Chashma Hydropower Electric Project was conceived as an economical source of energy. It was approved by ECNEC on June 22, 1994. The contract for construction of civil works was awarded to the petitioner. The letter of intent was given on 5-12-1994 by the respondent and parties entered into a formal contract on 14-12-1994. The petitioner entered the site on July, 5, 1995. The contract price was Rs,3,264,679,290. Chashma Group of Consultants were appointed by the respondent as "Engineer" for the" purposes of the contract. The petitioner furnished the following guarantees for the performance of the contract:--
(1) Performance Guarantee No,ACB/06/99/06 dated 8-3-1999 for Rs,313,256,029 from Askari Commercial Bank Limited (ACBL);
(2) Guarantee No,LG 1410/1997/0037 dated 29-1-1997 for US$ 895,185 from ANZ Grindlay's Bank Limited (ANZ);
(3) Guarantee No,LG 1410/1997/0038 dated 29-1-1997 for Rs,16,958,207 from ANZ. The contract was delayed for 1129 days. The petitioner-Contractor was granted four extensions of time; the first in February, 1998 for 212 days; the second in January, 1999 for 420 days; the third in January, 2000 for 397 days; and the fourth in July, 2000 for 100 days and the completion date was extended to November, 2000 by the respondent. Thy engineer vide his letter dated 18-8-2000 to the respondent recommended certain amounts to be paid to the contractor as an on-account payment of his claim for additional costs arising from delays. The respondent accorded the approval for on-account payments to the petitioner up to a maximum of US$ 5.5 million and the engineer was advised to include on-account payment against claims in Interim Payment Certificate (IP 79) in order to fully utilize the remaining Asian Development Bank Loan. The respondent-employer thus paid US$ 5.485 million to the petitioner as on-account payment. The petitioner submitted claim as additional costs incurred owing to the delay of 1129 days caused by the respondent vide letter dated 4-8-2000 and 4-12-2000 for Rs,466,237,174 (local currency) and Rs,907,823,398 equivalent to US$ 36,608,733. Before awaiting for the decision of the engineer, the respondent vide its letter dated 25-10-2001 informed the engineer that on-account payment of US$ 5.485 made to the Contractor against claims under. IPC 79 and IPC 80 was to be adjusted against his future payments of all kinds. The engineer was required to review his certification for the principal amounts as well as interest on late payments. The Contractor wrote to the Askari Commercial Bank Ltd and ANZ Grindlay's Bank on 28-11-2001 for encashment of the bank guarantees to the tune of Rs,313,256,029 and US$ 895,185.00 and Rs,16,958,027. A suit was filed against the respondent and ad interim relief was granted restraining the respondent from encashing the bank guarantees. However, the said notices were withdrawn and the suit was dismissed on 4-12-2002. Vide letter dated 11-2-2002 the respondent's CE/PD (Chief Engineer/Project Director) informed the engineer:-- "That Chairman, WAPDA has decided to recover the balance amount of on-account payment immediately from the Contractor's securities/outstanding sum like performance bond, retention money or any other amount of the Contractor held by WAPDA in accordance with WAPDA Rules and Regulations (to which 10% interest on the amount paid etc.)." You are requested to implement the decision of Chairman, WAPDA in the letter and spirit." After two days of the issuance of the above mentioned letter dated 11-2-2002 vide its letters dated 13-2-2002 the respondent asked the Askari. Commercial Bank Ltd. And ANZ Grindlay's Bank Ltd. To encash the bank guarantees to the tune of Rs,313,256,029 (Rupees three hundred and thirteen million two hundred and fifty-six thousand twenty-nine only) and US$ 895,185 (US$ eight hundred ninety-five thousand one hundred and eighty five only) and Rs,16,958,207 respectively. From here, the dispute between the parties aggravated. However, sanity prevailed and vide letter dated 26-2- 2002, the letters for encashment of bank guarantees were withdrawn second time. Vide letter dated 11-3-2002 the petitioner was again served a notice under clause 10.3 of the conditions of contract to recover a sum of US$ 4,310,437.66 from their guarantors. A letter was written third time to Askari Commercial Bank Ltd. For encashment of the guarantees for Rs,313,256,029. The same were again withdrawn vide letter dated 13-3-2002 and 16-3-2002. The engineer recommended the petitioner's claim for additional costs to the tune of Rs,62,911,860 (local currency) and US$ 5,155,321 (foreign currency). At the same time it was pointed out that the total aforesaid two sums was in excess of US$ 5.485 million already paid to the petitioner under IPC 79 and IPC 80. The respondent withheld its approval to the issuance of TOC (Taking Over Certificate) under clause 2.1(b)6 of the conditions of contract despite engineer's confirmation in his letter dated 13-11- 2000 that the works had been substantially completed (99.2%) as per clause 48.1 of the contract.
