Shujaat Ali Khan, J. Through this petition, under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 the petitioner has assailed order , dated 27.10.2017, passed by the learned Special Judge (Rent), Lahore whereby the application filed by it, under section 34 of the Arbitration Act, 1940 (the Act, 1940) for stay of proceedings in the ejectment petition filed by respondent No.2, was dismissed.
2. Learned counsel for the petitioner submits that the learned Special Judge (Rent) omitted to consider that when the arbitration clause in the original lease agreement was kept intact, in the event of any dispute between the parties the matter was to be referred for the Arbitration; that the Act, 1940 being the special law enjoys precedence over the Punjab Rented Premises Act, 2009 (the Act, 2009) being the general law but the learned Special Judge
(Rent) failed to consider the said important aspect of the matter; that since dispute pending before the competent forum for appointment of Arbitrator relates to quantum of rent, the learned Special Judge (Rent) cannot proceed in the ejectment petition till the matter is decided by the Arbitrator; that bona-fide of the petitioner is manifest from the fact that it disclosed in his application for leave to contest the ejectment petition that it had already moved for resolution of dispute through the Arbitrato r; that according to section 26(2) of the Act, 2009 proceedings before the learned Special Judge (Rent) are judicial in nature, section 34 ibid was fully attracted and that in case the impugned order is not set aside the petitioner would suffer an irreparable loss as it would be deprived of its right for settlement of issue through courtesy of the Arbitrator .
3. Conversely , learned counsel representing respondent No.2, while defending the impugned order , states that the petitioner was supposed to file application for stay of proceedings before taking any step in the ejectment proceedings but when it filed application for leave to contest it was debarred to file application under section 34 ibid; that since the petitioner has already been granted leave to contest, instead of producing evidence, it is using delaying tactics to delay conclusion of ejectment proceedings and that execution of Memorandum of Understanding
(MOU) amounted to novation of contract. Relies on Industrial Fabrication Company throug h M.D. v. Managing Director , Pak American Fertilizer Limited (PLD 2015 SC 154) and Messrs Nawab Brothers Ltd., Karachi v.
Project Director , Office of the Project Director , Special Projects, Planning and Development Department, Karachi and another (1981 CLC 638). In addition to his oral submissions, learned counsel has also made written submissions with the plea that the Act, 2009 being special law has over-riding effect on the Arbitration Act which is a general law and that when the parties mutually opted to amend the original Lease Agreement they were bound to adhere to the terms & conditions of the subsequent MOU which was signed by both the parties.
4. While exercising his right of rebuttal, learned counsel for the petitioner contends that MOU cannot be considered as novation of a contract as in the latter , the earlier contract is substituted with a new one whereas in the former the conditions of the original contract can be varied or modified; that since application seeking leave to contest was filed subsequent to filing of the application by the petitioner for resolution of the matter through an Arbitrator in terms of original Lease Agreement, the application of the petitioner filed under section 34 of the Act, 1934 could not be dismissed.
5. I have heard learned counsel for the parties at considerable length and have also scanned the documents, appended with this petition, as well as the case-law , cited at the bar .
6. A perusal of the original Lease Agre ement shows that under clause 16 of the said agreement the parties covenanted to get unsettled disputes resolved through arbitration. Further , under clause 18 of the said agreement, it was also agreed that terms & conditions of the original Lease Agreement could be altered, added or deleted with mutual consent. While invoking the said clause, the parties opted to execute MOU wherein besides introducing various amendments, certain additions were also incorporated in the original Lease Agreement and one of the newly added clause was that in case of any violation of terms & conditions, stipulated in the original Lease Agreement and subsequent MOU by the Lessee, the Lessor would be entitled to file ejectment petition at any time in the court of competent jurisdiction. The said newly added clause renders it crystal clear that the petitioner itself consented that in the event of any violation on its part, the Lessor would be at liberty to approach the court of competent jurisdiction, thus, filing of application for stay of ejectment proceedings seems to be against the spirit of said MOU, thus, the same was rightly dismissed by the learned Special Judge (Rent).
7. Since the moot question in this matter is interpretation of section 34 of the Act, 1940, it would be beneficial to have glance over it. For convenience of reference, the said provision is reproduced herein below:- "34. Power of Court, where arbitration agreement is ordered not to apply to a particular difference, to order that a provision making an award a condition precedent to an action shall not apply to such difference: Where it is provided (whether in the arbitration agreement or otherwise) that an award under an arbitration agreement shall be a condition precedent to the bringing of an action with respect to any matter to which the agreement applies, the Court, if it orders (whether under this Act or any other law) that the agreement shall cease to have effect as regards any particular difference, may further order that the said provision shall also cease to have effect as regards that difference."
