2000 PLP 1745 (MLD)

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 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, by 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 four 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 the 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 may be commenced unless such notice is given If the Engineer has given notice of his decision as to a muter 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 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, arbitration of such dispute shall not be commenced unless an attempt has first been made by the parties to settle such dispute amicably. 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, whether or not any attempt at amicable settlement thereof has been made." 67.3 Arbitration.--Any dispute in respect of which: (a) the decision, if any, of 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, unless otherwise specified in the Contract, under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed under such rules. 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 related 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 arbitrators) on any matter whatsoever relevant to the dispute. Arbitration may be commenced prior to or after completion of the Works, provided that the obligation of the Employer, the Engineer and the Contractor shall not be altered by reason of the arbitration being conducted during the progress of the Works. 67.4. Failure to Comply with Engineer's Decision.--Where neither the Employer nor the Contractor has given notice of intention to commence Arbitration of a dispute within the period stated in sub clause 67.1 and the related decision has become final and binding, either party may, if the other party fails to comply with such decision, and without prejudice to any other rights it may have, refer the failure to arbitration in accordance with sub-clause 67.3. The provisions of sub-clause 67.1 and 67.2 shall not apply to any such reference."

4. On reference by the petitioner to the Engineer of dispute/claim of refund of the amount deducted by the employer/respondent as interest on unadjusted Mobilization Advance, the Engineer on April-30, 1997 gave a decision. According to the petitioner, it is not a decision but a mere opinion. The Engineer held that the amount deducted by the employer as interest on unadjusted Mobilization advance and the interest-rate applied thereon is correct. The operative part of the Engineer's decision is reproduced below: "In pursuance to clause 67.1 of the Conditions of Contract (Part-1) and after examination of the Contactor's request, all material documents provided by the Employer and terms and conditions of the Contract, the Engineer is of the opinion that the amount deducted by the Employer as interest on unadjusted Mobilization Advance and the interest rate applied thereon. is correct."

5. The petitioner refused to accept the opinion of the Engineer and claimed reimbursement of the deducted amount of Rupees 155 millions. It is the case of the petitioner that the opinion of the Engineer was not a decision in terms of clause 67.1 (supra) and the same was, therefore, not challenged within any specific time and that it was the understanding of the petitioner that there was an agreement as regards the reimbursement of Rs.84,014,025 by the respondent to the petitioner and now the only issue was whether the petitioner was to be repaid the full amount of Rupees 155 millions. The petitioner further alleges in this petition that it was understood that if no agreement could , be arrived at between the petitioner and the respondent regarding a figure/amount over and above Rs.84,014,025 then the matter would be submitted before the Engineer for his proper decision under clause 67.1 of the Contract. It is thus, alleged that due to the assurance given by the respondent to the petitioner during the negotiations going on between the parties, the petitioner was precluded from taking the dispute to arbitration within the described period of 70 days under clause 67.1 from the date of Engineer's opinion and the petitioner sent a letter, dated August 11, 1997 for an early resolution of the dispute and reference in this regard is made to respondent's letter, dated August 27, 1997 whereby the respondent informed the petitioner that the point of view of the petitioner-Corporation on the issue is on record with respondent-National Highway Authority and the latter will take up the issue at the appropriate level and communicate the outcome to the petitioner. It is stated that the respondent, however, did not communicate the outcome in the matter as indicated in its letter dated 27-8-1997, therefore, the petitioner was 'constrained to issue a legal notice on 19-3-1999 to the respondent for the reimbursement of the illegal deduction of interest in respect of the Mobilization Advance but the respondent never replied to the legal notice and now finally the petitioner has received a letter dated 25-2-2000 from the respondent in response to the petitioner's letter dated 25-10-1999 informing the petitioner that reimbursement of the amount deducted from the progress payment as interest on the delayed repayment of the Mobilization Advance does not fall in contractual- entitlement of the Contractor i.e. the petitioner.

