ORDER

Date of Hearing

14.03.2008

Plaintiff

Al-Tariq Construction (Pvt.) Ltd. through Mr. Bilal A Khawaja, Advocate.

Defendant

None present from M/s. I. Puri Terminal Limited.

NADEEM AZHAR SIDDIQI, J : By this application under Section 20 of the Arbitration Act, 1940, the plaintiff has prayed that the defendant may be directed to file Arbitration Agreement in the Court and various disputes between the parties be referred to the arbitration.

The facts necessary for disposal of the application are that the defendant vide its letter dated 27.4.1998 awarded to the plaintiff construction of the Civil Work (Building) for their Edible Oil Storage Facilities at Plot No.34-35, Bin Qasim Road, Karachi for a contract price of Rs.14,366,542/-. It was alleged in the application that the defendant defaulted in its contractual obligations and inspite of the completion of work the payment has not been made. It was further stated that 9th final bill dated 02.09.1999 amounting to Rs.2,228,113/- was unduly and on flimsy grounds refused by the defendant. Thereafter, another invoice dated 28.02.2000 amounting to Rs.4,180,774/- on account of release of retention money was also refused without any reason. The plaintiff through his various letters reminded for the payment and finally on 18.9.2003 served a legal notice. It is stated in the application that the parties under Clause 54 of the Condition of the Contract agreed to resolve their dispute through Arbitration under the Arbitration Act, 1940.

The defendant has filed counter-affidavit to the application in which it has been stated that at the face of it claim raised in the suit is barred by time as it pertains to the claims alleged to have become due on 02.09.1999 and 28.02.2000, whereas present proceedings have been filed on 03.12.2003. It was further stated in the counter-affidavit that the plaintiff has not commenced work in time as provided in the contract and has not arranged adequate and satisfactory material and manpower to undertake execution of the contractual work and has delayed the completion. It was further stated in the counter-affidavit that the release of the final payment under the 9th Running Bill was dependent upon the plaintiff’s commitment to rectify defective works which the plaintiff has failed to honour, hence the defendant company has rightly refused to pay the said bill. It was further stated that the bill amounting to Rs.4,180,774/- inclusive of retention money lying with the defendant company was completely contradictory with the terms of the contract and there was no question of releasing the aforesaid retention money as under the condition of the contract the same could only be released after expiry of the maintenance period which would commence after issuance of completion certificate. In the counter-affidavit it was further stated that the plaintiff’s failure to fulfill its contractual commitment vis-à-vis rectifying the defective work as per specification of the contract disentitles it to claim any amount from the defendant and at no stage was there any question of an amicable settlement as the plaintiff at no stage practically rectified defective work as per their own commitment and the defendant has rightly refused to release 9th final running bill as well as retention money as the cost of rectifying the defective RCC flooring was worked out to be far greater than the amount claimed by the defendant company for this purpose.

Mr. Bilal A. Khawaja, the learned counsel for the plaintiff submits that there is no dispute with regard to the arbitration clause in the contract. He submits that there is a dispute between the parties with regard to the completion of work and withholding of the final bill as well as retention money and there is no amicable settlement between the parties and only recourse available is to refer the matter to the arbitration to resolve the dispute between the parties. He further submits that the question with regard to the limitation for raising of dispute can be decided by the arbitrator and at this stage the Court cannot enquire into the matter. He submits that cause of action for filing of this application was arose on the day when the defendant has refused to pay the final bill and retention money and not on the day when the invoices were raised.

The learned counsel for the defendant is not present. On the last date the General Manager of the defendant Company was present in person and requested for sometime to engage an advocate, but today no one is present to argue this matter.

I have heard the learned counsel for the plaintiff and perused the record of this case very carefully.

From the perusal of the contents of the counter-affidavit, it appears that the defendant has not disputed the awarding of the contract to the plaintiff and the availability of the arbitration clause in the said contract. The clause for settlement of dispute between the parties in the Contract reads as under: -

“All disputes between the Contractor and the Employer of any kind whatsoever arising in connection with this Contract (whether during the progress of the works or after their completion or before or after the determination, abandonment or breach of the Contract) shall be mutually settled if possible between the Employer and the Contractor. If the Employer and the Contractor cannot agree mutually on any dispute, then in such case either party (the Employer or the Contractor) shall within 28 days after failing to resolve the dispute mutually give a written notice to the other party requiring that such dispute be arbitrated upon. Such written notice shall specify the matter which are in dispute and no other matter of which such written notice has not been given shall be referred to two Arbitrators, one of the nominated by the Contractor and the other by the Employer. The Arbitrators will agree to refer the matter to an Umpire in case the dispute remains unresolved. The umpire shall be a retired judge of the High Court of Pakistan and be appointed by the Arbitrators in writing under their hand. The decision of such Arbitrators or the Umpire shall be final and binding on both the Contractor and Employer. Any such reference shall conform to the Pakistan Arbitration Act in force or any statutory modification thereof. The assessment of cost incidental to the reference and award respectively shall be at the discretion of the arbitrators or the Umpire as the case may be. Services under the Contract shall, notwithstanding the existence of any dispute continue during the arbitration proceeding and any payment due or payable by the Employer to the Contractor shall not be with-held on account of such proceedings unless such payments are the direct subject of the arbitration. Condition precedent to any other action at Law, Venue of all arbitration shall be in Pakistan.”

From the perusal of the counter-affidavit it also appears that apart from the ground of limitation the defendant has disputed satisfactory completion of the work by the plaintiff within contractual period and has tried to justify withholding of the final bill as well as retention money.

As far as the question of limitation is concerned, it is mixed question of law and fact and the arbitrator can determine the actual date of occurrence of cause of action. The question whether the cause of action arose on the day of invoice or refusal to pay is a factual dispute and can be dealt with by the Arbitrator. While considering an application under Section 20 of the Arbitration Act it will not be proper for the Court to enquire into the limitation. In the reported case of BASU DORABJI MARKER AND TWO OTHERS VS MUSHTAQ & SIX OTHERS (NLR 1981 UC 381) a Learned Single Judge of this Court relying upon the reported case of IMANDIN v. THAL DEVELOPMENT AUTHORITY (PLD 1972 SC 123) has held that an application under Section 20 of Arbitration Act is governed by the period of limitation provided for in Article 181 of the Limitation Act and commencement point is the date when the right to make the application accrued to the applicant. It was further held that it is not for the Court to enquire into the disputed question of fact arising out of the contractual right which falls within the ambit of the arbitration clause.

The defendant has also raised factual dispute with regard to the non-satisfactory work and delay in completion of the project. While dealing with an application under Section 20 of the Arbitration Act it will not be proper for the Court to go into the factual controversies, which will prejudice the proceedings before the Arbitrator. For referring the matter to the Arbitrator it is sufficient that there exist a contract between the parties to refer the dispute to the Arbitration and that prima facie a dispute exist between the parties.

From the contents of the plaint as well as from the counter-affidavit it is clear that the dispute exists between the parties and the same has to be resolved by way of arbitration as agreed by the parties.

In view of the above, the suit under Section 20 of the Arbitration Act, 1940, is allowed as prayed. Mr.Justice (Retd.) G.H. Malik is appointed Arbitrator to resolve the dispute between the parties and to give his award.

The suit stands disposed of in the above terms with no order as to cost.

Karachi

Dated ___.03.2008. JUDGE

*Farhan*