' NASIR SAEED SHEIKH, J.---A suit was instituted by the respondent in respect of the \ contract entered between the parties wherein there was an arbitration clause. The petitioner who is the defendant of the suit moved an application under section 34 of the Arbitration Act 1940 before the learned Civil Judge Lahore where the suit instituted by the respondent was pending. This application was accepted by the learned Civil Judge vide order dated 19-4-2012 and the proceedings of the suit were stayed and the file was consigned to the record and the respondent was directed by the learned Civil Judge to have recourse to the arbitration proceedings first and then if so advised come to the Civil Court for the redress of its grievances.
2. After the consignment of the suit to record as per order dated 19-4-2012 the petitioner wrote a letter dated 12-7-2012 to Bank Al-Habib for encashment of the Bank Guarantee furnished by the plaintiff for due performance of the contract. The respondent/plaintiff moved an application dated 13-7-2012 before the learned Civil Judge Lahore seeking an ad interim injunction against the encashment of the bank guarantee furnished by the respondent for due performance of the contract. The learned Civil Judge vide order dated 13-7-2012 issued an interim injunctive order restraining the encashment of the bank guarantee till the next date of hearing which was fixed by the learned Civil Judge to be 20-7-2012. The petitioner-Society issued a notice dated 16-7-2012 to the respondent for the rescission of the contract in question upon which the respondent also moved an another application dated 20-7-2012 under section 41(b) read with 2nd Schedule of Arbitration Act 1940 assailing the said notice dated 16-7-2012. This application was also entertained by the learned Civil Judge, Lahore and vide order dated 23-7-2012 the operation of the notice dated 16-7-2012 was suspended.
3. Through the instant civil revision the petitioner/ defendant of the suit has assailed the order dated 13-7-2012 restraining the encashment of the bank guarantee and the order dated 23-7-2012 suspending the notice dated 16-7-2012 issued by the respondent.
4. It is contended by the .Learned counsel for the petitioner that after passing the order dated 19-4- 2012 of staying the proceedings in the suit the learned Civil Judge had become functus officio and he could not have entertained the applications of the respondent/plaintiff for interim relief. The learned counsel for the petitioner argued that the matter was referred to arbitrator by invoking arbitration clause and that the proceedings were stayed and the file was consigned to the record by the learned Civil Judge vide order dated 19-4-2012. It is further argued that the issuing of notice dated 16-7-2012 by the petitioner was a step which gave rise to a new cause of action and was not covered by the controversy raised in the suit therefore the learned Civil Judge acted illegally by passing the order dated 23-7-2012 suspending the notice of rescission of the contract in question.
It was further argued that the honourable Supreme Court of Pakistan in the reported judgment SHIPYARD K. DAMEN INTERNATIONAL v. KARACHI SHIPYARD AND ENGINEERING WORKS LTD. (PLD 2003 SC 191) has laid down the law that no interim injunctive order can be issued against the encashment of bank guarantees which have been furnished by contracting parties for due performance of their contractual obligations. The learned counsel for the petitioner further contends that the order dated 13-7-2012 passed by the learned Civil Judge staying the encashment of bank guarantee dated 28-9-2010 and the order dated 23-7-2012 suspending the notice dated 16-7-2012 are passed without hearing the petitioner as well therefore are liable to be set aside.
5. The learned counsel for the respondent has contended that although proceedings of the suit were stayed by the learned Civil Judge but still the powers under section 41 read with 2nd Schedule of the Arbitration Act 1940 remained available to the learned Civil Judge to pass an interim injunctive order for the preservation of the subject property. After relying upon the judgments reported as ORIX LEASING PAK LTD. v. ZAHID INDUSTRIES AND OTHERS (NLR 1992 CLJ 693), ARBAB ABDUL QADIR v. MST. BIBI FATIMA (1984 CLC 546), MESSRS COMMODITIES TRADING INTERNATIONAL CORPORATION v. TRADING CORPORATION OF PAKISTAN LTD AND ANOTHER (1987 CLC 2063), FAREED YAQUB ALI v. HAJI MUHAMMAD TAHIR, HAJI MUHAMMAD TAHIR v. FAREED YAQUB (PLD 1989 Quetta 16) and CH. ABDUR RAUF v. MRS. ZUBEDA KALEEM AND OTHERS (2001 CLC 664) the learned counsel contends that the impugned orders have been rightly passed by the learned Civil Judge.
6. I have considered the arguments of the learned counsel for the parties and have perused the record with their able assistance.
7. The learned Civil Judge passed an order dated 19-4-2012 staying the proceedings of the civil suit by accepting the application of the petitioner under section 34 of the Arbitration Act 1940 and consigned the file to the record.
