' AMIR HANI MUSLIM, J.--- By this common order I intend to dispose of the Injunction Applications made in the aforesaid suits filed by the plaintiff besides the applications under section 34 of the Arbitration Act, made by the Defendant No,1 as the facts pleaded and issues involved in the aforesaid suits are almost common.
2. The plaintiffs in the aforesaid suits claimed that they are engaged in the business of recycling of used goods, including all categories of textiles, apparels, footwear, etc. The defendant No,1 is a statutory body established in the year, 1980 by the Government of Pakistan under section 4 of the Export Processing Zones Authority Ordinance, 1980 (hereinafter referred to as "the EPZA Ordinance").
The defendant No,1 was created with the object to boost industrialization and augment country's export by creating facilities for investors to enable them to set up export oriented units and to bring new technology and attract foreign investment. The management of the defendant No,1 and its affairs vests in the Board. The defendant No,2 is the authority, which has framed rules known as the Export Processing Zones Authority Rules, 1981 (hereinafter referred to as "the EPZA Rules").
3. As per the scheme/brochure of the defendant No,1 there exist only two categories of units in its zones, namely, (i) Industrial Unit and (ii) Trading/Warehousing Unit. There is neither any third category nor any other unit. The difference between the two categories i,e, Industrial and Trading Units lies in the facilities extended by the defendant No,
1. The Industrial Unit holder is allowed to following facilities:--
(a) Permission to export 80% of its goods to outside Pakistan;
(b) Permission to export 20% of its goods within Pakistan i,e, to export in the Pakistan Tariff Areas;
(c) Permission to dispose/throw out garbage in the dumping facilities provided in the Zone;
(d) Permission to sell 3% of the disposed off wastage in the Pakistan Tariff Areas."
On the other hand, the Trading Unit holder is entitled to following facilities from the defendant No,1:- - "(a) Does not have the facility to export goods within Pakistan (i,e, to export in the Pakistan Tariff Areas) except for eleven (11) items. These 11 items are (i) Raw Cotton (ii) Dyes (iii) Aluminum Ingots
(iv) Hides and Skins (v) Iron sheet (vi) Aluminum Foil (vii) Unblended Tea (viii) Supari (ix) Newsprint
(x) Spice in raw form (xi) Raw Material for pesticide and insecticide.
(b) Does not have permission to dispose/throw out its garbage in the dumping facilities provided in the Zone;
(c) Does not have the permission to sell/disposed off wastage in the Pakistan Tariff Areas."
4. The plaintiffs submitted applications to the defendant No,1 for investment in industrial scheme in the Export Processing Zones, Karachi, for recycling and processing of used clothing, shoes and toys for export sales. The plaintiffs have also submitted undertakings along with the applications, which read as under:- "Undertaking
(1) I/We hereby undertake to carry out the provisions of EPZA Rules, 1981 and EPZA Customs Rules, 1981, framed under the Ordinance IV of 1980, and as amended from time to time.
(2) My/our industrial operation will not endanger the Zone with atmosphere hazards or environmental pollution of any sort. In any case I/we shall take all possible measures to check/control the pollution and shall dispose of the industrial waste etc. In a manner acceptable to---EPZ administration."
5. On 3-9-2003, the defendant No,1 approved the plaintiffs' investment proposal for setting up an industrial unit in Export Processing Zones, Karachi. By two letters dated 27-2-2004 and 14-2-2004 the plaintiffs sought specific confirmation in regard to sale of their goods in Pakistan Tariff Areas.
The defendant No,1 by letter dated 23-4-2004 modifying the sanction letter 3-9-2003 allowed the plaintiffs to see 25% of its goods in the Pakistan Tariff Areas. However, the defendant No,1, as a matter of uniform policy, later on reduced the percentage of all industrial units from 25% to 20% Tariff Area facility.
6. After finalization of codal formalities General Agreements were executed between the plaintiffs and the defendant No,1, clause 17(a) whereof reads as under:-- "17. Provided always it is hereby agreed and declared as under:---
(a) Any dispute between the parties shall be referred to arbitration as provided under section 24 of the Ordinance IV of 1980 and such proceedings shall take place at Karachi."
