' MUNIB AKHTAR, J.---By means of the present application, filed under section 34 of the Arbitration Act, 1940, the defendant No. 3 seeks to have the suit stayed and the matter referred to arbitration in terms of an arbitration agreement between the said defendant and the plaintiff No.1 . The arbitration agreement is contained in a power purchase agreement dated 26-1-2010 ("PPA") between the said parties. The defendant No.3 is the National Transmission and Despatch Co. Ltd.
("NTDC"). The plaintiff No. 1 is now called K-electric Ltd., but is more familiarly known to Karachites as "KESC". Since that was the company's name when the PPA was entered into, it will for convenience be referred to herein as "KESC". The plaintiff No. 2 is said to be a shareholder of the plaintiff No. I .
2. In addition to NTDC, the suit also impleads a number of other defendants, including the Federation, the Province of Sindh, the SITE Association of Industries, the Judicial Activism Panel of Pakistan (which is stated to be an NGO type association) and an individual, one Mr. Abdul Karim Khan. Briefly stated, the grievance of KESC is as fellows. KESC obtains power for distribution in Karachi (and certain environs) from three sources; self-generation, independent power projects (or IPPs) and the national grid. The last is managed and controlled by NTDC, which is a spin-off component of WAPDA. The latter had of course originally managed and controlled the entire power sector throughout the country other than Karachi. KESC claims that in terms of the PPA it is entitled to draw up to 650 MW from the national grid. It has been continuously purchasing power from NTDC and has been regularly drawing power up to the aforesaid amount. It is stated that this is absolutely essential to meet the requirement of KESC's distribution area and if it is unable to draw power up to its entitlement, this can, and does, lead to serious power shortages, with attendant consequences for the residents and businesses of Karachi. It appears that in the past NTDC had been regularly meeting KESC's requests for supply of power under the PPA. However, of late, it has failed/refused to deliver power beyond 300 MW, i.e., power of 350 MW has been "withdrawn" from KESC. The reason for this is stated to be a decision taken by the Council of Common Interests (established under Article 153 of the Constitution) on 8-11-2012. The CCI considered and approved a summary prepared by the Ministry of Water and Power in the Government of Pakistan on the "equitable distribution of electricity" and directed that 350 MW be "withdrawn" from KESC. This led to a series of measures and actions by, inter alia. NTDC and the regulatory authority, NEPRA, with the ultimate result that, as noted, NTDC has refused to supply power beyond 300 MW, under the PPA.
KESC challenges this action and by means of the present suit seeks suitable declaratory and injunctive relief to the effect that it is entitled to draw up to 650 MW from the national grid. Along with the suit, KESC has also filed an application for interim relief, but that is not the subject of the present decision.
3. The PPA, in Article I, defines "Dispute" as meaning "any dispute or difference of any kind whatsoever between NTDC and KESC in connection with or arising out of this Agreement". Article XIII relates to dispute resolution. It contains a multi-step mechanism of the sort often to be found in power purchase agreements. As immediately relevant, section 13.3 contains the arbitration agreement, which, provides for arbitration a Disputes "in accordance with Pakistan's Arbitration Act, 1940, including its subsequent amendments".
4. Learned counsel for NTDC submitted that the case for reference to arbitration was straightforward. KESC claimed that it was entitled as of right to draw up to 650 MW of power under the PPA. NTDC contested this position. There was no allocated "quota" to which KESC was entitled. It could only draw power in terms of and under the PPA. Since. KESC claimed (which NTDC denied) that the latter was in breach of its obligation to supply power in terms thereof, there was clearly a Dispute between parties. The matter therefore had to be referred to arbitration and the suit stayed.
Learned counsel submitted that section 34 was fully applicable in the present facts and circumstances. The application had been filed before the taking of any other steps in the proceedings. The application was filed on 3-3-2014, the same day on which NTDC filed its counter affidavit to KESC's stay application. Learned counsel also referred to certain case-law in support of his submissions.
