' MUHARREM G. BALOCH, J.---Plaintiff namely Miss Farasat Umer, the sole proprietor of Messrs.
Phoenix International Corporation, has filed this suit under section 8 of the Arbitration Act, 1940, with the following prayers:--
(a) to supply the vacancy by appointing another person to act as arbitrator on behalf of the defendant as the same has fallen vacant due to refusal of Mr. Bombal as defendant's arbitrator and despite notice under section 8 of the Arbitration Adt, 1940 they failed to fill in the vacancy;
(b) to refer the case to, arbitration having been validly agreed and consented between the parties for resolution of issue of payment of loss/damage caused due to fire erupted in the Shed while.
Under possession, control and occupation of the defendant;
(c) Grant such other/additional relief as may be deemed appropriate under the facts and circumstances of the case.
(d) Costs of the suit.
2. Precisely, the facts of the plaintiff's case are that the plaintiff being sole proprietor of Messrs Phoenix International Corporation who manages properties, including godown built on plot No, 235-A/3, A/2, A/1, near Diamond Rubber Factory, Gulbai, Karachi, and providing facilities of storing goods/commodities in-the sheds. It is the case of the plaintiff that the defendant is also *a private limited company and is well known brand in electronics products and engaged in manufacturing and marketing, storage and sale of various electronic items and having its registered office at 25 kilometers, Multan Road, Muraka, Lahore, and branch office at Karachi at 7, Queens Court Building, 1st Floor, Abdullah Haroon Road, Karachi. The plaintiff further pleaded in the plaint that the defendant desired a portion of shed admeasuring 15,500 sq. Feet standing on Plot No, F-235-A/3, A/2, A/1, near Diamond. Rubber Factory, Gulbai, Karachi for storage of its electronic items with its available facilities. For this purpose on 25-7-2006 Abdul Rehman, Branch Manager Karachi along with Branch Accountant visited Gulbai warehouse and on the following day, the defendant approved the shed on the terms and conditions agreed between the parties for the said terms and conditions the parties entered into an agreement dated 1-8-2006 for a period of eleven months commencing from 1-8-2006 ending on 30-6-2007 against storage charges of Rs,155,000 per month payable on or before 5th of each calendar month in advance to the plaintiff whether the shed has been occupied/utilized or not. The important clauses are as follows:--
(i) Under clause 3 the defendant deposited security deposit which is adjustable at the time of vacation of the said shed in good condition.
(ii) Under clause 4 the shed had its separate electricity meter installed therein and the defendant agreed to pay monthly electric charges according to reading of the meter consumed units as per K.E.S.C. Billing.
(iii) Under clause 6 the defendant was exclusively made responsible for all sorts of precautionary measures of safety, security, preservation and risk in respect of storage in the said shed. The plaintiff shall not be responsible for any damage, loss or deterioration of such goods for any reason whatsoever including rain, floods, water seepage, fire, theft, civil commotion, riots, strikes, lock out, acts of God etc.
(iv) Under Clause 8 it was the responsibility of the defendant to arrange insurance at its own costs for goods stored in the said shed and said defendant was also made responsible for damage of the said portion including the said shed. Clause 8 has to be read with clause 16 of the said agreement.
(v) Under clause 9 the defendant was not permitted to use to storage facility for any inflammable, explosive material/commodities and for illegal purpose or activities which are not permissible under the law.
(vi) Under clause 11 the defendant was responsible for wear and tear proper maintenance of the said shed and was also responsible for any loss/damage if occurs during the period of the agreement and same shall be repaired timely by the defendant on their costs and if remain over sighted them before vacating the said shed.
(vii) Under clause 16 in case of any fire or accident or any mishap due to negligence of the defendant, other than act of God, resulting loss and damage at the premises including the said Godown and its shed, the defendant shall be responsible for the entire loss and damage and will be responsible to make good all that loss and damage occasion at their costs. In case of repair or rebuilding, the defendant will immediately carry out the same at their costs. In the presence or absence of insurance as stipulated in clause 8 hereinabove, the defendant will always remain responsible for all sorts of loss and damage to the plaintiff and other effected persons, irrespective of the insurance claim is made and is not made or has been realized or has not been realized by the defendant exclusively and it will not absolve the defendant from the loss and damage of the plaintiff and others.
