' SYED ASGHAR HAIDER, J.--- This appeal is directed against the order, dated 18-7-2006, passed by the Civil Judge, Lahore, whereby an application made by the respondent Messrs Ibell (Pvt.) Ltd.
Under section 20 of the Arbitration Act, 1940, for filing of Arbitration Agreement in Court, was allowed.
2. The backdrop of the controversy is, that an agreement dated 6-1-2003, was executed inter se the appellant and respondent at Rawalpindi, it contained an Arbitration clause, which is reproduced for ready reference:-- "Arbitration proceedings shall be held in Islamabad". Differences cropped up between the parties, resultantly the respondent filed an application under section 20 of the Arbitration Act, 1940, before the Civil Court at Lahore, this application after contest was allowed vide order, dated 18-72006, the parties were directed to nominate one Arbitrator each and submit his name to the Court. The appellant is aggrieved of this order and has filed the present appeal."
3. Learned counsel for the appellant contended that the impugned order is bad in law, according to the learned counsel pursuant to Clause 21.4 the venue of arbitration proceedings is Islamabad, thus, under the provisions of section 31(3), (4) of the Arbitration Act, 1940, the Courts at Islamabad would deem to hold jurisdiction over these proceedings, including the application under section 20 of the Arbitration Act, thus, the proceedings were wrongly instituted before the Courts at Lahore, she also submitted that the provisions of Contract Act had also not been adhered to and the proceedings are without jurisdiction. The impugned order is also not in consonance with the following precedents:--
(1) Rashid Ahmad v. The State PLD 1972 SC 271; (2) Societe Generaled D Surveillance S.A. v. Pakistan through Secretary, Ministry of Finance, Revenue Division, Islamabad 2002 SCM R 1694; (3) Sultan Ali v. Khushi Muhammad PLD 1983 SC 243; (4) Muhammad Sadiq through his Legal Representatives v.
Pakistan through Collector, Rawalpindi and 2 others 1988 CLC 123 Learned counsel for the respondent contrarily argued that the stance taken by the appellant is misconceived and is not sustainable in law, according to the learned counsel the venue for holding arbitration proceedings is no doubt Islamabad, but jurisdiction has not been deliberately bestowed upon the Courts of Islamabad for Court proceedings, he adverted to sections 2-C, 3 and 31 of the Arbitration Act, 1940 and section 20, C.P.C. To submit that Courts where cause of action arises can exercise jurisdiction, in the instant case the Bank guarantee was executed at Lahore, monetary transactions were conducted at Lahore, therefore, the Courts at Lahore are fully bestowed with jurisdiction, he relied upon the following precedents:--
(1) Hitachi Limited and another v. Rupali Polyester and others 1998 SCMR 1681; (2) Ravi Glass Mills Limited v. I.C.I. Pakistan Powergen Limited 2004 YLR 2503.
4. I have heard the learned counsel at length. The situation which emerges is that there is no dispute qua the holding of arbitration proceedings under the agreement and both parties concur that the venue for this purpose is Islamabad. However, the core dispute between them relates to the question of exercise of jurisdiction by Court. The agreement was executed on 6-1-2003, at Rawalpindi, Clause 21.4 reflects the intention of the parties qua Arbitration, it is clear from record that venue for arbitration proceedings was agreed but jurisdiction qua the Courts to oversee these proceedings was deliberately omitted, therefore, the agreement will be governed by the Arbitration Act, 1940. Section 2-C of the Arbitration Act reads:-- ""Court" means a Civil Court having jurisdiction to decide the question forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not except for the purpose of arbitration proceedings under section 21, include a Small Cause Court;"
5. The other section which will hold to determine the jurisdiction of the Court is section 31 of the Arbitration Act, 1940, according to which an award may be filed in any Court having jurisdiction in the matter to which the reference relates. The words "in any Court having jurisdiction in the matter to which reference relates" are significant and relevant, it clearly means that the proceedings have to be filed with the Court, which is bestowed jurisdiction and with no other Court, because proceedings filed in any other Court would be without jurisdiction and have no legal sanctity.
