This order will dispose of an application filed under Section 34 of the Arbitration Act, 1940 by the defendant.
2. Brief facts of the case are that the plaintiffs and the defendant are partners in a partnership firm "M/s. Abdul Sattar Haji Dawood & Sons". The present suit is for partition of Plot Nos. S/B 39 to S/B-56 in Survey Nos. 191 (Part), 192-193 (Part) 195 Deh Gujro Block No, 13-D/2- KDA Scheme No, 24, measuring 17008 Sq.. Yards amongst the plaintiffs and the defendant according to their share mentioned in Para No, 17 of the plaint as well as in deed of partnership dated 14.11.1975 read with deed of partition dated 20.11.1990 and deed of rectification dated 15.12.1992.
3. The defendant in his application referred to Paragraph No, 15 of the partnership deed in which it is provided that all the disputes relating to the partnership business shall be referred to the arbitration. The plaintiffs have failed to invoke the arbitration clause as provided in the partnership deed, therefore, their suit is liable to be stayed unless the dispute is referred to the arbitration and resolved through agreed mechanism.
4. The plaintiffs' attorney filed the counter affidavit and opposed the stay of the suit on the ground that there is no dispute between the parties in terms of- arbitration clause contained in the partnership deed. It is further stated that the plaintiffs are ready and willing to pay the share of the defendant to the extent of his admitted share in the property in question. The defendant wants to assert the claim which is not covered in the prayer clause of the present suit and it is for him to avail proper remedy in accordance with law.
5. At the very outset, learned counsel for the defendant referred to the partnership deed dated 14.11.1975 and argued that under Clause 15 of the partnership deed, proper mechanism has already been postulated for the resolution of dispute through arbitration. For ready reference, Clause 15 of the partnership deed is reproduced as under:-- "15. All disputes relating to the partnership business, meaning and construction of this Deed shall be referred to an arbitration of 2 arbitrators to be appointed by the mutual consent of all the partners, and in case of their disagreement, shall be referred to an umpire to be selected by the said arbitrators, whose award shall be final, conclusive and binding on all the partners to this agreement."
6. The learned counsel also referred to a deed of rectification dated 15.12.1992 in which the deed of partition dated 20.11.1990 is also mentioned with some schedules relating to share of the partners of the firm including the joint ownership of the different properties. He also referred to Paragraph '11 of the partnership deed in which it is clearly provided that in the event of death of any partner, the male heirs of the deceased partner shall with the consent of surviving partners be admitted to the partnership firm to the extent of the deceased partner's share in the partnership firm at the date of death of the partner. It was further agreed that in case of any partner or partners retirement from the partnership firm, the partnership firm shall be run by continuing partners if they so desire.
Learned counsel further argued that in pursuance of the order dated 15.05.2014, he filed a statement on 02.06.2014 in which without prejudice to the application moved under Section 34 of the Arbitration Act and without admitting any allegation or claim of the plaintiffs, his client submitted a proposal that after the death of his father on 15.07.1998, he is entitled to claim the share of his father in the properties as legal heir. The schedule-II of the rectification deed reflects to the properties given to the defendant which are in possession of the defendant so, .The plaintiffs should undertake that the defendant's possession shall not be disturbed. Learned counsel also pointed out Paragraph 15 of the plaint to show that the plaintiffs themselves pointed out a triable dispute through arbitration which is reproduced as under: "15. The defendant has caused colossal damage to the plaintiffs due to his adamant, unjustified and totally indifferent attitude towards rest of the partners/heirs of the partners and the plaintiffs reserve their right of initiating appropriate action in law for redress of their grievances. At present the suit has been instituted as the 'defendant in complete violation and supersession of the Partnership Deed now exerts claim over and above to what he is entitled under the Partnership Deed being 5% in the subject property as a partner. The share proportion of the defendant is also clearly shown as 5% in the rectification deed. Legally and factually the defendant is not entitled to anything in excess of 5% in the land in general and subject property in particulars."
7. The defendant in his statement pointed out various issues relating to the partnership deed and the settlement of dispute and in this statement too, he prayed that the matter may be referred to the arbitration in accordance' with the partnership deed. He also made much emphasis that the plaintiffs have prayed for the order of partition of the properties in question in view of the deed of partnership dated 14.11.1975 read with deed of partition dated 20.11.1990 and deed of rectification dated 15.12.1992, so proper course is to resolve the dispute through an agreed mode in the partnership deed rather than the suit for partition.