6. In the factual background, given above, it has been argued by the learned counsel for the petitioner that the opinion given by the Engineer is not a decision in terms of clause 67.1 of the Contract and a direction is required to be issued to the respondent to instruct the Engineer to convey his decision in terms of clauses 67.1 of the Contract. It is argued that the Engineer himself in his letter, dated April 30, 1997 (reproduced above) has termed it merely as an opinion and not as a final decision. It is submitted next that throughout this period till 25-2-2000, the respondent never took any final stand and the negotiations were going on and the petitioner was under the impression that an amicable settlement was going to take place and it is only on 25-2-2000 that the respondent has finally decided that it will not reimburse the amount deducted from the progress Statements as interest on the delayed repayment of Mobilization Advance and this decision of the respondent appears to be final and accordingly the petitioner has now to take this dispute to the appropriate forum for relief and redress and since the Contract contains an arbitration clause 67.3 (reproduced above), the appropriate forum for redress of the dispute is arbitration under the provisions of Arbitration Act, 1940 which is a speedier and more efficacious remedy than a civil suit which can be filed by the petitioner to seek recovery of its, unlawfully deducted interest but the respondent has refused for the settlement of dispute by arbitration. It is argued- that had the petitioner known that the Engineer's opinion, dated April 30,1997 is to be taken as a final decision by the respondent in terms of clause 67.1 of the Contract and not a mere opinion, the petitioner could have proceeded to arbitration by giving a notice of commencement of arbitration but the said course was not adopted by the petitioner because the decision given by the Engineer is not a decision in terms of clause 67.1 of the Contract and is a mere opinion warranting a direction by this Court to the respondent to ask the Engineer to give the decision and secondly the respondent kept on assuring the petitioner that the parties would reach an amicable settlement but now the respondent in violation of all its previous premises has decided to reject altogether the petitioner's claim for reimbursement at this belated stage when the petitioner on its own cannot go to arbitration and, therefore, the petitioner has vide its letter dated 25-3-2000 requested the respondent to proceed to arbitration but the request has been turned down orally. It is further argued that the respondent is a Government Organization and in this manner is thwarting the petitioner's right to achieve speedy justice through arbitration, therefore, this Court should direct the respondent to settle the dispute through arbitration and the Government functionaries cannot be allowed to rely on contractual technicalities of time limitation etc. in order to curb the rights of any person or party and the principle that higher standard. of action is required of Government functionaries has been pronounced by the superior Courts time and again on the basis of "equity", therefore, the respondent should be restrained from acting inequitably and strictly enforcing its contractual right which is denied by the petitioner in the first place. In this regard, Syed Ali Zafar, leaned counsel for the petitioner has placed his reliance upon Messrs Airport Support Services v. The Airport Manager, Quaid-a-Azam International Airport, Karachi and others (1998 SCMR 2268) wherein it has 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 derelictions of obligations, flowing from a statute, rules or instructions can adequately be addressed to for relief under the jurisdiction. Further a contract, carrying elements .of public interest, concluded by A functionaries of the State, has to be just, fair, transparent, reasonable and free of any taint of mala fides, all such aspect 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, reasonable, 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." The Honourable Supreme Court in this judgment while referring to Mahabir Auto Stores v. Indian Oil Corporation (AIR 1990 SC 1031) has also observed that the manner, the method and the motive of a decision of entering into a contract by a public functionary was open to judicial review on the touchstone of reasonableness, relevance, fair-play, natural justice, equality and non-discrimination.

7. The petitioner has also taken the plea in this petition that the respondent by its conduct implially extended time for referral to arbitration. The-pleas of promissory estoppel and legitimate expectancy have also been urged on the basis of meeting dated 11-6-1997 and letter dated 27-8-1998 from the respondent.

8. The respondents have also been heard at this preliminary stage and the comments furnished by them have also been gone through. The respondents have taken up the position that the Constitutional jurisdiction cannot be invoked for seeking the remedy of reference of the alleged dispute to the arbitration. It is also narrated in the comments that in this case the Engineer gave his decision on 30-4-1997 and any party dissatisfied with the decision was to ask for the reference of the dispute to the arbitration within 70 days of the decision and the said period having expired, the petitioner cannot be permitted now to invoke the arbitration clause in the Contract.

9. Khawaja Muhammad Farooq, learned counsel for respondent while vehemently opposing the petition has submitted that the writ cannot be granted as prayed for because the decision given by the Engineer on 30-4-1997 is a final decision given by him, there is no ambiguity in it and thus, writ cannot be issued directing the respondent to ask the Engineer to give the decision again. In regard to the second prayer of the petitioner, it is argued that the Contract envisages the reference of the dispute, if any, within 70 days of the decision of the Engineer, by either party if dissatisfied with the same and the time having expired, the respondent cannot be forced to agree to arbitration.

10. The plain readings of the decision of the Engineer given by him on 30-4-1997 shows that he has decided that the amount deducted by the employer as interest on unadjusted Mobilization Advance and the interest rate applied thereon is correct. There is no ambiguity in his decision and a finality is attached to it and there is nothing in the document to come to a conclusion that it is not a final decision and the final decision by the Engineer was to follow. Merely because the word 'opinion' has been employed by the Engineer cannot lead to a conclusion that it is not a final decision in terms of clause 67.1 of the Conditions of Contract and in this regard the arguments of the learned counsel for the petitioner have no force.

11. The petitioner, if not satisfied with the decision of the Engineer given by him on 30-4-1997, could have given a notice for referring the dispute to arbitration within 70 days of the Engineer's decision as mentioned in clause 67.1 of the Conditions of the Contract but the petitioner failed to refer the matter to arbitration within the time agreed upon between the parties through the Contract. The argument that the negotiations between the parties subsequent to the decision given by the Engineer on 30-4-1997 misled the petitioner- into believing that the respondent would agree to extend time to refer the dispute to arbitration if the negotiations broke down, has also no force. The documents referred to by the learned counsel in this regard do not show any such promise by the respondent and the negotiations going on between the parties subsequent to the decision given by the Engineer cannot lead to a conclusion that the respondent had agreed impliedly that it would agree to extend the time to refer the dispute to arbitration. The plea of promissory estopel has also thus, no force and the petitioner has failed to make out even a legitimate expectancy.

12. In the absence of any alive arbitration agreement between the parties, a party to a contract cannot be forced by the Court to agree to refer the dispute to arbitration and sch an agreement has to be voluntary. The Court cannot issue such a direction because the same would amount to forcing the parties to a fresh agreement of arbitration.

13. In view of the abovementioned, I see no merit in this petition which is accordingly disposed of with an observation that the petitioner, if no satisfied with the refusal of the respondent to agree to any settlement with the petitioner, may approach the Civil Court of plenary jurisdiction, through a regular civil suit. However, there is no order as to costs. Q.M.H./M.A.K./D-8/L