Citation(s): 1998 SLD 546 = 1998 SCMR 2268
Supreme Court of Pakistan
Civil Appeal No. 1477 of 1996, decision dated: 23rd June, 1998, hearing DATE : 2-
06-1998
AUTHOR(S): SAIDUZZAMAN SIDDIQUI, RAJA AFRASIAB KHAN AND WAJIHUDDIN
AHMED, JJ
MESSRS AIRPORT SUPPORT SERVICES
VS
THE AIRPORT MANAGER, QUAIDEAZAM INTERNATIONAL AIRPORT, KARACHI AND
OTHERS
Mian Fazle Mahmood, Senior Advocate Supreme Court and M.A. Zaidi, Advocate-
on-Record for Appellant. Munir Peracha, Advocate Supreme Court and Ejaz
Muhammad Khan, Advocate-on-Record for Respondents
Law: Central Government Lands and Buildings (Recovery of Possession) Ordinance (LIV of
1965)
Section: 3
Law: Pakistan Civil Aviation Authority Ordinance, 1982
Section: 11(5)
Law: Arbitration Act, 1940
Section: 34
Law: Constitution of Pakistan, 1973
Section: 185(3),199
Topic: Contractual Obligations and Judicial Review
Conclusions:
• Breaches of public contracts can invoke judicial review if statutory obligations or public
interest are violated.
• Arbitration clauses in contracts do not bar constitutional remedies if public interests are
affected.
Citations:
• Central Government Lands and Buildings Ordinance, 1965 (S.3)
• Case laws: Anjuman-e-Ahmadiya v. Deputy Commissioner, Sargodha (PLD 1966 SC 639)
JUDGMENT
WAJIHUDDIN AHMED, J.---The appellant which, on the facts incorporated in the memo.
claims to be registered as a partnership concern since 28-3-1995, is stated to have
addressed a letter of request dated 18-2-1995 pursuant to which, though the General
Manager Commercial, Respondent No.2Civil Aviation Authority (CAA), per letter dated 7-6-
1995, in principles, agreed to grant a licence to the appellant for establishing Passenger
Facilitation/Assistant Services at the Quaid-e-Azam International Airport Karachi (QIAP) for
a period of 3 years. Basic terms were reflected in the letter and the appellant was required
to execute the licence agreement with the director, Q.I.A.P., but before the execution, to
submit copies of the company's (sic.) registration certificate to the C.A.A. and the director,
Q.I.A.P. Around such time, the appellant is stated to have written a letter, dated 12-6-1995,
to the Airport Director, C.A.A., whereby the appellant applied for allotment of
accommodation in the office block at the Jinnah Terminal Complex. In response, the Airport
Manager, acting on behalf of respondent-C.A.A., vide letter dated 21-8-1995, allotted Room
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No.5038 at the Jinnah Terminal to the appellant w.e.f. 1-8-1995 to 31-7-1996.
Corresponding licence agreements, however, show that the agreement for Passenger
Facilitation/Assistance Service was concluded on 15-7-1995 and so also the agreement for
allocation for office space covered by room No.5038, aforesaid. The first of these licences,
apparently to allow for mobilisation, was to commence from 1-10-1995 for a period of 3
years ending 30-9-1998 whereas that for the room in question was to become effective
from 1-8-1995, enuring for one year only. Each carried a separate consideration and
security deposit, the last a monthly licence fee of Rs.10,000. Both the agreements were
executed by the Airport Manager, Karachi Airport, in the name of the C.A.A. It may bear
mention here that, on 3-10-1995, the General Manager Commercial, C.C.A., addressed a
communication to the director, QIAP, intimating that it had come to the notice of the
Headquarters, C.A.A., that the appellant had unauthorisedly sublet the licence to M/s Harat
Management (Pvt) Ltd., which party, previously, was running the same concession. The
director was required to investigate the matter and immediately forward his findings to the
Headquarters. On the following day viz. 4-10-1995 the Acting Director, writing to the C.A.A.,
informed that a team had been constituted to investigate the matter and, as per the report
enclosed, it was found that illegal money exchange business was being carried out at the
room aforementioned. In the report, which has been produced, it is detailed that money
changing business was taking place at the site and, besides, the same persons were found
on the location, as were earlier there in the Harat left-over baggage office. Also from the
record we find that Harat Management (Pvt.) Ltd. were the previous contractors under a
licence agreement dated 31-8-1994, which was terminated on 10-10-1994 on similar
allegations of unauthorisedly carrying on money changing business from the licensed
premises. Hafizur Rehman, their Managing Director, acknowledging default, however,
pleaded for a final chance through a letter dated 14-11-1994,and the licence was restored
on 28-11-1994, but subject to warning and payment of licence fee for the closed period.
