SAEED-UR-REHMAN FARRUKH, J.~ The petitioner, a Public Limited Company, through this writ petition under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973, has assailed the vires of letter dated 11.7.1997 passed by respondent No. 2, Private Power and Infrastructure Board (hereinafter called PPIB) whereby the contract between the petitioner and the Islamic Republic of Pakistan, respondent No. 1, for establishment of 450 MW LPG Barge Power Project, was cancelled.
Relevant facts forming the background of this Constitutional Petition are; ln March, 1994 the Government of Pakistan announced "Policy Framework and object of incentive for providing electrical power in Pakistan" highlighting the shortage of electric power as being one of the most crucial issues facing the country, lt was mentioned that the supply was unable to meet the growing demand for electric power with the result that it had been decided to fill in the gap by providing incentives to private sector for power generation, lt was also laid down that the performance obligations of WAPDA and fuel supply by the public sector i.e. Pakistan State Oil would be guaranteed by the Government of Pakistan.
2. Pursuant to the above policy, protracted and intensive negotiations took place between the petitioner and representatives of the Government of Pakistan for establishment of 450 MW LPG Barge Power Project. Ultimately" implementation agreement" (hereinafter called (I.A".) was signed between the Islamic Republic of Pakistan and the petitioner. Another agreement known as "Power Purchase Agreement" (hereinafter called "PPA") was signed between Karachi Electric Supply Corporation and the petitioner. The "I.A" now stands terminated Trough the letter dated 11-7-1997, impugned herein, lt reads as under:- "GOVERNMENT OF PAKISTAN MINISTRY OF WATER AND POWER (PRIVATE POWER AND INFRASTRUCTURE BOARD)
No. 1 (102) PPIB-9215/97/2 July 11, 1997.
1. Was Orient Power and Light Limited House No. 10, 'Ludeman Hakeem Road, G-6/3, Blue Area, Islamabad (Fax: 92-51 276 029)
2. Orient Energy Limited 414 East 75th Street, New York, NY 10022, USA.
SUBJECT: TERMINATION NOTICE FOR IMPLEMENTATION AGREEMENT DATED DECEMBER 17, 1997 BETWEEN THE ISLAMIC REPUBLIC OF PAKISTAN AND WAK ORIENT POWER AND LIGHT LIMITED AND ORIENT ENERGY LIMITED (THE "IMPLEMENTATION AGREEMENT").
Dear Sir, Reference is hereby made to the Notice of Intent to Terminate dated February 6, 1997 sent to you by this office. Was Orient Power and Light Limited and Orient Energy Limited (the "Companies") have failed to cure all identified defaults specified in our Notice of Intent to Terminate dated February 6, 1997, within the time period allowed in the Notice of Intent. However, Was Orient Power and Light Limited petitioned the High Court at Lahore and obtained a temporary injunction restraining us from taking action detrimental to the petitioners. This restraint has now been lifted upon the withdrawal of the writ petition by the petitioners. Therefore, we hereby deliver to the Companies this Termination Notice pursuant to Section 19.2 (c) of the Implementation Agreement terminating the Implementation Agreement with immediate effect. Capitalized terms used and not defined herein are used as defined in the Implementation agreement.
Yours sincerely, (Sahibzada Masood Ali)
Prior to this, while the petitioner was negotiating for the establishment of letter of credit, with a Financial Institution as postulated in "I.A", certain disputes arose between the parties with the result that the petitioner was forced to file Writ Petition (No. 5534/96) before this Court, lt came up for hearing on 7.11.1996 and was withdrawn.
3. Thereafter, on 6.2.1997, Private Power and Infrastructure Board, respondent No. 2 (hereinafter called PPIB) issued a notice to the petitioner expressing the intent of terminating the "I.A", lt was replied to on 22.3.1997. Another notice was received, in the meantime, by the petitioner from respondent No. 3 i.e. Karachi Electric Supply Corporation (hereinafter called ^K. E.S.C".) about the intention to terminate "P P A", with the petitioner.
