' MUHARREM G. BALOCH, J.---Through this order I propose to dispose of the main application under section 20 of the Arbitration Act, 1940, as well as C.M.A. No,11041 of 2008 under section 41 read with Second Schedule, Arbitration Act, 1940, read with Order XXXIX Rules 1 and 2, C.P.C.
2. Precisely, the facts of the present suit are that the plaintiffs being sole proprietorship concern has filed application under section 20 of the Arbitration Act, 1940 with the following prayers:--
(a) Direct the defendant to file the agreement, dated 6-10-2006, entered into by the plaintiff and the defendant and containing the arbitration clause before this Hon'ble Court.
(b) Direct that the disputes and differences between the plaintiff and defendant be referred for arbitration to an appointed Arbitrator.
(c) Direct the appointment of an Arbitrator, if the plaintiff and defendant cannot agree on the appointment of an Arbitrator.
(d) Direct the appointed Arbitrator to proceed with the Reference to Arbitration of the disputes and differences between the plaintiff and defendant in accordance with law;
(e) Pass a final decree in accordance with the Award as may be delivered by the Arbitration in the matter;
(f) Suspend the impugned letter, dated 30-8-2008, till an award is made by the appointed Arbitrator;
(g) Restrain the defendant, or any person acting through or under it, from violating or committing a breach of the terms and conditions of the agreement, till an award is made by the appointed Arbitrator;
(h) Restrain the defendants, its officers, agents, employees and/or authorized person from entering into any agreement with any third party for the marketing, distribution and sale of the products as defined in the agreement, till an award is made by the appointed arbitrator;
(i) (sic)
(j) Grant such further and/or other relief as this Hon'ble Court may deem just and appropriate in the circumstances of the case;
(k) Grant costs in favour of the plaintiff.
3. The plaintiff pleads that being sole proprietorship concern it is incorporated in the year, 1978 and engaged in the business of providing agricultural services to its clients since then. The plaintiff further stated that the defendants are private limited company and is the exclusive agent in Pakistan for Triumph Seeds, a company incorporated in the United States of America which markets corn, grain sorghum, sunflower and forage seed across various parts of the world. It is the case of the plaintiff that on 6-10-2006 the plaintiffs and the defendants entered into a Distribution Agreement whereby the plaintiff was appointed as sub-distributor for the defendants in Pakistan on an exclusive basis. It is further pleaded by the plaintiffs that in clause 9 of the above mentioned agreement it is stated that "should any dispute minor or major arise, both the parties will try to resolve it amicably with each other. Failing to do so both the parties will enter into arbitration through mutually agreed and appointed arbitrator. Decision of such Arbitrator will be final .And binding to both the parties".
4. It is further pleaded by the plaintiff that immense efforts were undertaken by the plaintiffs to market, distribute and sell the products as defined in the agreement as well as to enhance the brand name and the goodwill of the said products. The plaintiff further contends that at the time of signing of the agreement between the parties, Triumph Seeds owed an amount of approximately US$ 10,000 to the defendant. According to the plaintiff prior to the signing of this agreement the defendants had imported some products of Triumph Seeds which were below market standard and in order to compensate the farmer for their loss, the defendant paid roughly around Rs,600,000 to them and had been assured by Triumph Seeds that they would be reimbursed for this amount at a later stage. By virtue of the aforementioned arrangement the defendant has suffered a loss of reputation in the market to the extent that farmers had lost confidence in the defendant's ability to supply seed that was up to the market standard. Thus, the defendants needed service of sub- distributor with a good reputation i,e, the plaintiff to ensure that it could carry on with its business. It is further submitted that in March, 2007, the plaintiff contacted Triumph Seeds, giving its feedback on how the Triumph products have performed. During the e-mail correspondence the plaintiffs began to suspect that there was possibility that the defendant had not informed triumph of the existence and was perhaps in breach of the terms and conditions of the agreement. In June, 2007 the plaintiff, as per clause 13 of the agreement, offered to purchase outright the three agencies from the defendants. However, the defendants quoted a most unreasonable price which was highly unacceptable and appeared to be most illogical to the plaintiffs. The plaintiffs further submitted that despite of the above mentioned ongoing misunderstandings between it and the defendants, the plaintiffs continued to carry on with its obligations and commitments under the agreement when all of a sudden around second week of March, 2008 to the utter stock and astonishment of the plaintiff it discovered that the defendants had imported 9 Metric Tons of sunflower seed (part of the Triumph Products) and was intending to distribute the same without the collaborative efforts of the plaintiff as a sub-distributor. The plaintiffs being highly aggrieved by this unlawful action of the defendants thus demanded explanation for the same and was informed that it would not supply the plaintiff with any of the Triumph Products any other products mentioned in the agreement. As a dispute had arisen between the parties. It is submitted by the plaintiff that the actions of the defendants were tantamount to failure on its behalf to fulfill and comply with its contractual duties and obligations as expressly stated in the agreement, thereby amounting to grave and serious breach of the said agreement.