The respondent however, fixed 13-2-2001 instead of 8-11-2001 as the date of substantial completion of the works. Due to non-issuance of TOC the Defects Liability Certificate (DLC) could not be issued even after the petitioner had removed all defects as per its letter dated 31-1-2002.
2. Learned counsel for the petitioner contended that:-- That the documents mentioned in paras. 29 to 31 of the petition clearly establish that--
(1) the substantial completion of the whole of the Works was achieved on 8-11-2000;
(2) the TOC was due for issuance within 21 days from 8-11-2000;
(3) the Defects Liability Period expired on 31-1.2002.
(4) the Defects Liability Certificate was due for issuance on 28-2-2002;
(5) the Performance Guarantee mentioned above was due for release 28 days after the issuance of DLC by 28-2-2002 i.e, on 28-3-2002;
(6) the Bank guarantees were due for release three months after expiration of the Defects Liability Period i,e,, on 30-4-2002;
(7) the respondent has acted mala fide and in excess of its authority in withholding the issuance of the TOC and the DLC in order to ensure that the Bank guarantee mentioned above are not released and continue to be available to the respondent for wrongful encashment and coercing the petitioner to surrender his legal rights and remedies in favour of the respondent. To date the respondent has also withheld Petitioner' s Payments of Rs,127,229,244 equivalent to US$ 4,506,718 under IPC Nos.82 to 98. The engineer has verified petitioner' s claims for about US$ 18 million for additional costs arising from respondent caused 1129 days' delay for the completion of civil works. He further submitted that payments made to the petitioner cannot be recovered by the respondent under WAPDA Rules and Regulations and in fact, there are none. The sole object of the respondent's decision is to recover the payments made to the petitioner for its time-related claim through encashment of its Bank guarantees and to compel the petitioner to give up its valid claims of more than US$ 36 million out of which about US$ 18 million have been verified by the engineer.
Learned counsel urged that WAPDA is proceeding against the properties of the petitioner which are no longer securities. Respondent holds the securities in trust for petitioner. Withholding of the same is the violation of Articles 4, 24 and 260 of the Constitution of Islamic Republic of Pakistan. WAPDA as a Public Authority, is bound to act reasonably and fairly. He referred to sections 21 and 24-A of the General Clauses Act. WAPDA acts are motivated by malice. Learned counsel urged that the presence of arbitration clause in the contract does not debar the Constitutional remedy. The respondent is bound to release the bank guarantees. Reliance was placed on Messrs Gadoon, Textile Mills and 814 others v. WAPDA and others (1997 SCMR 641), Murree Brewery Co. Ltd. v.
Pakistan through Secretary to Government of Pakistan, Works Division and 2 others (PLD 1972 SC 279), The Federation of Pakistan through the Secretary, Establishment Division, Government of Pakistan, Rawalpindi v. Saeed Ahmad Khan and others (PLD 1974 SC 151), Messrs Airport Support Services v. The Manager, Quaid-e-Azam International Airport, Karachi and others (1998 SCMR 2268), Anjuman-e-Ahmadiyya, Sargodha v. Deputy Commissioner, Sargodha and another (PLD 1966 SC 639), Shaukat Ali v. Secretary, Industries and Mineral Development, Government of Punjab, Lahore and 3 others (1995 MLD 123), Asif Iqbal v. Karachi Metropolitan Corporation and 2 others (PLD 1994 Karachi 60), Federal. Government Employees Housing Foundation through Director-General, Islamabad v. Muhammad Akram Alizai, Deputy Controller, PBC, Islamabad (PLD 2002 SC 1079) and Abdul Rauf and others v. Capital Development Authority, Islamabad (1988 MLD 1523). Conversely the learned counsel for the respondent submitted that the dispute between the parties involves factual controversy. He has referred to different dates alleged by both the' parties and which are at variance for issuance of (1) DLC (Defect Liability Certificate), (ii) TOC (Taking Over Certificate), (iii) On-Account Payment, (iv) Claim Submission No,6, Section A, general expenses.