At that stage the petitioner also came to know that the financial guarantees furnished by the petitioner were being sought to be encashed by the Government of Pakistan with the result that it filed another Writ Petition (W.P. 16243/97) before this Court, lt came up for hearing on 14.10.1997 when the Attorney General for Pakistan entered appearance and made a statement that the "I.A" had been terminated through letter dated 11.7.1997, impugned herein. Hence this writ petition.
4. The Writ Petition was admitted to regular hearing on 20.10.1997 and notices were issued to the opposite party. Replies have been filed by respondents No. 1 and 2 as well as respondent No. 3, separately, to which rejoinders have also been submitted by the petitioners.
5. We have heard leamed counsel for the parties at great length and perused the voluminous record of the writ petition with their able assistance.
6. A preliminary objection as to maintainability of the Writ Petition was raised on behalf of respondents on the ground that the petitioner cannot seek the enforcement of the contract, "I.A", through Writ Petition and the only remedy available to it is by way of a civil suit or resort to arbitration clause as embodied in the agreement itself. We propose to first advert to this objection.
7. There is abundance of case-law on the subject and its brief survey is made hereinafter. Firstly few cases from Indian jurisdiction: in Mohabeer Pito Stores and others v. Indian Oil V Corporation and others (AIR 1990 SC 1031) it was held that the State Acts in its executive power under Article 298 of the Indian Constitution in entering into contracts with International parties could be subjected to judicial review.
In Kumari Shri Leka v. State of U.P. and others (AIR 1991 S.C. 537) paras 20, 21, 28 and 34) it was held "the personality of the State, requiring regulation of its conduct in all spheres by requirement of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion."
Similar view was expressed in Inia American Hybrid Seeds v. Chandigarh Industrial and Tourism Development Corporation (AIR 1995 Punjab and Haryana 138).
In D.F.O. South Kheri v. Ram Sanahi Singh (AIR 1973 S.C. 205) it was held:- "We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority he must resort to a suit and not to a petition by way of a Writ." ln Dwaskadas Masfatia v. Bombay Port Trust (A.I.R. 1989 S.C. 1642) Supreme Court of India held that all actions including contractual dealings of a statutory authority are subject to judicial review; if they are found to be arbitrary or unreasonable they are required to be struck down.
8. A Division Bench of Karachi High Court in M/s. Pacific Multi-national Private Ltd. v. Inspector General of Police (PLD 1992 Karachi 283) dealt with similar objection as to the maintainability of the Constitutional petition in contractual matter, lt was laid down at page 289 of the report:- "there can be no cavil with the proposition that enforcement of a purely contractual obligation could not properly form the subject-matter of proceedings under Article 199 of the Constitution.
However it could not be ignored that the State had a Constitutional obligation to act fairly even when performing an administrative function, therefore, when a party complained before a Court that the State while awarding a contract to a party had acted in an unfair or arbitrary manner or had discriminated against one of the parties who contested for the award of the contract, such grievance could be looked into by Superior Court in exercise of its power of judicial review under Article 199 of the Constitution". ln Messrs Bresson Manufacturing Ltd's case (1995 MLD 15) it was held that matters regarding enforcement of contractual obligations for performance of contract are subjects involving factual inquiries of some sort or other and other forums/remedy are to be availed of but where the controversy raised is about the process through which the decision has been arrived then the matter would aptly fall within the competency of this Court and there is no prohibition in law or authority to entertain the Constitutional petition.
10. ln Shoaib Bilal Corporation's case (KLR 1997 Revenue Cases 27) the learned Judge, seized of the matter, after referring to the plethora of case-law, reached the conclusion that the trend has now changed and writ can now be issued even in a contractual n atter if breach of contract is committed by a public authority in discharging its statutory functions.
11. Mr. Sher Zaman, Deputy Attorney General for Pakistan placed heavy reliance on the following cases to contend that the present Writ Petition was not maintainable as it sought enforcement of a contract:-
1. Shamshad Ali's case (1969 SCMR 122).
2. Al-Mehmood industries v. Trading Corporation of Pakistan (1974 S.C.M.R. 51)
He also relied on Federation of Pakistan's case (PLD 1989 S.C. 166) to argue that as there was an arbitration clause in the disputed contract the remedy of Writ could not be invoked.
