' ATTA-UR-REHMAN, J.---C.M.As. Nos.5274 and 5533 of 2003. This order will dispose of two applications. -One under Order XXXIX,Rules I and 2, C.P.C. Moved by the plaintiff for an order restraining the defendant from disputing the existing relationship between the parties and terminating the agreement dated 9-7-1989 (the agreement) and / or appointing any other person(s) to carry out any of the functions carried out by the plaintiff under the agreement. The other under section 34 of the Arbitration Act, 1940 (1940 Act) moved by the defendant to an order staying the proceedings in the suit under clause (9.3) of the agreement provides the resolution of dispute through Arbitration.
2. C.M.A. No,5533 of 2003:-- I will take up first the applicationunder section 34 of the 1940 Act. The facts as narrated in the plaint are that the defendant is a USA based Company carrying on the business of courier service. The defendant and plaintiff entered into the agreement whereby the plaintiff was appointed as contractor for the territory of Pakistan for carrying out the defendant's aforesaid business. The copy of the agreement is annexure A to the plaint. A dispute arose between the parties on account of payment of bills etc. The plaintiff, therefore, filed a suit for declaration, injunction and recovery of money and prayed for:--
(a) money decree of Rs,346, 292, 0404,
(b) money decree for all amounts given by the defendants to the plaintiff from 17-8-2003 till payment of such amounts,
(c) interest/mark up on the amounts payable by the defendant to the plaintiff @ 16% per annum until realization of the same,
(d) declare that the defendant cannot arbitrarily determine or effect the agreement and/or the existing relationship between the parties,
(e) to grant permanent injunction restraining the defendant and any person claiming through or under it from disrupting the existing relationship between the parties,
(1) to grant permanent injunction restraining the defendant and any person claiming through or under it from disrupting the existing relationship between the parties, maintain status quo, not to terminate the agreement and/or appoint any other person(s) to carry out or any of the findings being carried out by the plaintiff under the agreement and or in respect of UPS,
(g) cost, and
(h) other reliefs as may deem fit.
3. After the service of summons the defendant filed an application under section 34 of the 1940 Act.
This application was based on the Clause 9.5 of the agreement, which is, reproduced hereunder:-- "9.5 the parties agree that all questions as to the validity,construction and performance of this agreement shall be governed by the laws of the United States of America and laws of the State of New York, applicable to contracts wholly to be performed in said suit. The parties further agree that all disputes which may arise under, out of or in connection with or in relation to this agreement, which cannot be resolved by negotiations between the parties, shall be finally settled under the rules of the Arbitration of the American Arbitration Associations by three (3) Arbitrators appointed in accordance with those Rules in----city, New York.
"The decision of such Tribunal shall be conclusive and binding upon the parties; and the parties consent to the jurisdiction of the Supreme Court of the State of New York and the United States District Courts for the Southern District of New York for the enforcement of any such decision or award pursuant thereto, and further consent and that any process or notice to any motion of other application may be served by certified registered mail."
4. The defendant's case is that in view of the arbitration clause no proceedings under this suit can take place and the same are to be stayed. The defendant also referred to the earlier proceedings in Suit No,388 of 2002 filed by the plaintiff under section 20 of the 1940 Act, wherein the plaintiff had prayed to:--
(i) "Permit the timing of the Service Agreement dated 9th July, 1989 (Annexure "A" hereto) in this Honourable Court:
(ii) Refer the dispute of the compensation payable to the plaintiff by the defendant to arbitration to be conducted at Karachi by a sole arbitrator or such number of arbitrators as this Honourable Court may be pleased to direct;
(iii) .
(iv) ...............................................................
(v) ..........................
5. In these proceedings the prayer of the plaintiff was declined and he tiled High Court Appeal No,19 of 2003 which was dismissed with the following order:-- "for reasons to be recorded later, we are of the view that the appellant's application for conduct of arbitration proceedings at Karachi was not maintainable and justifiably dismissed. This, however, will not prejudice the appellant's right to seek adjudication of the dispute through a civil suit and in the eventof the respondent's applying for stay of suit under section 34 ibid, it would be open for the appellant to urge the proceedings before forum stipulated in Article 9.5 service agreement would be futile or inconvenient and the suit should not be stayed. The appeal stands disposed of in terms along with the listed application."
6: The plaintiff filed counter affidavit and submitted that it was no more interested in arbitration and wanted the matter to be decided on merits by this Court in the present suit for the reasons mentioned therein. It was further stated that the Appellate Court in Appeal No,19 of 2003 realizing the difficulty faced by the plaintiff allowed it to urge, that if foreign arbitration is "futile or inconvenient" the suit may not be stayed under section 34 of the Arbitration Act.