Learned counsel vehemently contended that the Constitutional petition was not maintainable. He further submitted that the Engineer' s decision regarding DLC. TOC and On-Account Payment as well as Claim Submission No,6 has been seriously disputed by the respondent. It has invoked clause 67-A of the contract for referring the matter to arbitration for the resolution of the dispute.
Learned counsel has submitted a long list of the case-law to urge that the Constitutional petition is not maintainable for enforcement or breach of contract, some of which are Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport, Karachi and others (1988 SCMR 2268).Nizam Din and others v. Civil Aviation Authority (1999 SCMR 467), Daewoo Corporation v. NHA (2000 MLD 1745) and Bayindir Insaat v. Pakistan (PLD 2001 Lahore 426). In rebuttal the learned counsel for the petitioner submitted that no evidence is to be recorded. All the documentary evidence was before this Court. The facts were admitted by the parties and require no further evidence as such this Court could proceed further in its Constitutional jurisdiction. The arbitration was not an adequate remedy in the particular circumstances of the case.
3. I have considered the arguments of the learned counsel for the parties and perused the voluminous record attached with the petition. In my view the contention of the learned counsel for the petitioner that the works have been completed and the contract has been substantially performed as such the security documents/guarantees are liable to be returned to the petitioner, is devoid of any force. The respondent has seriously disputed the decisions of the engineer.
Respondent vide letter ;fated 4-6-2002 disagreed with the engineer's decision regarding certification and payment of US$ 5,485,381.48 against Contractor's claim and replied as under:- "Subject: Civil Works Contract--Engineer's decisions in accordance with Clause 67-A Certification and Payment of US$ 5,548,381.48 against Contractor's claims. Reference is made to CGC Letter No,3242-26136 dated May 29, 2002 conveying the Engineer's decisions on the subject-matter. WAPDA does not agree with this Engineer's decisions and has opted for arbitration in accordance with contract provisions. This is for your information, record and further necessary action. If any, please." The letter dated 4-6-2002 by the respondent reads as under: "Subject: Civil Works Contract--Engineer's Decisions in accordance with Clause 67.A Clause 48.1--Date of Substantial Completion of the whole of the Works Clause 60.4B--Non-payment of first 50% f.c. Retention Money Clause 60.4B--Non-payment of final 25% of i.c. And f.c. Retention Money. Reference is made to CGC Letter No,3242-26087 dated May 29, 2002 conveying the Engineer's decision on the subject-matter. WAPDA does not agree with this Engineer's decisions and has opted for arbitration in accordance with contract provisions. This is for your information, record and further necessary action, if any, please." Similarly letter dated 31-7-2002 provides:-- "Civil Works Contract--Engineer's Decision in accordance with Clause 67.A. Clause 62.1--Approval and Issuance of Defects Liability Certificate. Clause 10.1.F and 60.4.C--Additional Cost of the Continuing Provisions of Contract Securities. Reference is made to your Letter No,3242-26199 dated June 11, 2002 conveying the Engineer's decision on the subject-matter. WAPDA does not agree with the subject cited Engineer's decision and has opted for Arbitration in accordance with Clause 67 of Conditions of Civil Works Contract Part-II. This is for your information record and further necessary action, if any, please." Again vide letter dated 2-9-2002 it was stated as under:- Subject: Civil Works Contract--Engineer's decisions in accordance with Clause 67.A Employers Rejection of Engineer's Interim Evaluation Report for Section A--General Expenses. Reference is made to CGC Letter No,3242-26258 dated June 21, 2002 conveying the Engineer's decisions on the subject-matter. WAPDA does not agree with this Engineer's decisions and has opted for arbitration in accordance with Contract Provisions. This is for your information, record and further necessary action, if any, please." Learned counsel for the respondent has placed on record a chart of the dispute about the factual controversy between the parties which is reproduced as under: DISPUTES BETWEEN THE PARTIES
1. DLC (DEFECT LIABILITY CERTIFICATE)
28-2-2002 Proper date according to contractor.