5. Learned counsel for KESC opposed the application. Learned counsel referred to various provisions of Article XIII preceding the arbitration agreement and drew attention to the fact that while the PPA was only between KESC and NTDC, the suit had a number of other parties, who were strangers to the agreement. Learned counsel submitted that there was no Dispute within the meaning of that term. The reason was that NTDC had all along been supplying power up to the full entitlement of 650 MW as and when required to do so by KESC. The present failure was entirety the result of the CCI decision, as a result of which NTDC had been pressurized to refuse supply of power beyond 300 MW. Thus, insofar as the, actual parties to the PPA were concerned, they were at one that KESC was entitled to draw power up to 650 MW. Referring to section 34, learned counsel submitted that its application was not mandatory: the Court had the discretion to refuse relief in appropriate situations, with the result that the suit would continue. While the plaintiff had to show "sufficient reason" why the matter should not be referred to arbitration, learned counsel submitted that such reason existed in the present facts and circumstances. Sufficient reason was provided by the decision of the CCI, which alone had created the situation that prevented NTDC from fulfilling its obligations under the PPA. Learned counsel also contended that there was a contradiction in the stand taken by NTDC. In para 4 of the affidavit in support of its application under section 34, NTDC had taken the position that the matters raised and alleged in the Suit (which are denied being contrary to facts and law) are all exclusively covered by and fall within the scope of the Arbitration Clause of the PPA". Learned counsel emphasized the word "exclusively". However, in its counter affidavit to the stay application, in pars 12. NTDC had taken a different stand. Its position there was, inter alia, as follows: "12. ... In addition, it may also be noted that through the instant Suit, the plaintiff No.1 is in essence seeking to impugn the decision of the CCI dated 8-11-2012. It is respectfully submitted that a decision of the CCI cannot be challenged before this Honourable Court keeping in view Article[s] 154 and 155 of the Constitution and the jurisdiction of the Courts stands abridged by the said constitutional framework. Further, the plaintiffs do not have the locus standi to institute the present Suit, as any grievance against the CCI may only be agitated by the Federal Government and/or the Provincial Governments...."
' Learned counsel submitted that the foregoing passage clearly showed that NTDC accepted that the basis of KESC's grievance was outside and beyond the scope of the PPA. Hence there could be no Dispute as could or ought to be referred to arbitration. Learned counsel also referred to certain case law. Learned counsel for the defendant No.5, though not as such concerned with the arbitration agreement and hence the present application, supported the case put forward by learned counsel for KESC. It was also submitted that the defendant No. 5 had filed a constitutional petition in this Court (which was still pending) in which much the same issues were involved.
6. Exercising his right of reply, learned counsel for NTDC denied that there was any contraction in its pleadings and contended that the PPA constituted a complete "code" between KESC and NTDC for the supply of power. Its provisions therefore had to be adhered to and complied with and the arbitration agreement embedded therein required the resolution of disputes through arbitration.
7. 1 have heard learned counsel as above, examined the record considered the case-law. In my view, whenever a dispute that comes within the scope of an arbitration agreement is made out then prima facie the matter must be so referred and the onus lies on the plaintiff (and it is, A in my view, a heavy one to discharge) to show that sufficient reason exists for the suit to continue. In the case at hand, if reduced to its bare essentials, there does appear, prima facie, to be a dispute within the meaning of section 13.3 of Article XIII. KESC has claimed or demanded the supply of power up to what it regards as its entitlement under the B PPA i.e. 650 MW. This NIDC has failed or refused to deliver. There is therefore prima facie a Dispute. Now normally arbitrators are regarded as being empowered to consider all legal and factual issues that may arise in relation to the dispute that is referred to them. This is so, e.g., even as regards their own jurisdiction (or competence). However, the present matter does raise a novel situation. The reason put forward by NTDC for refusing to supply power up to the level demanded by KESC is the CCI decision. This decision operates on the constitutional plane. There can hardly be any doubt that if the matter was referred to arbitration, the decision would constitute NTDC's primary defence. In its counter- affidavit to the stay application, NTDC has recognized that this is "in essence" KESC's grievance and has taken the categorical stand that not even the High Court has the jurisdiction to go behind the CCI decision or to allow it to be questioned. Reliance has been placed, inter alia, on Articles 154 and 155 of the Constitution. Now, arbitration in its essence is dispute resolution before what is sometimes called "domestic" forum, i.e. a forum of the parties' own choice. In that sense, it is a stand-in for a court of law: instead of the court hearing and deciding the dispute, the law allows the parties to take it to a forum of their own choosing. While initially the courts regarded certain matters as falling outside the scope of the arbitrators' jurisdiction (e.g. Their power to decide upon their own competence) that area has been steadily shrinking, with a corresponding increase in the jurisdiction of the arbitrators. Of course, the arbitrators may not have the last word in all matters the court may have the power of ultimate decision and the final say. It cannot however be gainsaid that the arbitrators' area of adjudication is now much enlarged, especially in relation to questions and issues of law. Nonetheless, it does remain open to question whether arbitrators, engaged upon a domestic arbitration and acting within the framework of the municipal law, can decide a constitutional issue of that jurisdiction. This is all the more so where the constitutional issue is said to be beyond the jurisdiction of even the courts. In my view, such an issue cannot be regarded as one that is suitable for arbitrators. There is, in my view, a distinction between a legal issue and one that is of a constitutional nature. The former may well now (subject to ultimate consideration by the court) be regarded as falling within the arbitrators' remit. However, the latter is an issue that must be decided by the court itself, especially where that court is a superior court such as the High Court.