12. lt is clear that the trend of authorities has now changed and remedy of writ is permitted to be resorted to in cases involving contract between a private person and Statutory functionary as it is considered to be more efficacious and speedy remedy as compared to a civil suit or arbitration proceedings.
13. We find that Supreme Court of Pakistan has in a later judgment, i.e. Majlis-e-lntizamia v. Ghulam Muhammad Abid (PLD 1975 S.C. 355) had upheld that view of High Court that a person whose lease was illegally cancelled by the Government could competently invoke writ jurisdiction. We respectfully follow this rule of law. As regards the presence of arbitration clause in the agreement, suffice it to say that arbitration proceeding are likely to take long time to conclude and in the circumstances of the present case, particularly so when the facts are not seriously disputed, we consider that remedy of Writ is more efficacious and speedy and the petitioner cannot be denied due relief on the ground of availability of forum of arbitration. We may, with profound respect, refer to the case of Muhammad Ashraf Ali (1986 S.C.M.R. 1096), wherein their Lordships of Supreme Court have ruled that jurisdiction of High Court to intervene under Article 199 in a contractual matter between a private person and statutory functionary like Cooperative Board was not altogether barred, despite the provision of arbitration clause in the contract.
14. ln the present case the petitioner does not seek enforcement of the terms and conditions of the contract but asserts its rights against the action of the State which is termed to be unlawful. The breach of contract complained of on the part of the State can be said to be breach of statutory obligation and, therefore, present Writ Petition is held to be maintainable. The objection raised in this behalf is over-ruled.
15. Coming to the merits of the case, it would be seen that the reason mentioned in the impugned letter dated 11.7.1997, reproduced in para 2 ibid is that as the petitioner had failed to "cure all identified defaults" specified in notice of intent to terminate dated February 6, 1997, within the time allowed in it, the "I.A" was being terminated, lt is necessary to reproduce letter dated 6.2.1997 as under:- MINISTRY OF WATER AND POWER (PRIVATE POWER AND INFRASTRUCTURE BOARD)
No. 1 (iG2)VPIB-9215/97/1
1. WAK Orient Power and Light Limited House No. 10, Ludeman Hakeem Road G-6/3, Blue Area, Islamabad Facsimile: 92 51 276 029
2. Orient Energy Limited 414 East 75th Street New York, NY 10022. USA.
Attention: Chief Executive.
NOTICE OF INTENT TO TERMINATE Dear Sir, Reference is hereby made to the Implementation Agreement between the President of the Islamic Republic of ' Pakistan, for and on behalf of the Islamic Republic of Pakistan (the "GOP"), and WAK Orient Power and Light Limited and Orient Energy Limited (the "Companies" dated 17th December, j 1994 (the "Implementation Agreement") and, in particular, Section 19.1 (a) (i) thereof. Capitalized terms used and not defined herein are used herein as defined in the Implementation Agreement Under Section 19.1 (a) (i), the Companies were required to achieve "Financial Closing" not later than 7th June 1995, which date was subsequently extended by the GOP to 7th December, 1995 upon a doubling of the performance Guarantee.
As of the date hereof, the Companies have not achieved Financial Closing (as defined in the Implementation Agreement or as specified in correspondence to the Companies from the Private Power and Infrastructure Board), and, as a result, there exists a "Companies Event of Default" under Section 19.1 (a) (i) of the Implementation Agreement. Pursuant to the terms of the Implementation Agreement, the Companies have ninety 90 days to cure the Companies Event of Default specified herein, failing which the GOP shall issue a 'Termination Notice" terminating ) > the Implementation Agreement in accordance with Section 19.2 (c) of the Implementation Agreement.
Yours Sincerely, Sahibzada Masood Ali Acting Managing Director Chairman/Managing Director, KESC, Karachi. Copy for information, Secretary, Ministry of Water and Power, Islamabad"
As is evident from the letter dated 22.8.1996 reproduced here-in-after the petitioner had achieved the financial closing in all respects except the opening of letter of credit in favour of Karachi Electric Supply Company for which no time was provided. The respondent could not later on proceed to cancel the implementation agreement on the ground that the letter of credit "had not been established. We may also state that the letter of credit in favour of Karachi Electric Supply Company was in the nature of a bank guarantee for supply of electricity after generation to the karachi Electric Supply Company and was in any case to take effect after the power plant had been set up and established, lt may also be mentioned that this condition also now stands fulfilled as the petitioner had already opened the letter of credit with the permission of this Court.