A perusal of the afore-quoted provision renders it crystal clear that a party can move for stay of judicial proceedings pending before a forum prior to filing written statement or taking any other steps in the pending proceedings. While elaborating the said condition, the Hon'ble Supreme Court of Pakistan in the case reported as Pakistan International Airlines Corporation v. Messrs Pak Saaf Dry Cleaners (PLD 1981 SC 553) has inter alia held as under:- "In my opinion, the true tests for determ ining whether an act is a step in the proceedings is not so much the question as to whether the party sought an adjournment for filing the written statement although of course that would be a satisfactory test in many cases but whether taking into consideration the contents of the application as well as all the surrounding circumstances that led the party to make the application display an unequivocal intention to proceed with the suit, and to give up the right to' have the matter disposed of by arbitration. An application of such nature, therefore, should prima facie be construed as a step in the proceedings within the meaning of section 34, and the whole burden should be upon the party to establish why effect should not be given to the prima facie meaning of the application."
Further , the said view was also endorsed in the case of Ghulam Sarwar and others v. Mazharullah (1988 SCMR 310) inter alia with the following observations: - "The main question, which came up for consideration before the High Court, was whether the petitioners, before filing of the application under section 34 of the Arbitration Act, had taken steps in the proceedings and having done so, were not entitled to invoke the arbitration clause and seek stay of the suit.
2. We heard the learned counsel for the parties and have gone through the impugned judgment. The learned High Court, on the basis of the evidence on the record, found that the petitioners had taken steps in the proceedings and as such were not entitled to invoke the arbitration clause and ask for the stay of the suit. The learned counsel for the respondent invited our attention to the order sheet of the trial Court in support of the findings of fact recorded in the impugned order ."
Similarly , the Apex Court of the country in the matter of Muhammad Farooq v. Nazir Ahmad and others (PLD 2006 SC 196 ) while dealing with the issue, under discussion, has laid law to the ef fect that: - "8. The admitted position is that the appellant/defendant for the first time appeared in the Court on 28th of March, 1998 when the same was adjourned to 17-4-1998 for submission of the written statement and filing power of attorney . The written statement was not filed as such suit was adjourned to 30-4-1998 when the learned Presiding Officer was on leave. The suit was accord ingly adjourned to 13-5-1998 yet on the said date written statement was not filed. Learned counsel for the appellant/defendant requested for adjournment to file written statement which was allowed and suit was adjourned to 18-5-1998 but as the Presiding Officer was on leave, therefore the suit was again adjourned to 30-5-1998 when applic ation under section 34 of the Arbitration Act was moved. From the above proceedings in the Court it would be clear that the appellant even after the receipt of notice of the plaint got three clear dates for filing written statement but the application under section 34 of the Act was moved on the fourth date.
Above acts of the appellant on number of dates stated above would show that he intended to participate and defend the suit before the Court. In this process he engaged a counsel and filed adjournment application or requested for adjournment on the above dates. We may also observe that test for determining whether an act is a step in the proceedings or not, this Court in the case of Pakistan International Airlines Corpora tion v. M/s. Pak Saaf Dry Cleaners PLD 1981 SC 553 at page 559 in the last para has observed:--- "As would be seen from above, the mere existence of a clause providing for arbitra tion does not bar a suit or other legal proceeding in Court. It only entitles a party to have the legal proceedings stayed. In order that a stay may be granted under the provisions of this section, certain conditions must be fulfilled. The party must take the objection and apply for stay proceedings before taking any step, for example, the filing 'of the written statement, that is, before he placed his cards on the table. The provisions of the section, further imply that the Court should, first of all, examine whether the arbitration clause applies to the dispute, and if it does, whether the nature of the dispute is such that the ends of justice will be better met by the decision of the Court than by that of private forum chosen and agreed upon, and to which the parties had made themselves bound to adhere and adopt in case that type of dispute arose between them. The Legislature has, of course, clearly implied in the language used in the section that the arbitration clause should be respected, but has also made it abundantly clear that the party seeking to avail of the provision of stay under this section must clarify his position at the earliest possible opportunity , so as to leave no manner of doubt that he wishes to have resort to arbitration proceeding. If, he hesitates in this regard, or allows the suit to proceed in any manner , that conduct would indicate that he has abdicated his claim to have the dispute decided under the arbitration clause, and to have thereby forfeited his right to claim stay of the proceedings in the Court."