7. In addition to the above, License Agreements were also executed between the plaintiffs and defendant No,1, clause 37 of which reads as under:-- "37. The Investor shall establish the unit on the allotted plot(s) in accordance with the laws and regulations framed by the authority, local administration, local bodies, the Ministry of Industries or any other competent Authority. This license shall be governed under chapter VI of the Easements Act, 1882 and contravention thereof shall make the allotment liable for cancellation and the allottee liable to ejectment summarily."
8. In Suit No,488 of 2008 the License Agreement executed between the parties contained specific arbitration clause 40-A, which reads as under:--- "40-A Any dispute between the parties shall be referred to arbitration as provided under section 24 of Ordinance IV of 1980 and such proceedings shall take place at Karachi."
9. After execution of the License Agreements/General Agreements the plaintiffs were put in possession of the plot on which they raised construction and set up recycling plant on it. On 4-2- 2008, the defendant No,1 has issued impugned circular to all the Karachi Export Processing Zone Units, including the plaintiffs, whereby it is claimed by the plaintiffs that the defendant No,1 has unilaterally changed the status of their units from Industrial to Trading, inter alia, on the ground that the plaintiffs' units do not conform to the definition of term "Manufacture" given in clause 2(g) of the Ordinance IV of 1980 and, therefore, it could not be treated as Industrial Units. On 5-3-2008 another impugned circular was issued by the defendant No,1, which was distributed to all the Karachi Export Processing Zone Units, including the plaintiffs, by which the permission granted earlier to the plaintiffs to export 20% of its goods to Pakistan Tariff Area was withdrawn besides revising the rates of rent. Thereafter, on the basis of the impugned circular dated 5-3-2008, the defendant No,1 issued fresh bill for payment of enhanced rent and security deposit at revised rates.
10. The plaintiffs filed injunction applications on which while issuing notices to the defendants for 31-3-2008, ad interim orders were passed by this Court. Upon service of notice, the defendant No,1 has filed applications under section 34 of the Arbitration Act, 1940, seeking stay of the proceedings in the aforesaid suits, inter alia, on the ground that agreements between the parties had arbitration clause and therefore the matters be referred to the arbitrator in terms of section 24 of Ordinance IV, 1980. Counter-affidavits to these applications were filed by the plaintiffs whereafter Rejoinder- Affidavits were filed by the defendant No, 1.
11. The facts in all the above suits are almost similar except that in Suits Nos.482 of 2008 and 485 of 2008 both License and General Agreements were executed between the parties while in Suit No,486 of 2008 General Agreement was executed. In the remaining suits, only License Agreements were signed between the plaintiff and defendant No,1, except Suit No,486 of 2008.
12. In the first place, I will take up the arbitration applications made by the learned counsel for the defendant No,
1. The learned counsel for the defendant No,1 has submitted that the plaintiffs have also filed undertakings along with their applications that they will carry out the provisions of EPZA Rules, 1981 and EPZA Customs Rules, 1981 framed under Ordinance (IV of 1980), as amended from time to time. According to the learned counsel, in addition to the undertakings the plaintiffs have executed License Agreement, Clause 37 of which clearly provides that the investor shall establish the unit on the allotted plot(s) in accordance with the laws and regulations framed by the authority, local administration, local bodies, the Ministry of Industries or any other competent authority and the terms of license shall be governed under Chapter-VI of the Easements Act, 1882.
The learned counsel submits that license agreements, which have been signed pursuant to the allotment letter on the basis of the applications submitted containing undertakings of the plaintiffs clearly manifests the intent of the parties that in case of any dispute between the parties, the matter has to be referred to the Arbitrator as per section 24(1) of the Ordinance IV of 1980, which reads as under:- "24. Disputes to be referred to arbitration.--(1) Any dispute relating to the interpretation of the provisions of any agreement made under any scheme prepared under section 10 between the authority and an investor or the rights of the parties to such agreement or any rights conferred or any liability imposed by this Ordinance shall be referred for arbitration to an arbitrator appointed by the parties.
(3) The provisions of the Arbitration Act, 1940, (X of 1940) shall, so far as they can be made applicable, apply to arbitrations under subsection (1)."