16. Reading both the impugned letter dated 11.7.1997 and letter dated 6.2.1997 together, it becomes manifest that the petitioner was initially required to achieve "financial closing" in terms of section 19.1 (a) (i) of I.A. not later than 7th June, 1995 which date was subsequently extended by Government, of Pakistan to 7.12.1997 upon a doubling of the performance guarantee, which allegedly could not be achieved and thus there existed "companies event of default" under section 19.1
(a) (i). Under the terms of "I.A." the petitioner had ninety days to cure this default, as specified by letter of "notice of intent to terminate" dated 6.2.1997 but it allegedly failed to do so, resulting in the termination of "I.A." vide section 1.30 as under: - 1.30 Financial Closing" means the execution and delivery of one or more loan agreement that together evidence the financing for the construction testing and completion of the Complex (following the resolution of any objections raised by the GOP to a term sheet or schedule in accordance with Section 15.3 that sets out a principal terms of the transaction between the Companies and the Lenders) and the receipt of commitments for such equity as is required by the Companies in order to satisfy the requirements of the Lenders and the Letter of Support".
17. According to Mr. S.M. Zafar. Advocate, learned counsel for the petitioner, the reason given in the impugned letter, i.e. failure to achieve "financial closing" within the stipulated period is not based on facts, lt is urged that as early as on August 22, 1996. "PPIB" had acknowledged the factum of Financial Closing through its letter (Aannex. "K") which is as under:- "GOVERNMENT OF PAKISTAN MINISTRY OF INVESTMENT (PRIVATE POWER AND INFRASTRUCTURE BOARD)
No. 1 (102) PPIB-9215/96 August 22, 1996.
Ch. M. Siddique Wah Orient Power and Light Ltd 135-3/1, Stadium Road Gulberg-III, Lahore.
SUBJECT: WAK POWER PROJECT FINANCIAL CLOSE.
Dear Sir, We are please to confirm that you have met all requirements or Financial Closing, except establishment of the Letter of Credit in favour of KESC as required under the Power Purchase Agreement. On establishment of Letter of Credit in favour of KESC, PPIB will acknowledge Financial Closing.
This confirmation is only valid as long as the performance Guarantee remains valid for at least one month at all times or until establishment of the Letter of Credit in favour of KESC.
Best regards.
Yours sincerely Acting Managing Director"
18. It is submitted on behalf of the petitioner that the condition with regard to the time limit to be fixed by "PPIB" as up to 17.3.1997 for opening L/C in favour of KESC, through its letter dated 19.12.1996, was not only outside the purview of "I.A" but also unilateral and as such not binding on the petitioner and could not form the basis/reason for termination of ''I.A". As regards the validity of "Performance Guarantee" for at least one month at all times, it is urged that it had already been furnished so as to remain valid up to 30.9.1997 i.e. long after the date of termination of "I.A" which is 11.7.1997. Reliance is placed on the letter by the petitioner to "PPIB" (Annex, "H") which is in the following terms:- "PRIVATE POWER AND INFRASTRUCTURE BOARD Govt, of Pakistan 50-Nazimuddin Road, F-7/4 Islamabad.
Attn: Mr. Sahibzada Masood Ali (Acting M. Director)
SUBJECT: 450 MW WAK OP&L BARGE POWER PROJECT AT BIN QASIM Extension of Performance Guarantees.
Dear Sir, We are please to inform you that we have extended the validity of following three Performance Guarantees till September 30, 1997 with all terms and conditions remain unchanged.
GUARANTEE AMOUNT (RS)
GL-ABN-LHR-78 23.142.0. 00 40.0. 000.00 21.0. 000.00 Yours sincerely (Ammar Ahmed Khan)
19, During the course of arguments it was not pleaded before us. on behalf of respondents Nos. 1 and 2. that these guarantees were either deficient, or not acceptable for any reason.