5. Besides above, the plaintiffs pointed out similar and identical pleas of the violations of the terms of the agreement. It is further submitted by the plaintiffs that on 30-8-2008 defendant wrote a letter to the plaintiffs stating therein that, "Our Principals have withheld their approval for you to be appointed as a Sub-Distributor under the circumstances we have no option but to terminate the said agreement with immediate effect". According to the plaintiffs, the above letter of defendants is illegal, unlawful, capacious, arbitrary, mala fide, vexatious, reckless, negligent and as such is null and void and thereby vehemently refuted and rebutted. According to the plaintiffs, the defendants after having entered into the agreement for almost two years and subsequently acting upon it terminated the agreement on the charade and pretense that it had no option but to terminate the agreement as its principals, Triumph has not given approval for plaintiff to be appointed as the sub-distributor of the defendants. The plaintiffs further submitted that instead of referring the matter to the Arbitration the above letter was issued illegally, therefore, this gave cause of action to the plaintiff to bring this suit with the above mentioned prayers.
6. The defendant has filed counter-affidavit to C.M.A. No,11041 of 2008 whereby it denied the claim of the plaintiff and submitted that the distribution agreement, dated 6-10-2006 clearly stated in clause 1 as under:-- "The Agent agrees to appoint Messrs Farm Services Syndicate as sub-distributor for all products of the Three Suppliers mentioned above as per Annexure 01, in the whole of the Territory, subject to respective approvals from the three, suppliers."
7.
7.According to the defendants the plain reading of the above clause, which is an overriding clause would indicate that if the respective approvals from the three suppliers are not obtained or are not given then the agreement will not take effect at all. In this connection clause 14 of the agreement would only be effective if the agreement comes into existence in the first place and not otherwise.
In such situation the defendants submitted that if plaintiff feels that it has suffered any loss, which is otherwise denied, because of their temporary association with the defendants of whatever sort, they are fully entitled to seek remedy under the general law but not by way of arbitration under an agreement that never came into existence at all, therefore, the defendants prayed for dismissal of the C.M.A. No,11014 of 2008 along with the main suit with costs.
8. I have heard Mr. Osman Ali Hadi, learned counsel for the plaintiff, and Mr. Tahir Mehmood, learned counsel for the defendants, and with their assistance perused the material available on record and so also the agreement which is the subject matter of this suit.
9. Learned counsel for the plaintiff has submitted that while considering the deeds, words are to be taken their literal, plain and ordinary meaning. Where the plain and ordinary meaning may lead to inconsistency with other expressions used in the document or absurdity then such plain and ordinary meaning can be modified to avoid absurdity and inconsistency because the law favours to save a deed. According to him when inconsistency arose between the parties then it is always to be resolved by modification such as arbitration as provided in the agreement itself. On this point he relied upon the case of House Building Finance Corporation v. Shahinshah Humayun Cooperative House Building Society (1992 SCMR 19) relevant page 29. He further submitted that the defendant has not denied the existence of the agreement but in fact admitted the same, therefore, he placed reliance on Port Qasim Authority v. Al-Ghurari Group of Companies (PLD 1997 Karachi 636), Hashmi Can Company v. Hysong Corporation of Karachi (PLD 1999 Karachi 25), Time N Visions International (Pvt.) Ltd. v. Dubai Islamic Bank Pakistan Ltd. (PLD 2007 Karachi 278) and Dar Okaz Printing and Publishing Ltd. v. Printing Corporation of Pakistan (PLD 2003 SC 808).