7. The defendant filed affidavit-in-rejoinder stating that it was neither inconvenient nor futile to refer the matter to Arbitration and further that the Court not allow the plaintiff to be released from the terms of the agreement and that the sanctity of the contract be maintained.
8. I have heard the counsel. Mr. Mandviwala for the defendants pleaded that the plaintiff's earlier application under section 20 was on the similar grounds as that of the present suit and that those have already been considered by the two Courts and subsequently rejected. The plaintiff, therefore, may not be allowed to agitate the same points and grounds enabling it to wriggle out from the Arbitration agreement. He relied upon the following paragraph of the order appearing on typed page (11) of the order present in suit No,388 of 2002 and reproduced hereunder:-- "From the bare perusal of the above clause, it is evident that even the legislature has saved the applicability of the Arbitration clause, it does not mean that the Court is divested of the jurisdiction to decide the controversy if it is otherwise competent to adjudicate. The Court merely stay off their hands from deciding the dispute between the parties in accordance with the normal procedure as laid down in various laws applicable to particular case. The Arbitration proceedings are resorted to avoid the complexity and rigors of the procedural law. It provides a forum as may be agreed by the parties for resolution of the dispute. The contention of Mr. Qazi Fazal Isa, learned counsel that the arbitration at the city of New York if enforced, it would amount to give the defendant advantage over the plaintiff as the defendant will be enjoying best of both the words i,e, venue of his choice and a domestic forum of its ownplace of business. Similar arguments with full force would be available to the defendant in case the forum of arbitration was at Karachi. As stated by the learned counsel for the defendants, American Citizens are facing hostile sentiments in Pakistan and they are being advised by American Government not to travel to Pakistan. The agreement containing arbitration clause was entered into in 1989 and was being followed till date when the plaintiff chose to invoke the arbitration clause but with variation."
9. Mr. Mandviwala argued that after failing in the earlier round, under section 20 of 1940 Act, the plaintiff now abandoned the arbitration clause to get the matter decided in this suit thereby violating the arbitration clause as well as the order passed in Suit No,388 of 2002. He pleaded that the plaintiff was indirectly seeking to set aside the arbitration agreement and such suit was barred by section 32 of 1940 Act. He submitted that the grounds raised by the plaintiff were not sufficient to refuse the stay of the proceedings. He relied upon Manzoor Textile v. Nichimen Corporation 2000 M LD 641 and referred to paragraph (14) at page 646 where in the six conditions for stay of proceedings under section 34 of the 1940 Act were enumerated. Mr. Mandviwala submitted that all the above conditions were met in this case. He also referred to the observations in paras (22) and
(23) at page 650 (supra) which are reproduced hereunder:-- "I cannot be mindful of well establish principle that the Court should not lightly release the parties from the bargain, that follows from the sanctity which the Courts attracts to contracts. In the present case a foreign firm is involved which entered into the contract in question on the basis that in case of any dispute the same would be adjudicated as per arbitration clause but the plaintiff wished to defeat the above clause with the aid of this Court. In order to acquire a respectable place in the community of nations not only the Government but even the individuals are expected to honour their commitments. In my view a party having entered into an agreement after having full knowledge of its consequences cannot be allowed to defeat the arbitration clause."
10. Mr. Mandviwala referred to the case of Eckhardt & Co. v. Muhammad Hanif PLD 1993 SC 42 and submitted that while agreeing with the conclusion drawn by the Court Mr. Ajmal Mian as he then was had recorded a separate note. The Honourable Judge in the note observed that while dealing with the application under section 34 ibid in relation to a foreign arbitration clause, unless there are compelling reasons, an arbitration clause should be honoured; in view of modern communicationand transport system such an arbitration clause is common nowadays; and that the Court should not lightly release the parties from their bargain; the sanctity that the Court attaches to the contracts, must be applied with more vigour to a contract containing a foreign arbitration clause. The learned Judge proceeded to observe that the grounds that it would be difficult to carry voluminous evidence or witnesses to foreign country or that it would be too expensive or that the subject matter of The contract is in Pakistan or that the breach of the contract was taken place in Pakistan cannot be a sound ground for refusal of stay a suit. The learned Judge also observed that in order to deprive a foreign party to undertake arbitration in a foreign country, the Court is to conclude; that the enforcement of such an arbitration clause would be unconscionable or would amount to forcing the plaintiff to honour a different contract. It is noted that in the referred case the single Judge of this Court had refused the stay and dismissed the application under section 34 ibid and the High Court appeal preferred before a D.B. Of this Court was also dismissed and it was concluded that:-- "In any case we cannot substitute our view for the view of the learned single Judge even if a different view of the matter was possible so long as we find that the learned single Judge, has exercised his discretion on relevant consideration."