13-2-2002 WAPDA's claim regarding correct date.
16-4-2002 Contractor sought Engineer's decision under clause 67.A.
11-6-2002 Decision 31-7-2002 Arbitration Notice.
2. TOC (TAKING OVER CERTIFICATE) Substantial Completion Refund of 50% Retention Money (FCY) and 25% Retention Money LCY + FCY.
08-11-2000According to Contractor [ +Engineer] 13-2-2001 According to WAPDA.Approved with 97 days LDs.
29-8-2002 Engineer's decision 21-3-2002 Contractor sought Engineer's decision pursuant to clause 67-A 4-6-2002 Notice of Arbitration by WAPDA 50% Unpaid RM was adjusted against on account of payment of USD 5,485,3781.48 50%RM=USD 1,790,370.
3. ON A/C PAYMENT USD 5,485,381.48.
21-3-2002 Contractor sought Engineer's decision under 67-A.
29-5-2002 Decision of Deputy Engineer 4-9-2002 Arbitration Notice by WAPDA After adjustments against payment for Works and Retention Money. USD 2,505,463.28 Principal, and USD 601,408.34 Interest.
USD 3,106,871.62 Paid in excess.
4. CLAIM SUBMISSION NO. 6, SECTION A--GENERAL EXPENSES.
18-5-2002 Claim rejected for Rs,62,911,860. $5,155,321.
30-5-2002 Contractor sought Engineer's decision under Clause 67-A 21-6-2002 Decision of Engineer 22-8-2002 2-9-2002 Arbitration Notice by WAPDA. The letter of the respondent dated July 7, 2000 reacts as under:-- "However on-account payment duly recommended by CGC would be made to M/s. Hyundai/Hidco-Kakas JV after approval of WAPDA Authority. If subsequently CGC consider that M/s. Hyundai/Hidco-Hakas JV were not entitled to such payment,.Then WAPDA would reserve the right to recover such on-account payment from M/s. Hyundai/Hidco-Hakas iv."
This leaves not a scintilla of doubt in my mind that the factual controversy does exist between the parties which cannot be resolved in the exercise of Constitutional jurisdiction by this Court. The Hon'ble Supreme Court of Pakistan in the case of Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport. Karachi and others (supra) has stated as under:-- "It has consistently been held that while routine contractual disputes between private parties and public functionaries are not open to scrutiny under the Constitutional jurisdiction, breaches of such contracts, which do not entail inquiry into or examination, of minute or controversial questions of fact, if committed by Government, semi-Government or Local Authorities or like controversies if involving dereliction of obligations, flowing from a statute, rules or instructions can adequately be addressed for relief under that jurisdiction. Further a contract, carrying elements of public interest, concluded by functionaries of the State, has to be just, fair, transparent, reasonable and free of any taint of mala fides. All such aspects remaining open for judicial review. The rule is founded on the premises that public functionaries, deriving authority from or under law, are obligated to act justly, fairly, equitably, reasonably, without any element of discrimination and squarely within the parameters of law, as applicable in a given situation. Deviations if of substance, can be corrected through appropriate orders under Article 199 of the Constitution. In such behalf even where a contract, pure and simple, is involved, provided always that public element presents itself and the dispute does not entail evidentiary facts of a disputed nature, redress may be provided." In the case of Amin Fabrics Limited, Karachi v. Pakistan Agricultural Storage and Services Corporation Ltd. (PASSCO), Lahore and another (PLD 1999 Lahore 313), Karamat Nazir Bhandari, J., as he then was, observed as under:-- "As noted by me, in the case of N.T.M., not much difficulty arises in cases where contract is rooted in some statutory provisions/rules/instructions. Cases of learn and contracts under the Punjab Local Government Ordinance, 1979, Petroleum Act, 1934 Mining Concession Rules, leases under Colonization of Government Lands Act, 1912 and host of schemes claims framed thereunder can be referred to as the cases falling in this category. The difficulty arises in cases of pure and simple commercial and mercantile contracts, free from any constraints of statutory provisions/rules."