20. We have perused the "I.A" to find out as to whether indeed there was a condition for the opening of L/C in favour of "K.E.S.C." within specified time but could locate none. As regards the second/alternate reason, mentioned in the impugned letter of termination of "I.A." i.e. failure to keep alive "Performance Guarantee" for at least one month at all times, we find that this condition stood fulfilled at the time of issuance of letter of termination. Perusal of letter of the petitioner (Annexure* "R") supra shows that the Performance Guarantee valid till 30th September, 1997 had been provided in favour of PPIB by the petitioner, lt is significant to note that correctness of contents of this letter has not been challenged by the respondents in their replies as well as during the course of arguments before us and as such the facts, mentioned therein, would be deemed to be stand admitted. As is evident the Financial Closing stood achieved in all respects except opening of letter of credit for which no period was fixed:- ln such a situation there is left no option but to hold that the reasons given in the impugned letter about termination of "I.A." were non-existent.
No justification, whatsoever, was available for PPIB to revoke an agreement entered into between the petitioner and respondent No. 1. lt need hardly be stressed that solemnity of contracts has to be protected and honoured under the prevalent statutory law more so keeping in view the mandate of Holy Quran: A Muslim who has submitted to the will of Allah will honour the contract entered into by him. See following verse from the Holy Quran: "O You who believe; fulfil all obligations."
AII obligations must be honoured, unless morally wrong. The Holy Prophet (S.A.A.W) observed the conditions of treaty of Hudhaybia although it meant that Abu Jandal, a new Muslim, had to be returned to the Quraysh envoy. Once a Muslim has given his word, or engaged in a legitimate contract, he must see it through.
The last messenger of Allah (peace be upon him) said, "The signs of a hypocrite are three: (i) whenever he speaks he tells a lie. (ii) whenever he promises, he always breaks (his promise); and
(iii) If you trust him he proves to be dishonest (If you keep something with him as a trust with him, he will not return it). (Abu Hurayrah-Sahih-AI Bokhari 1.32).
22. Mr. Sher Zaman Khan. Deputy Attorney General, faced with the above situation, tried to argue that this Court may not, in its discretionary jurisdiction under Article 199 of the Constitution of Islamic Republic of Pakistan, direct the restoration/revival of the "I.A." by declaring the termination letter to be without lawful Authority, on the consideration that this agreement, if acted upon, would prove to be detrimental to the national interest. According to him, the barges over which the power plant was to be mounted, might sail away any day, without notice/permission, after commissioning of the project, thus putting into jeopardy the national cause due to the sudden stoppage of electric supply to "K.E.S.C"
23. While exercising writ jurisdiction, which is essentially discretionary in nature, superior Courts in Pakistan will not hesitate a moment to refuse relief to a suitor seeking enforcement of contract against State or Statutory Corporation, if the national interest is thereby likely to he endangered, in the least, despite the fact that the legalistic right of such suitor for issuance of appropriate writ stood established. Relief would also be refused if the contract is shown to be unconscionable/mala fide/unreasonable or against public policy.
24. Likewise, a situation may arise where the Constitutional jurisdiction of this Court under Article 199 may be permitted to be involved by an aggrieved person for declaration of the act of representative of State/Statutory Corporation, about entering into a contract with third party, to be without lawful authority, on the above grounds.
However, we find that there is no basis, whatsoever, to hold that such a situation has arisen in this case calling for refusal to declare the impugned termination of "I.A." to be bad in law.
25. Significantly, in the replies filed by the respondents there is no averment as to the apprehension about danger to the national interest. We are not impressed at all by the oral contention of the learned Deputy Attorney General in this regard. Surely, had there been some material in support of this contention available with the respondents, the same would have been annexed with the replies and specific assertion made therein. This would have provided an opportunity to the petitioner to rebut it. Writ cannot be refused solely on mere apprehensions. We are clear that in the instant case what the learned Law Officer has asserted about danger to national interest is based on no evidence/material. This plea is rejected.
26. The upshot of the above discussion is that the action of respondents Nos. 1 and 2 in the matter of termination of "I.A" and the letter dated 11.7.1997, issued in this regard are declared to be without lawful Authority and of no legal effect.