MAULVI ANWARUL HAQ, J.---On 9-10-1999 the respondent filed a suit against the appellant for recovery of Rs,36,12,236. It was stated in the plaint that the appellant was appointed as a Clearing Agent of the respondent vide agreement dated 28-1-1993. The appellant was also authorized to clear the refund of the Octroi deposit on behalf of the respondent. On this account, the appellant received the suit amount which he was to hand over to the respondent but he failed A to do so. On 26-2-1999 the appellant executed another agreement and acknowledged that the said amount is payable by him to the respondent and issued six post-dated cross-cheques in, the, said amount.
The cheques were dishonoured when presented. A notice was served upon the appellant on 17-7- 1999 and in his reply dated 28-7-1999 he admitted his liability to pay the outstanding amount.
However, he has failed to do so. A decree was accordingly prayed for. Notices in the prescribed form were issued. The appellant put in appearance on 20-10-1999 through his learned counsel. The court was informed that application for leave to appear and to defend is to be filed. Since a day was still there, the case was adjourned to 25-10-1999. On this date the appellant stated that a copy had not been delivered. The respondent was directed to deliver the, copy and the case was adjourned to 4-11-1999. On this date an application was filed for leave to appear and to defend. A reply was filed. The application was dismissed by a learned Additional District Judge, Rawalpindi and the suit was decreed on 3-5-2000.
2. Learned counsel for the appellant contends that there was an arbitration clause in the admitted agreement dated 28-1-1993 and since a prayer had been made in the said application for stay of proceedings, the learned Additional District Judge, ought to have stayed the proceedings and could not have proceeded with the suit. Further contention is that the allegation that the second agreement was executed and cheques were issued under coercion exercised by the appellant were apparent on the face of the record. He refers to a letter dated 20-5-1999 at page 90 of paper book of the R.F.A. Further presses C.M. No,400/08 to produce two letters to demonstrate that as on 30-6-2000, a sum of Rs,2,536,515.00 was due and so was the position on 30-6-2003 whereas a decree for Rs,36,12,236 has been obtained. Learned counsel for the respondent, on the other hand, argues that section 34 of the Arbitration Act, 1940, is not attracted. According to him, the suit was based on bouncing of the cheques in the suit, amount issued by the appellant in favour of the respondent and this cause of action did not arise out of the said agreement containing the arbitration clause but under a separate arrangement under the latter agreement dated 26-2-1999.
Further contention is that the appellant had been taking steps in proceedings inasmuch as it had sought adjournments and submitted to the jurisdiction of the court by ultimately filing the application. Opposes the C.M. With the contention that the said account have nothing to do with the suit amount and further no reason has been stated as to why the said first mentioned document was not produced in the lower court. According to the learned counsel, there is no denial of liability in the application filed by the appellant for leave to appear and to defend the suit while the allegation of coercion is falsified by the admitted notice and its reply referred to in the plaint.
3. We have gone through the records of the learned trial Court, with the assistance of the learned counsel for the parties. We have already narrated the contents of the plaint above. We have examined the application filed by the appellant for leave to appear and to defend the suit on 4-11- 1999. We do find that the major stress was on the stay of suit under section 34 of the Arbitration Act, 1940. However, we find no denial whatsoever in the said application, of the material contents of the plaint that the appellant had C received the suit amount from the Municipal Corporation towards refund and that he was liable to pay the said amount to the respondent; that the cheques were issued and that these were dishonoured. However, it was, stated that the said second agreement and the issuance of cheques was result of coercion. The exact words used that the plaintiffs behaved against the merchant norms and practices and illegally forced the applicant/defendant to issue the alleged cheques patently without consideration.
4. There is no denial of the notice pleaded in the plaint and its reply by the appellant. The notice is available at page 53 of the trial Court record. It is dated 17-7-1999, it specifically states that the appellant received the suit amount from Karachi Municipal Corporation which he was liable to hand over to the respondent but failed to do so. There is reference to the execution of the agreement of repayment dated 26-2-1999 at Rawalpindi and issuance of the cheques in the amount due. The reply dated 28-7-1999 is at page 55 of the trial court record. This, in fact, is addressed to the learned counsel who issued the said notice and there is no allegation of any coercion or illegal force rather there is a promise to pay the amount. We, therefore, do find that the liability to pay the suit amount stands admitted and so is E the case with the promise to pay the same and issuance of cheques.
5. Coming to the said contentions, of the learned counsel,' we are not in agreement with the learned counsel for the respondent that by demanding copy of the plaint, the appellant can, be said to have taken steps in proceedings. This is a ground for adjournment. However, at the same time, we do agree with the learned counsel for the respondent that the suit was based on a cause of action arising out of the bouncing of the cheques, admittedly, issued by the appellant to discharge his liability to pay the suit amount to the respondent. Further it is apparent that the liability arose out of the second agreement dated 26-2-1999 at pages 31 to 33 of the trial Court record whereby the liability was acknowledged and a promise was made to pay the same and further the cheques, were issued. Another question that arises, is whether section 34 of the Arbitration Act, 1940, would at all be applicable in the circumstances of the present case i.e, where a suit has been, filed under Order XXXVII, C.P.C. As in the present case, the learned trial court has found and we have agreed that the appellant has failed to make out any F defence much-less a plausible defence to the suit. After holding that the appellant has no case is the Court still bound to stay its hands with reference to the said arbitration clause. To our mind the answer must be in the negative. We draw support for this view from observations of Hon'ble Mr. Justice Sabihuddin Ahmed in the case of Messrs Pioneer Cables Limited v. Messrs Saadi Cement Limited (1999 CLC 1841). These in turn are based on the opinion of Division Bench of the learned Karachi High Court in the case of Cotton Export Corporation of Pakistan (Pvt.) Ltd. v. M/s Asif Cotton Ginners and 5 others (1995 CLC 1024). The rule laid down is that in a suit filed under Order XXXVII, C.P.C. If an application is filed by the defendant under section 34 of the Arbitration Act, 1940, G then it has to be decided only with reference to the contents of the plaint and not with reference to the contents of the application. In the said case of Cotton Export Corporation of Pakistan (Pvt.) Ltd., the suit was found to be based upon a pro-note while in the said case of Messrs Pioneer Cables Limited, the learned Judge found the case to be based on cheques issued by defendants, having been dishonoured. It was held that the suit does not arise out of the agreement rather it arises out of a cause of action independent of the said agreement. The ratio was followed by the said court in the case of Nasir Ahmad v. Pakland Cement Limited (2001 CLC 1156). We are in respectful agreement with the said view and do hold that no case for stay of proceedings stood H made out in terms of section 34 of the Arbitration Act, 1940.
6.So far as the said application (C.M. No,400/08) for production of documents is concerned, we have examined the said documents and find that nothing turns on the same in view of the material already on record having been relied upon by the learned trial court and in the absence of any denial that the amount in question was received by the appellant from the Municipal Corporation, Karachi and was liable to be paid back to the respondent. The C.M accordingly is rejected.
7. For the reasons stated above, this R.F.A. Is dismissed with costs throughout.
8. The records of the learned trial Court be remitted back immediately.