2026 C L C 418

 2026 C L C 418

[Sindh]

Before Muhammad Iqbal Kalhoro and Muhammad Osman Ali Hadi,

JJ

The UNITED INSURANCE COMPANY OF PAKISTAN LIMITED

through

Authorized Attorney ---Appellant

Versus

PROVINCE OF SINDH through Chief Secretary and 2 others ---

Respondents

H.C.A. No. 473 of 2024, decided on 4th February, 2025.

(a) Sindh Public Procurement Rules, 2010---

----R.35---Contract cancelled by Procuring Agency---Bidder

blacklisted---Procuring Agency, powers of---Scope---Procuring

Agency (Transport and Mass Transit Department) cancelled contract

with Insurance Company (Appellant ) submitting / claiming that the

Appellant was blacklisted at the time of being given the contract, a

fact allegedly unknown to them (Procuring Agency /Respondent)---

Validity---Admittedly, the Appellant successfully bid and was granted

the agreement by Respondent and the said agreement was

unilaterally terminated by the Respondent vide cancellation letter---

Submission put forth by the Respondents did not appear to hold

merit for the reason that in order to initiate blacklisting proceedings

an entire process had been established, inter alia, under R.35 of the

Sindh Public Procurement Rules, 2010 ( the Rules 2010), and, in the

present case, Respondent was the procuring agency itself having

powers to initiate the process of blacklisting---Therefore, for the

Respondent to grant the Appellants contract and then subsequently

claiming they were unaware of the blacklisting appeared to be

contrary to the provisions contained in the Rules 2010---

Furthermore, the Respondents had failed to provide any

documentation showing blacklisting related proceedings initiated

against the Appellant---Rule 4 of the Rules 2010, upon which the

Respondents had relied, merely states procurement to be conducted

in a fair and transparent manner, which is a commonly known

principle and does not offer the Respondents any legal assistance in

the circumstances---Therefore the High /Appellate Court set aside

the Impugned stay-declining order, returning the matter /suit to the

Trial Court for adjudication on merits---Appeal was allowed

accordingly.

(b) Contract Act (IX of 1872)...

Ss.5, 20 & 22---Contract---Unilateral cancellation---Scope and

effect---Procuring Agency (Transport and Mass Transit Department),

relying on S.20 Contract Act, 1872, cancelled contract with Insurance

Company (Appellant) submitting / claiming that the agreement was

contradictory to law and void---Validity---Respondents in their

cancellation letter had, absurdly, stated that the agreement (which

they entered into with the Appellant) was contradictory to law and

void; which appeared bizarre considering that the same was the

Respondent s own agreement, and it would be contrary to the

principles of law and justice for the Respondents to be allowed to

issue a void contract and then rely on the illegality of the contract to

absolve themselves from the obligations contained therein---If such

argument were permitted, it would open a plethora of litigation for

any person/agency who did not wish to continue with their

obligations under a contract by simply claiming that their own

issued agreement was illegal and unlawful---Respondents in said

regard had relied on S.20 Contract Act, 1872, which was not

applicable in the circumstances while Ss. 5 & 22 of the Contract Act,

1872, would be better applicable to the matter in hand, but even

these provisions of law would not help the plea of the Respondents

but, to the contrary, would aid the Appellant---Respondents being

duty bound could not divest themselves from their contractual

obligations under the agreement in such manner, as certain rights

would have accrued to the Appellant upon entering the agreement---

Therefore the High /Appellate Court set aside the Impugned stay-

declining order, returning the matter /suit to the Trial Judge for

adjudication on merits---Appeal was allowed accordingly.

