1. FINAL AWARD FACTS OF THE CASE: Claimant No,1 is an investment holding company incorporated under the laws of Cayman Island.
2. Claimant No,2 is public limited company incorporated under the laws of Pakistan and is a subsidiary of claimant No,
1. Respondent No,1 is a public limited company while respondent No,2 is a private limited company; both incorporated under the laws of Pakistan. For the sake of convenience claimants Nos.1 and 2 and respondents Nos.1 and 2 will be referred hereinafter in this award as the claimants and respondents respectively.
3. On 22nd October, 2007 the claimants and respondents entered into a Joint Venture Agreement (JVA). The salient features of the JVA were as follows:---
(1) Pakistan Telecommunication Authority (PTA), which is the regulatory authority of telecommunication in Pakistan, on 4th August, 2004 issued to respondent No,1, 14 local loop licenses in respect of wireless services for all 14 telecom regions of Pakistan namely; Islamabad, Rawalpindi, Karachi, Lahore, Multan, Faisalabad, Gujranwala, Northern Telecom Region I, Northern Telecom Region II, Southern Telecom Region I, Southern Telecom Region V, Central Telecom Region, Western Telecom Region and Haripur.
(2) Respondent No,1 in. order to establish WiMax telecommunication services decided to surrender the above 14 local loop licenses issued to them by the PTA and obtain new licenses in lieu thereof.
4. Respondent No,1 also decided to set up a new private limited Joint venture Company in Islamabad under the name and style of respondent No,2, with an authorized capital equivalent to Rs,10,000,000 and an initial paid-up capital of Rs,1,000,000 and transfer the re-issued licenses and spectrums to respondent No,2, at a value of US$22,500,000.
(3) Claimant No,1 agreed to participate either directly or through its subsidiary, claimant No,2, which was already licensed to carry on wireless telecommunication business in Pakistan, in the proposed WiMax business with respondent No,2 by owning and controlling 90% shares of respondent No,2 for a total and cumulative consideration equivalent to Rs,900,000 to be paid by claimant No,1 to respondent No,1 and to further pay a sum of US$22,500,000 to respondent No,1 which respondent No,2 was liable to pay to respondent No,1 on account of proposed transfer of re- issued licenses and the Spectrum by respondent No,1 to respondent No,2, at the closing.
(4) The payments mentioned above were to be made by the claimants to the respondents upon fulfilment of number of conditions mentioned in clauses 4.1.1 to 4.1.14 of the JVA as "Owners'
5. Conditions Precedent" to be performed by the respondents, while claimants were required to perform the conditions mentioned in sub-clauses 4.2.1 and 4.2.2 as "Investors' Conditions Precedent", respectively, before the closing. The claimants could waive conditionally or unconditionally performance of any of the Owners' Conditions Precedent by respondents at any time on or before the closing in terms of sub-clauses 4.3 and 4.4 of JVA.
6. (5)The closing was to take place at the registered office of respondent No,2 on the seventh business day following, the satisfaction and waiver of all conditions precedent, other than those which were to be performed at closing or at such other place and time as the parties may mutually agree, within 30 days of the execution of JVA. The closing date could be extended by the party not in default; but under no circumstances the closing date could be extended beyond 120 days of the execution of JVA.
(6) The manner and effect of termination or abandonment of agreement is dealt with in clauses 4.8, sub-clauses 4.8.1 to 4.8.5 and clauses 4.9 to 4.15 of the JVA.
7. Before the execution of JVA, respondent No,1 had assigned the above-mentioned 14 licenses and spectrums (the subject-matter of JVA) in favour of Faysal Bank Ltd., by creating a charge on them to obtain financial facilities. In accordance with "Owners' Conditions Precedent" respondent No,1 was required to get the said charge removed so that the reissued licenses and spectrums could be transferred to respondent No,2 free from all encumbrances. Respondent No,1 was also required to apply to the PTA for permission to transfer the re-issued licenses and spectrums to respondent No,2, and to obtain approval of PTA for change in the share holdings of respondent No,2. These vital conditions of JVA along with other conditions precedent mentioned in the JVA were to be completed/performed within 30 days of the execution of JVA, subject to an extension in the closing date as provided in the JVA.
8. According to claimants, respondent No,!, prior to the execution of JVA, had applied to PTA on 8th October, 2007, for the splitting of the 14 local loop licenses issued to them into 28 licenses so that 14 re-issued new licenses are assigned 3.5 GHz band of radio frequency. In response to this request of Respondent No,1, PTA, on 17th October, 2007, asked respondents No,1 to supply some specific information and called upon them to clear outstanding dues of PTA. respondent No,1, on 25th October 2007, requested PTA to process its request to transfer the new re-issued licenses and spectrums in the name of its subsidiary, respondent No,2. Respondent No,1, vide its letter dated 7th November, 2007 assured the PTA to have the re-assignment of the roll-out endorsement carried out as required by the PTA. Respondent No,1 notified the incorporation of respondent No,2 as a subsidiary of respondent No,1, and forwarded all necessary documents in this behalf to PTA vide its letter dated 13th November 2007. Claimant No,1, in the meantime, vide its letter dated 18th November 2007, informed respondent No,1 that in accordance with the terms of JVA it is decided that claimant No,2 will hold and own the shares of respondent No,2. Claimant No,2 accordingly, vide its letter dated 21st November, 2007, informed respondent No,1, about completion of all the "Investors' Conditions Precedent" under the JVA and forwarded copies of relevant documents to respondent No, 1.
9. Since the "Owners' Conditions Precedent" that were to be completed by respondent No,1 by 23rd November, 2007 in terms of the JVA had not been completed, claimant No,2 vide its letter dated 22nd November, 2007, addressed to respondent No,1, granted a first extension of the closing date mentioned in the JVA and extended the closing date up to 22nd December 2007.
10. In December, 2007 respondent No,1 approached Faysal Bank. Ltd., and offered them Rs,68 million in settlement of their outstanding liabilities for issuance of approval letter and removal of registered charges on the 14 licenses held by them. Faysal Bank Ltd., however, demanded a sum of Rs,250 million to issue the requested approvals and removal of charges on the 14 licenses. Similarly, the PTA, in reply to respondent No,l's letter dated 25th October, 2007 requesting for processing of the transfer of re issued 3.5 GHz local loop licenses in favour of respondent No,2 and to split and re- issue the local loop licenses, informed respondent No,1 vide its letter dated 5th December, 2007, that the requests of respondent No,1 would be processed upon payment of Rs,119,771,655 this being the outstanding dues up to '30th June, 2006 and further providing the service wise break up of revenue and cost of revenue for calculation of annual license fee, USF and R&D charges for the year ending 30th June, 2007. Respondent No,1 disputed the above demands of Faysal Bank Ltd., and the PTA and entered into negotiation with them to obtain concession in payment of these amounts.
11. In this background as the Closing Date was approaching fast, claimants granted a second extension of the closing date, extending the closing date until 21st January, 2008 to facilitate the ongoing negotiations between respondent No,1 and Faysal Bank Ltd., and the PTA.
12. According to Claimants, after the grant of second extension of the Closing Date, they did not receive any status update about the negotiations between respondent No,1 and Faysal Bank Ltd. and the PTA. Therefore, claimant No,2 addressed a letter to respondent No,1 on 9th January, 2008, enquiring about the status of ongoing negotiations between respondent No,1 and Faysal Bank Ltd. and the PTA. The claimants claim that in response to this letter the respondents during discussions informed the claimants about the paucity of funds which resulted in their failure to clear the dues of Faysal Bank Ltd. and the PTA. The claimants accordingly vide their letter dated 16th January, 2008, offered to respondent No,1, the option of payment of the dues demanded by Faysal Bank Ltd. and the PTA by the claimants on behalf of respondent No,1 at the closing date of JVA.
13. Respondent No,1 in response to the above letter of claimants dated 16th January, 2008 informed the claimants vide its letter dated 18th January 2008 that it had already informed the claimants' consultants of the exact reason for nonpayment of the dues of Faysal Bank Ltd. and the PTA.
14. In response to the letter of respondent No,1 dated 18th January, ?008, claimant No,2 granted the third and the final extension in of the Closing Date on 19th January 2008, extending the closing date until 18th February, 2008, which coincided with the maximum period of 120 days provided in the JVA for performance of the JVA from the date of its execution.
15. As respondent No,1, failed to notify the completion of the "Owner's Conditions Precedent" in terms of the JVA, claimants issued a notice to respondent No,1 on 15th February, 2008 to submit to arbitration. Simultaneously the claimants filed a petition before the Civil Court, Islamabad, under section 20 of the Arbitration Act, 1940, requiring the respondent No,1 to file the arbitration agreement in Court so that matter may be referred to the Arbitral Tribunal under the Rules of Arbitration of the ICC 1998 (the "ICC Rules"), as provided in the JVA. The claimants also succeeded in obtaining a restraining order from the Civil Court, Islamabad, against the respondents in respect of 14 licenses and spectrums, the subject-matter Of JVA.