' The learned Civil Judge became functus officio. A letter was written by the petitioner dated 12-7- 2012 to the concerned bank which had furnished a bank guarantee of due performance by and on behalf of the respondent. The learned Civil Judge upon an application after the consignment of the file took up the matter and without issuing any notice to the respondent passed the order dated 13- 7-2012 by restraining the encashment of the bank guarantee. The honourable Supreme Court of Pakistan in the reported judgment PLD 2003 SC 191) after discussing the entire case-law cited before the honourable Supreme Court of Pakistan, in para-7 of the judgment at page 201 has laid down the following principles and this para-7 is reproduced below:-- "7. After having gone through the precedented law as mentioned hereinabove the judicial consensus seems to be as follows:-
(i) The performance of guarantee stands on the footing similar to an irrevocable letter of credit of Bank, which gives performance guarantee must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier has performed his contracted obligation or not, nor with the question whether the supplier is in default or not. The Bank must pay according to its guarantee all demands if so stipulated without proof or conditions. Only exception is when there is a clear fraud of which Bank has notice.
(ii) There is an absolute obligation upon the banker to comply with the terms and conditions as enumerated in the guarantee and to pay the amount stipulated therein irrespective of any disputes there may be between buyer and seller as-to whether goods are up to contract or not.
(iii) The Bank guarantee. Should be enforced on its own terms and realization against the bank guarantee would not affect or prejudice the case of contractor, if ultimately the dispute is referred to arbitration for the reason, once the terms and conditions of the guarantee were fulfilled, the bank's liability under the guarantee was absolute and it was wholly independent of the dispute proposed to be raised.
(iv) The contract of bank guarantee is an independent contract between the bank and the party concerned and is to be worked out independently of the dispute arising out of the work agreement between the parties concerned to such work agreement and, therefore, the extent of the dispute and claims or counter-claims were matters extraneous to the consideration of the question of enforcement of the bank and were to be investigated by the arbitrator.
(v) Where the bank had undertaken to pay the stipulated sum to respondent, at any time, whiteout demur, reservation, recourse, .Contest or protest, and without any reference to the contractor, no interim injunction restraining payment under the. Guarantee could be granted.
(vi) The Bank guarantee is an autonomous contract and imposes an absolute obligation on the bank to fulfil the terms and the payment on the bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable.
(vii) When once bank guarantee is discharged, the obligation of the bank ends and there is no question of going behind such discharge bank guarantee. Courts should refrain from probing into the nature of the transactions between the bank and customer, which led to the furnishing of the bank guarantee.
(viii) In the absence of any special equities and the absence of any clear fraud, the bank must pay on demand, if so stipulated and whether the terms are such must be have to found out from the performance guarantee as such.
(ix) The unqualified terms of guarantee could not be interfered with by Courts irrespective of the existence of dispute."
' In the reported judgment in para-24 the honourable Supreme Court of Pakistan further laid down the following principles of law regarding the encashment of bank guarantee:-- "24. In the light of what has been discussed hereinabove it can be inferred safely that encashment of bank guarantee has no nexus with the spirit of the contract executed between the parties being an independent contract containing its own terms and conditions to be performed by the concerned parties. The encashment of the bank guarantee had nothing to do with the alleged dispute between the petitioners and the respondent, which must be decided independently on the basis of terms of that contract without involving the contract of bank guarantee. It must be noted that bank guarantee is an autonomous contract and imposes an absolute obligation on the bank to fulfil the terms and the payment on the bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable. If any authority is needed reference can be made to case titled National Construction Company Limited v. Aiwan-e- Iqbal (PLD 1994 Supreme Court 311)".
8. It is not denied in the instant case that the bank guarantee submitted by the respondent for due performance of the contract was an absolute and unconditional bank guarantee therefore not only because of the fact that the learned Civil Judge became functus officio by staying the proceedings of the suit by invoking the provisions of section 34 Arbitration Act 1940, but in view of the law laid down by the honourable Supreme Court of Pakistan the learned Civil Judge could not have even stayed the encashment of the bank guarantee. The case-law cited by the learned counsel for the respondent is distinguishable and has no relevance with the facts and circumstances of the instant case. Therefore the order passed by the learned Civil Judge dated 13- 7-2012 staying the encashment of bank guarantee submitted by the respondent for due performance of the contract towards the petitioner is set aside and the application moved by the respondent for the purpose is ordered to be dismissed.
9. As far as the rescission of the contract in question through notice dated 16-7-2012 by the petitioner is concerned, this was also an independent act undertaken by the petitioner and was subsequent to the stay of the proceedings ordered by the learned Civil Judge vide order dated 19- 4-2012. The issuance of the notice dated 16-7-2012 could have given' rise to an independent cause of action to the respondent for which he might have opted to file a fresh proceedings for assailing the said notice dated 16-7-2012 on the grounds available to the respondent but this notice was not at all the subject matter of the main suit instituted by the respondent ,, therefore the learned Civil Judge having become functus officio after the stay of the proceedings and consignment of the file to the record, could not have entertained of miscellaneous application moved under section 41 of the Arbitration Act 1940 to issue an interim injunctive order suspending the notice dated 16-7-2012 therefore the order passed dated 23-7-2012 by the learned Civil Judge is not sustainable in the eye of law and is set aside. The application moved by the respondent under section 41 of the Arbitration Act 1940 for seeking suspension of the notice dated 16-7-2012 was therefore not entertainable by the learned Civil Judge and is ordered to be dismissed. The civil revision is allowed with no orders as to costs.