ISLAMABAD, Aug 8: The Supreme Court on Wednesday directed Westinghouse Electric Corporation, US firm, to furnish bank guarantee of US$1 billion for allowing it the right of defence in a suit for damages instituted by a Pakistani company for its alleged failure to honour the contract.

The apex court upheld the Lahore High Court judgment which had remanded the suit to the civil court with the direction that the Westinghouse Electric Corporation, shall be allowed to submit written statement.

The apex court, however, directed the company to furnish bank guarantee equivalent to decreed amount, $1 billion to the satisfaction of the trial judge.

The civil court Lahore had created history on July 7, 1999 when it decreed the biggest ever civil suit of $1bn without hearing defendant company. The judgment, however, was suspended by the Lahore High Court, and remanded it to retrial court.

Both the parties approached the Supreme Court, demanding different reliefs. The American firm demanded that the case shall not be remanded to the trial court and instead it should be sent for arbitration.

The Pakistani firm, Wak Orient, owned by former Senator Gulzar, host of Benazir Bhutto whenever she visited Lahore, had filed a suit for specific performance of the contract and recovery of damages in the Civil Court at Lahore against the US firm for its alleged failure in the establishment of 400 mega watt power station near Port Qasim.

The Supreme Court’s three-judge bench, headed by the Chief Justice Sheikh Riaz Ahmad, had reserved the judgment on April 11, 2002.

The Supreme Court announced on May 21, 2002, that the judgment in the case would be announced. It was not announced on that day. The apex court office, after one month again made a similar announcement on June 21 by affixing a notice for the announcement of the judgment. This time again it was not announced.

The court made yet another announcement on July 12 for the announcement of the judgment. It was annouced on the date, but the copy of the judgment was only made available to the parties on Aug 5, 2002.

The Civil Court after striking off defence of the respondent company passed the decree in the suit worth US $ 1 billion on July 7, 1999. The decree was passed for non-compliance of the order of filing the written statement in the given situation.

The LHC, however, set aside the judgment and decree and remanded the case for its disposal after obtaining written statement from the respondent company. Both the parties approached the apex court.

The Supreme Court in its judgment said that the non filing of the written statement did not amount to the admission of facts contained in the plaint.

The apex court held that the penal provision of Order VIII Rule 10 of CPC could not be invoked in a case in which the defendant was not required by the court to file the written statement.

“The court in such cases instead of imposing the penalty of striking off the defence under Order VIII Rule 10 of CPC would prefer to condone the delay to avoid any injustice

and would be hesitant in exercising the discretionary powers unless there are compelling reasons and exceptional circumstances.”

The apex court further directed the civil court to first decide the question of its jurisdiction. “Without deciding the question of the jurisdiction of the court and disposal of the application under Section 34 of the Arbitration Act 1940, it was not proper for the learned judge to invoke the provision of the Order VIII, Rule 10 of CPC and pass the decree in the suit.”

The Supreme Court in its final order that the respondents shall file their written statement within the time to be given by the trial court.