3. It is the case of the plaintiff that the defendant took over the possession of the shed on the same date i,e, 1-8-2006 and also made payment of security deposit of Rs,150,000 and Rs,147,250 being the rent for one month. The case of the plaintiff is that on 4-10-2006 the warehouse caught fire in the shed under physical possession and occupation of the defendant and whole warehouse was burnt including the internal fitting. During the fire between 4-10-2006 to 9-10-2006, on portion lying with the defendant, the defendant just watched the entire episode and did not take any rescue action to salvage the, shed or to prevent the fire from spreading. Resultantly the fire engulfed the whole warehouse which eventually destroyed rending it un-useable. The plaintiff further pleaded that gross negligence and carelessness was shown by the defendant which caused colossal loss and damage to the premises occupied by the defendant as well as 10,000 sq. Feet of adjacent sheds occupied by other parties. Thus the plaintiffs sent letters and reminders to the defendant regarding payment of rent vide letters dated 28-10-2006, 22-11-2006, 11-11-2006 and 14-11-2006 but was of no avail. On 17-10-2006 the defendant has sent a letter to plaintiff's company regarding resolving the matter over a cup of tea implying to solve the matter in an amicable manner. The defendant undertook that process of removing scrap will be completed within 10 days. The plaintiff further pleaded that the plaintiff vide its reply letter dated 18-11-2006 requested the defendant to give the possession of the said premises on 31-12-2006 as the plaintiff wanted to hand over the possession of the premises after removing the scrap and setting the matter through mutual consent. On 9-12-2006 Abdul Rehman and Inam, representatives of the defendant visited the officials of the plaintiff company to discuss the matter in detail. A memo was signed and agreed between the parties on 9-12-2006. According to the plaintiff certain points were discussed and decided which have been reproduced in para No,10.
4. On 26-12-2006 the defendant vide its letter requested the plaintiff to adjust their security deposit of Rs,150,000 against the overdue rental for the month of October, 2006. It is the case of the plaintiff that the defendant could not hand over the possession of the shed on 31-12-2006 and failed to reach any settlement through amicable understanding in pursuance of memo signed by the parties on 9-12-2006, hence the warehouse was kept by the defendant under its physical possession and control.
5. Since no decision had taken place, therefore, the defendant sent its representative Abdul Rehman along with Mr. Ghulam Ahmed Bombal, Mr. Siddiq and another gentleman. After detailed discussion the matter remained unsolved the undecided. Upon failure of the amicable settlement that defendant suggested for arbitration to which the plaintiff agreed. It is the case of the plaintiff that defendant vide its letter dated 13-1-2007 addressed to Abdul Rashid Kara, COO-Logistic Division of Phoenix International Corporation paid rent for the month of December, 2006 vide Pay Order No, 1154324 dated 13-1-2007 amounting to Rs,150,000 and stated that rent fo; January, 2007 was not due. They further appointed Ghulam Ahmed Bombal as their arbitrator and undertook that they would abide by the decision of arbitrators. The defendant further requested the plaintiff to nominate their side of arbitrators so both the arbitrators could arrange meetings on this issue. The plaintiff vide its letter dated 15-1-2007 appointed Aftab Ali Khan as an arbitrator from their side and requested the defendant to present summary to the arbitrators so all the matters be resolved by the arbitrators. The plaintiff further pleaded that the defendants vide its letter dated 18-1-2007 appreciated the appointment of Mr. Aftab Ali Khan as arbitrator on the side of the plaintiff for resolution of the difference of opinion between the parties. The plaintiff further pleaded that the defendant on 22-1-2007 while acknowledging the receipt of the plaintiff's letter dated 20-1-2007 clearly stated that. "The arbitration you know is focused on the difference of opinion as to the costs of repairing the damage caused by fire to the property, whereas the current discussion relates to the occurrence of rent of the warehouse ". The plaintiff vide her letter dated 22-1-2007 replied in detail to the defendant's letter mentioned above. However, on 15-2-2007 both the arbitrators namely Ghulam Ahmed Bombal and Aftab Ali Khan agreed to appoint Mr. Justice Nasir Aslam Zahid as an Umpire. Aftab Ali Khan was asked to request Mr. Justice (R) Nasir Aslam Zahid to act as an Umpire. Consequently, a leter dated 17-2-2007 duly signed by both the arbitrators was sent to Mr. Justice (R) Nasir Aslam Zahid seeking his consent to act as Umpire. Mr. Justice (R) Nasir Aslam Zahid conveyed his acceptance vide letter dated 28-2-2007 in the following words:-- "I accept the nomination as Umpire.
