2021 CLD 1069 SUPREME-COURT

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ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED Inter-connected, inter-dependent, or multiple contracts forming an 'indivisible whole contract'---Scope---Gas Supply Agreement ('GSA') between a power generation facility and distributor of natural gas---Dispute over payment for gas---After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount---Question as to whether the GSA and the Payment Agreement were comprised of interconnected or inter-dependent contracts to be treated as "indivisible whole contract" or whether they were separate and independent from each other---Held, that the both the agreements i.e GSA and the Payment Agreement were by and between the same parties--- Obligations undertaken under the Payment Agreement were for the accomplishment of a single goal i.e. the fulfillment of the terms of the GSA---Both the contracts were economically interdependent and had a common origin. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED Take or pay clause---Scope and significance. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED Words 'shall' and 'may'---Scope---Words "may" and "shall" in legal phraseology were interchangeable, depending on the context in which they were used, and were not to be interpreted with the rigidity which was attributed to them in ordinary parlance. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED art. 7(2)---Recognition and Enforcement (arbitration agreements and Foreign arbitral awards) act (XVII of 2011), Preamble---arbitration act (X of 1940), Preamble---arbitration agreements---Incorporation of an arbitration clause by reference---Scope---article 7(2) of the United Nations Commission on International Trade Law on International Commercial arbitration ("UNCITRaL Model Law"), in furtherance of its pro arbitration aims, explicitly allowed for incorporation of arbitration clauses by reference---Supreme Court observed that in a commercially fast paced world, where the world was essentially a global village, it was regrettable that Pakistan, although a signatory to 'UNCITRaL Model Law', had till date not incorporated its provisions into its domestic law and the Recognition and Enforcement (arbitration agreements and Foreign arbitral awards) act, 2011 made no mention of incorporation of arbitration clauses by reference. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED S. 74---Compensation for breach of contract where penalty stipulated for---Reasonable compensation---Scope---In working out the amount for reasonable compensation, it would be relevant to consider whether any loss had or had not accrued to the party, which had suffered on account of the breach, and the extent of that loss---Award of compensation by the court under section 74 of the Contract Act, 1872 would depend upon a case by case factual and circumstantial analysis as to what would be reasonable compensation in each case subject to the limit of the amount mentioned in the contract. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED arbitral tribunal---Jurisdiction---Doctrine of Kompetenz-kompetenz (competence-competence)---Scope---No legal impediment in the way of a court or tribunal to decide its own jurisdiction---Doctrine of Kompetenz-kompetenz essentially allowed the arbitral tribunal to determine its own jurisdiction. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED Scope---For a claim of unjust enrichment to succeed, there must be enrichment at the expense of the plaintiff and this enrichment must be unjust in such a way that there should be no lawful justification for the same. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED award---Unjust enrichment---'Juristic reason' for enrichment---Scope---Gas Supply agreement ('GSa') between a power generation facility ('power company') and distributor of natural gas ('SNGPL')---Dispute over payment for gas after power company refused to take up gas from SNGPL---Question as to whether the award rendered by the arbitrator in favour of SNGPL amounted to unjust enrichment---Held, that although SNGPL was receiving payment for the same amount of gas twice, it needed to be clarified that this was upon failure of the power company to take up the gas, and further, the SNGPL, in any case, was not recovering the same amount, due to the fact that it was redirecting transmission to its domestic consumers, which paid a lower tariff than Independent Power Producers (IPP) like the power company---Furthermore, to allow the power company's claim would mean overlooking the fact that SNGPL was still under an obligation to supply the Make-Up Gas to the power company at any time within the duration stipulated under the GSa, therefore, there was a 'juristic reason' for the enrichment---Further, the power company had failed to prove its deprivation as it was entitled to Make-Up Gas at a later date, which it failed to avail within the stipulated time frame---Furthermore the arbitrator while dismissing the claim of unjust enrichment raised by the power company correctly explained that SNGPL expanded monies to construct the infrastructure to deliver gas to the power company; that SNGPL remained liable to its upstream suppliers even if the power company chose not to take the Take or Pay Quantity but opted to pay instead and to Make Up Gas later; that SNGPL had to bear the responsibility of cutting its losses and find an alternative buyer (even at a lower price) for the Gas not taken by the power company and the likely additional costs of its transmission, distribution and unaccounted for gas---Power company (appellant) had failed to make out a claim for unjust enrichment, and the award rendered by the arbitrator was not disproportionate to the losses suffered by SNGPL---appeal was dismissed. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED Contract--- Inter-connected or inter-dependent contracts---Arbitration clause in one agreement deemed to be incorporated into another agreement---Scope---Gas Supply Agreement ('GSA') between a power generation facility and distributor of natural gas---Dispute over payment for gas---After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount---Plea of power generation facility that had the arbitration clause in the GSA did not cover the Payment Agreement, and thus the Sole Arbitrator exceeded his jurisdiction by deciding the issues arising out of the Payment Agreement---Held, that the arbitration clause in the GSA covered disputes, disagreements or default of the seller and buyer "in connection with or arising out of" the GSA---Dispute under the Payment Agreement was inarguably a dispute connected to the GSA, and also arose out of the obligations under the GSA---Controversy arising out of Payment Agreement was a progeny of the GSA and could not be divorced from the parent GSA---Arbitration clause contained in the GSA would therefore be the "centre of gravity" and would be deemed to be anchored in the Payment Agreement which itself was merely an implementation of the GSA---Disputes "arising out of" the GSA were thus wide enough to cover the Payment Agreement --- Neither was it commercially sensible nor realistic to hold that both the agreements were to be decided by separate forums--- Had this been the case, the parties, as rational businessmen, would have been prudent in expressly excluding the arbitration clause from the Payment Agreement---Appeal was dismissed. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED art. V(2)(b)--- Recognition and Enforcement (arbitration agreements and Foreign arbitral awards) act (XVII of 2011), S. 6 & Preamble---International commercial arbitration---arbitral award---Recognition and enforcement of arbitral award may be refused if the award would be contrary to "public policy" of that country" --- Public policy exception---Scope---Public policy exception acted as a safeguard of fundamental notions of morality and justice, such that the enforcement of a foreign award may offend these fundamentals---Public policy exception was never meant to be given a wide scope of application---Most courts world over favoured a restrictive approach to public policy in international commercial arbitration---Public policy exception should not become a back door to review the merits of a foreign arbitral award or to create grounds which were not available under art. V of the New York Convention as this would negate the obligation to recognize and enforce foreign arbitral awards---Such kind of interference would essentially nullify the need for arbitration clauses as parties would be encouraged to challenge foreign awards on the public policy ground knowing that there was room to have the Court set aside the award---Public policy defense was an exceptional one, which demanded heightened standards of proof that courts would normally require in order to refuse recognition and enforcement of a foreign arbitral award---Such heightened standard of proof was compatible with the exceptional nature of the public policy defense as well as with the fact that art. V(2)(b) of the New York Convention provided a mere facility to the courts and not an obligation. Citation Name: 2021 CLD 1069 SUPREME-COURTBookmark this Case ORIENT POWER COMPANY (PRIVATE) LIMITED VS SUI NORTHERN GAS PIPELINES LIMITED Contract--- Inter-connected or inter-dependent contracts---Incorporation of an arbitration clause from one contract into another in international commercial arbitration---Survey of case law from the United Kingdom, Singapore, Hong Kong, India and Pakistan.

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