' SALMAN HAMID, J.---This Rule will set out CMA No,9329 of 2007, (CMA), favoured by the defendant under section 34 of the Arbitration Act, 1940 (the Act 1940) given that the present suit has been instituted by the plaintiff for recital of the Agency Agreement dated 12-12-2003 (AA) which also contains an intercession clause by way of Article 8 i.e., referring the dispute arising therefrom for Arbitration to be appointed by the plaintiff and the defendant.
2. The plaintiff combated the CMA and argued that the rations of section 34 of the Act 1940 under essentials of the case are not germane. It was urged that the defendant had given up the arbitration clause of the AA and depicted in the counter affidavit of the plaintiff that "despite various persuasions the defendant has refuse, to consent an any sole Arbitrator". As an auxiliary, the learned counsel for the plaintiff also argued that since the plaintiff has also prayed for an interim relief to the tune that the defendant be restrained from disallowing inspection team of NAFDAC to inspect the manufacturing plant of the defendant, CMA cannot be approved and that such has been moved only to delay the present cause. Agitating further, it was argued that since two loan agreements first dated 24-3-2005 and other dated 21-2-2007 are also the subject matter of the lis, under which agreements payments by the defendant are due to the plaintiff, which do not contain arbitration clause and are subject matter hereto, CMA chosen by the defendant must fail as the agreements do not fall mischief to section 34 of the Act 1940. Counsel for the plaintiff also dwelled on the argument that the application has been filed not in the sprit of resolution but to unjustifiably delay the motion of this matter so as to avoid timely inspection of the defendant's manufacturing plant by the inspection team of NAFDAC. Last but not the least, it was argued, that the provisions of section 34 of the Act 1940 are not pertinent as the defendant has taken steps in the proceedings by filing application under section 148, C.P.C. As evident from additional registrar's diary of 28-3-2008. To hold up above arguments, the erudite counsel for the plaintiff relied upon PLD 1965 Dacca 260 and 1998 SCMR 310.
3. Heard arguments and perused the trace.
4. The record of the case would reveal, which is also an admitted position on either end, that AA was executed between the plaintiff and the defendant on or about 12-12-2003 whereby the defendant appointed the plaintiff as its sole and exclusive agent for exporting and distribution of pharmaceutical products manufactured by the defendant to various countries mentioned in the AA under the head of Designated Territories. Article 10 of AA relates to termination which has not been invoked by either of the party and therefore the deduce is that AA is continuing.
5. Despite latitudes and indulgences of the plaintiff, acts of omission and commission have been attributed against the defendant in strict compliance of the AA and fulfillment of obligations there- under. Having been faced with such a state of affairs, the plaintiff filed the present suit with the following prayers:-- "(1) Order the defendant specific performance of the contracts/ agreements entered in to between the plaintiff and the defendant and in particular order:--
(a) That the defendant fulfill its obligations towards the plaintiff in terms of the Agency Agreement and the Sales Contract and supply to the plaintiff the products detailed in the Sales Contract and Sales Contract No,1;
(b) That the defendant fulfill its obligations towards the plaintiff in terms of the Agency Agreement and pay to the plaintiff the sum of Rs,21,188,412 being the loss suffered by the plaintiff on account of failed inspections and defective products and agreed to be indemnified by the defendant; and
(c) That the defendant fulfill its obligations towards the plaintiff in terms of the 1st and 2nd Loan Agreement and repay to the plaintiff the sum of Rs,1,200,000
(2) Order for a permanent injunction requiring restraining the defendants from causing any further breaches of the Agency Agreement, 1st Loan Agreement, 2nd Loan Agreement and the Sales Contract and allowing any future inspections over the Manufacturing Plant to be carried out as and when requested by relevant authorities of the agreed territories/ countries from time to time.
(3) Cost of this suit.
(4) Any other relief(s) which this Hon'ble Court may deem fit having regard to the circumstances of the case."
6. Upon cautious reading of above reproduced prayers it would become manifestly plain that the defendant was obliged, under the AA to refer for resolution of disputes arising out of or in connection with AA and the matters contemplated therein to arbitration. It would also become clear from the narration of the plaint as well as the various prayers invited above that the two loan agreements and sale contracts were in pursuance and/or in conjunction to the terms of the AA and/or for performance of AA by the defendant. Such being the position, I am clear in my mind that the dispute which has been raised by way of present matter is indeed covered by Article 8 of the AA the tongue of which is as under:-- "8. Arbitration:--
(i) Any dispute arising out of or in connection with this Agreement and the matters contemplated therein shall be settled by arbitration between the parties.
(ii) Any party may apply for arbitration by giving the other party one-month notice or its intention of going to arbitration.
(iii) The matter shall be decided by an arbitrator to be appointed by RG and SP."
7. At this stage it would be worthwhile to mention that even in the counter-affidavit threefold reasons for fail of the CMA had been raised. First was that the defendant gave up Article 8 of the which provided for arbitration; second was that referring the matter to the arbitration would delay the proceedings and third was that the application altogether was not maintainable because the defendant had taken steps into the proceedings. As far as first objection is concerned, nothing has been brought on record to show that at any stage of time despite plaintiff's request the defendant specifically gave up the right of arbitration before the arbitrator and therefore it does not hold the field. Approaching to the second ground that proceedings before the arbitrator would delay the measures is not a position for not referring it to arbitration, more partcularly when it comes to be appreciated from the perception that, the parties by choice willingly and knowingly chose such jurisdiction and that it, cannot be defeated as it would amount to usurping the catrol of the domestic forum which the plaintiff and defendant had agreed upon earlier in time when they arrived at executing AA. Therefore, as a matter of principle it would not be proper to proceed into the matter for A which previous consent was accorded by the parties to each other for resolution before a forum other than this court. Reaching to the third argument which could have been the only plausible and determining factor on the part of the plaintiff in dislodging the CMA that steps have been taken into the proceedings by the defendant had the application under section 148, C.P.C., referred to by the plaintiff, was moved by the defendant earlier in time than the CMA.