16. Respondents meanwhile served notice of termination of the JVA under clause 4.8.2 of the JVA read with clause 4.9 of the JVA, claiming that as the Closing could not take place within the stipulated period of 60 days, which had been extended by a cumulative 120 day period from the date of JVA, they have exercised the option available to them.. In this background the claimant sent a request to the Secretariat of the ICC International Court of Arbitration (the "ICC Secretariat") for referring the matter to arbitration, which was received by the ICC Secretariat on 10th March 2008 and forwarded to the respondents on 13th March, 2008 and received by the latter on 17th March, 2008.
17. The answer to the request for arbitration was received by the ICC Secretariat on 15th May, 2008. The nominations of Justices Nasir Aslam Zahid and G.H. Malik as co-arbitrators was confirmed by the Secretary General of the ICC International Court of Arbitration on 14th May, 2008, pursuant to Article
(2) of the ICC Rules, and in accordance with the arbitration clause contained in the JVA, the co- arbitrators jointly nominated Justice Saiduzzaman Siddiqui as Chairman of the Arbitral Tribunal.
18. The ICC International Court of Arbitration (the "ICC Court"), at its session of 4th July, 2008, confirmed the appointment of Justice Siddiqui as Chairman of the Arbitral Tribunal upon the joint nomination of the co-arbitrators. The file of the case was transmitted to the arbitral Tribunal in accordance with Article 13 of the ICC Rules on 4th July, 2008. The time limit for establishing the term of reference in accordance with Article 18(2) of the ICC Rules was extended by the ICC Court until February 28, 2009. However, the terms of reference were signed by the parties and the Arbitral Tribunal, much before that date, on 13th November, 2008.
19. The Arbitral Tribunal, after considering the claim and the reply of respondent, settled the following issues for trial:--
(a) Whether the claimants are entitled to the specific performance of the Joint Venture agreement dated 22nd October, 2007 (the "JVA")?
(b) Whether the respondents failed to perform their obligations under the JVA?
(c) Whether the respondents validly terminated the JVA in accordance with clauses 4.8.2 and 4.8.3 of the JVA? If so, its effect?
(d) Whether the respondents acted in bad faith and with mala fide intentions in deciding not to proceed with the completion of the JVA?, If so, what is the effect?
(e) Whether the claimants suffered any loss or damage on account of respondents' refusal to perform the JVA? If so, what amount the claimants are entitled to recover from respondents by way of loss or damages?
(f) What should the award be?
20. At the time of settlement of terms of reference, the parties agreed to the following procedure and time table for the conduct of arbitration proceedings at Singapore:--
(a) Disclosure of documents by the parties on 17th November, 2008.
(b) Admission and denial of documents by the parties by 25th November, 2008.
(c) Parties agree to lead evidence through affidavit of evidence with right of cross-examination.
21. Affidavits of evidence of witnesses to be exchanged by the parties by 15th December, 2008.
(d) Reply affidavit of evidence, if any, to be filed by the parties by 31st December, 2008.
(e) Evidence of parties from 6th January, 2009 to 13th January, 2009 (Place Singapore).
(f) Written arguments to be submitted by 5th February, 2009 (Place Singapore).
(g) Oral arguments 19th and 21st February, 2009 (Place Singapore).
22. The parties followed the schedule mentioned at paragraphs (a) to (d) above, but agreed to make slight changes in the schedule mentioned at' (e) to (g) in view of flight position from Karachi to Singapore and other difficulties faced by them. Accordingly it was agreed that the Members of the Tribunal will travel to Singapore on 3rd January, 2009 and record evidence of parties from 5th January, 2009 to 9th January, 2009 and to hear the arguments the Members of the Tribunal will travel again to Singapore on 7th February, 2009. Written arguments in the case will be submitted by the parties on 9th February 2009 and oral submissions will be made by the counsel of the parties from 9th to 13th February, 2009. The Arbitral Tribunal, accordingly, recorded evidence of parties at Singapore on the above issues from 5th January, 2009 to 8th January, 2009 and reviewed the recorded evidence with the assistance of learned counsel for the parties on 9th January, 2009. The claimants examined Mr. Mark Sturza (CW-I), an expert witness, who produced his affidavit in evidence and documents CW-I/I; Mr. Mohsin Qazi (CW-2), Chief Financial Officer of claimant No,2, who produced his affidavits in evidence CW-2/1, CW-2/2 and CW-2/3; Mr. Akbar Bilgrami (CW-3), CEO and Director of Bridge Factor (Private) Limited, who produced his affidavits in evidence CW- 3/land CW-3/2; and Mr. Zulqarnain Bhatti (CW-4), Deputy Director Litigation and Adjudication of the PTA, who produced documents CW-4/1 and closed their side. The respondents examined Mr. Shahid Firoz (RW-1) as their only witness and he produced his affidavit in evidence RW-1/1 and closed their side. The Arbitral Tribunal travelled to Singapore to hear the arguments of parties at Singapore, on 7th February, 2009. The parties' submitted their written arguments on 9th February, 2009 and the same day the oral arguments commenced which continued until 13th February, 2009.
23. On conclusion of arguments, the Arbitral Tribunal declared the proceedings closed as required by Article 22(1) of the ICC Rules and judgment in the case was reserved, on 13th February, 2009. The time for rendering the final award was extended from time to time by the ICC Court; the last extension in this regard is to expire on 31st January, 2010.
24. The main issue in the case is: Whether the claimants are entitled to specific performance of Joint Venture Agreement dated 22nd October, 2007?
25. Clause 15 of the JVA contains the arbitration clause as well as it mentions the law that governs the enforcement of the agreement. ' It reads as follows:-- "15. Governing Law: (15.1) This agreement shall be governed by, and construed in accordance with, Pakistan Law.
26. (15.2) Any dispute,. controversy or claim arising out of or in connection with this agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the rules of the I International Chamber of Commerce ("ICC") for the time being in force, which rules are deemed to be incorporated by reference to this clause.
27. (15.3) The Tribunal to be appointed shall consist of one arbitrator, if the amount at issue is less than US$5,000,000 (Unites States Dollars Five Million) or otherwise three arbitrators with one arbitrator to be appointed by the investor and one arbitrator to be appointed by the owner. For the purpose of appointing the arbitrators the owner and the JV Company, if so required, together shall be deemed to be a single party, claimant or respondent as the case may be. The two arbitrators thus appointed shall choose the third who will act as the presiding arbitrator of the Tribunal. The presiding arbitrator shall be appointed by the Secretary General of the ICC if the two arbitrators are unable to agree on the choice of presiding arbitrator within 30 days of their appointment.
28. (15.4) The seat of arbitration shall be Singapore and the language to be used in arbitral proceedings shall be English.
29. (15.5) The arbitral award shall be final and- binding upon the parties.
30. (15.6) It is acknowledged that a party may be damaged in amounts that are impossible to measure upon an actual or threatened breach of the provisions of this Agreement by the breaching party, and accordingly, the non-breaching parties may not be have an adequate remedy at law, the non-breaching parties shall, therefore, be entitled to obtain immediate injunctive relief restraining a potential or actual breach by the breaching party of its obligations under this agreement pending recourse to arbitration under this clause 15. The breaching party shall not urge, as a defence to any proceeding for such injunctive relief, that the non breaching parties have an adequate remedy at law."
31. In terms of clause 15.1 of the JVA, the enforcement of the JVA is governed by Pakistani Laws. The case, therefore, is to be decided in accordance with the provisions of Specific Relief Act, 1877 and the Contract 1872 (hereinafter to be referred as Act I of 1877 and Act of IX of 1872, respectively, for the sake of convenience) as applicable in Pakistan.
32. Chapter II of Act I of 1877, which contains sections 12 to 30, deals with cases in which the Court may either grant or refuse specific performance. Section 12 of Act I of 1877 mentions the cases in which Court may grant specific performance in its discretion. It reads as follows:-- "Section 12.--Except as otherwise provided in this chapter, the specific performance of any contract may in the discretion of the Court be enforced: When the act agreed to be done is in the performance, wholly or partly, of a trust;
(a) When there exists no standard for ascertaining the actual damage caused by non- performance of the act agreed to be done;
(b) When the act agreed to be done is such that pecuniary compensation for its non-performance would not afford adequate relief; or
(c) When it is probable that pecuniary compensation cannot be got for the non-performance of the act to be done.