13. He further submitted that section 24 of the Ordinance IV of 1980 provides that any dispute relating to the interpretation of provisions of any agreement made under any scheme prepared under section 10 between the authority and an investor or the rights of the parties to such agreement or any rights conferred or any liability imposed by this Ordinance shall be referred to for arbitration to an arbitrator appointed by the parties. Subsection (3) of section 24 provides that the provisions. Of Arbitration Act, 1940, shall, so far as they can be made applicable, apply to arbitrations under subsection (1). The learned counsel for the defendant No,1 submitted that in the face of the undertaking coupled with the terms of License Agreements and General Agreements wherein the plaintiffs have consented to approach the arbitrator in the event of dispute, the plaintiffs cannot approach this Court by filing the present suits. According to the learned counsel, no separate agreement for arbitration is required for referring the matter to the arbitrator.
According to Mr. Ali Mumtaz Sheikh it is the intention of the parties reflecting from the documents and not necessarily a separate agreement containing arbitration clause is required to refer the matter to arbitrator.
14. He next contended that Suits Nos.482 and 485 of 2008 both License and General Agreements were executed while in Suit No,486 of 2008 only General Agreement was executed between the parties. He contended that clause 17(A) of the General Agreement provides that any dispute between the parties shall be referred to arbitration as provided under section 24 of Ordinance IV of 1980 and such proceedings shall take place at Karachi. He submitted that the General Agreements were executed between the parties in addition to the undertaking which has been furnished by the plaintiffs along with their applications for investment in industrial sector that they will carry out the provisions of EPZA Rules, 1981 and EPZA Customs Rules, 1981, and the License Agreements executed separately by the plaintiffs and defendant No,1, was in addition to and not in supersession of the earlier documents referred to hereinabove. He submitted that under the circumstances, the applications under section 34 of, the Arbitration Act, 1940, be allowed. In support of his contention, he has relied upon the case of Tribal Friends Co. v. Province of Balochistan reported in 2002 SCMR 1903, where their lordships have held that "an Arbitration Agreement should be in writing and need not to be signed by both the parties. If the intention to refer the dispute to the arbitration is manifest from the documents it amounts to an Arbitration Agreement." In this authority, the Honourable Supreme Court of Pakistan has taken note of the cases Shamim Akhtar v. Najma Baqai and others PLD 1977 SC 644, Muhammad Hussain and others v. Ghulam Rasool and others 1983 SCMR 231, Cotton Factory v. Ali Muhammad Abdullah and Co. PLD 1966 Kar. 197, and Province of Punjab v. Industrial Machine Tools, Lahore PLD 1978 Lah.
829. The learned counsel for the plaintiff has also relied upon the case of Saleem Ali v. Akhtar Ali reported in PLD 2004 Lahore 404 where a learned Division Bench of Lahore High Court held that "Arbitration Agreement need not necessarily be incorporated in a formal document, it can be by incorporating a clause in a contract. An arbitration agreement may be spelt out from correspondence or letters exchanged between the parties or on the basis of their statements, or even those of their counsel. Such an agreement need not be signed by the parties."
15. In regard to the Injunction Applications the learned counsel for the defendant No,1 has fairly conceded and has endorsed his no objection to the confirmation of the interim injunction order passed on 31-3-2008 as no finding could be given at an interlocutory stage and the issues required to be resolved through regular suit and in the intervening period of plaintiffs may continue their business.