Section 31(4) of the Arbitration Act, gives an overriding effect to the Act over any other law, thus, in case of conflict the provisions of Arbitration Act would prevail, section 2(c) of the Arbitration Act reflects that the subject-matter means subject-matter of reference, if the same had been subject- matter of the suit, therefore, recourse will have to be made to section 20, C.P.C. As both the provisions are in harmony with each other and relevant for the purpose of determining the jurisdiction. Section 20, C.,P.C. Reads:-- "Other suits to be instituted where the defendants reside or cause of action arises.--- Subject to the limitations aforesaid, every'suit shall be instituted in a Court within the local limits of whose jurisdiction---
(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there ale more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises."
' Therefore, in accordance with the spirit of section 20, C.P.C. The suit can be instituted under section 20(a & c) where the defendant actually or voluntarily resides or personally works for gain or where cause of action wholly or in part arises. Cause of action means where a demand of right is made and if traversed and proved would give a right to judgment to the plaintiff. Thus, it is in this background that the present agreement is to be reviewed.
6. The respondent/Messrs Ibell filed an application under section 20 of the Arbitration Act highlighting and referring to certain disputes and alleging violation by the petitioner, in paragraph 23 of the application under section 20, Arbitration Act the plaintiff/respondent itself adverted to cause of action, and stated that it firstly arose on 6-1-2003, when the agreement was executed and secondly in April, 2003 when policy extraneous to the contract was enforced and thirdly when it completed, ram up period, in July, 2003. In paragraph 24 it is stated that the cause of action accrued in Lahore because Bank Guarantee was issued in Lahore, and payment was made in Lahore. The events giving rise to cause of action have been elucidated and highlighted by the plaintiff in paragraph 23, none of these happened in Lahore.
7. Section 20, C.P.C. Has to be read as whole, clauses (a), (b) and (c) have to be read in conjunction and not in isolation, the emphasis of the learned counsel for the respondent, that part of cause of action accrued at Lahore is not based on sound reasoning. The events which led to the present action are highlighted in paragraph 23 of the application under section 20 of the Arbitration Act but they do not contain any recital to payment. Learned counsel for the respondent submitted that as the bank guarantee was executed at Lahore, therefore, part of cause of action has arisen at Lahore, he has adverted to paragraph 24 of the application in this context. Bank guarantee is an independent contract, its impact, import or performance or non-performance would hardly help the case of the respondent, therefore, this would not constitute a part of cause of action for determining jurisdiction. Reference is made to Pakistan National Shipping Corporation, P.N.S.C.
Building Karachi v. Samsung Co. Ltd. And 3 others 2001 CLC 1473 and Messrs National Construction Ltd. v. Aiwan-e-Iqbal Authority PLD 1994 SC 311. In contracts jurisdiction normally, would vest with the Court where the agreement was executed as the present agreement was executed at Rawalpindi, and has been so accepted by both the parties, therefore, the D jurisdiction would vest in the Courts at Rawalpindi. I am fortified in my view by Messrs Nalanda Ceramic and Industries Ltd. v. Messrs N.S. Choudhury & Co. (P.) Ltd. AIR 1977 SC 2142, according to this precedent the contract was made at Calcutta, therefore, the Courts at Calcutta were possessed with the jurisdiction in this context.
Likewise Food Corporation of India and another v. Greet Eastern Shipping Co. Ltd. AIR 1988 SC 1198, also affirm this position because the contract was made at Bombay, therefore, jurisdiction would vest with the Courts at Bombay. Further the appellant/defendant works for gain in Rawalpindi, the agreement was executed at Rawalpindi, the alleged breaches also occurred at Rawalpindi, therefore, the Courts at Rawalpindi would hold jurisdiction over these proceedings on this account as well. The precedent cited by the learned counsel for the respondent. Ravi Glass Mills Limited v.
I.C.I. Pakistan Powergen Limited 2004 YLR 2503 relates to the territorial jurisdiction pertaining to fraction of cause of action or part of cause of action but is distinguishable on facts as no cause of action has accrued at Lahore, therefore, this precedent is of no help to the respondent. Hitachi Limited and another v. Rupali Polyester and others 1998 SCM R 1618 relates to interpretation of section 20, C.P.C., elucidates part of cause of action, this precedent again is distinguishable on facts as in the instant matter no cause of action has accrued at Lahore. Resultantly, this appeal is allowed and the order, dated 18-7-2006, passed by the Civil Judge, Lahore, is set aside being without jurisdiction. No order as to costs.