P L D 2003 Lahore 714 (PLP)

Clause 62.1--Approval and Issuance of Defects Liability Certificate. Clause 10.1.17 and 60.4.C--Additional Cost of the Continuing Provisions of Contract Securities. Reference is made to your Letter No.3242-26199 dated June 11, 2002 conveying the Engineer's decision on the subject-matter. WAPDA does not agree with the subject cited Engineer's decision and has opted for Arbitration in accordance with Clause 67 of Conditions of Civil Works Contract Part-11. This is for your information record and further necessary action, if any, please.". Again vide letter dated 2-9-2002 it was stated as under:-- Subject: Civil Works Contract--Engineer's decisions in accordance with Clause 67.A Employers Rejection of Engineer's Interim Evaluation Report for Section A--General Expenses. Reference is made to CGC Letter No.3242-26258 dated June 21, 2002 conveying the Engineer's decisions on the subject-matter. WAPDA does not agree with this Engineer's decisions and has opted for arbitration in accordance with Contract Provisions. This is for your information, record and further necessary action, if any, please." Learned counsel for the respondent has placed on record a chart of the dispute about the factual controversy between the parties which is reproduced as under:

1. DLC (DEFECT LIABILITY CERTIFICATE) 28-2-2002 Proper date according to contractor. 13-2-2002 WAPDA's claim regarding correct date. 16-4-2002 Contractor sought Engineer's decision under clause 67.A. 11-6-2002 Decision 31-7-2002 Arbitration Notice.

2. TOC (TAKING OVER CERTIFICATE) Substantial Completion Refund of 50% Retention Money (FCY) and 25 % Retention Money LCY + FCY. 8-11-2000 According to Contractor [+Engineer] 13-2-2001 According to WAPDA. Approved with 97 days LDs. 21-3-2002 Contractor sought Engineer's decision pursuant to clause 67-A 29-8-2002 Engineer's decision 4-6-2002 Notice of Arbitration by WAPDA 50% Unpaid RM was adjusted against on account of payment of USD 5,485,3781.48 50%RM=USD 1,790,370.

3. ON A/C PAYMENT USD 5,485,381.48. 21-3-2002 Contractor sought Engineer's decision under 67-A. 29-5-2002 Decision of Deputy Engineer 4-9-2002 Arbitration Notice by WAPDA After adjustments against payment for Works and Retention Money. USD 2,505,463.28 Principal, and USD 601,408.34 Interest. USD 3,106,871.62 Paid in excess.

4. CLAIM SUBMISSION NO. 6, SECTION A GENERAL EXPENSES. 18-5-2002 Claim rejected for Rs.62,911,860. $5,155,321. 30-5-2002 Contractor sought Engineer's decision under Clause 67-A 21-6-2002 Decision of Engineer 22-8-2002 2-9-2002 Arbitration Notice by WAPDA. The letter of the respondent dated July 7, 2000 reads as under:-- "However on-account payment duly recommended by CGC would be made to M/s. Hyundai/Hidco-Kakas JV after approval of WAPDA Authority. If subsequently CGC consider that M/s. Hyundai/Hidco-Hakas JV were not entitled to such payment, then WAPDA would reserve the right to recover such on-account payment from M/s. Hyundai/Hidco-Hakas JV." This leaves not a scintilla of doubt in my mind that the factual controversy does exist between the parties which cannot be resolved in the exercise of 8 Constitutional jurisdiction by this Court. The Hon'ble Supreme Court of Pakistan in the case of Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport, Karachi and others (supra) has stated as under:-- "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, redress may be provided. " In the case of Amin Fabrics Limited, Karachi v. Pakistan Agricultural Storage and Services Corporation Ltd. (PASSCO), Lahore and another (PLD 1999 Lahore 313), Karamat Nazir Bhandari, J., as he then was, observed as under:-- "As noted by me, in the case of N.T.M., not much difficulty arises in cases where contract is rooted in some statutory provisions/rules/instructions. Cases of leases and contracts under the Punjab Local Government Ordinance, 1979, Petroleum Act, 1934 Mining Concession Rules, leases under Colonization of Government Lands Act, 1912 and host of schemes claims framed thereunder can be referred to as the cases falling in this category. The difficulty arises in cases of pure and simple commercial and mercantile contracts, free from any constraints of statutory provisions/rules. " Under clause 67.A of the conditions of contract the dispute between the Employer and the Contractor in connection with, or arising out of the contract, or the execution of the works whether during the progress of the works or after their completion shall be referred to and settled by the engineer. Subject to arbitration his decisions in respect of every matter so referred shall be final and binding upon the Employer and the Contractor. The respondent has invoked the arbitration clause 67.A and rightly so. In my view if the Employer can show, despite the satisfaction approval or certification by the engineer that the work nevertheless is not in accordance with the contract, he is not precluded from invoking the arbitration clause. It is yet to be seen that the certificate or satisfaction of the engineer is final and binding on the Employer and the Contractor. In view of the above discussion I do not consider it necessary to examine the rest of plethora of case-law cited by both the parties.