33. Explanation:--Unless and until the contrary is proved, the Court shall presume that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money, and that the breach of a contract to transfer moveable property can be thus relieved."
34. Section 21 of Act of 1877 mentions the contracts which cannot be specifically enforced. It reads as under:-- "Section 21. The following contracts cannot be specifically enforced:
(a) A contract for the non-performance of which compensation in money is an adequate relief;
(b) A contract which runs into such minute or numerous details, or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the Court cannot enforce specific performance of its material terms;
(c) A contract the terms of which the court cannot find with reasonable certainty;
(d) A contract which in its nature revocable;
(e) A contract made by trustees either in excess of their powers or in breach of their trust;
(f) A contract made by or on behalf of a corporation or public company created for special purpose, or by the promoters of such company, which is in excess of its powers;
(g) A contract the performance of which involves the performance of a continuous duty extending over a longer period than three years from its date;
(h) A contract of which material part of the subject-matter supposed by both parties to exists, has, before it has been made, ceased to exist.
35. And, save as provided by the Arbitration Act 1940 no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such contract other than an arbitration agreement to which the provisions of the said Act apply and has refused to perform it sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit."
36. The learned counsel for the claimants contended that the claimants have performed their part of the obligations under the JVA and have always been ready and willing to perform their part of the JVA. It is also contended by the learned counsel for the claimants that the subject-matter of the JVA is so peculiar and unique in nature that it is not readily available in the open market and as such compensation in terms of money cannot be an adequate remedy in the circumstances of the case. The learned counsel went on to argue that the respondents committed a breach of the terms of the JVA inasmuch as they failed to compete the "Owners' Conditions Precedent" relating to removal of charge of Faysal Bank Ltd. on the subject-matter of the JVA (14 licenses pledged with the bank). They also failed to pay the dues demanded by the PTA for transfer of 14 re-issued licenses and spectrums to respondent No,2, which was an essential condition on the part of the owner under the JVA. The learned counsel accordingly urged that as the claimants were always and are still willing and ready to perform their part of the JVA, the Tribunal may direct the respondents to specifically perform the JVA by obtaining release of charge on the 14 licenses after making payments of dues demanded by Faysal Bank Ltd. and by making payments of the dues demanded by the PTA for processing the request of respondents to transfer the re-issued 14 licenses and spectrums to respondent No,2 and for obtaining approval of transfer of shares of respondent No,2 in favour of claimant No,2. The learned counsel also argued that in case the respondents are not willing and ready to perform these essential conditions of the JVA, the claimants may be permitted to make payment on behalf of respondents to Faysal Bank Ltd. and the PTA and adjust the amount from the consideration payable to respondents by the claimant under the JVA. In support of his contentions the learned counsel for the claimants relied on the following reported decisions from Indian, English and Pakistani jurisdictions:--
(1) Rojasara Ramjibhai Dahyabhai v. Jani Narottam Lallubhai AIR 1986 SC 1912.
(2) Motital and others v. Nanhelal and another AIR 1920 PC 287.
(3) The Pan-Islamic Streamship Co.. Ltd., v. Messrs General Imports and Export PLD 1959 (WP)
37. Karachi 750
(4) Dalsukh M. Pancholi v. The Guarantee Life and Employement Insurance Co., Ltd., AIR 1947 PC 182
(5) Nan Fung Textiles Ltd., v. H. Pir Muhammad Shamsuddin PLD 1979 Karachi 762 (?)
(6) Amina Bibi v. Mudassar Aziz PLD 2003 SC 430(?)
(7) Mst. Batul and others v. Mst. Razia Fazal and others 2005 SCMR 544
(8) Ramulu v. Anantha AIR 1966 Andhra Pardesh 70
(9) Nathu Lal Phootchand AIR .1970 SC 546
(10) Messrs Badri Narayan Agarwalla v. Messrs Pak Jute Balers Ltd. PLD 1964 (?) Dacca 164 '
(11) Partabmull v. K.C. Sethia (1951) 2 AELR 352
(12) Ramaesh Chandra v. Chun' Lal AIR 1971 SC ,1238
(13) S.A.P. Devasthanam v. Sabapathi Ppillai and another AIR 1962 Madras 132
(14) Ryanair Limited v. SR Technic Ireland Limited 2007 EWHC 3089 (QB)
(15) Muhammad Sama Mondal v. Muhammad Ahmed Sheikh PLD 1963 Dacca 816
(16) Ashraf Hanif v. Najma Alvi 2001 CLC 1029
(17) Muhammad Yaqoob v. Shah Nawaz 1998 CLC 21
(18) Jamshed Khodaram Irani v. Burjorji Dhanjibhai AIR 1915 PC 83
(19) Tilley v. Thomas 1867 3 Ch. 61
(20) Satyabarata v. Mugneeram AIR 1954 SC 44
(21) Barauer & Co. v. James Clark 1952 All ELR 497
(22) Davis Contractors v. Fareham Urban District 1956 AC 696
(23) A.Z. Company v. Government of Pakistan PLD 1973 SC 311
(24) CCC Films (London) Ltd. v. Impact Quadrant Film Ltd. 1984 All ER 298
(25) Hayes v. Dodd 1990 2 All ER 815 The learned counsel for the respondents on the other hand contended that the respondents did not commit breach of any of the conciliations of JVA and non-fulfilment of the "Owners'
38. Conditions Precedent" mentioned in the JVA resulted on account of arbitrary payments demanded by Faysal Bank Ltd. And the PTA. The respondents genuinely negotiated with Faysal Bank Ltd. and the PTA to revise their respective demands before the closing, but could not succeed.
39. It is accordingly contended by the learned counsel that as the respondents could not fulfil the "Owners' Conditions Precedent" within the time mentioned in the JVA, they had the option to terminate the JVA under clause 4.8.2 of the JVA. The learned counsel contended that consequences of termination of the JVA are elaborately stated in the JVA. According to the learned counsel for the respondents, the relief of specific performance or the damages claimed by the claimants cannot be granted to them in view of the stipulation contained in the JVA. The learned counsel for the respondents also contended that the relief of damages otherwise cannot be granted to the claimants as they have failed to lead any evidence to establish the same. The learned counsel for the respondents relied on the following cases in support of his above contentions:--
(1) Muhammad Ishaq v. Sufia Begum 1992 SCMR 1692
(2) Badridas v. Gour Chandra AIR 1952 Patna 392
(3) Pervaiz Samad v. Konkar Union Council 1987 MLD 2347
(4) Qureishi Muhammad Anwar v. S.A. Qureishi 1994 CLC 733
(5) City Education Board (Registered) Sialko_t v. Maqbook Nasreen PLD 2008 Lahore 51
(6) M. Musarat v. Shafiq Hyder 1995 CLC 1323
(7) Haji Abdul Sattar Chapri v. Secretary Karachi Grain & Seeds Merchants Group 1991 MLD 2697
(8) Abdul Wahid v. Government of Pakistan 2007 CLC 1700
(9) Concentrate' Manufacturer Company of Ireland v. Seven up Bottling Company(Private) Limited 2002 CLD 77
(10) Surraya Nasreen v. Mussarat Khan 2007 YLR 2973
(11) Ahmad Hassan v. Government of Punjab 2005 SCMR 186
(12) Syed Imam Shah v. Government of N.-W.F.P. 2003 PLC (CS) 1522
(13) Mahmud Khan v. Government of Punjab 2005 YLR 1133
(14) Punjab Small Industries Corporation v. Ahmad Akhtar Cheema 2002 SCMR 549
(15) Qadri Begum v. Province of Sindh 1999 CLC 2023
(16) Al-Pak Ghee Mills v. Zeeshan Traders 2008 CLC 120
(17) Chief Officer District Council, Sheikhupura N. Haji Sultan Safdar 1999 YLR 1963
(18) Kib-e-Hyder & Company (Private) Limited v. National Bank of Pakistan 2008 CLD 576
(19) Tahir Jahangir v. Don Waters 2003 CLC 1699 The claimants in the present case are seeking specific performance of a contract relating to sale of moveable property (shares). The grant or refusal of the relief of specific performance is discretionary with the Court. One of the cardinal principles guiding the Court in granting specific performance of a contract under Act I of 1877 is that the compensation in terms of money would not be an adequate relief. Section 12 of Act I of 1887, mentions the contracts in which the Court would ordinarily order specific performance. This section specifically provides that the Court shall presume, unless the contrary is proven, that breach of a contract relating to transfer of immovable property cannot be adequately relieved by compensation, while breach of contract relating to movable properties can be thus relieved, meaning thereby that grant of specific performance in a case relating to the sale of immovable property is a rule while it is an exception in the case relating to the sale of movable property. Therefore, apart seeking specific performance of a contract relating to the sale of movable property has to satisfy the Court that the monetary compensation will not adequately relieve the performance of the contract.