16. Ms. Sana Minhas, learned counsel for the plaintiffs, has opposed the Arbitration Applications, inter alia, on the ground that on execution of License Agreements in the two suits, the General Agreements being prior in time was superseded. Her further contention was that section 34 of the Arbitration Act, 1940, requires that a party should show willingness for the purposes of referring the matter to the arbitrator. According to the learned counsel, the defendant No,1 at no point of time was willing to refer the issue to the arbitrator and, therefore, present suit was filed. It was further contended by the learned counsel for the plaintiffs that section 34 of the Arbitration Act, 1940 does not create obligation on the Court to refer every matter to the arbitrator and it is the discretion of the Court, which may or may not refer the matter to the arbitrator. Her next contention was that wthere is no valid arbitration clause in any of the agreements, which could justify this Court to allow the applications of the defendant No,
1. Her next contention was that the defendant No,2, who was made party by the plaintiffs, was not a party to the arbitration agreements, hence, such an order allowing the applications under section 34 of the Arbitration Act cannot be passed. Sloe further contended that harmonious interpretation has to be given to subsections (1) and (3) of section 24 of the Ordinance IV of 1980, which according to her were in conflict with each other. It was also contended by the learned counsel for the plaintiff, that since there is no valid arbitration clause in any of the agreements and section 2A of the Arbitration Act provides that there has to be a written agreement between the parties, which in the instant case is missing, therefore, the application filed by the learned counsel for the defendant No,1 for referring the matter to the arbitrator ought to be dismissed on this short score. In support of her contention, she has relied upon the following cases:---
(i) Uzin Export Import Foreign Trade Co. v. MacDonald Layton and Co. Ltd. Reported in 1996 SCMR 690, (ii) Cosmopolitan Development Co. v. SO DI.ME.-S.P.A. Reported in 1987 MLD 2832, (iii)
Tradesmen International (Pvt.) Ltd. v. Federation of Pakistan reported in 2005 MLD 541, (iv) Arshad Ali v. Sarwat Ali Abbasi reported in 1988 CLC 1350, (v) Novelty Cinema Lyallpur v. Firdaus Films reported in PLD 1958 (W.P.) Lah. 208, (vi) Gulf Iran Co. v. Pakistan Refinery Ltd. Reported in PLD 1976 Kar. 1060, (vii) MacDonald Lyton & Co. v. Associated Electrical Enterprises Ltd. Reported in PLD 1982 Karachi 786 and (viii) Collector of Sales Tax and Central Excise v. Mega Tech (Pvt.) Ltd. Reported in 2005 SCMR 1166.
17. I have heard the counsel and have perused the record. The question as to whether a party in order to invoke the provisions of section 34 of the Arbitration Act, 1940, is required to show that an arbitration agreement or an agreement containing arbitration clause has been executed between the parties. The learned counsel for the plaintiffs has contended that in order to refer the matter to the arbitration a formal agreement containing arbitration clause is necessary. She in support of her contention has relied upon the definition contained in section 2A of the Arbitration Act, 1940.
However, she could not cite any direct case-law in support of her contention. The cases cited by the learned counsel for the plaintiffs were distinguishable on facts and did not apply to the case in hand.
18. As against this, Mr. Ali Mumtaz Sheikh, the learned counsel for the defendant No,1 has cited the case of Tribal Friends Co. v. Province of Balochistan reported in 2002 SCMR 1903 wherein their lordships have held that the arbitration agreement should not be in writing and need not be signed by the parties. It was further observed in the case that if the intention of the parties to refer the dispute is manifest from the document, it amounts to arbitration agreement and parties can refer the matter for arbitration. This finding of the Honourable Supreme Court fully covers the case in hand. In order to establish that the intention of the parties was manifest to refer the dispute to the arbitrator, the plaintiffs have signed an undertaking with the defendant No,1 at the time when they made application for investment in the industrial sector in Export Processing Zone, Karachi, to the defendant No,1. The plaintiffs in the said undertaking have undertaken that they would carry out the provisions of EPZA Rules, 1981 and EPZA Customs Rules, 1981, framed under the Ordinance IV of 1980.
Additionally, the plaintiffs in Suits Nos.482, 485 and 486 of 2008 have executed General Agreements with defendant No,
1. Clause 17(1) of the said agreement provides that any dispute between the parties shall be referred to arbitration as provided under section 24 of the Ordinance IV of 1980 and such proceedings shall take place at Karachi. This General Agreement could not deem to have been superseded, as has been contended by the learned counsel for the plaintiffs, on execution of License Agreement, which agreement is independent of the General Agreement and has to be read in addition to the General Agreement. Clause 37 of the said License Agreement provides that the plaintiffs, in law, were entitled to establish the unit on the allotted plots in accordance with the law and regulations framed by the authority, local administration, local bodies, Ministry of Industries and/or any other competent authority.