Reverting, in so far as the appellant is concerned, the outcome of the inquiry was also
confirmed by a representative of the Royal Currency Exchange Booth. In the circumstances,
the Acting Director recommended termination of the agreement. On the same date viz. 4-
10-1995 the Acting Director addressed a letter to the appellant, requiring the appellant to
provide a copy of the certificate of the appellant's registration, dated 20-3-1995, the details
pertaining to the addition of new partners, inducted in the firm after the execution of the
agreement, without the prior approval of the licensor and a list of the appellant's .clients,
together with to date activities at the airport. The letter cannot be equated with a notice. In
the appellant's reply, dated 8-10-1995, it was stated that the copy of registration showing
the details of the partners had already been supplied and that the composition of the firm
was an internal matter, having been made under the law, the agreement with the C.A.A.
being silent as to obtaining prior approval for any change of partners.
It remains to be pointed out here that the two agreements aforesaid, each executed on 15-
7-1995, carried identical termination clauses in paras. 8 and 29 respectively thereof, the
first concerning the business and the second relating to licencing of the room. For our
purposes, out of these, para. 29 is relevant, which in extenso is this:
"29 Violation of licence terms.---In the event of violation of terms and conditions of this
licence, the licensee may be given written notice, specifying the violation, require the
licensee to remove of the violation within the time specified. In case of failure of the
licensee to remove the violation to the satisfaction of the Airport Manager the latter may
take either of following actions:--
(a) Impose fine up to Rs.500 (Rupees Five Hundred only) on the licensee for each violation
of the terms of the licence. The fine so imposed shall be immediately paid by the licensee or
else realized from the Security Deposit. The licensee in the latter event shall replenish the
security deposit depositing like amount within three days of imposition of fine.
(b) Forfeit the entire Security Deposit and/or cancel the licence without incurring any
liability or any compensation whatsoever."
In fact many of the clauses in the two agreements are similar and the other relevant ones
pertain to references of the disputes to arbitration, such being numbered as 19 and 30,
respectively. Applicable para. 30 is reproduced below:--
"30. Disputes.---In case of any dispute existing between the licensor and the licensee in
respect of the interpretation, conduct, performance of any terms or conditions of this
licence, the same shall be referred to the Director-General, Civil Aviation Authority whose
decision thereon shall be final and conclusive and not open to challenge.
Reverting, through letter dated 12-10-1995, the Airport Manager, Q.I.A.P., upon recording
the following pleas, terminated the agreement under clause 29(b). The grounds and the
attending termination are these:
"2. An investigation was conducted against your company and following
irregularities/violations have been observed: --
(i) To date M/s. Airport Support Services have not provided a copy of their company's
registration (certificate of incorporation).
(ii) The copy of the registration as submitted, dated September 18, 1995 by the party is
merely indicating the change of partnership of the company which has to be approved by
C.A.A. before the change.
(iii) The office allotted to the party is being used for illegal currency exchange business.
Civil Aviation Authority by exercising its power according to clause 29(b) have decided to
terminate your licence agreement and forfeited the entire security deposit with immediate
effect."
On the same date namely, 12-10-1995 the Airport Manager, acting under section 3 of the
Civil Aviation Ordinance, 1965, [an error for the Government Lands and Buildings (Recovery
of Possession) Ordinance], addressed a notice to vacate in terms reflected hereunder:--
"3. You are, therefore, called upon to vacate peacefully the said premises and remove your
belongings/materials etc. or any super structure with immediate effect.
4. In case you fail to abide by this notice, we shall be constrained, to demolish/remove from
the said premises your unauthorised occupation at your risk and costs and the possession
of C.A.A. shall be recovered. Your security deposit is hereby forfeited as per clause 29(b) of
the licence agreement."
It is the case of the appellant that possession of the room in question was taken over
forthwith.