In para. 3 at page 564 of the above cited decision this Court has observed:-- "In my opinion, the true test for determining whether an act is a step in the proceedings is not so much the question as to whether the party sought an adjournment for filing the written statement although of course that would be a satisfactory test in many cases but whether taking into consideration the contents of the application as well as all the surrounding circumstances that led the party to make the application display an unequivocal intention to proceed with the suit, and to give up the right to have the matter disposed of by arbitration. An application of such nature, therefore, should prima facie be construed as a step in the proceedings within the meaning of section 34 and the whole burden should be upon the party to establish why effect should not be given to the prima facie meaning of the application."
From the above citations, one thing is clear that the party should invoke provisions of section 34 ibid prior to filing of written statement or taking any other step in the proceedings which fact can be verified from the conduct of the party concerned.
8. Now the next question which boils down for determination by this Court is as to whether filing of application seeking leave to contest by the petitioner amounts to taking of any other step. While clinching somewhat similar issue, under discussion, the Hon'ble Pesh awar High Court in the case of Government of the N.-W .F.P. and others v. Khalid Khan and others ( 2006 MLD 1897 ) has inter-alia held as under:- "3. The main ground for dismissing the petition for sending the matter to the arbitrator was that the defendants had taken steps in proceedings and had not submitted application promptly . The adjournments requested for and granted to the defendants for submission of written statement were declared as steps taken by the defendants and it was held that the defendants had not taken up the issue of sending the matter to the arbitrator at the earliest and, hence, had relinquished/waived their rights for such request......
9. In the instant case, after setting aside the ex parte proceedings/order against the respondents, the respondents requested for adjournments for submission of written statement, which amounted to their submission to the jurisdiction of the Court and their acquiescence also. By making such requests for adjournment, the appellants (then defendants) gave the mind to the opposite party that they were ready to contest the suit before the learned trial Court and were preparing for submission of written statement. There was every opportunity for the defendants to submit application for stay of proceedings at the earlier before such requests and adjournments, as they had the knowledge of the suit and have been praying for setting aside the ex parte order against them. The defendants could make up mind urgently and could submit an application under section 34 of the Arbitration Act, 1940 at the earliest without requesting for adjournments for submission of written statement."
It is admitted position that in the instant matter the petitioner filed application seeking leave to contest the ejectment petition filed by respondent No.2 but did not bother to move application under section 34 ibid for stay of the proceedings simultaneously . If the intention of the petitioner was to get stay of ejectment proceedings, it was supposed to file such application at the earliest. Further , intention of the petitioner to bye-pass the arbitration proceedings is evinced from its act of signing MOU giving option to respondent No.2 approach the court in the event of violation of terms and conditions of the original Lease Agreement as well as MOU.
9. During the course of arguments, learned counsel for the petitioner has put much emphasis on the fact that since the arbitration clause available in the original Lease Agreement was not expressly done away through subsequent MOU, any dispute between the parties was to be resolved through the Arbitrator . In this regard, I am of the view that in the original Lease Agreement it was decided between the parties that in the event of any unsettled dispute the matter would be resolved through an Arbitrator but when the petitioner itself consented to the effect that in case of violation of any terms & conditions of original lease agreement and subsequent MOU respondent No.2/lessor would be at liberty to approach the court of competent jurisdiction, it was estopped to move application for stay of proceedings of the ejectment petition filed by respondent No.2.
10. It is very astonishing to note that during the course of arguments, learned counsel for the petitioner , while portraying the Act, 2009 as general law claimed that it was subservient to the Act, 1940 being the special law. In this regard, I am unable to subscribe to the said view as the Act, 2009 being special law to deal with the rent matters exclusively cannot be dubbed as general law rather the Act, 1940 being applicable to multiple proceedings instituted under dif ferent enactments can be termed as such.
11. Despite addressing the Court at length, learned counsel for the petitioner has not been able to point out any material illegality in the impugned order justifying interference by this Court in exercise of its Constitutional jurisdiction.
12. For what has been discussed above, I see no force in this petition which is dismissed with no order as to costs.