11. Mr. Mandviwala also referred to the following cases:--
(i) of Messrs Dhanrajamal Gobindram v. Messrs Shamji Kalidas and Co. AIR 1961 SC 1285; 1293 and 1294 and relied upon the following at pages 1293 and 1294, paragraph 26:--- "In the present case the parties by their agreement have placed the power of selecting an Arbitrator or Arbitrators (in, it is included also the umpire) in the hands of the Chairman of the Board of Directors of the East India Cotton Association Limited, the Court certainly performs the ministerial act of sending the agreement to him to be dealt with by him. Once the agreement filed in Court is sent to the Chairman, the Bye-laws lay down the procedure for the Chairman and the appointed arbitrator or arbitrators to follow and that procedure, if inconsistent with the Arbitration Act prevails."
(ii) Charles Louis Dreyfus & Co. v. Gurditta Mall 1911 Indian Cases 655, while dealing with section 141, Order II, Rule 3, Schedule II, Clause 17 of C.P.C. (Act XIV) of 1882, section 532 the Court was pleased to observe following at page 657:-- "Parties must adhere to contracts made by them with fullunderstanding of all the terms and must not be allowed to resile from agreements simply because they subsequently find it to their interest to do so. The law is definite and leaves no option to the Court. The Arbitrator must be appointed in accordance with the provisions of the agreement."
12. Mr. Isa, the learned counsel for the plaintiff in his reply submitted that this Court is the natural or most appropriate forum for trying the dispute between the parties. He relied upon the reasons mentioned by him in para (18) of plaintiff's counter affidavit, which are enumerated hereunder:--
(i) The agreement was executed in Pakistan and for the territory of Pakistan.
(ii) All parcels are collected in Pakistan and signed for onward distribution.
(iii) All the amounts under the agreement are delivered in Pakistan.
(iv) The claim has arisen under the agreement in Pakistan.
(v) All documentary evidence and witnesses are in Pakistan.
(vi) It is less expensive to proceed with the claim in Pakistan before this Court.
(vii) The American counsel are expensive as compare the Pakistani Counsel.
(viii) The establishment of the business is in Pakistan.
(ix) The plaintiffs are incorporated in Pakistan.
(x) Obtaining visas for United States after September 11th, 2001 has become difficult etc.
13. He submitted that there had been no specific denial from the other side of the above and therefore, it constitutes an admission as provided under Order VIII, Rules 3, 4 and 5, C.P.C. He argued that in the instant case only the plaintiff has a claim against the defendant and not vice versa; the defendants had filed no counter claim or referred the matter to Arbitration in Pakistan or in the U.S.A. He emphatically relied upon the following case law:--
(i) Observation at pages 694 and 695 in Uzin Export Foreign Trade Co. v. Mcdonald Layton & Co.
1996 SCM R 690, it was observed in the case supra that:- ' At page 694 "By entering into an agreement and referring the dispute to arbitration, the jurisdiction of the Court is not ousted. The Court has the jurisdiction to entertain suits for adjudication of claimsof parties containing arbitration clause, but subject to the provision of law that the Court in its discretion may stay such suits. Therefore, the Court has to consider whether discretion should be exercised in a particular case or not. Such discretion is to be exercised judiciously, reasonably and taking into consideration all the facts and circumstances of the case."
' And at page 695 "It is now judicially recognized that inter alia the facts that in what country the evidence is situated or readily available, the balance of inconvenience to the party causing denial of justice or that it would be unfair to stay the proceedings have always been considered for exercise of discretion.
Same view has been taken in certain English cases referred in the above judgments and also by the Indian Supreme Court in Michael Golodetz and others v. Serajuddin & Co. AIR 1963 SC 1044."
(ii) Eckhardt & Co. Supra wherein at page 51 it was observed that:-- "In such circumstances, whole evidence on this point has to come from Karachi composed of documents and oral evidence and taking of such evidence to London would be inconvenient to the parties and also would be expensive. For facts and reasons so stated above, we find no merit in this appeal, which is hereby dismissed."