Scrutiny of the file would reveal that the CMA was filed by the defendant on 12-11-2007 whereby stay of the suit was prayed for under the provisions of section 34 of the Act 1940; whereas application under section 148, C.P.C. Was filed by the defendant much after and as late as on 28-3- 2008. Thus, it would become richly clear that moving of application under section 148, C.P.C. Has no bearing and/or is not fatal when it comes to the decision of the CMA as the test is to determine whether act of filing application under section 148, C.P.C. Was a step in to the proceeding? And whether it displays an unequivocal intention of the defendant to proceed with the suit and to give up the right of decision of the matter through arbitration?
8. It is well settled by now that steps taken after filing of application under section 34 of the Act 1940 does not disentitle the defendant to pray for stay of the proceedings of the suit. Only proceedings which had been taken prior in time to the moving of application under section 34 of the Act 1940 would disentitle a party to ask for stay of proceedings. The courts have gone to the extent that even if written statement has been filed by the defendant after preferring application under section 34 of the Act 1940, such step would not debar and/or disentitle the defendant from seeking stay of the proceedings under section 34 of the Act, 1940. It seems that application under section 148, C.P.C.
Was moved by the defendant under precarious situation when this case was fixed before the concerned Registrar of this court for filing written statement which compelled it to file application under section 148, C.P.C. The record of the file would further reveal that this case was fixed before this court on 19-5-2008 for further orders as written statement was not filed by the defendant since 25-1-2008 when on such day the counsel for the defendant stated before the court that he has already filed the CMA by which the matter is to be referred to the arbitrator and it was further stated the CMA is still pending for hearing. It is, thus, clear that the defendant was all along interested to pursue the CMA and at no stage of time had given it up or that no steps were taken by the defendant as alleged by the plaintiff. Therefore, the two authorities cited by the plaintiff first being the case of Muhammad Idris and otheRs, v. Tobarak Hossain reported as PLD 1965 Dacca 260 and the case of Ghulam Sarwar and others v. Mazharullah 1998 SCMR 310 are not applicable in the present facts and circumstances of the case. In the case of Muhammad Idris (Supra) the Division Bench of Dacca High Court dismissed the application under section 34 of the Act, 1940 when it came to the conclusion that the suit was filed on 1-6-1962 and the summons were served upon the defendants on 15-6-1962 and thereafter the defendants entered appearance on 27-6-1962 and applied for time which was allowed on 29-6-1962 and thereafter the defendants moved application under section 34 of the Act 1940 on 9-7-1962 i.e., after taking steps into the suit proceedings and not prior; whereas in the present case it would be evident that the CMA was moved much prior on 12-11-2007 and application under section 148, C.P.C. Was filed under compelling circumstances on 28-3-2008. Coming to the case of Ghulam Sarwar and others (Supra) suffice to say that nowhere in this reported case it was mentioned as to when and under what circumstances the application moved by the defendant under section 34 of the Act 1940 and why it was dismissed. Therefore, the reported case is of no assistance.
9. As against this the standard cited and relied upon by the learned counsel for the defendant would unveil that in the case of Muhammad Azam Muhammad Fazil and Co. Application moved under section 34 of the Act 1940 was allowed by the court by observing amongst others that, "the scheme of the Arbitration Act very clearly shows that the existence or validity of an arbitration clause may be successfully attracted either on the grounds upon which the whole contract can be attacked or only the arbitration clause may be attacked as invalid although the contract of which it forms part is not open to such attack. If the challenge is to the validity of the arbitration clause itself obviously the objection has to be decided by the Court for, in that case the objection goes to the very foundation or the jurisdiction of the Arbitrator and he cannot decide the question so as to give jurisdiction to himself. However, if the Arbitration clause is challenged collaterally along with the challenge to the contract itself of which it forms part, different consideration would arise. If the whole contract is questioned as void or non-existent in law on any ground, such a question also affects the validity of the arbitration clause which falls or stands along with the main contract. But if the challenge to the arbitration clause is founded on disputed question of interpretation of other terms of the contract, the decision of such a question would amount to usurping the jurisdiction of the domestic forum which the parties have chosen for adjudication of their disputes. Both on authority and principle it is proper to leave such question to be adjudicated and decided by the Arbitrator".
10. In the case of Manzoor Textile Mills Ltd., it was held by the Karachi Hiah Court that, "the Court should not lightly release the parties from their bargain that followed the sanctity which the Court attracted to contracts and where a party entered into an agreement after having full knowledge of its consequences, such party could not be allowed to defeat the arbitration clause and that under the circumstances, proceeding in the civil suit were stayed so that the matter might be referred to arbitration as per arbitration clause and that in order to acquire a respectable place in the community of nations, not only the government, but even the individuals are expected to honor their commitments".
11. The upshot of the above discussion is that the plaintiff and defendant having chosen by way of Article 8 of the AA to refer any dispute arising out of or in connection with it and the matters contemplated therein shall be settled by arbitration between them must be referred to arbitration.
Since according to me the dispute that has been brought herein squarely falls within the ambit of Article 8 of the AA, the CMA must prevail. Consequently proceedings of the suit are stayed and the parties are directed to take up the matter before the arbitrator in accordance with Article 8 of the AA.