M/S JHK Construction Company Vs PDA

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PESHAWAR HIGH COART, PESHAWAR

FORM OF ORDER SHEET

Date of Order of Order or othcr Procecdings with Signature ofJudge. Proceedings

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ORDER Regular First Appeal No.421P12024 25.11.2024 wit h C. M. No. 74 5-Pl2 02 4 Present Mr. Isaac Ali Qazi, Advocate, for IWs JHK Construction Company, appellant.

S. M. ATTIOUE SHAH . J.- The appellant, through this appeal, has challenged the order dated,30.10.2024 passed by the learned Additional District Judge-XII, Peshawar, which rejected the plaint under Order VII Rule I I CPC. The court has carefully considered the arguments presented by the parties and conducted a thorough perusal of the record

2.The appellant had filed a suit against the respondents seeking relief for declaration, prohibitory, and mandatory injunctions. The core grievance revolved around alleged breaches of a construction contract. The appellant claimed that the respondents defaulted on contiactual obligations by providing inaccurate estimations, revising costs and work quantum, failing to appoint a consulting engineer, withholding payment of pending bills, and refusing to enhance escalation rates per Engineering Council notifications. Furthermore, the appellant challenged

the termination of the contract (dated 05.09.2024), arguing it was unlawful, unjustified, and lacked authority, particularly because it imposed an obligation to complete the remaining work at the appellant's risk and cost. Adding to the contention, the respondents issued a re-tender notice with escalated rates while denying the appellant the same benefit The appellant asserted that such re-tendering, especially at their risk and cost, created a vested right for the appellant to conclude the contract at enhanced rates and sought setting aside the re-tendering process

3.The respondents, in response, filed a written statement and an application under Order VII Rule 1l CPC, challenging the maintainability of the suit and seeking rejection of the plaint. The learned Trial Court, after hearing arguments, allowed the application and rejected the plaint. Aggrieved by this decision, the appellant has now brought the matter before this court

4.It is worth noting that under Order VII Rule I I CPC, a court can reject a plaint even without a formal application from the defendant if certain conditions are met. These include: (i) the plaintfails to disclose a cause of action, (ii) the suit is barred by law, (ii, the court laclcs jurisdiction, (iv) improper valuation of the

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plaint, (v) absence of requisite court fee, or (vi) failure to rectifu a court fee deficiency within the prescribed time. The purpose of this provision is twofold to conserve the court's valuable time and to protect the opposing party of the burden of prolonged and frivolous litigation. It is a well-established principle that if the court, upon reviewing the plaint, concludes that the suit is barred by law or lacks a cause ofaction, the plaint must be rejected. This ensures that a stillborn suit is dismissed at the outset, preventing unnecessary proceedings. Additionally, such rejection of plaint provides the plaintiff an early opportunity to pursue the remedy before the appropriate forum

5.Turning to the merits of the case, the record reveals that the appellant, a construction company, entered into a contract with the Peshawar Development Authority (PDA) on July 19,2021. The contract pertained to the construction of work de- scoped from the main project under Contract No "ICB/PSBRTC-PDA-CWPackage-I Procurement of Civil Worlu for Ghora Qabristan (Post Aman Chowk) to Cancer Hospital (Hayatabad), Km 0+000 to 1l+730.172 KM (Package I, Lot II, Reach III)" The task was to be completed within 240 days. Disputes arose when the appellant failed to complete the project within the stipulated timeline and alleged non-

F payment of outstanding bills by the respondents Frustrated, the appellant served the respondents with a termination notice on August 18, 2024, under sub- clause 16.2(d) of the contract. However, instead of addressing grievances, the respondents issued their own termination notice on September 5,2024, tnder sub-clauses 15.2(a) and (b), and simultaneously published an e-tender notice for the completion of the remaining work. Feeling aggrieved, the appellant initially filed Writ Petition No. 4964-Pl2024 before this court. However, the petition was dismissed in limine on October 9, 2024, on the grounds that the matter was not within the writ jurisdiction due to the availability of altemative dispute resolution mechanisms, such as the Dispute Board under Clause 20.5 and arbitration under Clause 20.6 of the contract Following the dismissal, the appellant filed the present suit against the respondents

6.Undoubtedly, the appellant, through the present suit, sought declarations and permanent as well as mandatory injunctions against the respondents.