Sd/-28-2-07"
6. The acceptance was received by Mr. Aftab Ali Khan on 2-3-2007. On 15-3-2007 a meeting was held between the arbitrators and Mr. Bombal was apprised of the consent of the Umpire and he showed his satisfaction and consented to the issuance of notice to the parties for 27-3-2007.
Accordingly, Mr. Aftab Ali Khan issued notices to both the parties for 27-3-2007. On 27-3-2007 Mr. Bombal (arbitrator) informed plaintiff's arbitrator that he had just returned from Punjab and that since he was extremely busy in his business affairs, therefore, he was unable to conduct the arbitration .Proceedings and he stated that he would inform next date of arbitration proceedings.
He undertook to inform the defendant about the said postponement. Later Mr. Bombal did not inform any one about the next date of arbitration proceedings. On 21-4-2007 the plaintiff vide its covering letter dated 21-4-2007 addressed to both the arbitrators forwarded their claim in the sum of Rs,7.2 million against the defendant. To the utter dismay and shock during the pendency of the arbitration proceedings, the plaintiff received letter dated 25-4-2007 whereby the defendant backed out of arbitration by saying that there was no arbitration clause provided in the agreement.
Thus this gave cause of action to the plaintiff to bring this suit in shape of application under section 8 of Arbitration Act, 1940 with the prayers as mentioned above.
7. The defendant contested the application filed by the plaintiff by way of filing an application under section 33 of the Arbitration Act, 1940 praying therein to stay proceedings and dismiss the suit for want of existence and validity of an arbitration agreement to refer for arbitration proceedings. In the above application the defendant pleaded that the agreement dated 1-8-2006 between the plaintiff and the defendant, as referred by the plaintiff, does not have any clause for arbitration to refer dispute whatsoever to the arbitration under the provisions of arbitration Act, 1940, thus, no reference to arbitration can be referred. Besides, it is pleaded by the defendant that there is no jurisdiction, scope, validity and existence of any arbitration agreement and reference to arbitration shall be contrary of law, if any, proceedings, of arbitration as being initiated by the plaintiff for any purpose are void, illegal and of no legal value, effect and bindings. It is the case of the defendant that unless through a valid, mutually agreed arbitration agreement of referring the dispute to arbitration exists between the parties, no such reference can be initiated and proceeded as the said illegal way of plaintiff will not import arbitration clause into the said agreement. It is further pleaded that no specific clause in the main instrument for reference to arbitration is incorporated. No person as arbitrator has any authority to proceed with arbitration, if there being any valid arbitration clause in the agreement between the parties. Besides, the defendant pleaded that the arbitration agreement does not exist between the parties and this Court has no jurisdiction to entertain and proceed with the present suit and or application etc. Of the plaintiff because the suit is hit by provisions of section 283 and sections 7 and 9 of the Companies Ordinance, 1984. It is the case of the defendant that the defendant is a private limited company having its registered office at Lahore and the suit of the plaintiff is liable to be dismissed for want of jurisdiction. With above pleas and others the defendant prayed, through this application, for dismissal of the suit and in the meanwhile stay of the proceedings.
8. Both the learned counsel for the plaintiff and defendant had already filed written arguments supported by law and according to them the written arguments which they filed before the Court be treated as their arguments.
9. I have gone through the written arguments/submissions of the plaintiff and the defendant with the case law relied upon by them.
10. Admittedly, the agreement dated 1-8-2006 does not mention any arbitration clause for the dispute, the Objections filed by the defendants that agreement does not carry arbitration clause, therefore, cannot be referred for arbitration. As against the plaintiff through their written arguments submitted that despite the fact that there is no arbitration clause in the agreement, as stated above, the conduct of the defendant in shape of correspondence between the parties and the statements made by the parties be considered sufficient to be treated as an arbitration agreement. To the above point the reference was made to letter dated 17-11-2000 filed as Annexure 'C' to the plaint (Page 41 of the file) in which the defendant wrote to the plaintiff that their deeply regret to state that godown caught fire in October causing huge loss to the company and warehouse belonging to the plaintiff. However rent of the warehouse is applicable only if it is useable position and they had storage facilities available. It was further stated in the said letter that said premises is no more in useable position, therefore, provisions of law for payment of rent do not apply. However, they further stated in the letter that they can sit together on a cup of tea and resolve the matter. The plaintiff has also drawn the attention of the Court to Annexure `E' which is a memo dated December 9, 2006, signed by both the plaintiff and the defendant in which following points were discussed and decided upon:--
(1) The original agreement will be sent to us by today via TCS and to be received by us on Monday the 11th of December, 2006 as discussed with Mr. Talat Mahmood (MD of Orient Electronics) on telephone in front of all present.