40. The contracts which cannot be ordered to be performed specifically by the Court are mentioned in section 21 of Act I of 1877. This section provides that the Court will not order specific performance of a contract which by its nature is revocable. The learned counsel for the respondents contended that firstly, the JVA cannot be ordered to be performed specifically as it relates to the sale of movable property for which compensation in terms of money is an adequate relief. Secondly, the performance of the (JVA) issued to respondent No,1 in favour of respondent No,2, and approval of transfer of shares of respondent No,2 in favour of claimant No,2, by the PTA, which was not granted in spite of best efforts of respondents. Thirdly, the JVA clearly provides that on or before the date of closing the parties have the unfettered right to terminate the contract and in that event no liability arise on any of the parties in consequence of such termination. It is lastly contended by the respondents that clause 4.8.2 of the JVA gives the right to either party to terminate the JVA after 60 days of the date of execution of the JVA or after expiry of extended period of date of closing provided closing has not occurred. We will first take up the third and the last contention of the learned counsel for the respondents, because if he succeeds on it, it may not be necessary to decide other contentions of the parties.
41. Clause 4.8 of the JVA which provides for termination of agreement upon failure to satisfy conditions precedent reads as follows:--- "4.8. This agreement may be terminated and the transactions contemplated hereby may be abandoned at any time on or prior to the closing date (provided that, any termination validly made under this clause 4.8 shall be without prejudice to the surviving rights of parties under the agreement):--- 4.8.1 by mutual written consent of the owner and the investor, or 4.8.2 by the investor or the owner at any time after (sixty) 60 days from the date of this agreement if closing shall not have occurred, subject to an extension or extensions notified whereby closing shall be extended by the extension period or extension periods notified provided such extensions or extensions cumulatively do not extend closing by more than 120 (one hundred and twenty) days after execution of this agreement, or 4.8.3 by the investor or the owner, if any governmental authority of competent jurisdiction shall have issued an order, decree or ruling or taken other action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling to other action shall have become final and on-appealable and including a failure by the relevant Governmental Authority to issue approvals contemplate under clauses 4.1.1., 4.1.2, 4.1.3, 4.1.4 and 4.1.7; or 4.8.4 by the owner, upon a material breach of this agreement by the investor provided the owners' conditions precedent and investors' conditions precedent having been complied with or fulfilled; or 4.8.5 by the investor, upon a material breach of this agreement by JV company or the owner provided the owners' conditions precedent and the investors' conditions precedent having been complied with or fulfilled, or Notwithstanding the foregoing, no party hereto may affect a termination (other than by mutual agreement) if such party is in material default or breach of this Agreement."
42. The procedure for and effect of termination is dealt with in clauses 4.9 to 4.13 of the contract which read as follows:-- "4.9 In the event of termination of this agreement and abandonment of the transactions contemplated hereby by the parties hereto pursuant to clause 4.8 hereof, written notice thereof shall be given by the party so terminating to the other party and this agreement shall forthwith terminate and shall become null and void and of no further effect, and the transactions contemplated hereby shall be abandoned without further action by the owner or investor.
43. 4.10 If this agreement is terminated pursuant to clause 4.8, all fillings, applications and other submissions made pursuant hereto shall, to the extent practicable withdrawn from any Government Authority or to whomever made.
44. 4.11. In the event of termination of this agreement pursuant to clauses 4.8.1, 4.8.2 or 4.8.2 <u>there shall be no libility or obligation under this agreement on the</u> part of owner or the investor or their respective directors, officers, employees, affiliates, controlling persons, agents or representatives.
45. 4.12. In the event of termination of this agreement pursuant to clause 4.8.4 or 4.8.5, the liability or obligation of the owner or the investor, as the case may be shall be limited to 50% (fifty per cent) of US$22,500,000 (United States Dollars Twenty two million five hundred thousand).
46. 4.13. The obligations provided for in clauses 4.9, 4.10, 4.11 and 4.12 shall survive any such termination.
47. Lock in period (Owner)
48. 4.14. In the event of this agreement being terminated as a consequence of , 4.14.1 the owners' failure to fulfil any or all the conditions precedent specified under clauses 4.1.5, 4.1.6, 4.1.9, 4.1.10, 4.1.12, 4.1.13 and 4.1.14 or 4.14.2 failure to obtain any or all of the approvals and consents required to be obtained under clauses 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.7 and 4.1.11 due to the owners' failure to provide and submit the necessary information to the relevant Governmental Authority or PTA, or failure of the owner to act upon any instruction or fulfil any reasonable requirements issued by the relevant Governmental Authority or Regulator, the Owner shall not enter into any agreement to in any way transfer directly or indirectly the ownership, title and interest in the re-issued licenses and/or the spectrum which is held under the re-issued licenses or the original licenses, as the case may be, to any third party fon a period of 6 (six) months (lock in period) from the date of termination of this agreement under clauses 4.14.1 or 4.14.2. It is clarified that the grant of security interest or assignment by way of collateral for securing the financing obligations of the owner shall not be deemed to be transfer for purposes of this clause.
49. Lock in Period (Investor)
50. 4.15 In the event of this agreement being terminated as a consequence of; 4.15.1 the investors' failure to fulfil the conditions precedent specified under clauses 4.2.2 or 4.15.2 failure to obtain any or all of the approvals and consents required to be obtained under clauses 4.1.3 and 4.1.4, is due to the investors' failure to provide and submit the necessary information to the relevant Governmental Authority or PTA, or failure of the investor to act upon any instruction or fulfil any reasonable requirements issued by the relevant' Governmental Authority or PTA in terms of clause 4.2.1 above; Neither the investor nor Burraq will directly or indirectly enter into any agreement to purchase or acquire license and/or spectrum in the 3.5 Ghz band from any third party nor directly apply to the PTA for such spectrum for a period of 6(six) months from the date of termination of this agreement as a result of reasons enumerated under clauses 4.15.1 or 4.15.2 Clause 4.8 of the JVA clearly provides that either party may terminate and abandon the agreement at any time on or prior to the closing date. Sub-clause 4.8.2 provides that either party may terminate the agreement after 60 days of the execution of the agreement or if the closing date of the agreement has been extended, which under no circumstances shall be beyond 120 days of the date of JVA, after such extended date provided the closing has not taken place. Under the above-mentioned two clauses of JVA the parties have unfettered right to terminate and abandon the agreement provided the closing has not taken place. Similarly under sub-clause 4.8.3 either party may terminate the contract if the competent Governmental Authority has issued order restraining or prohibiting the transaction contemplated by JVA, or a failure on the part of Governmental Authority to issue approvals contemplated under clauses 4.1.1, 4.1.2, 4.1.3, 4.1.4 and 4.1.17. The closing takes place under the agreement on satisfaction or waiver of all conditions precedent within 60 days of the execution of agreement or within the extended period of closing date as provided in the agreement.
51. The evidence on record shows that the owners (respondents) could not complete the owners' conditions precedent (4.1.1, 4.1.2, 4.1.3, 4.1.4 and 4.1.5) mentioned in JVA within 60 days of the execution of agreement. This owners' conditions precedent stipulated in,the JVA remained unfulfilled in spite of extensions in the closing date granted by the investors (claimants) which extended the closing date of the agreement to 18th February, 2008. There is nothing on record to show that the investors (claimants) waived all or any of the owners' conditions precedent mentioned in the agreement. The respondent in this background opted to terminate the agreement under clause 4.8.2 of JVA and issued notice to claimants terminating the Agreement on 25th February, 2008 in terms of clause 4.9 of agreement.
52. The learned counsel for the claimants contends that respondents could not terminate the agreement as they were in material default and breach of the JVA. The contention is that the respondents failed to pay the dues demanded by Faysal Bank Ltd., to remove the charge on the 14 licenses pledged with them and also the dues demanded by PTA to process the request of respondent No,1 for splitting the 14 loop licenses and transferring the re-issued licenses and spectrums to respondent No,2 and approving the transfer of shares of respondent No,2 in favour of claimant No,2. These failures according to learned counsel for the claimants constituted material breach of the agreement on the part of respondents.
53. The learned counsel for the respondent on the other contended that there were genuine disputes with regard to the dues demanded by Faysal Bank Ltd., and PTA and as these disputes could not be resolved within the Closing Date of the agreement in spite of extension of the closing date of the agreement granted by the claimants up to 18-2-2008, the respondent No,1 was well within its right to terminate the agreement in accordance with the provisions of clause 4.8.2 of the agreement as the closing did not occur.