10. On the other hand learned counsel for the defendant argued that the very suit is not maintainable because the plaintiff has no legal status to bring the suit. He submitted that the plaintiff being proprietary concern cannot file in such capacity by name. He has placed reliance on 2001 CLC 419. He further submitted that the instant suit has been filed in the name of proprietor Mrs. Feroza Byram Avari but plaint has been verified by her son Freyan B. Avari, thus according to him, the suit was filed by sole proprietor Mrs. Feroza Byram Avari but verified by her son which is not permissible, therefore, the same is liable to be dismissed. He placed reliance on Ahan Saz Contractors v. Pak Chemical Limited (1999 MLD 1781). He has also placed reliance on Inayatullah Khan v. Obaidullah Khan (1999 SCMR 2702), West Pakistan Tanks Terminal (Pvt.) Ltd. v. Collector (Appraisement) (2007 SCMR 1318), M.A. Majeed Khan v. Karachi Water and Sewerage Board (PLD 2002 Karachi 315), Muhammad Anwar v. Messrs Associated Trading Co. (1989 MLD 4750), and in view of the above case-law he prayed for dismissal of the suit and the injunction application as well with costs.
11. I have considered the arguments advanced by learned counsel for the parties and also perused the agreement annexed with the plaint as Annexure 'B' which is dated 6-10-2006 entered upon by the parties. The above agreement provides specific clause in case of disputes minor or major both the parties shall try to resolve the same amicably with each other and failing to do so they will enter into arbitration through mutually agreed and appointed arbitrator. Decision of such Arbitrator will be final and binding to both the parties. The above agreement also provides terms of termination of the agreement through clause 10.2 which speaks that in case of termination of this agreement from either A side, if the sub-distributor is carrying any stocks of products the Sub- Distributor will be allowed a period of 10 months from the date of termination, to liquidate his stock during which period the agent will not make any arrangements with any other party to distribute the products. It further defines in sub-clause (3) of the above clause that the agent will not be liable to the sub-distributor for any statutory liabilities or indemnities for termination of the sub- distribution ship, or for loss of clients, goodwill, present or prospective profits or discounts on sales or anticipated sales, or for expenditures, investments, or commitments made in connection therewith or in connection with the establishment, development or maintenance of the sub- distribution ship business.
12. Considering the above clauses of arbitration and the termination of the agreement, the defendants have not fulfilled the conditions of the same but simply terminated the agreement through letter, dated 30-8-2008 which simply amounts to an intimation that the distribution agreement, dated 6-10-2006 was terminated with immediate effect. The above termination does not disclose the reasons that why this has been done. Under such circumstances, when clause 9 of the agreement is very clear in respect of minor or major dispute then there is an arbitration, the plaintiff has specifically pleaded in para. 16 of the plaint that it is apprehended by the plaintiff that the defendant, prior to and after issuing its illegal and unlawful termination letter to the plaintiff has been entering into arrangements with third parties such as other distributors/ dealers and companies for the sub-distribution of the Triumph Products as well as other products as defined in the agreement. The parties by virtue of the distribution agreement, dated 6-10-2006 shall have to perform the duties and observe the covenani to be performed and absolved by them respectively and in case of termination of agency, the parties have to perform their obligations in terms of such agreement. In the present case the defendants have not performed its obligations while terminating the agreement of the plaintiff, therefore, I am of the considered view that the plaintiff has made out case whereby this application be allowed.
13. In view of the foregoing reasons, I allow the application and direct the plaintiff to file the original arbitration agreement in Court within seven days from today. The matter will be put up for further orders in this behalf on 8-6-2009.
14. Since the order on the main suit has been passed therefore, C.M.A. No,11041 of 2008 is allowed till the arbitrator appointed in the matter for award, however, with no order as to costs.