19. It is not disputed that the defendant No,1 is a statutory body created under Ordinance IV of 1980.
The EPZA Rules, 1981, are framed by the Federal Government under section 26 of the Ordinance (IV of 1980). Moreover, section 24(1) of the Ordinance deals with the disputes to be referred to the arbitrator. Section 24(1) provides that any dispute relating to the interpretation of the provisions of any agreement made under any scheme prepared under section 10 between the authority and an investor or the rights of the parties to such agreement or any rights conferred or any liability imposed by this Ordinance shall be referred for arbitration to an arbitrator appointed by the parties. Subsection (3) of section 24 provides that the provisions of the Arbitration Act, 1940, shall, so far as they can be made applicable, apply to arbitrations under subsection (1). The undertaking which admittedly the plaintiffs have signed and submitted in addition to the General Agreements and License Agreements executed between the plaintiffs and defendant No,1 contained the clauses referred to hereinabove. I am clear in my mind that the plaintiffs and defendant No,1 at all times intended to refer the matter to the arbitrator in case of dispute between them. This intention of the plaintiffs and the defendant No,1 is manifest from the documents I have referred to hereinabove. It is not necessary that arbitration agreement is required to be executed in a formal document or any agreement must incorporate arbitration clause in it. No formal agreement of arbitration or agreement containing arbitration clause is necessary if such intent of the parties is manifest from the documents and/or correspondences exchanged between them. It is not necessary that an arbitration agreement is required to be reduced in writing and signed by the parties. The documents signed by the plaintiffs and defendant No,1, referred to herein-above, clearly reflect that the plaintiffs and defendant No,1 did have the clear intention to refer the dispute to the arbitrator, which intention was manifest from the documents. The case of Saleem Ali v. Akhtar Ali reported in PLD 2004 Lah. 404, a Division Bench Judgment of the Lahore High Court, cited by the learned counsel for the defendant No,1 in support of his contention fully covers the present case.
20. The contention of the learned counsel for the plaintiffs that the defendant No,1 was never willing for referring the matter to the arbitrator is also without substance. No material has been placed before this Court to establish that at any point of time the plaintiffs have ever called upon the defendant No,1 for referring the dispute to any arbitrator. The other contention of the learned counsel for the plaintiffs that since defendant No,2 is stranger to the arbitration arrangement, therefore, the matter cannot be referred to the arbitrator is also misconceived as the defendant No,2 is a pro forma defendant and no relief of any nature was sought against them.
21. There is no ambiguity in the language of section 24(1) of the Ordinance (IV of 1980) which is clear and it incorporates any dispute, which arises from any agreement made under any scheme prepared under section 10 by the defendant No, 1 . The scheme for investment in industrial sector prepared by the defendant No,1 in terms of section 10 is covered by subsection (1) of section 24 of the Ordinance IV of 1980 and the plaintiffs on signing the documents referred to herein-above clearly admits and undertakes that they will abide by the rules/regulations framed/contained in EPZA Rules, 1981, cannot take a somersault to dispute the application of arbitration.
22. I also do not find any conflict in the language of subsections (1) and (3) of section 24 of the Ordinance (IV of 1980) as has been contended by the learned counsel for the plaintiffs. In fact subsection (3) of section 24 facilitates the arbitrator appointed under subsection (1) of section 24 to apply the provisions of Arbitration Act, 1940 while entertaining the dispute between the parties.
23. So far as the Injunction Applications are concerned, the plaintiffs were doing the business on the allotted plots and on account of impugned circulars their business is likely to come to an end and continuance of their business would save them from irreparable losses. The plaintiffs having made out a prima facie case and balance of convenience is also in their favour, the interim order of injunction is, therefore, confirmed. The learned counsel for the defendant No,1 has rightly conceded to the confirmation of the ad interim injunction granted to the plaintiffs on 31-3-2008.
'Above are the reasons of my short order dated 13-1-2009 whereby I have allowed to applications under section 34 of the Arbitration Act made by the defendant No,1 and the injunction applications under Order XXXIX Rules, 1 and 2, C.P.C. Made by the plaintiffs.