54. The contention of the learned counsel is not without force. The argument of the learned counsel for the claimant that the respondents failed to pay the dues demanded by Faysal Bank and PTA which amounted to non-completion and non-fulfillment of the owners' conditions precedent and therefore, they were in material breach of the agreement and thus not entitled to terminate the agreement, is apparently based on the non-obstante clause appended to clause 4.8.5 of JVA which reads as: "Notwithstanding the foregoing, no party may effect a termination (other than by mutual consent) if such party is in material default or breach of this agreement." In our view the non-obstante clause is restricted in its application to clauses 4.8.4 and 4.8.5 of the agreement and does not apply to cases falling under clauses 4.8, 4.8.1, 4.8.2 and 4.8.3. The reason for our this conclusion is that clauses 4.8.4 and 4.8.5 deal with situations where owners' conditions precedent and investors' conditions precedent mentioned in the agreement have been completed or fulfilled.
55. It is natural and logical that when owners' conditions precedent and investors' conditions precedent mentioned in the agreement have been fulfilled and complied with, the closing should follow as provided in the agreement. At that stage if any of the parties commits a material breach of the agreement, the other party gets the right to terminate the agreement or the agreement could only be terminated by mutual consent of the parties. The party in default or breach of agreement cannot terminate the agreement in that situation. The cases falling under clauses 4.8, 4.8.1, 4.8.2 and 4.8.3 are distinguishable in as much as the termination of the agreement under these clauses is at a stage when either owners' conditions precedent or investors condition precedent or both were not completed or fulfilled and closing did not occur.
56. The agreement gives unfettered right to either party to terminate the agreement and abandon the transaction contemplated therein either on or before the closing date as provided in clause 4.8. In that event the termination does not affect any surviving rights of the parties under the agreement.
57. Similarly, either party is entitled to terminate the agreement and abandon the transaction contemplated therein in terms of clause 4.8.2 of the Agreement, after 60 days from the date of the JVA, or where the closing date is extended in accordance with the agreement, which under no circumstances, could go beyond 120 days from the execution of the JVA, after the expiry of extended period of closing date, provided the closing has not occurred. The respondents pleaded that they terminated the agreement under clause 4.8.2 of the agreement. The agreement (JVA) was executed on 22nd October, 2007. The closing date was extended by the investors (claimants) by 120 days which expired on 18th February, 2008. The respondents served the termination notice on 25th February, 2008, which was after the expiry of extended date of closing. This is perfectly valid under clause 4.8.2 as the closing had not occurred.
58. The evidence on record shows that investors' conditions precedent were complied with and fulfilled by the claimants. However, the respondents failed to comply with the owners' conditions precedent mentioned in the agreement in as much as they neither succeeded in getting the charge removed on licenses held by Faysal Bank Limited under a pledge nor they were able to obtain permission from PTA for splitting of the 14 local loop licenses issued to them and transfer of the splitted 14 licenses and the spectrum in favour of JVA Company (respondent No,2) and approval of the transfer of shares of respondent No,2 in favour of claimant No,2. It is true that the failure to get the charge on the licenses removed from Faysal Bank and the required permission from. PTA for transfer of re-issued licenses to respondent No,2 and transfer of shares of respondent No,2 in favour of claimant No,2 was on account of failure on the part of respondent No,1 to pay the amount demanded by Faysal Bank Limited and PTA respectively in this behalf but this failure of the respondents did not in our view amount to "material breach of the agreement" in view of our earlier finding that the non-obstante clause appended to clause 4.8.5 did not apply to the case falling under clause 4.8.2. Therefore, failure of respondents to obtain permission from PTA and removal of charge from Faysal Bank did not take away their right to terminate the agreement and abandon the transaction in terms of clause 4.8.2 of the agreement as closing did not occur. We are therefore, of the view that respondents validly terminated and abandoned the contract in accordance with the provisions of clause 4.8.2.
59. The respondents have also claimed in the alternative that they had the right to terminate the agreement under clause 4.8.3., as the relevant Government Authorities had declined/failed to issue the required permission for transfer of license and spectrums in favour of claimants. The evidence on record does not show that PTA at any stage categorically refused to issue the required permission to the respondents for transfer of licenses and spectrum in favour of claimants. The failure to issue the required permission by the PTA for transfer of licenses and spectrums in favour of claimants was the result of the disputes raised by the respondents with regard to the payment of amount demanded in this connection by PTA. We are therefore, of the view that the agreement could not be terminated by the respondents under clause 4.8.3 of JVA on the ground that there was failure on the part of PTA to issue the required approval for transfer of licenses and spectrums in favour of claimants.
60. Under clause 4.9 of JVA, if the agreement is terminated under clause 4.8, a written notice by the party terminating the agreement is necessary and on such notice being given the agreement become null and void forthwith and the transaction contemplated under the agreement is abandoned without any further action by the owner or the investor. It is an admitted position that respondents served a notice on the claimant on 24th February, 2008 (after about 7 days of the expiry of 120 days from the date of execution of JVA which expired on 18th February, 2008) terminating the agreement and therefore, the JVA stood terminated and abandoned forthwith as provided in clause 4.9 and all applications and other submission made by respondent No,1 to PTA or to any other authority also stood withdrawn in accordance with the provisions of clause 4.10 of JVA.
61. The specific performance of JVA, otherwise in our opinion could not be granted in view of the explanation to section 12 of Act I of 1877 which clearly provides that the Court shall presume that the breach of a contract relating to transfer of immovable property cannot be adequately relieved by compensation in terms of money and that the breach of contract to transfer movable property can be thus relieved. The JVA is.for transfer of shares and rights in the re-issued licenses and spectrum, a movable property, and therefore, the claimants have to make out an exceptional case for grant of specific performance of JVA. The learned counsel for the claimants contended that licenses and spectrums, the subject-matter of JVA are unique in nature and are not available in the market. The contention of the learned counsel does not find support from the evidence on record. Claimants' witness Mohsin Qazi (CW-2) in his cross-examination admitted that prior to the signing of JVA the claimants negotiated for purchase of WLL licenses and spectrums from many other parties. In reply to another question asked in cross-examination this witness admitted that technically it is correct that the claimants could acquire spectrums from Dancom, Worldcall, PTCL, Cybernet and others. Therefore, the subject-matter of JVA was neither unique in nature nor it was such which could not be made available in open market so that compensation in terms of damages or monetary compensation could not be assessed.
62. The learned counsel for the claimant attempted to argue that the claimants in such circumstances may be awarded 50% of US$22,500,000 as provided in clause 4.12 of JVA. Clause 4.12 of JVA has no application in the facts and circumstances of the present case. This clause is applicable only when the termination of agreement takes place either under clause 4.8.4 by the owner or under clause 4.8.5 by the investor after owners' conditions precedent and investors' conditions precedent mentioned in JVA have been complied with. It is common ground between the parties that the respondent did not comply or fulfil the owner's conditions precedent mentioned in JVA. The respondents claim that they terminated the agreement under clauses 4.8 and 4.8.2. We have already reached the conclusion that the termination of contract by the respondent under clause 4.8 and 4.8.2 of JVA was valid. We are therefore, of the view that clauses 4.12 of JVA has no application in the case.
63. The case-law cited by the learned counsel for the claimants in support of his contention that his clients are entitled to seek specific performance of JVA against the respondents is hardly of any assistance in view of the clear provisions contained in JVA dealing with the rights and obligations of the parties, method of termination of the contract and the consequences flowing out of such termination. It is well-settled that where a contract contains provisions providing for its enforcement and also provides for the consequences of its breach by any of the parties to the agreement the rights and obligations of the parties are to be determined according to the provisions contained in the contract and general law will apply only to the extent the contract is silent about it or offers no solution to the controversy arising between the parties. We have already discussed above the relevant provisions of the contract which deals with the rights of the parties, their obligations to each other and the methodology of its enforcement in the event of breach. The learned counsel for the claimants was unable to point out anything in the provisions contained in the JVA which limited the right of the respondents to terminate the abandon the contract after the closing date, if they failed to complete and fulfil the owners' conditions precedent mentioned in the JVA.
64. In Ramjibhi case AIR 1986 SC 1912 the appellant who was tenant of the agricultural land entered into an agreement to purchase it from the superior titleholder of the land. The agreement provided that the vendor will apply for permission to the collector to convert the agricultural land into a village site and sale was to be executed in favour of appellant after the requisite permission is obtained.