(2) Mr. Abdul Rehman fias requested to adjust one months deposit against the rent for the month of October, 2006, and the rent of November, 2006 will be paid by Orient Electronics shortly. Mr. Abdul Rehman has requested Phoenix to waive the rent of December, 2006 and undertakes that the final date of removal of goods and vacation/possession to owners will be on 31st December; 2006, Phoenix will consider the request of Mr. Abdul Rehman and revert by next week with their decision.
(3) It has been mutually decided that a joint surveyor will be appointed early next week to assess the structural loss and then a meeting will be called on 15th December, 2006 to discuss and finalize the extent of structural loss and solution. The MD of Orient Electronics Mr. Talat Mahmood is requested to kindly be present in the meeting if not possible the entire proceedings will be communicated on telephone while the meeting will be in progress.
11. Learned counsel for the plaintiff drew my attention to Annexure `G' (page 55) of plaint which is a letter dated 13-1-2007 addressed to Abdul Rasheed Kara, COO-Logistic Division, Phoenix International Corporation, Karachi, by Abdul Rehman, Branch Manager of the defendant whereby he in reference of letter dated 10-1-2007 of plaintiff wrote that:-- "We were pleased to appoint Mr. Ghulam Ahmed Bombal as our arbitrator. He is fully authorized and we hereby bind ourselves to accept his decision. Therefore, you are requested to nominate your authorized arbitrator so that you arbitrator and Mr. Bombal can arrange to meet each other on this issue. We would like to handover keys and possession of Godown (F-235 Gulbai SITE Karachi); kindly give us permission to lift the remaining salvage."
12. In reply to the above letter the plaintiff wrote to defendant through its Branch Manager Abdul Rehman on 15-1-2007 that the plaintiff has appointed Mr. Aftab Ali Khan as arbitrator from their side. It is also written in the letter that the defendant may present somebody to the arbitrator while the plaintiff will present their own version to them. Thus, all the matters henceforth will be discussed and decided by themselves. Besides above, learned counsel for the plaintiff referred to Annexurc `K (Page 69) which is a letter dated 17-2-2007 addressed to Mr. Justice (R) Nasir Aslam Zahid for appointment as umpire whereby the arbitrator Aftab Ali Khan on behalf of the plaintiff and Sh.
Ghulam Ahmad on behalf of defendant requested Mr. Justice (R) Nasir Aslam Zahid to grace the office of umpire in the event of conflicting awards are made by the arbitrators in the above referred matters which arose on account of eruption of fire in the godown under tenancy of the defendant. It was also requested to Mr. Justice (R) Nasir Aslam Zahid to convey his acceptance at an early date. Learned counsel for the plaintiff further drawn the attention of the Court in his written arguments that Mr. Justice (R) Nasir Aslam Zahid on 28-2-2007 showed his willingness and endorsed request of the arbitrators as under:-- "I accept the nomination as Umpire.
Sd/28-2-2007"
13. Thus the learned counsel for the plaintiff submitted that despite the fact that there was no arbitration clause in the agreement itself and not signed by the parties as long as its terms and conditions signed by the parties but since the intention to refer the dispute to arbitration is manifest from the documents hence the same amounts to an arbitration agreement. He further submitted that the above documents whereby it was displayed by the defendant that they wanted to resolve the dispute by way of arbitration and for that purpose the defendant had appointed their arbitrator Ghulam Ahmed Bombal and the plaintiff being Aftab Ali Khan. Further both the arbitrators wrote letter to Mr. Justice (R) Nasir Aslam Zahid for going his consent for acting as an umpire in case of difference who has also given his consent to act as umpire on 28-2-2007. Thus, the above conduct on the part of the defendant constitutes an arbitration agreement after the mishap of fire erupted in the shed in occupation of the defendant. Learned counsel for the plaintiff in support his contention had placed reliance on the following cases:--
(1) PLD 1977 SC 644 (Mst. Shamim Akhtar v. Najma Baqai and 3 others)
(2) 2002 SCMR 1903 (Messrs Tribal Friends Co. v. Province of Balochistan)
(3) PLD 1990 Karachi 216 Messrs Ahmed Constructions through Sole Proprietor v. Messrs. Nepture Textile Mills and another)
(4) PLD 1978 Lahore 829 (Province of Punjab and another v. Messrs Industrial Machine Pool, Lahore)
(5) PLD 2001 Lahore 239 (Shan Muhammad v. Nawab and 3 others)
(6) AIR 1955 S.C. 812 (V. 42 C. 118 Dec.) (Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji)
(7) NLR 1980 UC 181 (Haji Ilyas Haji Issa and others v. Haji Ahmed and others)
(8) AIR (36) 1949 East Punjab 199 (Firm Manga Chand Banawari Lal v. Fir Pyare Lal).