However, it is an admitted fact that the parties had entered into a formal contract containing specific terms and conditions goveming the completion of the assigned work. Interestingly, the appellant has not annexed the said contract with the instant appeal, for

reasons best known to them. Nonetheless, in the interest ofjustice and to ensure clarity, this court has requisitioned the appellant's prior writ petition from the record room, where the contract in question was found. Upon examining the contract, it is evident that it provides a detailed framework for termination by both parties-sub-clause 15.2(a) & (b) empowers the employer to terminate, while sub-clause 16.2(d) allows termination by the contractor. Moreover, the contract outlines a comprehensive dispute resolution mechanism under sub-clatse 20.2, which mandates the establishment of a Dispute Board to address conflicts arising during project execution. Sub-clause 20.4 prescribes the procedure for "Obtaining the Dispute Board's decision," covering disputes related to certificates, determinations, instructions, opinions, or valuations by the Engineer, etc., in terms of sub- clause 20.5 of the Contract. Failing that, Clause 20.6 provides for arbitration as the ultimate forum for resolution. This meticulous mechanism underscores that disputes tied to the contract must be addressed within its contractual framework, ensuring that the parties adhere to the agreed procedures for resolution rather than bypassing them

7.Now turning to the crux of the matter: whether a suit for declaration, permanent, and mandatory

\ injunction is maintainable before a Civil Court of plenary jurisdiction under Section 9 CPC when the contract itself provides a clear mechanism for dispute resolution through a Dispute Board followed by Arbitration? The answer is Big "No." When parties, by mutual agreement, choose a specific forum and mechanism for resolving disputes arising from a contract, they are bound to honor that choice. Such mechanisms cannot be bypassed or disregarded under any circumstances. The dispute resolution process outlined in a contract is not only efficient but also conclusive and reflective of the parties' free will. In these circumstances, the disputes must be referred to the forum prescribed in the contract, as it carries both competence and finality in resolving such matters. It is settled principle of law that when a contract specifies a particular forum for dispute resolution, then, circumventing the said forum of adjudication and direct approach to the civil court of plenary jurisdiction has never been approved by the superior courts. This specialized mechanism takes precedence over general jurisdiction, and the courts must respect this hierarchy. The appellant's counsel, when confronted with this legal position, argued that arbitration could only proceed with the mutual consent of the parties, as required under the law.

He contended that since no such agreement existed in this case, the Civil Court retained jurisdiction to adjudicate the matter. However, this argument holds no weight. The record shows that the respondents submitted a written statement along with an application under Order VII Rule I I CPC, asserting that the appellant had no cause of action before the Civil Court and that its jurisdiction was expressly barred due to the dispute resolution mechanism in the contract. It is well-settled law that when a contract explicitly provides forums for resolving inter-se disputes between the parties, then these forums are the sole avenue for redress. A suit before the Civil Court in such cases is not only incompetent but legally bared. The very purpose of these contractual forums is to ensure that disputes are resolved effrciently, conclusively, and without interference from courts of general jurisdiction. Therefore, the rejection of the plaint under Order VII Rule I I CPC was justified, as the appellant's attempt to bypass the agreed-upon mechanism was contrary to law. Muh ammnd Avub & Brolhers lhroush Partner vs. Province of Sindh throush Secretarv. Irrisation & anolhe r (2009 YLR 34E). Although the Arbitration Act, 1940 does not expressly exclude the jurisdiction of Civil Courts of plenary and ultimate jurisdiction under Section 9 CPC

v in matters arising from contractual disputes, such jurisdiction is impliedly barred when the contract prescribes a specific mechanism for dispute resolution

8.In the present case, the contract provides for dispute resolution through a Dispute Board and Arbitration. Therefore, this Court is of the considered view that, in the presence of such an effective and agreed mechanism, the filing of a suit before a Court of general jurisdiction stems from a misconception of the legal framework goveming the matter Consequently, the suit was barred, and the plaint was liable to be rejected under Order VII Rule I I CPC.

The appellant's beliefthat the arbitration clause ceases to exist upon the termination of the contract reflects a misunderstanding of the clause's intent and purpose.

At the time of executing the contract, no dispute existed between the parties; yet, the arbitration and dispute resolution clauses were voluntarily incorporated by mutual consent to address any future disputes, including those arising from or after the termination of the contract. It is well-settled that the termination of a contract does not render such clauses redundant. These provisions, once included in the contract, would remain binding and operative, even after post-termination, for resolving disputes or differences between the parties. Therefore, the

I jurisdiction of the Civil Courts stands impliedly excluded in favor of the contractual mechanism, which must be given effect in the circumstances of the case Messrs National Construc tion Co. vs. the llest Pakktan ll/der and Power Develooment Authorilv throush its Chairman (PLD 1 987 SC 46ll: Pakistan Mobile Communication Ltd.. (MobilinH Islumabad throush Authorized Reoresenlalive vs. Naimatullah Achakzai & olhers (2O12 CLC Baluchistan 12) & Messrs Exceed Private Limited vs, Jamil Ahmed Khan & others (2021 CLC Islamabad 3l).