65. Soon after the agreement the appellant entered into an agreement for sale of the same land to the respondent. The agreement provided that appellant will get the land converted into village site at his own cost. The appellant applied to the Collector for permission to convert the land into a village site in 1950-51, which was refused. Under Land Reforms Act of 1951, the title of the superior owner of the land was extinguished and appellant was recognized as an occupant of land under the provisions of Bombay Land Revenue Code. In 1958 and 1959 the Revenue Authorities granted permission to appellant for converting the land to nonagricultural use. The respondent called upon the appellant to execute the sale in his favour and on failure instituted a suit for specific performance of agreement of sale in September, 1960. The appellant resisted the suit on two grounds. Firstly, that at the time he entered into agreement of sale with the respondent his title in the land was imperfect; and secondly, the contract for sale executed by appellant in favour of respondent was contingent upon grant of permission to the superior title holder of the land for conversion of the land to non-agricultural use. The contentions were repelled. The Court held that with the extinction of the title of superior holder of land and conferment .of occupancy right on appellant under Land Reforms Act of 1951 there was no impediment for sale of land especially when permission was also granted to the appellant by revenue authorities at the time the suit was filed by the respondent. The case is of little assistance to the claimant as in the case before us till the hearing of the arguments in the case no permission from PTA to transfer the re-issued licenses and the spectrum of respondent No,2 and approval of PTA for transfer of shares of respondent No,2 to claimant No,2 was available.
66. The learned counsel for the claimants very heavily relied on Motilals' case AIR 1930 PC 287 to contend that the Tribunal should pass a decree for specific performance in favour of claimants with the direction to respondents to obtain permission from PTA to transfer the re-issued 14 licenses and the spectrums in favour of claimant No,2 as provided in JVA. Since the decision in this case is the sheet anchor of claimants argument that they are entitled to a decree of Specific Performance against the respondents it is necessary to examine in some details the facts and conclusions of the Court. In this case respondent entered into a contract for purchase of 4 annas share in a village including sir and khudkasht land with cultivating rights in sir land for a consideration of Rs,46,000 and paid earnest money to the seller amounting to Rs,5000 on 9th July, 1914. As she was unable, to pay the balance of the consideration, she arranged for payment of the balance amount to the seller through appellants' father on the condition that she may ask him to convey the land on payment of Rs,41,100- any time within ten years. The appellants' father paid the balance amount and got the conveyance of land in his name on 14th August, 1914. On 4th September, 1914, two agreements were executed; one by the appellant's father in favour of respondent and the other by the respondent in favour of appellants' father incorporating the above arrangement. On 18th March, 1918, appellants' father mortgaged 4 annas share in the land to two other persons On 9th October, 1919, the respondent gave notice to the appellants' father to carry out the contract as she was ready to pay the price of land mentioned in the agreement dated 4th September, 1914. The appellants' father took no notice of the letter of respondent whereupon she instituted the suit for specific performance against the appellants' father and the mortgagees. The trial Court dismissed the suit but on appeal the Judicial Commissioner decreed the suit for specific performance. In appeal before the Privy Council, the appellant urged two points. It was firstly, contended that the agreement entered into between appellants' father and the respondent made no mention of transfer of cultivating rights in the sir land to respondent and secondly, the transfer was dependent on the permission being granted by the Revenue Authorities for transfer of cultivating rights in the sir land which required making of application by one or more of the defendants to the Revenue Authorities for sanction of transfer of cultivating rights in the sir land and Court had no jurisdiction to require the defendants or any one of them to make such an application. Both the contentions were repelled by the Court. On the first point the Court came to the conclusion that the agreement dated 4th September, 1914 between the respondent and appellants' father for transfer of land included the transfer of cultivating right in the sir land also.
67. Repelling the second contention the Court held that the transfer of land was made in favour of appellants' father after permission was granted by the revenue authorities and therefore, the condition for transfer of cultivating rights in the sir land after obtaining permission from the revenue authorities was an implied condition of the agreement dated 4th September, 1914. The Court however, while dealing with the question of sanction of revenue authorities for transfer of cultivating rights in sir land in favour of respondent observed "it is not necessary for their lordships to decide whether in this case the application for sanction for of transfer must succeed, but it is material to mention that no facts were brought to their lordships' notice which would go to show that there was any reason why such sanction should not be granted". The case is distinguishable both on facts and on point of law. The case before us relates to the enforcement of an agreement in respect of transfer of movable property (licenses and spectrums) while in the reported case the contract related to the sale of immovable property. Section 12 of Specific Relief Act 1877 which applied to both the cases provides that Court may grant specific performance where the act agreed to be done is such that pecuniary compensation for its non-performance would not afford adequate relief. The explanation to section 12 is very important which says that "unless and until the contrary is proved, the Court shall presume that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money, and that the breach of a contract to transfer movable property can be thus relieved". It is therefore, quite clear that different considerations apply by the Court while considering grant of specific performance of a contract of sale relating to immovable property and movable property. Secondly, provisions in the JVA give unfettered right to the parties to terminate and abandon the contract if the closing has not taken place and the date of closing has passed. Section 21 of Act I of 1877 provides that a contract which in its nature is revocable cannot be specifically enforced. It is also to be noted that the respondents applied for grant of permission to PTA for transfer of 14 re-issued licenses and the spectrums to respondent No,2 and shares of respondent No,2 to claimant No,2 but till the hearing of arguments in the case such permission from PTA was not granted. We are therefore, of the view that the ratio laid down in the above-cited case does not advance the case of claimants for grant of specific performance of JVA.
68. Pan Islamic Steamship Co. Ltd. Case PLD 1959 Karachi 750 was an application under section 20 of the Arbitration Act 1940, filed by the plaintiff for a direction to defendant to file the arbitration agreement in Court so that'the dispute between the parties may be referred to the arbitrators. The contention of the respondent in the case before the Court was that since it has repudiated the contract, which contained the arbitration clause, the arbitration clause is no more enforceable, The Court held that in spite of repudiation of contract by one of the parties, the arbitration is enforceable at the instance of the party, which has not repudiated the contract. No such contention arises in the case before us and the cease, already stand referred to the Arbitral Tribunal.
69. Dasukh M Pancholi AIR (34) 1947 Privy Council 182. This was also a case of specific performance of a contract of sale of immovable property. The suit was dismissed as permission was not obtained for sale of property from the executing Court where suit property was attached. The Court held the contract was a contingent contract and as the contingency failed there was no contract which could be ordered to be performed. Firstly, the case relates to the Sale of Immovable property where consideration for grant and refusal of specific performance are different from the sale of movable property. Secondly, in that case the executing Court refused to grant permission for sale of the property and therefore, the agreement of sale which was dependent on the grant of permission for sale by the Court could not be enforced. No such question arises in the case before us. The respondent's contention in the case before us is that they terminated the agreement in accordance with the provisions of the agreement, which is upheld.
70. Nan Fung Textile Ltd. PLD 1979 Karachi 750 (sic) this was an application under section 5 of the Arbitration (Protocol and Convention) Act, 1937 for pronouncement of judgment in terms of a foreign award given in favour of the applicant. The respondent in the case opposed the prayer for making the award rule of the Court amongst other on the ground that the contract was frustrated, as the permission required for export of goods was not granted by the State Bank of Pakistan. The Court rejected the contention on the ground that the contract between the parties did not provide that it was subject to the grant of permission by the State Bank of Pakistan. In the case before us the agreement specifically provides that either party may terminate the agreement if the relevant governmental Authority either refused or failed to issue approvals contemplated under clauses 4.1.1, 4.1.2, 4.1.3, 4.1.4 and 4.1.7. We fail to see how this case is of any assistance to the claimant in the facts and circumstances of the case.
71. Badri Narayan Agarwalla PLD 1966 Dacca 164: It was an appeal filed by the defendant against the order making the award rule of the Court. Amongst other contentions the appellant urged before the Court that he could not export the goods because of frustration of contract and relied on section 56 of the Contract Act. The Court rejected the contention holding that at the time the appellant entered into the contract for export of jute he was aware of the existence of the circular which required registration. It was also found that the bar of registration came into force on 11th February so the plea that he could not lift the goods in the absence of registration number cannot be allowed to defeat the contract. The decision has no application in the present case as the JVA could not be performed in the absence of required permission from PTA.
72. Mst. Amina Bibi PLD 2003 SC 430, Batul 2005 SCMR 544, Rumulu AIR 1966 AP 70, Nathulal AIR 1970 546, Ramesh Chandra AIR 1971 SC 1238, Haji Muhammad Yaqoob 1998 CLC 21, Jamshed Rohdoaram Irani AIR 1915 PC 83, Ashraf Hanif 2001 CLC 1029, Tilley 18673 Ch. 61 cited by the learned counsel for the claimants were all cases in which the contracts related- to the sale of immovable properties. In some of these cases the Court addressed the question whether time was of the essence of contract. As a general proposition of law the Court held that in case of sale of immovable property time is not treated as an essence of contract in the absence of a clear and specific provision in the contract expressing the intention of the parties. It was also held that where time was not originally made an essence of contract in clear and express terms it cannot be made essence of contract by subsequent conduct of any party. The ratio decidendi in these cases is of little assistance in the facts and circumstances of the case before us which firstly relate to the sale of moveable property (the license and the spectrum) and secondly, the JVA was to be performed within 120 days of its execution on account of extensions granted by the claimants.