8. On the contrary, the learned counsel for the plaintiffs argued that the defendant has failed to point out any triable dispute through arbitration in terms of deed of partnership. The learned counsel further pointed out an order dated 15.5.2014 in which his associate Mr. Arshad Tayyab Ali conceded to before this Court that the plaintiffs are willing to provide whatever share the defendant is entitled to in accordance with law and for that amicable settlement is to be arrived at between the plaintiffs and the defendant so that the share of other partners may be paid in accordance with law. In the same order, the counsel for the defendant submitted that though the defendant has some other issues relating to the business which are not the subject matter of the suit. However, he submitted before this Court that he will seek instructions from his client. The matter was adjourned with the directions to the counsel for the defendant to make a definite statement as to whether the defendant is willing to act in accordance with the. Proposal made by the counsel for the plaintiffs. After inviting my attention to the aforesaid Court's order, the learned counsel for' the plaintiffs "reiterated that the properties in question can be partitioned without referring to the matter to the arbitration and whatever the issues raised by the defendant in the application or the statement filed in compliance of the order by this Court dated 15.05.2014 have nothing to do with the property in question which can be easily partitioned by this Court.
9. Heard the arguments. An arbitration agreement is a contractual undertaking by which parties agree to settle the dispute by way of arbitration rather than to proceed in Court. Whenever, the .Dispute arises any party of the agreement may apply for staying of Court proceedings. A party who wishes to refer to the dispute to arbitration has to apply without delay to the Court for the stay of proceedings particularly in breach of agreement to arbitrate the dispute which arises between the parties must fall within the scope of arbitration. The world dispute is to be given its ordinary meaning and includes any claim which the other party admits under Section 34 of the Arbitration Act. The Court has power to exercise its discretion to stay the legal proceedings provided that there has been a valid arbitration agreement, the proceedings in Court have been commenced, the application is made by a party to the proceedings before filing written statement and or taking any other step and he is ready and willing to do all acts necessary to the proper conduct of arbitration.
The simple reading of Section 34 of the Arbitration Act demonstrates its object which is meant for minimizing the agony of parties from facing protracted litigation by referring the matter to the arbitrator. However, the Court has to see if there are some reasons as to why the matter should not be referred to the arbitration in accordance with the agreement.
10. In the case of Farid Virani versus Feroz Virani, (PLD 2013 Sindh 386), (authored by me), it was held that Section 34 of the Arbitration Act, 1940 relates to stay of proceedings brought before the Court in the subsistence of valid agreement of arbitration. This section aims at to make arbitration agreement effective and to prevent a party from going to Court contrary to his own agreement.
Whether the provisions of this section are 'attracted, the Court may stay the proceedings requiring the matter to be referred to the Arbitration. In order to stay the legal proceedings it is necessary that the proceedings must have been commenced by a party to arbitration agreement against any other party to the agreement, the legal proceedings which are sought to be stayed must be in respect of a matter agreed to be referred, the applicant for stay must be a party to the legal proceedings, the applicant must have taken no step in the proceedings after appearance, the applicant has to satisfy that he was not only at the time when the proceedings were commenced, but still ready and willing to do everything necessary for the proper conduct of the arbitration and the Court must be satisfied that there is no sufficient reason why the matter should not be referred to arbitration. Mere existence of an arbitration clause in the agreement does not bar the jurisdiction of Civil Court. Section 34 does not make it obligatory on a Court to necessarily refer to the dispute to arbitration and exercise the discretion to stay the proceedings unless it is satisfied that there is no sufficient reason why the matter should not be referred to in accordance with the arbitration agreement. The above suit (Farid Virani Case) was filed for dissolution of partnership business and appointment of receiver for distribution of shares and making inventory of stocks etc. Though in the above case Section 34 of the Arbitration Act was expatiated and dilated upon in detail but the discretion of staying the suit was not exercised due to multiplicity somewhat pending litigation of the parties in Court for and against on the same subject matter and nature of controversy including various allegations of fraud vice versa which could not be decided by the arbitrator hence the application in the cited case was dismissed. At this juncture I would be keen on quoting PLD 1993 S.C. 42 IMIs. Eckhardt & Co. v. Muhammad Hanifl, in which apex Court held that under Section 34 of the Arbitration Act, stay can be refused by the Court if it is satisfied that there is no sufficient reason for making reference to arbitration and substantial miscarriage of justice would take place or inconvenience would be caused to the parties. No hard and fast rule can be laid down or line of demarcation can be drawn to say in what cases refusal can be made. Each case has different facts and grant or refusal of stay is dependent upon peculiar facts and circumstances of each case. The Court can make objective assessment and come to the conclusion whether stay legal proceedings can be granted or refused.