9.In recent years, the superior judiciary has underscored the sigrificance of Altemate Dispute Resolution (ADR) as a pivotal mechanism for resolving disputes. Recognizing its potential, all provinces, including the Islamabad Capital Territory, have enacted dedicated ADR statutes. These laws aim to promote efficiency, cost-effectiveness, and the amicable settlement of disputes-an approach that ensures outcome are both conclusive and equitable.

ADR provides a'win-win' altemative to conventional litigation, which in this region is often marred by prohibitive costs, protracted timelines, and inconclusive outcomes, leaving parties entangled in an exhausting zero-sum game. Unlike traditional litigation, ADR offers flexibility, confidentiality, and

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the ability for parties to tailor solutions to their unique circumstances, fostering mutual satisfaction and preserving relationships. Moreover, ADR aligns with the global trend of modemizing justice delivery systems, emphasizing collaboration over confrontation. It not only reduces the burden on overburdened courts but also empowers parties to take actrve control of their disputes, culminating m outcomes that reflect faimess and finalitv. Such mechanisms are indispensable for a progressive legal framework that values both justice and efficiency. The Hon'ble Supreme Court of Pakistan in the case reported as Province of Puniab throush Secretam C&W. Lohore and olhers ys. Messrs Haroon Construction Comnanv. Government Con tractor & others (2024 SCMR 947) while enco uraging out of court settlements through ADR particularly through mediation, held in the following manner:-

10.We have noticed that Rule 68 of the Rules provides that after the coming into force of the procurement contract, disputes between the parties to the contract shall be settled through mediation or arbitration. The words of Justice Sandra Day O'Connor are telling: "The courts of this country should not be the places where resolution of disputes begins. They should be the places where the disputes end afier alternative methods of resolving disputes have been considered and tried." Even though in the instant case alternate dispute resolution mechanism was not ovailable as interpretation of the Act and the Rules were involved, which is best lefi to the court of law, we wish to underline that courts must encourage out of court settlements through Alternate Dispute Resolution ('ADR"), in particular mediation. The essence of mediation lies in its voluntary and confidential process, where a neutral third party, the mediator, assists disputants in reaching a

lt consensus. Unlike in litigation, where the outcome is ofien a zero-sum garne, mediation thrives on the principle of win-win solutions, preserving relationships and allowing for creative resolutions that legal parameters might not accommodate. ,,The notion that ordinary people want black-robed judges, well-dressed lawyers, and fine paneled courtrooms as settings to resolve their disputes is incon'ect. People with problems, like people with pains, want relief and they want it as quicHy and inexpensively as possible.

11.Mediation, as a form of alternative dispute resolution (ADR), has garnered widespread acclaim for its efficiency, cost-ffictiveness, and ability to facilitate amicable settlements. In contrast to the adversarial nature of litigation, mediation embodies a collaborative approach, encouraging parties to find mutually beneficial solutions. The courts should not only encourage mediation but also exhibit a pro- settlement bias and a pro-mediation bias. By Pro- mediation bias or pro-settlement we mean a predisposition or preference within the legal system for resolving disputes through mediation rather than through litigation or other forms of dispute resolution. This bias is not about favoring one party over another but rather about favoring the process of mediation itself as a preferred method of dispute resolution. This bias is grounded in the belief that settlements are generally more eficient and satisfactory for all parties involved compared to outcomes determined by a court.

12.Prominent legal scholars and jurists, including the likes of Roger Fisher and William Ury, authors of the seminal work "Getting to Yes," advocate for mediation. They emphasize its potential to produce outcomes that are more satisfactory to all parties involved, compared to the often rigid and polarizing verdicts of court proceedings. Their work underscores the importance of interests over positions, encouraging parties to seek common ground rather than entrenching themselves in adversarial stances. For instance, in "Judging Civil Justice," legal scholar Hazel Genn discusses the encouragement of settlement as a way to reduce court caseloads and promote the fficient use ofjudicial resources. Courts may exhibit a pro- settlement bias by encouraging parties to settle even before the case goes to trial or during the litigation process.

