This revision petition is directed against the order dated 4-7-2002 passed by the learned Civil Judge 1st Class, Islamabad declining to grant an interim injunction.
2. The petitioner filed an application under section 20 of the Arbitration Act, 1940 on 24-6-2002 for filing of the Arbitration Agreement dated 26-4-1994 in Court and direction to the parties to appoint their arbitrators and to enter into arbitration for resolution of their dispute. Alongwith this application, an application under section 41 of the Arbitration Act, 1940 was made for grant of interim injunction. The learned trial Court declined to grant the interim injunction vide order dated 4-7-2002.
The President of Islamic Republic of Pakistan granted a concession to the parties for Exploration, Discovery and Production of Petroleum in Pakistan.
The term "concession" is an agreement between a host Government on the one hand and a Company/Companies or an individual (called the concessionaire), granting the latter the use of territory for exploring, developing and trading in Hydrocarbons. In the Mineral and Oil Industry, it is known as "Concession Agreement".
Because of high risks of Exploration, Development and Production of Hydrocarbons which require capital intensive undertaking the Petroleum Industry used "Joint Venture" as the mode of operation, known to all in the industry as "Joint Operating Agreement" (JOA). In this background, Shakardara Petroleum Concession Agreement (PCA) was executed between the President of Pakistan and the parties to this petition on 26th December, 1994. The working interest of the parties was as follows:-- A collateral Joint Operating Agreement (JOA) was also made on the same day between the President of Pakistan and the parties to this petition. Under Article 2 of the P.C.A., respondent No.1/Oil and Gas Development Corporation (OGDCL) was appointed as "Operator" for the "Joint Venture" and under Article 22 thereof, Operator was under obligation to conduct "Joint Venture Operations" as per terms of JOA. In 1999, "The Joint Venture" made a discovery of oil and gas in Shakardara Concession Area known as "Chanda Discovery". In December, 2001, the " Joint Venture" decided to submit a Provisional Notice of Commerciality of "Chanda Discovery", a provisional Development Plan and an application for Development and Production Lease to the Government of Pakistan.
These applications were sent by respondent No. 1 as Operator vide letter dated 11-1-2002, the same were rejected by the Government of Pakistan vide letter dated 16-1-2002 on the ground that there was no provision in the Pakistan Petroleum (Exploration and Production) Rules, 1986 for any provisional approval of the commercial discovery notice and grant of Development and Production Lease. Subsequently, OGDCL/respondent No. 1 as 'Operator' submitted a Development Plan and application for Petroleum Development and Production Lease to the Government of Pakistan. The Development Plan and the grant of Development and Production Lease was approved by Government of Pakistan vide letter dated 1-6-2002. This is where the dispute between the parties cropped up.
A dispute arose on the manner in which gas from the oil field is to be utilized. OGDCL obtained the approval of the Government for the gas pipelines to be taken to Daudkhel and thereafter fed into the main SNGPL system. Zaver is of the view that Gas supplies should be taken to Dharnal, 105 kilometre away and facilities already available there be utilized. Zaver is already operating at Dharnal.
3. The learned counsel for the petitioner submitted that the grant of Development and Production Lease by the Government of Pakistan vide letter dated 1-6-2002 is only to respondent No. 1 as opposed to the "Joint Venture". It was urged that the alleged Development Plan was not approved by the "Joint Venture" nor the application for Development and Production Lease had its concurrence. The petitioner issued notice under Article 5.9 of the JOA for holding an "Operating Committee Meeting" (OCM) on 23-6-2002 for removal of respondent No. 1 as Operator. OGDCL rejected the petitioner's notice under Article 5.9 of JOA for change of Operator vide letter dated 20- 6-2002 which reads as under:-- "2.3 ZPCL approved application for the grant of the Chanda Oilfield Development and Production Lease on March 7, 2002. "
"2.4. Further, since OGDCL has more than the requisite 66% Working Interest in both pre-commercial discovery and post-commercial discovery phases under the Shakardara Petroleum Concession Agreement ("PCA"), the Chanda Oilfield Development Plan and application for the grant of the Chanda Oilfield Development and Production Lease was approved upon casting of OGDCL's vote.
Therefore, even if ZSCL had voted against the Chanda Oilfield Development Plan and the application for the grant of the Chanda Oilfield Development and Production Lease, Chanda Oilfield Development Plan and the application for the grant of the Chanda Oilfield Development and Production Lease still would have been approved: ------.."
The petitioner gave notice to respondent No. 1 on June 22, 2002 that failure to hold OCM on 23-6- 2002 tantamount to 'wilful default' and a breach of JOA.