(iii) The Eleftheria (1969) 2 All E.R. 641, wherein at page 645 it was observed that:-- "In exercising its discretion, the Court should, take into account all the circumstances of the particular case. In particular, the following matters, where they arise, may properly be regarded;
(a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts; (b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects; (c) With what country either party is connected, and how closely; (d)
Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages; (e) Whether the plaintiffs would prejudiced by having to sue in the foreign Court because they would (i) be deprived of security for that claim, (ii) be enable to enforce any judgment obtained, (iii) be faced with a time-bar not applicable in England, or (iv) for political, racial; religious or other reasons be unlikely to get a fair trial."
(iv) Michael Golodetz v. Serajuddin & Co. AIR 1963 SC 1044-1046 paragraph (4) which is reproduced hereunder:- "(4) The High Court had raised itself to the question, whether the pleas raised by the respondents constituted sufficient reason within the meaning of Arbitration Act and pointed out, and in our judgment it was right in se doing, that the statement made in the affidavit of the respondents had remained practically unchallenged; that all the evidence in the case relating to the dispute was in India and that was on strong ground for not exercising the discretion in favor of the appellant. It must be observed that having resolved to the severe restrictions imposed in the matter of providing foreign exchange to individual citizens it would be impossible for the respondents to take their witnesses to New York and to attend before the Arbitrators at the Arbitration proceedings to defend the case against them and the proceedings before the Arbitrators would in fact be ex parte. That would result in injustice to the respondents. Undoubtedly the appellant would be put to some inconvenience if they are required to defend the suit filed against them in India, but the High Court has considered the balance of inconvenience and other circumstances and has come to the conclusion, and in-our judgment that conclusion is right, that the facts established make out "sufficient reason" for not granting stay."
(v) Aratra Potato Co. Ltd. And another v. Egyptian Navigation Co. (EL Amria) Lloyd's Law Reports 1981 Vol. 2 at page 119) and submitted that the English Court has refused to stay the suit and at page 128 observed that:-- " Two considerations, which I regard as dominant, have leadme to that conclusion. The first is the fact that the evidence of surveyors and agronomists on both sides, who examined the cargo during or after discharge, and the evidence concerned with the speed or slowness with which the ship was discharged, is all to be found in England. The second is the fact that the plaintiff had on foot, as a consequence of defendant's own allegation their parallel action against the Mersey Docks and Harbour Company and that it is essential, in order to avoid the risk of different decisions on the same issues by two different countries that the two actions should be tried together". (The underlined consolidation was not referred by the counsel for the plaintiff).
(i) At page 123 of Al Amira supra where the learned Judge once again followed the test laid down in the Eleftueria supra.
(vii) The Fehmarn All England Law Reports (1958) 1 at page 333 wherein at page 335 it was observed that:- "It has been said by counsel for the ship owners that this contract is governed by Russian law and should be judged by the Russian Courts, who know that law, and that the dispute may involve evidence from witnesses in Russian about the condition of the goods on shipment. Then why, says counsel, should trot it be judged, in Russian as the condition says? I do not regard the choice of law in the contract as decisive. 1 prefers to look to see with what country the dispute is most closely concerned. Here the Russian element in the dispute seems to be comparatively small. The dispute is between the German owners of the ship and the English owner as of the cargo. It depends on evidence here as to the condition of the goods when they arrived here in London and on evidence of the ship, which is a frequent visitor to London. The correspondence leaves in my mind, just as it did in the learned Judge's mind, the impression that the German owners did not object to the dispute being decided in this country but wished to avoid the giving of security.
' The dispute is more closely connected with England than with Russia, and. I agree with the Judge that sufficient reason has been shown why the proceedings should continue in these Courts and should not be stayed. I would therefore dismiss the appeal."
14. Mr. Ira finally contended that the case of the present plaintiff is on a higher footing, than the cases referred above. He argued that the plaintiff has no idea as to the American law, which will be resorted to the arbitration proceedings at New Yark. Secondly the proceeding in the New York will be governed by the law of United States which in fact is meant for the contracts to be performed there whereas no part of the instant contract was required nor performed in United States or any part thereof.
15. I have considered the submissions of the counsel. It is an admitted legal position that by entering into the Contract and referring the dispute to the Arbitration the jurisdiction of the Court is not ousted. The Court has jurisdiction to entertain the suits pertaining to the claims of the parties containing an arbitration clause but it may stay the proceedings of such suits exercising discretion judiciously and reasonably taking into consideration, all the facts and circumstances of each case.
16. As to thus contention of Mr. Mandviwala that once the Court under section 20 has refused to the change of the arbitration venue, the plaintiff on similar grounds cannot seek relief under section 34, it is nowthus necessary to examine the two sections and their scope. The relevant portions of section 20 and section 34 are reproduced hereunder:- S. 20 Application to file in Court Arbitration Agreement.