4. There is another aspect of the matter that though the respondent has not accepted the decisions of the engineer and has invoked the Arbitration clause 67.A of the conditions of contract, yet has not acted fairly in calling upon the banks to encash the bank guarantees. Learned counsel for the respondent admitted that there are no WAPDA Rules and Regulations for forfeiture of the Contractor's securities. He stated at the bar that WAPDA has decided to go to arbitration and will not invoke the clause authorising encashment of bank guarantees before the resolution of the dispute through arbitration. Clause 67.A of the contract clearly states that the dispute between the Employer and the Contractor in connection with or arising out of contract, or the execution of work shall in the first place be referred to and settled by the engineer who shall within a period of 90 days, after being requested by cither party to do so give written notice of his decision to the employer and the Contractor. Subject to Arbitration the decision of the Engineer shall be final and binding upon the Employer and the Contractor and shall forthwith be given effect to by the Employer and the Contractor. The respondent-Employer has not agreed with the decisions of the engineer and has chosen to go to arbitration under the aforementioned clause. Without having recourse to arbitration, the Employer could not become a judge in his own cause and ask for encashment of the bank guarantees which would have amounted to forfeiture of the property of the petitioner without getting the dispute adjudicated first. The petitioner has placed on record a document showing that he had to pay US$ 7.4 million to the banks after the notice of encashment of the bank guarantees by the respondent. The petitioner appears to have suffered immensely in its credit rating before its guarantors. It had to make colossal payment. The disposition made by the respondent, towards the petitioner put him under a great financial risk. In my view unlawful pressure was exerted on him. This in fact amounted to economic coercion. The respondent acted like a gunman who actually helps himself to his victim's wallet. The coercive nature of the threat, though it was withdrawn thrice, was so powerful that the petitioner had to deposit $ 7.4 million with its guarantors. In my judgment it constituted an improper threat and conduct in coercing the petitioner for making the disputed payments to the respondent and keep the guarantees intact. It does not appear normal commercial pressure or permissible pressure to exert. I am not disputing the right of the respondent to encash the bank guarantees but in all fairness the respondent has not acted fairly and reasonably in the particular circumstances of the case. Unfortunately, this fact again cannot be decided in this Constitutional petition. Lastly I would like to observe that according to the record placed before this Court it transpires that original evaluated cost of the project was Rs.10,557 million. There is a delay of 1129 days (three years and thirty four days) in the completion of the project. The price of the project was increased to Rs.17822 million, thus costing the exchequer extra Rs.7265 million. The project clearly reflects inefficiency of WAPDA and the authorities concerned. The country has suffered a colossal loss of Rs.7265 million. ex facie the contract speaks volumes for the mismanagement and inefficiency of the authorities concerned in the implementation of the project. The responsibilities have not been fixed nor any action has been taken against the guilty. Even NAB has not initiated any inquiry. Every body seems to be complacent. The citizens of this country have been made to incur and suffer an extra cost as aforementioned. No body seems to be responsible.

5. The upshot of the above discussion is that this petition has no merit and is dismissed leaving the parties to bear their own costs. S.A.K./H-151/L Petition dismissed.