MUSHTAQ HUSSAIN, J.-This is a first appeal against an order, passed by the learned District Judge, Lahore on 17th December 1968 whereby he discharged an ex parte temporary injunction issued by him earlier against the present respondents at the behest of the present appellant and accepting the prayer of the respondents stayed the suit, pending before him, under section 34 of the Arbitration Act. The plaintiff-appellant has fell; aggrieved and therefore filed this first appeal against order.
2. The facts of this case are that on 31st October 1966 Messrs G. M. Pfaff A. G., a public company, liability of whose members is limited, filed a suit under section 21 of the Trade Marks Act read with sections 54 and 55 of the Specific Relief Act. It was alleged in the plaint, inter alia, that defendant No. 3, Kayser-Sartaj Company Ltd., is a joint venture of the plaintiff-- company and Sartaj Industries Ltd. Defendant No. 4. The plaintiff came to know of the infringement of its trade mark "Pfaff" by the defendants who were advertising the sale of Pfaff Sewing Machines and inviting applications for appointment of Sub-agents. The plaintiff contended that these advertisements were designed to create an impression on the mind of the general public of the defendants' goods as those of the plaintiff: It was contended that Messrs Kayser-Sartaj Company Limited and other defendants had no right to do so. It was further alleged that parts of Pfaff Sewing Machines imported in a large quantity for sale as such by defendant No. 3 were now being used for assembling sewing machines which were being traded under the name "Pfaff" thereby infringing the Trade Mark of the plaintiff. The plaintiff claimed damages, a perpetual prohibitory injunction and a similar mandatory injunction, rendition and making up of accounts, costs and any further relief that may be available.
3. Along with this plaint, the plaintiff filed an application for the grant of temporary injunction under Order XXXIX, rules 1 and 2 and section 151 of the Code of Civil Procedure and section 53 of the Specific Relief Act for restraining the defendants from selling, stocking and dealing in and using the plaintiff's trademark "Pfaff" or any other mark so resembling the trade mark "Pfaff" in suit and from infringing the said trade mark and passing-off respondents goods as those of the plaintiff in any manner pending disposal of the suit. Another application under Order XXXIX, rule 2 read with section 151 of the Code of Civil Procedure for detention, preservation, inspection etc. Of subject- matter of the suit was also presented.
4. After hearing the learned counsel for the plaintiff, the District Judge, by his order dated 16th November 1968, directed that summons be issued to the defendant-respondents for the 28th of November 1968. By the same order he granted the ad interim injunction as prayed which was to be operative till the aforesaid date. Mr. Maqbul Ahmad, Advocate, was directed to prepare an inventory of stock of the sewing machines bearing the trade mark of the defendants and, for this purpose, to visit various places, detailed in the order.
5. A "written-statement on behalf of the respondent/ defendants" was presented on the 24th of November 1968, in which the subject was mentioned as under :- "Application under Order XXXIX, rules 2 and 7 (1) (a) read with section 151, C. P. C., for detention., preservation, inspection etc., of subject-matter of the suit."
A preliminary objection was incorporated in the first paragraph of this "written statement" in which Articles 180, 181 and 182 of the Articles of Association of Kayser-Sartaj Company Limited, which contained the provision for reference of all disputes to one or more arbitrators, were mentioned and it was stated that- "It is, therefore, respectfully submitted that in view of the provisions of Articles 180, 181 and 182 above the suit is bad, and incompetent at least against defendant/respondent No. 3."
The learned District Judge passed the impugned order on the 17th of December 1968, the operative part of which may be reproduced as under :- "The plaintiff is a member of Kayser-Sartaj Co. Ltd., Lahore which is defendant No. 3 before me and in the Articles of Association of the latter, there is a provision vide Articles Nos. 180, 181 and 182 for reference to Arbitration between Kayser-Sartaj Co. Ltd. Defendant No. 3 and Pfaff plaintiff- petitioner.
The suit against Messrs Kayser-Sartaj Co. Ltd. Defendant No. 3 is therefore stayed under section 34 of the Arbitration Act and the temporary injunction issued against Messrs Kayser---Sartaj Co. Ltd.
Defendant-respondent No. 3 is discharged.
It is for the plaintiff to decide whether it would or would not proceed against other defendants and whether in view of my above finding he would like to amend the plaint. The case is adjourned to 6- 1-69 by which date the amended plaint, if any, must be filed. The temporary injunction against other defendants barring Messrs Kayser-Sartaj Cc Ltd. Defendant No. 3 shall continue."
The plaintiff felt aggrieved by this order and filed the present appeal in which both the order recalling the temporary injunction and the one staying the suit under section 34 of the Arbitration Act have been assailed. We will first deal with the grievance arising out of the stay of the suit.