8. Examined from this perspective the present dispute cannot be referred to arbitration under section 13.3 of Article XIII. It is quite obvious that KESC's claim would be resisted by NTDC on the basis of the decision of the CCI, i.e., a constitutional issue would arise. KESC would challenge this defence, with the result that the arbitrators would be required to rule upon the constitutional validity (or otherwise) of the CCI decision. That, in my view, is not an issue suitable for an arbitral tribunal, no matter how eminent may be its composition. The matter is one of principle.
Constitutional issues must be regarded as falling peculiarly within the jurisdiction of the courts (and especially a superior court such as the High Court) and hence beyond the ambit of arbitrators. This is all the more so where as here, it is contended that even the High Court does not have the jurisdiction to take up the constitutional point. Of course, these observations are being made with reference to a purely domestic arbitration and one that would operate wholly within the framework of the municipal law. Different considerations may apply where the arbitrators are called upon to interpret and apply foreign law, and give a ruling on a constitutional issue of the foreign jurisdiction. This point does not arise here and I leave it open for consideration in a suitable case.
9. There is however, another aspect that must be considered. Could it be said that the arbitrators do have the jurisdiction to decide whether the constitutional point operates as a valid defence to performance under the contract, without touching upon the validity of the point in constitutional terms? For example, in the present case, could the arbitrators have the jurisdiction to decide whether the CCI decision operates as force majeure within the meaning of Article XI of the PPA, without deciding the constitutional validity of the decision itself? Clearly, it does lie within the jurisdiction of the arbitrators to decide whether a party has properly and successfully invoked a force majeure clause in the contract in relation to or out of which the dispute arises. It may therefore be that in this limited sense, a constitutional point may go to the arbitrators. But, the situation just postulated could only arise where the party that has brought the suit does not challenge the validity of the constitutional point or decision. However, in the present case, KESC has directly challenged the CC1 decision. It has contended, e.g., in para 21 of the plaint that the CCI decision is without jurisdiction and ultra vires the Constitution, and has cited a number of provisions in this regard. Whether this challenge will ultimately prevail is not the issue here. What is clear is that if the matter goes to arbitration, KESC will take up this position before the arbitrators and per force, they will have to decide on the constitutional validity of what the CCI has done. As just noted, in my view this is normally to be regarded as beyond their jurisdiction and a matter that is for the Court itself to decide. One point must however be made clear. The constitutional issue raised in the suit must be directly and substantially in issue. If it is only collaterally or incidently in issue, then there would be no bar to referring the matter to arbitration. If such be the case, the Court can, if necessary, suitably clarify this point. However, here the point taken by KESC is directly and substantially in issue in the suit as framed. It constitutes the core of KESC's grievance. It cannot therefore be referred to arbitration.
10. On account of what has been stated herein above, it is not necessary to consider the case-law cited by learned counsel in any detail, since the point as arises here does not appear to have arisen directly in the cited decisions.
11. Accordingly, I am of the view that sufficient reason has been shown by KESC for not referring the present dispute to arbitration. The suit must be allowed to proceed, and be heard and decided on its own merits. The present application fails and is hereby dismissed.