73. Partabmull Rameshwar 1951 2 All ELR 352, This was an appeal by the seller against the judgment of appellate Court confirming the order of original Court upholding the award given by the committee of the London Jute Association. It was contended by the appellant that the implied term of necessary licenses and quota should have been read as an implied term of the 4 contract for sale of jute. The decision of Court of Appeal that the Court would read an implied term into a contract only where it was clear that both parties intended that term to operate, was confirmed by House of Lords. No such issue arises in the case before us as the condition regarding obtaining of permission for transfer of licenses and spectrum in favour of claimant by the respondent from PTA is specifically mentioned in the JVA.
74. SAP Devasthanam AIR 1962 Madras 132, this was an appeal by the plaintiff against the decree of the trial Court for Rs,7422 as against the claim of Rs,21744-11-4 being the arrears of lease money in respect of agricultural land. The Court framed two questions for determination. (1) Whether the defendants are liable to pay the rent fixed in the lease deed notwithstanding the promulgation of Ordinance IV of 1952 which was subsequently repealed and replaced by Act XIV of 1952, and (2) whether the plaintiff was bound to receive only fair rent fixed by Conciliation Officer. The respondent/ defendant raised the pleas of frustration of contract which was not raised before the trial Court. The Court in the final analysis held: "Thus though the law is not settled, the general trend of opinion both in House of Lords and in our Courts in India seems to be that the doctrine of frustration or impossibility of performance will not be applicable to cases of agricultural leasesFurther as stated already, the theory of frustration cannot be applied to a commercial adventure, and being an agricultural lease, there is no question of impossibility of performance or frustration." These observations do not apply to the case before us as the respondents claims to have terminated the cotitract in accordance with the provisions of JVA.
75. Ryanair Ltd. 2007 EWHC 3089 (QB), the case related to enforcement of an agreement under which the SRT (defendant) had agreed to provide Ryanair for a period of 15 years a section of hanger space at Dublin Airport. The Court framed the questions for decision as "whether the failure of SRT to obtain the consent of the DAA to the grant of a licence for Ryanair to occupy hanger space at Dublin constitute a breach on the part of SRT of its contractual obligation towards Ryanair. The further or alternative question which may arise for decision is whether SRT was contractually entitled to revoke Ryanairs' licence to occupy the hangar space. If these answers are resolved in favour of Ryanair, an issue arises whether Ryanair is entitled (as it claims) to relief in the form of an injunction restraining SRT from revoking Ryanairs' license to occupy the hangar space and/or from refusing to make available to Ryanair the said hangar space or whether (as SRT contends)
76. Ryanairs' remedy lies in damages only." The Court after reviewing the law and authorities of the Courts granted relief of injection against SRT and further directed SRT to use its best endeavors to obtain consent for a Hangar License Agreement for a term of 15 years. The Court granted relief of injunction in this case upon a finding that failure to obtain consent of the DAA by SRT constituted breach of agreement and directed the defendant to use its best endeavors to obtain the required consent. In the case before us our finding is that failure on the part of respondents to obtain removal of charge on the licenses from Faysal Bank and permission for transfer of re-issued licenses from PTA did not amount to material breach of the agreement and therefore, no such relief can be granted to the claimants.
77. Muhammad Sama Mondal PLD 1963 DACCA 816, it was an appeal by one of the defendants against consent decree in a suit for specific performance of a contract of sale relating to agricultural land.
78. The appellant contended before the Court that he could challenge the consent decree as it was ex parte against other defendants in the suit and it contravened the provisions (East Bengal) Transfer of Agricultural Land Act 1951. It was also contended that the agreement was contingent upon obtaining of permission from the collector for sale of land and therefore, no decree for specific performance in such case could be passed by the Court. The Court rejected all the contentions.
79. The Court after reproducing the definition of "contingent contract" given in section 31 of the Contract Act held that the condition to obtain permission from collector was not collateral but formed part of the contract and therefore, the contract cannot be held to be a contingent contract.
80. The case is of no assistance to the claimants in the facts and circumstances of the case before us as it is common ground between the parties that permission from PTA for transfer of licenses and spectrums in favour of claimant by the respondent was necessary which was not available.
81. Satyabrata Case AIR 1954 SC 44, the Court determined in this case the scope of frustration of contract as enunciated in section 56 of the Contract Act 1872 and observed: "The doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of section 56. To the extent that the Contract Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law `dehors' these statutory provisions...Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. In cases, where the Court gathers as a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand discharged on the happening of certain circumstances, the dissolution of the contract would take place under the term of the contract itself and such cases would be outside the purview of section 56 altogether. They would be dealt with under section 32 which deals with contingent contract or similar other provisions contained in the Act." These observations of the Court do not advance the case of claimants' in any manner as in the case before us the respondents pleaded that they terminated the agreement in accordance with the provisions of JVA which has been upheld.
82. Brauer & Co. 1952 All ELR 497, the proceedings arose from an award made by the arbitrators in favour of buyer for damages. The seller appealed to the Board of Appeal of the Seed, Oil, Cake and General Produce Association and requested that the award of the Board should be stated in the form of a special case for the opinion of the Court. Subject to the decision of the Court on question of law the board made an award in favour of buyers. The Court answered the question in favour of seller, thus reversing the decision of the Board. The buyer appealed. The Court was concerned, with the interpretation of "force majeure" clause in the agreement. The contract was subject to any Brazilian export license. On facts the Court found there was no prohibition or embargo or physical or legal prevention of export, the sellers were therefore found not relieved from liability by the "force majeure" clause in the agreement. The Court found that the reason for failure of seller to obtain the license was the rise in the price of goods agreed to be exported which could not justify application of "force majeure clause. The case is of no assistance to the case of claimants as here the respondents have not pleaded "force majeure" but claim that they were entitled to terminate the agreement after expiry of the period of extensions (120 days) which has been upheld.
83. Davis Contractors Ltd. 1956 AC 696, it was a case of building contract. The contractor had attached to his tender form a letter, which stated it was subject to adequate supplies of labour being available. The contractor pleaded frustration of contract and claimed to be entitled to payment on quantum meruit to a sum in excess of contract price. The Court held that the fact that, without the fault of either party, there had been unexpected turn of event, which rendered the contract more onerous than had been contemplated, was not a ground for relieving the contractor of the obligation which they had undertaken and allow them to recover on the basis of a quantum meruit. No such dispute arises in the case before us and we find case inapplicable to the case before us.
84. Issues Nos.(b), (c) and (d) are interconnected and can be conveniently disposed of together. There is enough evidence on record to show that respondents failed to perform their obligation under JVA in as much as they could not get the charge of Faysal Bank removed over the 14 licenses pledged with the bank. Similarly, the respondents also failed to get the permission from PTA for transfer of splitted 14 licenses and the spectrum in favour of respondent No,2 and approval of PTA for transfer of shares of respondent No,2 in favour of claimant No,2. The contention of the claimant is that the respondents acted in bad faith and with mala fide intention in deciding not to proceed with completion of JVA. The burden of proving bad faith and mala fides of respondents is on the claimants. The evidence on record shows that before signing the JVA the respondent No,1 had approached PTA for permission to split up the 14 local loop Licenses issued to them and transfer the splitted licenses and the spectrums in favour of its subsidiary respondent No,2. The record shows that respondent No,1 remained in correspondence with PTA throughout to get the required permission for transfer of splitted licenses and the spectrums in favour of respondent No,2. It is true that the respondent No,1 did not pay the amount demanded by PTA to process its request for transfer of splitted licenses in favour of respondent No,2 but the explanation of respondent No,1 is that there existed genuine dispute with regard to the amount demanded by PTA. The correspondence on record shows that different amounts were demanded by PTA in its letters addressed to respondent No,1 from time to time. The fact that respondents did not pay the amount demanded by PTA which was disputed by them and which was ultimately found to be correct, is not sufficient to hold that the respondent No,1 acted in bad faith or with mala fide intentions.
