintiff has filed this suit for damages and permanent injunction restraining the defendant and/or its officials, employees or any one on their behalf from interfering with, impeding and/or stopping construction/completion of the work/university or from interfering in the plaintiff’s peaceful possession, enjoyment, use and ownership of the subject properties.
In brief the case of the plaintiff is that the project in dispute was awarded by the plaintiff to the defendant on or about 20.07.2012. It was required to be completed within 13 months however it is claimed that defendant has assigned various reasons in delay of its completion, which it attributed to plaintiff.
After filing of the suit, notices and summons were issued to the defendant and in response thereto defendant put an appearance and filed an application under section 34 of Arbitration Act, 1940. This application ought to have been decided in priority and is being decided accordingly.
Defendant’s counsel has taken me to sub-clause 50 headed as ‘Sub-Clause 50 Disputes & Arbitration’, available at page 185 Part 1 of Annexure P/9 to the plaint. Counsel submitted that in case of a dispute between the employer and the contractor out of the contract or the execution of works, whether during execution of work or after its completion, and whether before or after repudiation or other termination of contract, including any dispute as to any opinion and instruction, determination, certificate or valuation of the Engineer, the parties shall seek to resolve such dispute or difference by mutual consultation and friendly discussion and on their failure it is referable to the Engineer in writing who would oblige to give decision not later than 21 days after the day on which he received such Reference. It is only when any dispute arises out from the Engineer’s decision that the matter shall proceed directly to formal arbitration under sub-clause 50.5.
Learned counsel for defendant submitted that without resorting to any such clause, the plaintiff has filed this suit seeking such injunctive order restraining the defendants from proceeding further in relation to the work awarded by the plaintiff to the defendant. Hence, this application under section 34 of Arbitration Act, 1940 is filed and prayed for grant of the same accordingly.
Learned counsel for the plaintiff on the other hand has denied that such arbitration clause could be implemented as defendant has dis-entitled itself since it has taken steps in the proceedings. He submitted that the inventory has been prepared and the defendant by participating therein in pursuance of the orders of the Court dated 16.07.2014 has dis-entitled itself from invoking Section 34 of the Arbitration Act, 1940. He submitted that the defendant has delayed the project and the plaintiff has reminded the defendant of such delay through several letters issued to them. He however on query stated that there is no formal letter issued to the defendant insofar termination of the contract/award is concerned. It is submitted by the learned counsel for the plaintiff that the defendant was given notice by the plaintiff that on account of their disability to complete the work and quality issues faced by the plaintiff it constrained them to itself deploy resources for completing the same at the defendant’s cost by engaging another contractor.
I have heard the learned counsel and perused the material available on record.
There cannot be a question that there existed a dispute between plaintiff and the defendant i.e. employer and the contractor. Plaintiff undertook to complete the project by appointing another contractor in pursuance of letter dated 10.07.2014. The subject clause i.e. sub-clause 50, which relates to disputes and arbitration, for the convenience is reduced as under:-
“Sub-Clause 50 Disputes & Arbitration
Sub-Clauses 50.1 to 50.4 are deleted and substituted by the following new Sub-Clauses 50.1 to 50.4 and the new Sub-Clauses 50.5 and 50.6 are added:
50.1 If a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with, or arising out of, the Contract of the execution of the works, whether during the execution of the Works or after their completion and whether before or after repudiation or other termination of the Contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer, the parties shall seek to resolve such dispute or difference by mutual consultation and friendly discussion.
50.2 If the parties fail to solve such dispute or difference by mutual consultation and friendly discussion then the matter in dispute shall be referred in writing to the Engineer, with a copy to the other party. Such reference shall state that it is made pursuant to this Clause. No later than the twenty first (21) day after the day on which he received such reference, the Engineer shall give notice of his decision to the Employer and the Contractor. Such decision shall state that it is made pursuant to this Clause.
Unless the Contract has already been repudiated or terminated, the Contractor shall, in every case, continue to proceed with the Work with all due diligence, and the Contractor and the Employer shall give effect forthwith to every such decision of the Engineer unless and until the same shall be revised, as hereinafter provided in an amicable settlement or in an arbitral award.
In any case where the Conditions provide that the decision of the Engineer is to be final and conclusive, such decision shall not be referable to arbitration under this Clause nor shall the same be questioned in any other form of proceedings whatsoever.
Any dispute arising from the Engineer’s decision under Sub-Clause 2.7 shall not be reviewed by the Engineer under this Sub-Clause 50.2 and the matter shall proceed directly to formal arbitration under Sub-Clause 50.5.
50.3 If either the Employer or the Contractor be dissatisfied with a decision of the Engineer or if the Engineer fails to give notice of his decision on or before the twenty first (21) days after the day on which he received the reference, then either the Employer or the Contractor may, on or before the twenty eighth (28) day after the day on which the said period of twenty one (21) days expired, as the case may be, give notice to the other party to commence arbitration, as hereinafter provided, as to the matter in dispute. Such notice shall establish the entitlement of the party giving the same to commence arbitration, as hereinafter provided, as to such dispute and, subject to Sub-Clause 50.6, no arbitration in respect thereof may be commenced unless such notice is given.