On 15-10-1995 the appellant, citing to be represented by parties, Syed Hasan Abbas,
Hafeezur Rehman and Arabab Khan preferred a Constitutional petition in the High Court of
Sindh. In the comments submitted by the C.A.A., it was pleaded that the appellant was, by
covenant, restricted to use the premises to the purpose for which it was licensed, that the
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C.A.A. had about a 100 other licensees at the location who are to be disciplined and that
the appellant, again against stipulations, proceeded to take new partners without the prior
approval of the C.A.A. Hafeezur Rehman, who as a parther has verified the petition and
supplied the supporting affidavit is, as claimed by the C.A.A., presumably the same
individual that figured as the Managing Director of Harat Management (Pvt.) Ltd, the
previous contractor and, what is still more significant, he and Arbab not being partners in
the original partnership, were inducted as such on 18-9-1995, two of the matching partners
from the initial three earlier retiring. Be that as it may, the petition coming up before a
Division Bench of the High Court was dismissed in limine on 20-12-1995, the High Court
coming to the conclusion that the dispute was covered by an arbitration clause and, at any
event, investigation into fats, pertaining to contractual rights being involved, remedy of a
suit was more appropriate in the circumstances, Leave pursuant to a petition in this Court,
was granted on 21-6-1996, upon a plea that the question was not one of enforcement of
contractual obligations but of violation of mandatory provisions of law, requiring prior notice
as envisaged in section 3 of the Central Government Lands and Buildings (Recovery of
Possession) Ordinance, LIV of 1965, since amended by Ordinance X of 1984, which was not
duly considered in the High Court. Such amended version of section 3 (ibid), as made
invocable by the amended section 11 (5) of the Pakistan Civil Aviation Authority Ordinance,
per Ordinance XXXII of 1984, is placed below, side by side of the latter provisions:
Amended section 3 of the Government Lands and Buildings (Recovery of Possession)
Ordinance, 1965.
"3. If, on the expiry, whether before or after the commencement of this Ordinance, of the
period of any lease or licence in respect of any land or building of which the Central
Government is the lessor or licensor or on the determination of such lease or license on the
ground of breach of any covenant imposing an obligation on the lessee or licensee to give
up possession of the demised land or building required for any public purpose, the lessee or
licensee refused or failed, or refuses or fails, to vacate that land or building and put the
Central Government into possession of the same, any officer authorised by the Central
Government in this behalf may, notwithstanding anything contained in any other law for the
time being in force or in any contract, at any time, enter upon the demised land or building
and recover, vacant possession of that land or building by evicting the lessee or licensee
and may also demolish and remove the structures, if any, erected or built thereon by the
lessee or licensee:
'Provided that such officer shall not enter upon the demised land or building unless the
Federal Government has given an opportunity of being heard to the lessee or licensee;
Provided further that such officer shall, before demolishing and removing any structures
under this section, issue a notice to the lessee or licensee calling upon him to remove such
structures within the period specified in the notice.'
Section 11 (5) of the Pakistan Civil Aviation Authority Ordinance, 1982: "11
(1) ..............................
(2) ..............................
(3) ..............................
(4) ..............................
(5) The Federal Government Lands and Buildings (Recovery of Possession) Ordinance, 1965,
shall apply to lands and buildings vesting in the Authority and for the purpose of such
application shall have effect as if reference therein to the Federal Government included a
reference to the Authority. "
From the terms of the contract as also on a fair reading of sections 3 and 11 (5)
respectively of the 1965 and 1982 Ordinances, above reproduced, it is manifest that a prior
notice and opportunity for a lawful entry was necessary E and because such prerequisites
were not strictly satisfied, it can hardly be , questioned that the impugned action of the Civil
Aviation Authority fell beyond the scope of the contractual stipulations and statutory
mendates. The High Court order, however, has proceeded to decline relief on the grounds
that Constitutional jurisdiction did not extend to enforcement of contractual obligations and
that the arbitration clause also came in the way of the appellant.
Neither of the conclusions of the High Court is sustainable. It has consistently been held
that while routine contractual disputes between private parties and public functionaries are
not open to scrutiny under the Constitutional jurisdiction, breaches of such contracts, which
do not entail inquiry into or examination of minute or controversial questions of fact, if
committed by Government, semi-Government or Local Authorities or like controversies if
involving dereliction of obligations, flowing from a statute, rules or instructions can
adequately be addressed for relief under that jurisdiction. Further a contract, carrying
elements of public interest, concluded by functionaries of the State, has to be just, fair,
transparent, reasonable and free of any taint of mala fides, all such aspects remaining open
for judicial review. The rule is founded on the premises that public functionaries, deriving
authority from or under law, are obligated to act justly, fairly equitably, reasonably, without
any element of discrimination and squarely within the parameters of law, as applicable in a
given situation. Deviations, if of substance, can be corrected through appropriate orders
under Article 199 of the Constitution. In such behalf even where a contract, pure and.