85. Similarly, the amount demanded by Faysal Bank to remove the charge over 14 licenses pledged with them was on the basis of overall liability of respondent No,1 to the bank while respondent No,1 was offering to pay the specific amount for which charge was created over 14 licenses pledged with the bank. Mala fides and bad faith has to be pleaded with particularity and evidence must be led to establish facts which constituted mala fide or bad faith. Mere general allegations of mala fide or bad faith are not enough to prove these allegations. The claimants have neither disclosed the particular acts of respondents, which constituted mala fide, and bad faith on their part nor led any evidence in support of these allegations. We are therefore, of the view that the claimants have failed to prove mala fide and bad faith on the part of respondents in failing to complete their obligations under JVA. While discussing issue No,(a) which related to the relief of specific performance of JVA, we have already reached the conclusion that the termination of JVA by the respondent was valid and therefore, even otherwise the allegations of mala fide and bad faith lost their significance. Since we have reached the conclusion that JVA was validly terminated by respondents the contract stood abandoned and the respondents were not required to proceed further with the completion of JVA.
86. The next issue relates to the damages and loss suffered by the claimants allegedly on account of non-performance of JVA by the respondents. We have already reached the conclusion that the termination of JVA by the respondents under clause 4.8.2 is valid. Clauses 4.10 and 4.11 of JVA provide that where the contract is terminated under clauses 4.8 or 4.8.2 or 4.8.3 all applications and other submissions made pursuant to the JVA shall to the extent practicable, be withdrawn from any Governmental Authority or whomsoever made. It also provide that there shall be no liability or obligation under the JVA on the part of owner or investor or their respective directors, officers, employees affiliates, controlling persons and agents or representatives. However, clauses 4.14.1 and 4.14.2 provide that in the event of owners' failure to fulfil all or any of the conditions precedent mentioned in clauses 4.1.5, 4.1.6, 4.1.9, 4.1.10, 4.1.12, 4.1.13 and 4.1.14 or on failure of the owner to obtain any or all the approvals and consents required to be obtained under clauses 4.1.1, 4,1.2, 4.1.3, 4.1.4, 4.1.7 and 4.1.14 due to failure of owner to provide and submit the necessary information to the relevant Government Authority or PTA or failure of the owner to act upon any instruction or fulfil any reasonable requirements issued by the relevant Governmental Authority or Regulator, the owner shall not enter into any agreement in any way to transfer directly or indirectly the ownership, title and interest in the reissued licenses and/or the spectrum which is held either under the re- issued licenses or the original licenses as the case may be to any third party for a period of six months. This restriction however, does not apply to the creation of security interest or assignment by way of collateral for securing financing obligations of the owner. Apart from these consequences no other obligations arise on the owners. In view of the above provisions in JVA it is highly doubtful if claimants could claim any loss or damages from the respondents on account of termination of JVA.
87. Apart from it the burden of proving damages and loss suffered by claimants on account of non- performance of JVA is on the claimants. The claimants failed to lead any evidence in this behalf.
88. The claimants in their application for arbitration claimed that on account of delays caused by the respondents which consequently caused loss of business opportunity to the claimants, they suffered loss and damages amounting to US$5,000,000 besides costs incurred by the claimants to the extent of US$350,000. The claimants' witness Mohsin Qazi (CW-2) however, in paragraph 11 of his affidavit of evidence claimed the following amounts:--
(A) Loss on account of additional capital cost on account of requirement of additional equipment and infrastructure due to reduction in available spectrum capacity US$25 million
(B) Loss on account of additional operational costs on account of requirement of additional infrastructure due To reduction inavailablespectrum capacity US$17 million Loss of profit on account of inability to provide certain high quality services otherwise planned and capable of delivery with the additional spectrum availability US$15 million Loss on account of delay of availability of spectrum by February 2008 resulting in a delay already extending to over 10 months in commercial roll out of the planned project and additional actual costs on account of redesign of technical architecture and change of equipment amongst other and loss of opportunity cost on value of business US$ 5 million All the above claims remained unsubstantiated in evidence. For instance when questioned about the loss of Rs,5 million which the witness claimed that it was the amount which the claimant No,2 already spent, but not a single document in support of payment of fee to consultant or cost incurred, or for recruitment, the reply was that we had not filed these documents as these were business confidential documents and respondents could cross verify them. Similarly, when the witness was questioned about the cost of acquiring additional equipment and infrastructure on account of reduction in available spectrum capacity, the reply was that the claimants did not acquire any equipment and had only done the planning. Finally when the witness was suggested that the claimants did not actually spend any amount, the reply was in the affirmative. Similarly the claimants could neither substantiate the claim for additional operational cost, which they allegedly incurred on account of requirement of additional infrastructure due to reduction in available spectrum capacity nor any evidence was led to establish the loss of profit. Loss on account of inability to provide certain alleged high quality services otherwise planned and capable of delivery with the additional spectrum , availability. We therefore, hold that the claimants failed to prove the amount of damages claimed by them.
89. On the question of grant of costs of the proceedings there is difference of opinion between the Chairman and the Co-arbitrators. The parties at the final hearing of the case at Singapore did not address any argument on the question of costs. The Chairman and one of the Co-arbitrator (Justice (R) G.H. Malik) are of the view that the respondents are entitled to the costs which they deposited towards arbitration, proceedings while the other Co-arbitrator (Justice (R) Nasir Aslam Zahid) is of the view that in the facts and circumstances of the case the parties should bear their respective costs. Article 31(3) of ICC Arbitration Rules 1998 provides as follows:-- "Article 31(3).--the final Award shall fix the costs of the arbitration and decide which of the parties shall bear them or in what proportion they shall be borne by the parties."
90. The cost of the arbitration proceedings in terms of Article 31(3) of ICC Arbitration Rules quoted above therefore, is to be determined by. the Arbitral Tribunal. Grant of costs is otherwise at the discretion of the Court. Costs ordinarily must follow the event. A successful party is entitled to his costs unless he is guilty of misconduct or there is some other good cause for depriving him of it such as he did not come to the Court with clean hands (See T.S. Swaminatha Odayar v. Official Receiver AIR 1957 SC 57). The test for granting or refusing costs is not whether the party has succeeded completely in the case or not. A party who substantially succeeds in his case is entitled to his costs, although he may not have got the precise form of relief he wanted (see Agha Mohammad Aslam v. Jodh Singh AIR 1923 Lahore 513(2)). Where plaintiff succeeds only on part of his claim but fails on the most important heads of controversy, the defendant will be entitled to the whole costs of the suit (see Devidoss & Co. v. Abboyee Chetty & Co. AIR 1941 Madras 31). Keeping in view the above principles we hold by majority (The Chairman and Co-arbitrator-G.H. Malik) that the claimants must bear the costs of arbitration and pay to the respondents the costs deposited by them towards arbitration expenses.
91. The parties have deposited in advance a sum of US$385,000 towards costs determined by the ICC Court, in equal shares. The ICC Court at its session of 29th October, 2009, has fixed the costs of the arbitration as follows:-- Administrative expenses US$41170 Chairmen's' fees US$124932 Co-Arbitrators fees: (US$93,699x2)US$187 398 Expenses incurred: US$31,500 Total: US$385,500 By a majority decision (Chairman & Co-Arbitrator Justice (R) G.H. Malik) we direct the claimants to pay to the respondents US$192500, being the shares of the advance costs paid by the respondents.
92. As a result of the above discussion our conclusions are as follows:--
(A) The claimants are not entitled to the Specific Performance of the Joint Venture Agreement dated 22nd October 2007;
(B) The respondent validly terminated the Joint Venture Agreement on 25th February, 2008 'under clause 4.8.2 of JVA as the owners' conditions precedent could not be complied with within the extended period of 120 days from the date of execution of JVA;
(C) The respondents could not validly terminate the agreement lender clause 4.8.3 on the ground of failure of PTA to issue the required permission/approval for transfer of licenses and spectrum in favour of claimants as the respondents disputed the amount demanded by PTA and for that reason did not deposit the same;
(D) The claimant failed to prove mala fide intentions and bad faith on the part of respondent in completion of JVA;
(E) The claimant failed to prove loss or damages suffered by them on account of non- performance of the agreement (JVA);
(F) The Arbitral Tribunal therefore, unanimously rejects the Arbitration application filed by the claimants and all other claims of claimants against respondents.
(G) The claimant does pay to the respondent US$192500 being the 'share of advance costs deposited by the respondent. (Majority decision by Chairman & Co-Arbitrator G.H. Malik) Justice JR) Nasir Aslam Zahid, on the issue of costs As regards question of costs, it may he observed that there was no default on the part of the claimants in as much as they had fulfilled all the investors' conditions before the closing date and JVA could not be implemented as the respondents were not able to fulfil the owners'- conditions and this is the opinion of all the members the Arbitral Tribunal. Additionally, the legal question involved in this case relating to non-fulfilment of conditions by the owners before the closing date and its consequences had not been considered in any decision by any Court or Arbitration Tribunal before the decision of this case. I do not agree with the reasons given by the learned Chairman on the question of costs. In-the circumstances, I am of the view that there should be no order as to costs and the parties should bear their own costs. It is directed accordingly.