If the Engineer has given notice of his decision as to a matter in dispute to the Employer and the Contractor and no notification of intention to commence arbitration as to such dispute has been given by either the Employer or the Contractor on or before the twenty eighth (28) day after the day on which the parties received notice as to such decision from the Engineer the said decision shall become final and binding upon the Employer and the Contractor.
50.4. Where notice of intention to commence arbitration as to a dispute has been given in accordance with Sub-Clause 50.3, arbitration of such dispute shall not be commenced unless an attempt has been made by the parties to settle such dispute amicably through mutual negotiation within ninety (90) days from the date of notification of Engineer’s decision.
50.5 Any dispute in respect of which:
(a) the decision, if any, of the Engineer has not become final and binding pursuant to Sub-Clause 50.2 and
(b) amicable settlement has not been started/reached within the period stated in Sub-Clause 50.4
shall be finally settled, unless otherwise specified in the Contract, under the Pakistan Arbitration Act, 1940 (Act No.X of 1940) and Rules made thereunder. Any dispute arising from the Engineer’s decision, or lack thereof, under Sub-Clause 2.7 shall also be finally settled in accordance with this Sub-Clause 50.5.
[The arbitration shall be conducted by a panel of three arbitrators, with each party being entitled to appoint one arbitrator and an umpire to be appointed by the two arbitrators before entering upon a reference.] The said arbitrator(s) shall have full power to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer for the purpose of obtaining said decision pursuant to Sub-Clause 50.2. No such decision shall disqualify the Engineer from being called as a witness and giving evidence before the Arbitrator(s) on any matter whatsoever relevant to the dispute.
The venue and language of arbitration proceedings shall be the place in Pakistan as mentioned in the Preamble to Conditions of Contract.
Reference to arbitration under this Sub-Clause 50.5 shall not relieve the Contractor of its obligation to proceed with the Works in accordance with the Contract and/or the Engineer’s decision or instruction nor relieve the Employer of any of his obligations under the Contract.”
Sub-Clause 50.1 relates to a dispute between the contractor and the employer in connection with or arising out of the contract or the execution of work and the parties were obliged to seek resolution of such dispute or difference by mutual consultation and friendly discussion. It is nobody’s case that Sub-Clause 50.1 was exhausted; there were some discussions and correspondence but in particular not with reference to Sub-Clause 50.1.
It is only on account of failure of such amicable solution that Sub-Clause 50.2 triggered that if the parties fail to solve such dispute or difference by mutual consultation then the matter in dispute shall be referred in writing to the Engineer. Certainly that situation is also not ripe as Sub-Clause 50.1 was not exhausted. Had it been so the Engineer was under the obligation to give a decision within 21 days after the day on which he received such Reference from either of the parties. The second part of Sub-Clause 50.2 relates to repudiation and termination of contract by the Engineer as in the absence of such termination the contractor was obliged to continue to proceed with the work with all due diligence and the contractor and the employer were also obliged to give effect forthwith to every such decision of the Engineer unless revised amicably.
In case of disagreement of a decision of the Engineer Sub-Clause 50.3 stimulates and within 28 days of the prescribed time for Engineer to respond and was obliged to give decision, any party may give notice to commence arbitration. However, in case the requisite time of 28 days expires, after such decision of the Engineer within 21 days of reference, as prescribed, it becomes final in terms of second part of Sub-Clause 50.3.
Sub-Clause 50.4 relates to an attempt to be made for an amicable resolution of the dispute before commencement of the arbitration proceedings. Clause 50.5 is in relation to arbitration proceedings in relation to a decision of the Engineer in pursuance of Sub-Clause 50.2. The defendant’s stand to the extent that if at all they (plaintiffs) have any dispute in relation to the work either in progress or completed etc. covers by Sub-Clause 50 and hence the plaintiff was required to exhaust such remedy if they feel that they are aggrieved of any such act of the defendant.
One thing is quite important in the entire proceedings i.e. termination of the contract. It seems that under the hierarchy of Sub-Clause 50, which relates to the disputes and arbitration, it seems that the discretion to repudiate or terminate the contract is with the Engineer and it is for this reason that such exercise has not been carried out and/or such option is not availed of and the plaintiff opted to have the work completed (as claimed) through some other contractor without terminating and repudiating the subject contract as if could have only been done by Engineer.
Insofar as the contention that the defendant has taken steps in the proceedings, I am not convinced with such proposition. The only proceeding that has taken place in the present proceedings is the inventory that was prepared in terms of order dated 16.07.2014 passed in the absence of the defendant and their participation in the inventory is only on account of the orders of the Court. It does not amount to taking any steps in the proceedings. The modification was only sought by the defendant to the extent that its representation be allowed to be present at the time of inspection since the machinery and other articles of the defendant, as claimed by them, were lying at the site. I do not consider this contention of the defendant to participate in inspection to constitute steps being taken by defendant.
In view of the above and in terms of the applicability of Sub-Clause 50, the plaintiff has not been able to refute the claim of the defendant as far as application under section 34 of the Arbitration Act, 1940 is concerned, which is accordingly allowed as prayed.
Dated: Judge