simple, is involved, provided always that public element presents itself and the dispute does
not entail evidentiary facts of a disputed nature, rederess may be provided. A number of
precedents have contextually come to-occupy the field and, inter alia, may to noted (1)
Anjuman-e-Ahmadiya, Sargodha v. Deputy Commissioner, Sargodha, PLD 1966 SC 639, (2)
The D.F.O. South Khari v. Ram Sanehi Singh, 1971 (3) Supreme Court Cases 864AIR 1973
SC 205; (4) Rashid A. Khan v. West Pakistan Railway Board PLD 1973 Lahore 733; (5) The
Majilis-i-Intizamia, Jamia Masjid, Ghulam Muhammad Abad Colony v. Secretary to
Government of West Pakistan, Communication and Works Department, PLD 1975 SC 355;
(6) Muhammad Ashraf Ali v. Muhammad Naseer and 2 others 1986 SCMR 1096 (7) M/s.
Dwarkadas Marfatia & Sons v. Board of Trustees, Bombay Port, AIR 1989 Supreme Court
1642; (8) M.H. Abidi v. State Life Insurance Corporation, 1990 MLD 563; (9) Mahabir Auto
Stores v. Indian Oil Corporation, AIR 1990 Supreme Court 1031; (10) Shrilekha Vidyarthi v.
State of U.P. AIR 1991 Supreme Court 537; (11) M/s Pacific Multinational (Pvt.) Ltd. v.
Inspector Generai of Police Sindh. PLD 1992 Karachi 283; (12) M/s Presson Manufacturing
Ltd. v. Secretary Ministry of Petroleum & Natural Resources and 2 others 1995 MLD 15
(Lahore) and (16) Shoaib Bilal Corporation v. Government of Pakistan KLR 1997 Rev. Cas.
27 Lahore.
The doctrine has further been recognised and augmented by the recent insertion of section
24-A in the General Clauses Act, 1897, which delares that where a statute confers a power
to make any order or to give any direction to any Authority, office or person, such would be
exercised reasonably, fairly, justly and for the advancement of the purpose of the
enactment. What is more, the order or direction, so far as necessary or appropriate would
reflect reasons for its making or issuance and, where the same is lacking, an affectee may
demand the necessary reasons, which, in response, would be furnished. Section 24-A
(supra) is this:--
"24-A. Exercise of Power under enactments. --(1) Where, by or under any enactment, a
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power to make any order or give any direction is conferred on any authority, office or
person such power shall be exercised reasonably, fairly, justly and for the advancement of
the purpose of the enactment.
(2) The authority, office or person making any order or issuing any direction under the
powers conferred by or under any enactment shall, so far as necessary or appropriate, give
reasons for making the order or, as the case may be, for issuing the direction.
(3) Where any order made or any direction given in exercise of the powers conferred by or
under an enactment affects any person prejudicially such person may require the authority,
office, or person making the order or giving the direction to furnish the reasons for the
order or, as the case may be, the direction and such authority, office or person shall, furnish
the reasons to such person."
As regards arbitration clauses in contracts of the genus, the normal rule of bar of
proceedings under section 34 of the Arbitration Act and other postulates of the same law,
manifestly, do not, with conventional force, reflect on Constitutional remedies, for the
simple reason that a sub-Constitutional legislation cannot curtail or otherwise cut across the
Constitutional mandates.' Even while the preclusions -in the ordinary laws may contextually,
stand so l clogged, and in the category may relevantly be included in the Contract Act,
1872, the Specific Relief Act, 1877 and Sale of Goods Act, 1930, the Court, when
addressing a Constitutional relief cannot be altogether oblivious of the just, reasonable and
salutary provisions in such legislations. Thus, where a contract in terms of the Specific
Relief Act cannot be specifically enforced or under the Contract Act is void ab initio or under
the Sale of Goods Act giving effect to the same may contravene the principles and
postulates of that law, a Constitutional Court would be slow in extending relief. It is for this
reason that a servant cannot be forced on an unwilling master nor can contracts eminently
unsuitable for specific performance to be directed to be specifically performed nor
considerations of public policy may be ignored in extending a Constitutional remedy. All this,
however, in the Court's discretion may give way to public interest and public good, where a
State functionary has exceeded his power and wilfully or wantonly trampled upon vested
private or public rights. That such a power, relevant to the Arbitration Act, 1940, vests in
.the superior Court has clearly been recognised in at least two of the reported cases from
this jurisdiction, which have been cited by Mr. Fazl-e-Mehmood, appearing for the appellant.