The Government of Pakistan regretted the grant of lease to respondent No.2 alone vide letter dated 12-6-2002. It was noted that instead of OGDCL, it should have been "lessees". It was further stated that the same shall be corrected at the time of the finalization of the legal documents. Main thrust of the argument of the learned counsel for the petitioner is that the alleged Development Plan is a void document being without the concurrence of JOA Partners. The learned counsel has elaborated this by referring to different documents particularly the Minutes of the OCM/TCM dated 26-12-2001. The relevant portion of which is as under:-- "Mr. Zaheer Alam advised that JV partners prepare a development plan, keeping in view the reservoir, placing of wells, dispositional environment etc. OGDCL clarified that the commerciality and development plan would be provisional subject to revision based on EPT and PVT results. "
He further referred to a document dated 29-4-2002 approving certain proposals, the same is reproduced as under:-- "After due consideration the Board approved in principle as follows:- 391.1. That the proposal No.2 i.e., Gas Dehydration and LPG recovery at Chanda, gas sales to SNPGL at Daud Khel through 8" din, 55 kms. Gas transport line with river crossing at existing disused Kala Ragh Bridge, Crude oil transportation by tankers to Bulkassar for onward pumping to ARL, be pursued.
391.2. Laying of 8" din pipeline from Chanda to Daudkhel be undertaken by OGDCL's Engineering Department.
391.3. Shifting of Gas Dehydration Plant from Missa Kaswal Field and LPG Plant from Fimkassar to Chanda Field.
391.4. For financial approval, the Directors were of the view that the proposal may be submitted after its clearance from the partners."
Learned counsel submitted that a real dispute has arisen between the parties which is to be referred to arbitration under Article 28 of the PCA. Learned counsel contended that if the proposal of the petitioner is accepted, only half of the amount about 11 Million Dollars will be incurred in executing the Development Plan. It was contended that the respondent was in fiduciary relationship and was betraying the trust of the petitioner. It was further contended that the learned trial Court erroneously dismissed the petitioner's application under section 41 of the Arbitration Act, 1940 for grant of injunction restraining the OGDCL/Operator from implementing the Development Plan submitted by it to the Government of Pakistan. The petitioner has spent more than 10 Million Dollars and has a working interest which may rise up to 10%. The loss to the petitioner cannot be measured in monetary terms. Till the announcement of the award by the arbitrators, respondent No. 1 should be restrained from implementing the Development Plan. He submitted that there was a prima facie case in favour of the petitioner and in case of implementation of the Development Plan, the petitioner shall suffer an irreparable loss. The balance of convenience also lies in its favour as the Development Plan has not yet been implemented. Reliance was placed on PLD 1976 Karachi 644 (Messrs Jamia Industries Ltd. v. Messrs Pakistan Refinery Ltd., Karachi); 1995 CLC 1877 (Messrs Hatta Construction Company (Pvt.) Ltd. v. Faisalabad Development Authority, Faisalabad through Director and another) and 1992 MLD 1751 (Syed Rahim Shah v. Kassim and another).
Conversely, Mr. Waseem Sajjad, learned counsel for the respondent submitted that meeting of OCM held on 26th December, 2001 gave authority to the respondent for finalization of the Development Plan, the relevant portion of which is reproduced as under:-- "OGDCL, representative pointed out that the EWT results are expected in end of January, 2002 whereas PVT results would be coming in by mid-- February, 2002. As the one year renewal for appraisal and evaluation of Chanda Discovery is due to expire on 12-1-2002 therefore, given the time frame available the operator intends to declare commerciality over Chanda field provisionally and apply for a Development and Production Lease alongwith a Provisional Development Plan prior to 12-1-2002 OGDCL also sought partners' approval to the Chanda commerciality report which was accorded."
"We are forwarding herewith a revised write up of Development Plan in respect of Chanda field based on development options as contained in the Chanda commerciality report and discussed in the aforesaid meeting for your review and approval.
3. In view of the time constraint an immediate approval shall be highly appreciated. "
Meeting of all JOA Partners took place on 9-1-2002 at which the Development' Plan was approved by GHPL. The document dated 9-1-2012 which is hand-written reads as under:-- "We hereby approve Chanda Development Plan submitted by OGDCL (the Operator) vide letter dated 2nd January, 2002 and revised vide letter dated 8th January, 2002 for submission to Government."
This was signed by Zaver Petroleum. An application to this effect was submitted to the Government of Pakistan on behalf of "Joint Venture" for grant of Development and Production Lease. The Schedules attached for grant of Development and Production Lease were duly signed by Mr. Shams Baqai Vice---President (Technical) of the petitioner and its authorized representative. The Government of Pakistan vide letter dated 16-1-2002 informed the Operator/respondent No.1 that there was no provision in the Pakistan Petroleum (Exploration and Production) Rules, 1986 or provisional approval of commercial discovery notice and rejected the Development and Production Lease. A meeting of OCM was held to consider the letter dated 16-1-2002 of the Government of Pakistan. The representative of the petitioner insisted that their option should be included in the Chanda Commerciality Notice. It was insisted that the following sentences should be included in the Chanda notice:-- "The possibility of processing petroleum at nearby fields will also be examined while preparing options for including in Chanda Development Plan."
