2008 M L D 1606

[Lahore]

Before Sayed Zahid Hussain, C.J.

WAPDA through General Manager---Appellant

Versus

S.H. HAQ NOOR AND COMPANY and another---Respondents

F.A.O. No.62 of 2008, heard on 15th July, 2008.

Arbitration Act (X of 1940)---

----Ss. 20 & 41---Contract Act (IX of 1872), S.126---Civil Procedure Code (V of

1908), O.XXXIX, Rr. 1 & 2---Application for filing arbitration agreement in
Court---Grant of injunction against encashment of performance bond---Validity---
Specific procedure had been laid down in arbitration agreement for resolution of
disputes between parties, which had to be resorted to before approaching Court
under S. 20, Arbitration Act, 1940---Applicant had made a reference to Engineer,
but without awaiting his decision had approached Court without showing any
plausible and cogent justification therefor---Applicant had adopted premature
course of action---Making of such a restraint order was not warranted---High
Court accepted appeal and set aside impugned order in circumstances.

Messrs Ayaz Builders through Attorney v. Board of Trustees of the Karachi Port
Trust and another 2008 CLC 726; Shipyard K. Damen International v. Karachi
Shipyard and Engineering Works Ltd. PLD 2003 SC 191; Heavy Mechanical
Complex (Pvt.) Ltd. Taxila v. Attock Industrial Products Ltd. Rawalpindi PLD
2003 SC 295; Messrs Atlas Cables (Pvt.) Limited through Director v. Water and
Power Development Authority through Chairman an 2 others PLD 2008 Lah. 238
rel.

Umer Sharif for Appellant.

Nemo for Respondents

Date of hearing: 15th July, 2008.

JUDGMENT

SAYED ZAHID HUSSAIN, C.J.---Order of the trial Court, dated 28-3-2008

made on application moved by respondent No. 1 under section 41 of the
Arbitration Act, 1940 retraining the encashment of the performance bond is
sought to be assailed through this appeal.

Ever since the service of respondents Messrs Bilal A. Khawaja and Aurangzeb
Mirza, Advocates had been appearing for respondent No.1 but today none of them
is present. Mr. A.H. Masood, Advocate initially stood up for representing the said
respondent who had Power of Attorney/Wakalat Nama with him from respondent
No.1 but when he was asked to argue the matter, he expressed his inability and
requested not to be marked as counsel in the matter for respondent No.1. The
matter was adjourned on number of dates at the request of respondent No.1 to
explore the possibility of some amicable settlement. The learned counsel for the
appellant has stated today that no serous attempt was made by the respondent for
this purpose and there is no use of adjourning the matter any further. It has been
heard accordingly.

3. Since the matter (application under section 20 of the Arbitration Act, 1940) is
still pending before the trial Court, I would refrain from going into details and
dilating upon the factual aspects of the matter and would like to examine the
correctness of the order made by the trial Court i.e. issuance of restraint order. The
contention of the learned counsel for the appellant that ,in view of the procedure set
down in clause 67 of the Contract, the application of respondent No.1 under section 20
of the Arbitration Act, 1940 was premature and making of such a restraint order was
not justified in the facts and circumstances of the case, is not without substance. In this
context, the relevant clause of the contract is as follows:---

"67.1 Engineer's Decision

If a dispute of any kind whatsoever arises between the Employer and the
Contractor in connection with, or arising out of the Contract or 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 matter in dispute shall, in the first place, 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
eighty-fourth 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 Works 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 an arbitral award.

If either the employer or the Contractor be dissatisfied with any decision of the
Engineer or if the Engineer fails to give notice of his decision on or before the
eighty-fourth day after the day on which he received the reference, then either
the Employer or the Contractor may, on or before the seventieth day after the
day on which he received notice of such decision, or on or before the seventieth
day after the day on which the said period of 84 days expired, as the case may
be give notice to We other party with a copy for information to the engineer of
his intention 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 67.4 no arbitration in respect thereof maybe commenced unless
such which notice is given.

If the Engineer has given notice or his decision as to a matter in dispute to the
employer and the Contractor and no notice of intention to commence
arbitration as to such dispute has been given by either the Employer or the
contractor on or before the seventieth 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.

67.2 Amicable Settlement

Where notice of intention to commence arbitration as to a dispute has been

given in accordance with sub-clause 67.1 the parties shall attempt to settle such
dispute amicably before the commencement of arbitration. Provided that unless
the parties otherwise agree arbitration may be commenced on or after the fifty-
sixth day after the day on which notice of intention to commence arbitration of
such dispute was given even if no attempt at amicable settlement thereof has
been made.

67.3 Arbitration

Any dispute in respect of which:

(a) the decision, if any, or the Engineer has not become final and binding
pursuant to sub-clause 67.1; and

(b) amicable settlement has not been reached within the period stated in sub-
clause 67.2.

shall be finally settled under the provisions of the Arbitration Act, 1940 as
amended or any statutory modification or re-enactment thereof or the time
being in force. 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 relate to the dispute.

Neither party shall be limited in the proceedings before such arbitrator/s to the
evidence or arguments put before the Engineer for the purpose of obtaining his
said decision pursuant to sub-clause 67.1. 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 despite.
 The place of arbitration shall be Lahore".

The perusal of the above would show that certain specific procedure had been laid
down for dispute resolution between the contracting parties which had to be resorted to
as provided for before approaching the Court under section 20 of the Arbitration Act,
1940. It is admitted position that indeed respondent No.1 had made a reference to the
Engineer as contemplated by Clause 67.1 without awaiting, however, the outcome
thereof, he had approached the civil Court. The view taken by the learned trial Judge in
the matter does not find support from either the facts and circumstances of the case or
the law settled on the subject. In Messrs Ayaz Builders through Attorney v. Board of
Trustee of the Karachi Port Trust and another (2008 CLC 726) it was observe that:

"Clause 67.1 of the contract provides that the dispute of any kind between the
employer and the contractor in connection or arising out of the contract,
whether during the execution of works or after their completion and whether
before or after repudiation or termination of the contract, in the first place be
referred in writing to the Engineer. The said clause further provides that either
the employer or contractor be dissatisfied with any decision of the Engineer, or
if the Engineer fails to give notice of his decision than either of the party give
notice to other party of his intention to commence arbitration.

From the perusal of clause 67.1 the contention of Mr. Salman Talibuddin
appears to be correct that the arbitration proceedings provided in terms of the
contract cannot be commenced unless the Engineer gives his decision or fails to
give his decision."

It was a prerequisite for resorting to arbitration proceeding or approaching the civil

Court for that matter for which no plausible and cogent justification was made out. A
premature course of action was adopted by respondent No.1. Reference may also be
made to Shipyard K. Damen International v. Karachi Shipyard and Engineering Works
Ltd. (PLD 2003 SC 191), Heavy Mechanical Complex (Pvt.) Ltd. Taxila v. Attock
Industrial Products Ltd. Rawalpindi (PLD 2003 SC 295) and Messrs Atlas Cables
(Pvt.) Limited through Director v. Water and Power Development Authority through
Chairman and 2 others (PLD 2008 Lahore 238). From these precedents it is evident
that making of such a restraint order was not warranted. I, therefore, find no
justification for the issuance of restraint order by the trial Court. The order impugned,
dated 28-3-2008 is, thus, set aside.

As a result of the above, the appeal is accepted with no order as to costs.

S.A.K./W-14/L Appeal accepted.

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