6. The appellant-company entered into collaboration with respondent No. 3 and formed a company under the name and style of Kayser-Sartaj Company Limited which was registered under the Companies Act, 1913, in Pakistan. Paragraph 2 of the Memorandum of Association of the company recites the business which was to be undertaken and carried on by this new company and which is sought to be related to the present dispute. This paragraph runs as follows :- "2. To Manufacturer, import, export, purchase, sell, or otherwise deal in, products which at present are or in future will be manufactured by Messrs G. M. Pfaff A. G. Of Kaiserslautern/Federal Republic of Germany and/or by Messrs Critzner-Kayser A. G. Of Karlsruhe-Dulach/Federal Republic of Germany, and/or by Messrs Sartaj Industries Ltd., of Lahore/Pakistan, or of one of their subsidiary companies according to separate contracts of technical co-operation, if any, to be concluded between the company and said enterprises;"
Part XXVI of the Articles of Association of the Company, comprising Articles 180 to 182, has "Arbitration" as its caption. The Articles contained in it are reproduced hereunder for facility of reference- "180. Whenever any dispute arises between the company, on the one hand, and any of the shareholders, their executors, administrators or assigns, on the other hand, touching the true intent or construction, or the incidence or consequences of these presents, or of the Memorandum of Association, or touching any thing then or thereafter done, executed, omitted or suffered in pursuance of these present or of the Memorandum of Association or touching any breach or alleged breach or otherwise relating to the promises or to these presents or to any statute affecting the company, including the fixing of the fair value of the shares of the company every such disputes shall be finally settled under the rules of conciliation and arbitration of the international chamber of commerce by one or more arbitrators appointed in accordance with the rules.
181. The cost of and incidental to any such reference and award shall be as per the rates of the international chamber of commerce for such cases and the parties will have to abide by these rules.
182. The submission to arbitration shall be subject as to, the mode and consequence of the reference and in all other respects, to the rules of Conciliation and Arbitration of the International Chamber of Commerce."
It is by virtue of these Articles that the respondents are claiming that the matter dispute has to be referred to arbitration and the Court cannot proceed with the suit.
7. The first objection raised by learned counsel for the appellant is based upon the provisions of section 152 of the Companies Act. It has been contended that section 152, which deals with submission of disputes between a company and any other company or person to arbitration, makes it obligatory that the reference should be in accordance with the Arbitration Act, 1940, and subsection (3) specifically lays down that the provisions of Arbitration Act, 1940, shall apply to all arbitrations between the companies and persons in pursuance of this Act. Article 182 of the Articles of Association of the Company, alluded to above, lays down that the arbitration shall be subject to "the rules of conciliation and arbitration of the international chamber of commerce". Learned counsel for the appellant, therefore, submits that this article is in conflict with section 152 of the Companies Act in so far as the latter provides that the Arbitration Act, 1940, shall be applicable to all arbitrations. Article 182 is consequently void and cannot be adopted by any company.
8. Section 152 of the Companies Act is merely an enabling provision and was enacted at a time when the Arbitration Act of 1889 was in force. By virtue of section 2 of the Act of 1889 the Act applied to Presidency Towns and to such other towns as were notified by the local Government from time to time. The effect of the enactment of section 15 L was to enable Companies to refer disputes arising outside Presidency Towns to arbitration. The Arbitration Act, 1940, is, however, in force throughout the length and breadth of the country, and, therefore, references made by Companies also are governed by this Act. It is therefore established that by virtue of section 152 a company can refere a dispute between itself and any other person to arbitration. Such an arbitration shall be governed by the Arbitration Act. 1940.
9. Let us now examine if the clause in the Articles of Association in the present case falls foul of the provisions of the Arbitration Act, 1940.
10. Section 47 of the Act provides that- "Subject to the provisions of section 46, and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder: Provided that an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of a suit by any Court before which the suit is pending."
All arbitration proceedings, except those excluded by this section, are therefore to be governed by the Act. One of the exceptions is-"save in so far as is otherwise provided by any law for the time being in force". The Arbitration (Protocol and Convention) Act, 1937 is one such law, but unfortunately learned counsel made no reference to it The Arbitration Act of 1940, far from prohibiting an arbitration covered by the Act of 1937, recognises it by force of section 47, the relevant portion of which has been quoted above.
11. Section 2 of Act VI of 1937 defines "foreign award" as follows :- "In this Act "foreign award" means an award on difference; relating to matters considered as commercial under the law it force in Pakistan, made after the 28th day of July 1924,-
(a) in pursuance of an agreement for arbitration to which the Protocol set forth in the First Schedule applies, and
(b) between persons of whom one is subject to the jurisdiction of some one of such Powers as the Central Government being satisfied that reciprocal provisions have been made; may, by notification in the official Gazette, declare to be parties to the Convention set forth in the Second Schedule, and of whom the other is subject to the jurisdiction of some other of the powers aforesaid, and
(c) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said Convention applies, and for the purpose of this Act an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made."