The said sentence was added in the Commerciality Notice. On 4-3-2002 Operator/respondent No. 1 sent complete Commerciality Notice to the Government the Development Plan was already with the Government and no fresh plan was required to be sent. The approval was accorded by the Government of Pakistan to that very plan which was submitted on 11-1-2002 which was approved by the petitioner on 9-1-2002 putting its signatures thereon. The petitioner is actuated by self- interest and wants to carry the pipeline to Dharnal from Chanda Dharnal is about 105 kilometres away from Chanda Development Field and would require the building of a bridge on the River Indus. The proposal to carry the pipeline to Daudkhel will be less expensive as it is only 45 kilometres away and a bridge on River Indus already exists there. The Dharnal is under depletion and facilities are available there for further use. Zaver Petroleum wants these facilities to be used by Joint Venture and rent be paid to it for this purpose. The proposal approved by the Government, carrying the pipelines is less expensive. If the proposal of petitioner is accepted, it will require double expenditure i.e. About 22 Million Dollars. The infrastructure of the Sui Northern Gas Pipelines Ltd. Will be used and would be in the National interest to carrying gas into the main system and particularly to N.-W.F.P. It was urged that the injunctive order from this Court was causing immense loss to the parties. The estimate of the loss is about Rs.69 Million per day. The interest charges on each day's delay in terms of US Dollars amounts to $28,000. Learned counsel submitted that there was no prima facie case in favour of the petitioner nor any irreparable loss would be caused to it and the balance of convenience also did not lie in favour of the '"petitioner. Reliance was placed on 1973 SCMR 184 (Muhammad Yakoob v. Health Officer, Municipal Committee, Hyderabad and another) and PLD 1969 Dacca 832 (East Pakistan Inland Water Transport Authority v. Haji Abdul Jalil Bepan and others).
During the hearing of this petition, both the parties produced some documents which were not placed on the record of the lower Court. In the interest of justice, I allow both the parties to place the same on record.
4. I have given my anxious consideration to the arguments of learned counsel for the parties.
5. The thrust of the argument of the learned counsel for the petitioner is that the alleged Development Plan submitted to the Government of Pakistan did not have the concurrence of the petitioner, its move is not actuated by self-interest. I would not like to decide this issue lest it should influence the trial Court in deciding the question of dispute between the parties and referring the same to arbitration under clause 28 of the PCA or the arbitrators in case the same is ultimately referred to arbitration. I restrict myself to the point whether the petitioner is entitled to an interim injunction. Under section 41(b) of the Arbitration Act, 1940, the Court shall have for the purpose of, and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court. Under this Second Schedule, the Court has the power in my view to issue interim injunction.
The execution of the approved Development Plan by the Government of Pakistan by the Operator is maximum a breach of the contract. The normal remedy for breach of contract is, of course, damages, and there is little doubt that this was recognized since long. Before an interlocutory injunction is granted, the plaintiff/petitioner must--
(i) have an extremely strong prima facie case;
(ii) show actual or potential damage of a very serious nature i.e. Irreparable loss. The order should not be sought as a fishing expedition; end (i.e) the balance of convenience must favour the grant of interim injunction.
The authorities relied upon by the learned counsel for the petitioner are not applicable to the facts of the present case. In the case of Messrs Jamia Industries, supra, the High Court was seized of the matter under action 20 of the Arbitration Act, 1940 and while disposing of the same the encashment the bank guarantee was stopped. Similarly, in the case of M/s. Hatta Construction Company, supra, it was a contract of construction of a Sewerage Pump Station. The Contractor could not complete the work and the contract was rescinded. FDA threatened to recover the differential amount as arrears of land revenue which is a coercive measure (M/s. Petrosin Products (Pvt.) Ltd. v. Government of Pakistan through Secretary, Privatization Commission of Pakistan 2000 MLD 785 was also a case of encashment of the bank guarantee.
6. In the end, I would like to observe that a Joint Venture involves the pooling of resources of two or more enterprises. It cannot be lightly assumed that their objectives and motivations for entering into Joint Venture are necessarily identical. A successful Joint Venture therefore, requires a precise and unequivocal articulation of common objectives and a mutuality of interest. Such mutuality of interest will be assumed by compatibility of partners, unequivocal agreement on long term objectives of the Venture, trust between the parties, mutual compromise, respect and commitment and the avoidance of mistakes. The investors with the best strategies would avoid the worst pitfalls.
Mistrust has occurred between the parties which may land them where angels fear to tread.
Conflicting interests may mar the entire project.
7. For what has been stated above, this petition has no merit and is dismissed with no order as to costs.
Mr. Saleem Zulfiqar, learned counsel for the petitioner after announcement of the order orally made a prayer that till the filing of the petition for leave to appeal before the Hon'ble Supreme Court, the operation of this order may be suspended. He relied upon 1990 ALD 446(1) (Khalid Siraj Textile Mills Ltd. v. Federation of Pakistan and others). The request seems to be reasonable. I, therefore, allow this request and direct the respondent not to implement the Development Plan for a period of two weeks from today.
(i) OGDCL 85.5%
(ii) Zaver 9.5% (i.e) Government Holdings5%