Under clause 67.A of the conditions of contract the dispute between the Employer and the Contractor in connection with, or arising out of the contract, or the execution of the works whether during the progress of the works or after their completion shall be referred to and settled by the engineer. Subject to arbitration his decisions in respect of every matter so referred shall be final and binding upon the Employer and the Contractor. The respondent has invoked the arbitration clause 67.A and rightly so. In my view if the Employer can show, despite the satisfaction. Approval or certification by the engineer that the work nevertheless is not in accordance with the contract, he is not precluded from invoking the arbitration clause. It is yet to be seen that the certificate or satisfaction of the engineer is final and binding on the Employer and the Contractor. In view of the above discussion I do not consider it necessary to examine the rest of plethora of case-law cited by both the parties.
4. There is another aspect of the matter that though the respondent has not accepted the decisions of the engineer and has invoked the Arbitration clause 67.A of the conditions of contract, yet has not acted fairly in calling upon the banks to encash the bank guarantees. Learned counsel for the respondent admitted that there are no WAPDA Rules and Regulations for forfeiture of the Contractor's securities. He stated at the bar that WAPDA has decided to go to arbitration and will not invoke the clause authorizing encashment of bank guarantees before the resolution of the dispute through arbitration.
Clause 67.A of the contract clearly states that the dispute between the Employer and the Contractor in connection with or arising out of contract, or the execution of work shall in the first place be referred to and settled by the engineer who shall within a period of 90 days, after being requested by either party to do so give written notice of his decision to the employer and the Contractor. Subject to Arbitration the decision of the Engineer shall be final and binding upon the Employer and the Contractor and shall forthwith be given effect to by the Employer and the Contractor.
The respondent-Employer has not agreed with the decisions of the engineer and has chosen to go to arbitration under the aforementioned clause. Without having recourse to arbitration, the Employer could not become a judge in his own cause and ask for encashment of the bank guarantees which would have amounted to forfeiture of the property of the petitioner without getting the dispute adjudicated first. The petitioner has placed on record a document showing that he had to pay US$ 7.4 million to the banks after the notice of encashment of the bank guarantees by the respondent. The petitioner appears to have suffered immensely in its credit rating before its guarantors. It had to make colossal payment. The disposition made by the respondent, towards the petitioner put him under a great financial risk, In my view unlawful pressure was exerted on him.
This in fact amounted to economic coercion. The respondent acted like a gunman who actually helps himself to his victim's wallet. The coercive nature of the threat, though it was withdrawn thrice, was so powerful that the petitioner had to deposit $ 7.4 million with its guarantors. In my judgment it constituted an improper threat and conduct in coercing the petitioner for making the disputed payments to the respondent and keep the guarantees intact. It does not appear normal commercial pressure or permissible pressure to exert. I am not disputing the right of the respondent to encash the bank guarantees but in all fairness the respondent has not acted fairly and reasonably in the particular circumstances of the case. Unfortunately, this fact again cannot be decided in this Constitutional petition.
Lastly I would like to observe that according to the record placed before this Court it transpires that original evaluated cost of the project was Rs,10,557 million. There is a delay of 1129,days (three years and thirty-four days) in the completion of the project. The price of the project was increased to Rs,17822 million, thus costing the exchequer extra Rs,7265 million. The project clearly reflects inefficiency of WAPDA and the authorities concerned. The country has suffered a colossal loss of Rs,7265 million. Ex facie the contract speaks volumes for the mismanagement and inefficiency of the authorities concerned in the implementation of the project. The responsibilities have not been fixed nor any action has been taken against the guilty. Even NAB has not initiated any inquiry.
Everybody seems to be complacent. The citizens of this country have been made to incur and suffer an extra cost as aforementioned. Nobody seems to be responsible.
5. The upshot of the above discussion is that this petition has no merit and is dismissed leaving the parties to bear their own costs.