11. This suit for partition has been filed for the partition of Plot Nos. S/B-39 to S/B-56 located in Survey Nos. 191 (Part), 192-193 (Part) 195 Deh Gujro Block No, 13-D/2-KDA Scheme No, 24 and heavy reliance has been placed on Paragraph 17 of the plaint in which the share` of each partner is mentioned and the partition has been sought in view of the deed of partition and deed of rectification. The cumulative effect emerging from all three deeds unequivocally show that the parent document is the deed of partnership and the plot in question is owned by the partnership firm, though the partners have executed the deed of partition followed by deed of rectification. If the application and statement of the defendant filed in view of the order dated 15.5.2014 is placed in juxtaposition it will transpire that various controversies have been raised by the defendant and he also claims the share by way of inheritance in the partnership business. It is further stated that on vacating the office at Adamjee Insurance Building I. Chundrigar Road, Karachi the partnership firm received a handsome amount but the defendant has not been paid his share as partner. In fact the defendant tried to demonstrate that his deceased father was holding 10% share and the defendant is holding 5% share and since his father had died on 15.07.1998, he is entitled to inherit the share of his father in the partnership deed. On filing this suit and in response to the application in question, the counsel for the plaintiffs argued that since there is no dispute in relation to the property in question, the same can be partitioned without referring the matter to the arbitrator in terms of partnership deed but on the contrary, the plaintiffs in paragraph 15 of the plaint have pleaded that the defendant in complete violation and supersession of partnership deed exerting the claim while he is not entitled to anything in excess of 5% share in the land in general and the subject property in particular. By saying so, the plaintiffs themselves touched the other properties and used the, words "land in general and subject property in particular". The controversy or the dispute between the parties is not confined to the subject property but there are various other issues raised by the defendant as one of the partners of the firm for which he claims the resolution through arbitration. The present suit is not for the partition alone but plaintiffs have also stated in paragraph 18 that the injunctive order against the defendant is expedient for restraining him not to claim any right in the subject property beyond his 5% share while Paragraph 20 of the plaint relates to the cause of action describing, different events giving rise to the filing of suit, the plaintiffs have also pleaded the cause of action from the date when undue and unjustified hindrances created by the defendant affecting all the plaintiffs. The nature of dispute prima facie shows that there is a heated discussion between two sets of partners in relation the properties owned by the firm including the devolution of shares of a deceased partner amongst his heirs so for all intent and purpose this should be resolved through an agreed mode of arbitration in the deed of partnership. I do not feel it appropriate to subscribe the argument developed by the learned counsel for the plaintiff that the issue of partition of the property in question should be considered separately and or in isolation without recourse to arbitration which counts to exasperate and frustrate the arbitration clause. So I am of e firm view that the dispute relates to the partition of the property the partnership firm for which proper course of its dispute solution is agreed between the partners in the deed of partnership in separate clause having wide and broadened scope which covers all e disputes including the one involved herein and there are sufficient reasons for making reference to arbitration. In such a situation the partners are not allowed to pick and choose as to which dispute convenient or feasible to be decided by the arbitrator and or the Court out it is for the Court to decide keeping in view the dispute resolution clause. Each case has different facts and grant or refusal of stay is dependent. Upon peculiar facts and circumstances of each case for which Court can make an objective assessm ent and come to the conclusion whether stay legal proceedings can be granted or refused.
12. In the wake of above discussion, the proceedings are taxed. Let the parties resolve their dispute in accordance with Clause 5 of the deed of partnership.