(1) Where any persons have entered into an Arbitration Agreement before the institution of any suit with respect to the subject-matter of an agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter 11, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court.
(2) The application shall be in writing---------------
(3) On such application being made, the Court shall direct notice thereof to be given to all parties
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon a arbitrator, to an arbitrator appointed by the Court.
(5) Thereafter the arbitration shall proceed-------- S. 34: Power to stay legal proceedings where there is an arbitration agreement.---Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party b the agreement or any person claiming under him in respect o' any matter agreed to be preferred, any party to such legal prodding's, may at any time before filing a written statement or talking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the 'ratter should not be referred in accordance with the arbitration agreement and that the applicant was at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings.
17. Section 20 reveals that a person party o the arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement in case of dispute may apply or the arbitration agreement to be filed in Court; on receiving such application the Court will call upon the parties to the agreement to show cause why the agreement should not be filed in Court; and if no sufficient cause is shown, the Court will order the agreement to be filed and refer thematter to the Arbitrator. Whereas section 34 provides that the proceedings may be stayed in case:--
(i) the proceedings must have been commenced by a party to an arbitration agreement with any other party to the agreement,
(ii) the legal proceedings which are sought to be stayed must be in respect of a matter agreed to be referred,
(iii) the application for stay must be referred by party to legal proceedings,
(iv) the request must be before the filing the written statement,
(v) the applicant must have taken no steps in the proceedings after appearance,
(vi) the applicant is and was also at the commencement of the proceedings ready and willing to do all things necessary to the proper conduct of the arbitration. (see Manzoor Textile Mills Ltd.
Supra).
18. The perusal of the two sections show that they are independent of each other. The finding on section 20 application, in my view, will not bar the application under section 54. Even otherwise an application A under section 34 is not subject to the findings, if any, on section 20. The contentions of the learned counsel for the defendant are therefore, not tenable.
19. In the case in hand, while considering the fact and circumstances, it is found that:--
(i) the plaintiff is a private limited company being managed by educated persons and well advised legally.
(ii) the plaintiff has not alleged that either they were forced to enter in the Arbitration Agreement or that enforcement thereof would be unconscionable or amounting to force the plaintiff to honour a different contract.
(iii) there is nothing on record to substantiate that the evidence is so voluminous which cannot be carried to New York. It is also not established that the proposed evidence can only be produced in Pakistan and not in United States.
(iv) the case appears to be based on documentary evidence and perhaps the physical production of witnesses would not be necessary for that purpose. Even otherwise the plaintiff has not disclosed the number of witnesses or details thereof to establish the expensiveness of their production in New York.
(v) the plaintiff failed to show that there is any security risk or hardship for them or their witnesses while travelling to United States.
(vi) the plaintiff has not placed any material to show that the laws of United States defers from the Laws of Pakistan in material aspects and if the adjudication takes place at United States, they will not be able to enforce the judgment against defendants.
(vii) the plaintiff has not placed any material to show that there is no likelihood of getting fair trial in the United States.
(viii)the grounds of inconvenience have not been established by the plaintiff.
(ix) there are no counter cases between the parties pending in Pakistan and therefore, there is no likelihood of conflicting judgment if this suit is stayed.
(x) the suit is between the parties to the Arbitration Agreement and no third party is involved therein.
(xi) the plaintiffs have not been able to substantiate with any plausible reason that they could be relieved of a valid contract and be allowed to proceed in this suit.
20. The sum up of the case law referred by the parties is that the all facts and the circumstances of each case have to be examined. The parties should not lightly be released from their bargain that follows from the sanctity which the Court affixes to the contracts. The Court before refusing to stay the proceedings should conclude that enforcement of such arbitration clause would amount to forcing the plaintiff to honcur a different contract. In this case I do not find such a situation. With respect the case law referred by the counsel for the plaintiff does not apply to the facts of the case in hand. On the contrary the case law referred by the counsel for the defendant supports the view that the suit be stayed under section 34 of the 1940 Act. The plaintiff in this matter appears to have been seeking procedural advantages and avoiding a trial as per the agreement. I am in agreement with the contention of the counsel for the defendant that the ground raised by the plaintiff in the plaint as well as against the application under section 34 ibid are not sufficient/sound enough for a refusal of stay.
21. The upshot of the above is that a judicious and reasonable exercise of jurisdiction would be to allow the application and to stay proceedings.
' In the circumstances, this application is allowed and the proceedings in the matter are stayed.
22. C.M.A. No, 5274 of 2003, in view of the order passed herein above, no further orders are required on this application and the same is disposed of accordingly.