(c) Constitution of Pakistan---

----Arts. 4, 10-A & 25---Contract---Unilateral cancellation of---Right of

party to be heard---Scope---Procuring Agency (Transport and Mass

Transit Department), relying on S.20 Contract Act, 1872, unilaterally

cancelled contract with Insurance Company (Appellant)---Validity---

Appellant ought to have been given a proper notice to explain any

grievance the Respondents may have had, before they unilaterally

cancelled the agreement; by not doing so, the Respondents had

violated established principles of natural justice being audi alteram

partem (no one should be judged unheard) and nemo judex in causa

sua (rule against bias), as well as legal rights of the Appellant

protected under the Arts. 4, 10-A and 25 of Constitution---Appellant

(as any citizen) was entitled to a fair hearing and was protected

against any bias which prima facie was shown against them in the

instant matter, as the Respondents did not provide any opportunity

for a fair hearing or notice to the Appellant to explain / redress their

grievance before cancellation of the agreement---Therefore the High /Appellate Court set aside the impugned stay-declining order,

returning the matter /suit to the Trial Judge for adjudication on

merits---Appeal was allowed accordingly.

Ahmed Ali Hussain for Appellant.

Syed Hassan Shah, Assistant Advocate General, Sindh for

Respondents Nos. 1 to 3.

Date of hearing: 4th February, 2025.

JUDGMENT

MUHAMMAD OSMAN ALI HADI, J.---The Appellant is an Insurance

Provider, being aggrieved with the order dated 04.11.2024 ( the

Impugned Order ) passed by the learned Single Judge in Suit

No.1155/2024 whereby the learned Single Judge disposed of an

injunction application against the Appellant (CMA No. 15148/2024)

against which the Appellant has filed the instant Appeal under Rule 1

Order XLIII of the Civil Procedure Code, 1908.

2. That pursuant to a successful tender bid, the Appellant had

entered into an agreement dated 28.04.2023 with Respondent No.2

whereby the Appellant was to provide insurance coverage in line with

compensation payable in case of death and / or injury to passengers

travelling inter-provincial routes, in a stage carriage contract.

Consequent to entering the said agreement, the Appellant states they

furnished a Bank Guarantee for the amount of Rs. 30,000,000/- given to

Respondent No. 2. Shortly after, the Appellant alleges they received

cancellation letter dated 13.05.2024 sent by Respondent No. 2

unilaterally cancelling the said agreement. In the cancellation letter,

Respondent No. 2 stated their reason for cancelling the said Agreement

was because it was contradictory to the law and therefore void, and

was cancelled by Respondent No. 2 with immediate effect.

3. That soon after the cancellation letter, the Appellant submits that

Respondent No.2 issued Public Notices dated 12.10.2024 & 14.10.2024

for a Fresh Request for Expression of Interest on the same Project and

on the same terms and conditions under which the Plaintiff had

already previously contracted with the said Respondent No.2. The

Plaintiff being aggrieved filed Suit No.1155/2024 before the Hon ble

High Court of Sindh at Karachi inter alia against such cancellation,

during the pendency of which the Appellant (Plaintiff in the said Suit)

initially obtained injunctive orders which were subsequently recalled /

vacated through the Impugned Order, and hence the instant Appeal.

4. The premise of the Appellant s argument was that his contract /

agreement was unilaterally revoked by Respondent No. 2 without any due process provided, nor was the Appellant given an opportunity to

address any grievance the Respondent may have had, since the

Appellant was not made aware the agreement was going to be revoked

by the Respondents. Counsel for the Appellant further states that the

same cancellation was done purely for mala fide purposes, and that he

has approached the Trial Court for redressal of his grievance. He

further urges the mala fide is apparent in that the Respondents

cancelled their agreement but soon after issued a fresh request

inviting parties to submit their interests in the matter under the same

terms and conditions previously agreed with the Appellant.

5. The said Respondents (through their Counsel) countered the

allegations put forth against them by initially taking the stance the

Appellant was blacklisted at the time the agreement was entered

which was unknown to them, and hence they claimed they had to

terminate the agreement. They relied upon Rule 4 Sindh Public

Procurement Rules, 2010 ( 2010 SPP Rules ), and section 20 of the

Contract Act, 1872. When they were confronted by the cancellation

letter dated 13th May, 2024 which did not mention anything about

blacklisting, the Respondents changed their stance and at such point

urged they cancelled the agreement because the Appellant was failing

to fulfil its conditions. At this juncture they relied upon section 49

Motor Vehicles Ordinance, 1965.