13.By fostering a pro-settlement bias, courts can contribute to a more harmonious and efrcient dispute resolution landscape, where parties are empowered to resolve conflicts collaboratively and constructively. Encouraging mediation aligns with the broader goals of justice systems worldwide: to resolve disputes in a manner that is fair, fficient, and conducive to the long-term well-being of all involved parties. "In the future, it is likely that the traditional trial will be the exce on rather than the

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rule. "

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10.The aforementioned dicta have revolutionized the judicial dispensation of justice by mandating the resolution of disputes through ADR mechanisms before resorting to litigation. This paradigm shift ensures quicker and more conclusive relief for parties, fostering an efficient and amicable dispute resolution framework. By promoting a pro-settlement bias, courts can create a more harmonious and constructive environment where conflicts are resolved collaboratively and conclusively. This evolution reflects the global trend of prioritizing ADR mechanisms over traditional trials, paving the way for a justice system that values effrciency, flexibility, and mutual satisfaction. Article 189 of the Constitution unequivocally mandates that any decision of the august apex court, insofar as it determines or enunciates a principle of law, ls binding on all subordinate courts in Pakistan. Accordingly, the said judgment of the apex court carries binding authority, compelling all courts to implement the principles and spirit of ADR as emphasized therein. This approach not only alleviates the burden on judicial resources but also empowers parties to seek creative and fair solutions that traditional litigation often cannot provide. Similarly, in Kousar Rana Resources

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ivate Limite e y.s. ar Lubricants

W.L.L. (OA LCO ( 2025 SCP 4) the Supreme Court affrrmed a pro-arbitration approach, stressing its applicability to domestic disputes as follow:

16.This conclusion aligns with the pro- arbitration bias firmly established in the enforcement of international arbitral awards, which, in our consifured view, is equally applicable to domestic disputes. Were parties agree to talrc their disputes to arbitration, they expect the court to hold them to their bargain. It is underlined that the word "bias" used in the work "pro-arbitration bias" is not used in the negative or prejudicial sense. Instead, it reflects a judicial and a policy inclirntion towards supporting arbitration as a preferred method for resolving disputes. This tendency arises from recognizing arbitration's benefits, such as eficiency, flexibility and the ability to deliver tailored outcomes. Applying this pro-arbitration bias to domestic arbitration advances the overarching objectives of arbitration law, including fficiency, party autonomy and minimising judicial interference. Requiring a party to an arbitration agreement to /irst approach a ciyil court of general jurisdiction for enforcement of the arbitration agreement and then, if the arbitral proceedings fail, to revert to a civil court of special jurisdiclion, introduces unnecessary delay, inconvenience and expense. Such a convoluted process undermines the purpose of arbitralion as an expeditious and cost-ffictive mechanism for dispute resolution. Adopting a pro- arbitration bias in domestic disputes is also essential to addressing the challenges posed by the overwhelming bacUog of cases in our judicial system, particularly at the level of courts of original jurisdiction (trial courts).

11.The judgment of the apex Court has in a very ample manner highlighted arbitration's efficiency, flexibility, and cost-effectiveness, criticized procedural delays caused by court interventions, and emphasized arbitration's role in easing the trial courts' case backlog.

12.In line with global best practices, many

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jurisdictions worldwide have embraced ADR as an

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integral part of their legal systems, promoting its use as a preferred method for resolving disputes. For instance, countries like Singapore, the United Kingdom, and Australia have established dedicated ADR frameworks and institutions, such as the Singapore Intemational Mediation Centre (SIMC) and the Centre for Effective Dispute Resolution (CEDR) in the UK. These models emphasize the use of mediation, arbitration, and other ADR mechanisms to resolve disputes efficiently, affordably, and amicably Modem justice systems recognize the inherent benefits of ADR, including confidentiality, flexibility, and the ability to achieve tailored solutions that reflect the unique needs and interests ofdisputing parties. By fostering collaboration and mutual understanding, ADR not only preserves business relationships but also enhances access to justice, particularly tn complex commercial and contractual disputes

13.In essence, the appellant was obligated to pursue the forums designated in the contract for dispute resolution. Consequently, the Civil Court of plenary and ultimate jurisdiction lacked authority to entertain the matter. This Court firmly holds that the learned Trial Court rightly rejected the plaint under Order VII Rule 11 CPC upon accepting the

respondents' application. The impugned findings reflect a meticulous appreciation of the material on record and are devoid of any legal or jurisdictional infirmity warranting interference in appellate jurisdiction. Such decisions align with the judiciary's evolving emphasis on ADR, which prioritizes efficiency, cost-effectiveness, and amicable settlements over prolonged litigation. By encouraging parties to honour ADR clauses, courts not only uphold contractual integrity but also advance the global shift towards collaborative and conclusive dispute resolution mechanisms, reducing the strain on traditional judicial resources and fostering mutual satisfaction among disputants, therefore, the impugrred findings are not open to any interference.

14.In light of the foregoing discussion, this appeal, being bereft of merit and substance, stands dismissed in limine, along with the accompanying C.M.

Announc

25.11.2024 JUDGE

(S.B) Justice S. M. Attlque Shah, HJ