Such are Anjuman-e-Ahmadlya Sergodha v. Deputy Commissioner, Sargodha, PLD 1966 SC
639 and Muhammad Ashraf Ali v. Muhammad Naseer 1986 SCMR 1096.
Nonetheless, the question which arises for consideration is whether, in the circumstances of
the case, the appellant qualifies for relief. As to antecedants, legitimate queries may be
whether the transaction was transparent and whether such was squarely motivated by
public interest. Plainly, the appellant applied for grant of licence at a time when it had not
yet been Constituted as a firm. The C.A.A. do not even seem to know whether the appellant
is a firm or a company. This is enough to raise eye brows in a society, where a lot is known
to be accomplished by dint of sheer command performances. It is nobody's case that the
contract was granted competitively or that any matching opportunity was afforded to the
public at large. Besides, there were apparent deviations on the part of the appellant from
the stipulations solemnly subscribed to by it. Thus, there were specific provisions for the
licensee to employ qualified persons and, at the time of commencement of the business,
provide the names and details thereof to the licensor. The names and particulars of
subsequently hired employees were, likewise, to be notified immediately to the licensor,
together with "any other change in this behalf". Further, all employees of the licensee, who
were to work in the terminal buildings of the Q.A.I.P. or any other sensitive area, were
required to obtain security clearance from the concerned agencies. Clauses (7) and (13)
preclude unauthorised business and assignment respectively. These provisions clearly
implied similar incidems with regard to a change, if any, in the partners of the firm. Such a
change assumed significance when one or more inductees as partners belonged to the
previous contractor of the C.A.A., whose antecedents were not entirely without blemish and
when the licensee, allegedly, was found induging in the same kind of deviations as ascribed
to that previous contractor, Significantly, there is not a word in the memo of the petition
presented to the High Court that the allegations as to transgressions were fake or that no
change in the complexion of the firm had occurred. It is in this scenario that the case of the
C.A.A. to be viewed, Such is that the purpose for which the grant was made had been
thrown over-board. One of the new entrants, as unfolded in these proceedings, virtually
took over the pursuit of the business and its concomitant disputes as it he had supplanted
the original firm, Ex Facie confirmatory of the report made mention of in the C.A.A. letter
dated 3-10-1995. The equities, in such background, are clearly against the appellant.
As was pointed out by Muhammad Afzal Zullah, J., (as he then was), in Rashid A. Khan v.
West Pakistan Railway Board, PLD 1973 Lahore 733, a distinction is to be made between an
ordinary contract and a contract through the process of tender. In the latter case, any
serious contravention of rules/instructions may not be accepted as lawful and a public
functionary may even be personally required to make good the loss attending upon such an
illegality. The instant case, therefore, is distinguishable inasmuch as the contract was a
result of private negotiations and, thus, not endowed with the sanctity attaching to a higher
plane, when a contract follows upon a due, open and public process. This, in turn, should be
caution enough to the officers of the C.A.A. that all further contracts fully abide by
institutional and public norms. Much the same was observed by the. Indian Supreme Court
in Mahabir Auto Stores v. Indian Oil Corporation, AIR 1990 Supreme Court 1031, where, in
relation to contractual rights having a public element, it was stated that the manner, the
method and the motive of a decision of entering or not entering into a contract by a public
functionary was open to judicial review on the touchstone of reasonableness, relevance,
fairplay, natural justice, equality and non-discrimination. It seems to me that even where no
challenge is made to a public contract on such a yardstick the Court cannot be oblivious to
the considerations. when called upon to give effect to the same. More than this and
anything beyond generalised statements of principles need not, in view of the order
proposed hereinbelow, be treated here.
In the foregoing circumstances, while I am of the view that the act of termination and take
over on the part of the Civil Aviation Authority is neither lawful nor sustainable, the case
remains unfit for extension of any relief here on account of the appellant's own conduct, of
which the most revealing is that the petition in the High Court was verified and affirmed by
Hafizur Rehman, the Managing Director of the previous C.A.A. contractor, thereby relegating
the relief to the appellant for the benefit of another, since a firm is nothing but a sum total
of its partners. The jurisdiction under Article 199 of the Constitution being discretionary, the
Court, where equities require, may, even in the best of cases, choose to decline
interference. Even since the principle was recognised in Nawab Syed Raunaq Ali's case, PLD
1973 SC 236, the same has frequently been resorted to. This is one such case where, even
though the respondents are found liable, redress need not follow. For such reasons, I am
constrained to hold that this appeal should fail, but the parties be left to bear their own
costs.
Order accordingly