6. We have heard the learned counsel for the Parties. It is an

admitted position by both Parties the Appellant successfully bid and

was granted the agreement dated 28.04.2023 by Respondent No. 2. It is

further an admitted position the said agreement was unilaterally

terminated by the Respondent No. 2 vide cancellation letter dated

13.05.2024. Addressing the first submission put forth in which the

Respondents claimed the Appellant was blacklisted at the time of being

given the contract, a fact allegedly unknown to the Respondent, and

hence the Respondent No. 2 made an error in granting the agreement

to them, does not appear to hold merit. The reasons for this, is that in

order to initiate blacklisting proceedings an entire process has been

established, inter alia, under Rule 35 of the 2010 SPP Rules, and it is

the procuring agency itself (in this case Respondent No. 2) who

initiates the process of blacklisting. So for them to grant the Appellant

a contract and then subsequently claim they were unaware of the

blacklisting appears to be contrary to the provisions contained in the

Rules (upon which the Respondents themselves now rely).

Furthermore, the Respondents have failed to provide any

documentation showing blacklisting or related proceedings initiated

against the Appellant. Rule 4 of the Sindh Public Procurement Rules,

2010, upon which the Respondents have relied merely states

procurement to be conducted in a fair and transparent manner, which is a commonly known principle and does not offer the Respondents

any legal assistance in the circumstances. The counsel for the

Appellant further drew our attention to a Judgement in Writ Petition

No.1669/2003 filed the Hon ble Islamabad High Court which had set

aside another blacklisting order against the Appellant, which prima

facie shows the Appellant is not currently blacklisted.

The second main contention put forth by the Respondents was that

the Appellant failed to fulfil their obligations under the agreement.

This appears to be a secondary attempt to try and salvage their

position, after being unable to satisfy the Court on the issue of

blacklisting (supra). The Respondents in their cancellation letter have

absurdly stated the agreement (which they entered into with the

Appellant) was contradictory to law and void. This appears bizarre

considering it is the Respondent No. 2 s own agreement, and it would

be contrary to the principles of law and justice for the Respondents to

be allowed to issue a void contract and then rely on the illegality of the

contract to absolve themselves from the obligations contained therein.

If this argument were permitted, it would open a plethora of litigation

for any person / agency who did not wish to continue with their

obligations under a contract would simply have to claim their own

issued agreement was illegal and unlawful. The Respondents in this

regard have relied on section 20 Contract Act, 1872, which we do not

find applicable in the circumstances. Sections 5 and 22 of the Contract

Act, 1872 would be better applicable to the matter at hand, but even

these provisions of law would not help the plea of the Respondents,

but to the contrary would aid the Appellant. We are of the opinion the

Respondents being duty bound cannot divest themselves from their

contractual obligations under the Agreement in this manner, as

certain rights would have accrued to the Appellant upon entering the

agreement. We have further failed to see the relevance of section 49 of

the Motor Vehicles Ordinance, 1965, referred by counsel for the

Respondent, as the matter at hand currently only pertains to

interlocutory proceedings.

7. The Appellant ought to have been given a proper notice to explain

any grievance the Respondents may have had, before they unilaterally

cancelled the agreement. By not doing, the Respondents have violated

established principles of natural justice being audi alteram partem (no

one should be judged unheard) and nemo judex in causa sua (rule

against bias), as well as legal rights of the Appellant protected under

the Constitution (articles 4, 10-A and 25) and settled law. The Appellant

(as any citizen) is entitled to a fair hearing and is protected against any

bias which appears prima facie shown against them in the instant

matter, as the Respondents did not provide any opportunity for a fair

hearing or notice to the Appellant to explain / redress their grievance before cancellation of the agreement. Therefore, at this interim stage

we allow the instant Appeal and the Impugned Order dated 04.11.2024

is set aside. The matter will return / resume in Suit No. 1155 of 2024

where the learned Trial Judge will adjudicate the matter on its own

merits.

This Appeal stands disposed accordingly.

MQ/U-1/Sindh Appeal allowed.