(9) AIR 1958 Calcutta 620 (Ram Chandra Ram Nag Ram Rice 7 Oil Mills Ltd. v. Howrah Oil Mills Ltd.)
(10) 1983 SCMR 231 (Muhammad Hussain and others v. Ghulam Rasool)
(11) PLD 1970 Karachi 379 (Karachi Cooperative Housing Societies Union Ltd. v. Safia Bai)
(12) PLD 1963 (W.P) Karachi 813 (Messrs Valika Textile Mills Ltd. v. Messrs Sh. Mian Mahmood Allah Bakhsh)
(13) 1981 SCMR 129 (Haji SooMar Haji Hajjan v. Muhammad Amin Muhammad Bashir Ltd.)
(14) PLD 1994 Karachi 194 (Karachi Catholic Cooperative Housing Society Ltd. v. Mirza Jawad Baig)
14. I have ,gone through the above mentioned case law wherein it is held that when there is no specific arbitration clause in the agreement itself but the conduct and correspondence made between the parties prove that they agreed to resolve the matter through arbitration then jurisdiction under section 8 of the Arbitration Act, 1940 can be invoked.
15. Learned counsel for the defendant has relied upon the following cases:--
(1) PLD 1982 Karachi 786 (Messrs Macdonald Layton & Co. Ltd. v. Messrs Associated Electrical Enterprises Ltd.)
(2) PLD 1988 Pesh. 133 (Mst. Hukumzada v. Samandaroon Khan)
(3) 1989 CLC 1666 (Noor Sahib Khan v. Mir Jananson)
(4) PLD 1970 SC 43 (Messrs Badri Narayan Agarwala v. Messrs Pak Julie Balers Ltd.)
16. I have considered that arguments of both the learned counsel for the plaintiff and the defendant and also the case law relied upon by them. The case-law relied upon by the defendant are distinguishable on the point that where there is no clause in the agreement for arbitration no arbitration can take place. The case-law relied upon by the plaintiff is in respect of the despite the fact that there is no mention of any arbitration clause in the agreement itself but the conduct of the parties import that they are willing to refer the dispute to the arbitrators and in the present case the defendant himself has accepted the arbitration by way of appointing his own arbitrator and so also requiring Mr. Justice (R) Nasir Aslam Zahid to act as an umpire in case of difference.
17. The learned counsel for the defendant has also taken plea that the jurisdiction of this Court is barred under section 283 of the Companies Ordinance, 1984 and so also sections 7 and 9 of the ibid law. Section 283 of the Ordinance 1984 empowers the company to refer the matter to arbitration whereas sections 7 and 8 is in respect of jurisdiction of the courts. It is stated in subsection (1) of 'section 7 that the Court having jurisdiction under this Ordinance shall be the High Court having jurisdiction in the place at which the registered office of the company is situated.
Section 9 prescribed the procedure of the Court. It appears that the learned counsel for the defendant has attacked the jurisdiction of the Court as per provision of subsection (1) of section 7 of the Companies A Ordinance 1984. It is a fact that the company of the defendant is having its registered office at Lahore but it is also a fact that the company of the plaintiff having its registered office at Karachi and the agreement is also entered into by the parties at Karachi, therefore, I am of the opinion that the provisions of section 7 and so also other provisions of Companies Ordinance, 1984, as submitted by learned counsel for the defendant, are not applicable to the present case, therefore, the arguments on this point that the jurisdiction of this Court is barred under the provisions of Companies Ordinance, 1984 is repelled.
18. In view of the above discussion, I am of the considered view that the defendant has accepted the arbitration through its conduct and correspondence, therefore, the case law relied upon by the learned counsel for the plaintiff is applicable in the present matter. Accordingly, as discussed above, the suit of the plaintiff is decreed to the extent of prayer clauses 'A' and 'B' with no orders as to costs.