Section 4 makes such an award enforceable in Pakistan as if it were an award made on a matter referred to arbitration in Pakistan. Section 5 provides for the filing of such a foreign award in Court.
Section 6 provides for the enforcement of a foreign award enforceable under this Act by the Court.
Section 7 lays down the conditions for enforcement of foreign awards. The First Schedule to the Act reproduces the "Protocol on Arbitration Clauses" signed on behalf of India at a meeting of the Assembly of the League of Nations while the Second Schedule reproduces the "Convention on the Execution of Foreign Arbitral Awards" signed at Geneva.
12. Article 1 of the Protocol is as follows:- "Each of the Contracting States recognises the validity of an agreement whether relating to existing or future differences between parties subject respectively to the jurisdiction of different Contracting States by which the parties to a contract agree to submit to arbitration all or any differences that may arise in connection with such contract relating to commercial matters or to any other matter capable of settlement by arbitration, whether or not the arbitration is to take place in a country to whose jurisdiction none of the parties is subject.
Each Contracting State reserves the right to limit the obligation mentioned above to contracts which are considered as commercial under its national law. Any Contracting State which avails itself of this right will notify the Secretary---General of the League of Nations in order that the other Contracting States may be so informed."
It need not be reiterated that Pakistan is a "Contracting States." The agreement contained in Article 182 has, therefore, to be recognised by virtue of the foregoing provisions.
13. The relevant portion of Article 1 of the Second Schedule which contains the Convention on the execution of the foreign arbitral awards is reproduced as under :- "In the territories of any High Contracting party to which the present Convention applies, an arbitral award made in pursuance of an agreement, whether relating to existing or future difference (hereinafter called a ---submission to arbitra--petition') covered by the Protocol on Arbitration Clauses opened at Geneva on September 24, 1923, shall be recognised as binding and shall be enforced in accordance with the rules of the procedures of the territory where the award is relied upon, provided that the said award has been made in a territory of one of the High Contracting Parties to which the present Convention applies and between persons who are subject to the jurisdiction of one of the High Contracting Parties."
This provision makes an award delivered in pursuance of the agreement referred to above binding and enforceable in Pakistan in accordance with the rules of procedure obtaining in this country.
14. One of the agencies existing in realm of international commerce for settling disputes arising out of international transactions by arbitration is the International. Chamber of Commerce. Its headquarters are in Paris. If two parties residing in two different High Contracting Countries enter into an agreement to refer to their disputes to arbitration and in this connection agree to abide by the rules of the International Chamber of Commerce the award would then be a foreign award as defined by section 2 of Act VI of 1937 and would be enforceable in this country under that Act. This is highly consistent with the provisions of section 47 of the Arbitration Act of 1940.
15. The objections on the score that Article 182 of the Articles of Association of The Kayser-Sartaj Company is violative of section 152 of the Companies Act or section 46 or 47 of the Arbitration Act, 1940, are therefore devoid of all force and cannot be sustained, and the agreement to refer disputes to arbitration in the present case is in accordance with law and is enforceable under the law, referred to above.
16. The next question that arises is whether the learned District Judge has acted rightly in staying the suit before him so far as it concerned the plaintiff-appellant and Kayser-Sartaj Company, the respondent.
17. If it were a case of local arbitration, section 34 of the Arbitration Act, 1940, would have been attracted to the facts of the case. The matter, however, as we have already seen, relates to an agreement in accordance with the rules of the International Chamber of Commerce and would, therefore, be governed by the Act of 1937, referred to above. Section 3 of the Act of 1937 is in effect, so far as it concerns the present case, analogous to the provisions of section 34 of the Act of 1940 both of which deal with the stay of the proceedings when a party to a valid arbitration agreement instead of referring the dispute to an arbitrator has recourse to a Court of Law by way of a civil suit.
18. Learned counsel for the appellant contended that the respondent could have applied for stay only before filing the written-statement and since it has filed the written-statement in the case without first making the application for stay it is now debarred from asking for such a relief.
19. We have already reproduced above the caption of the document which has been called "written statement" by the parties. The expression "written-statement", as used in section 3 of the Arbitration (Protocol and Convention) Act, is a term of art. The heading of Order VIII of the Code of Civil Procedure is written Statement and Set-off" and rule 1 of that Order provides "that the defendant may, and, if so required by the Court, shall, at or before the first hearing or within such time as the Court may permit, present a written statement of his defence." This Order follows Order VII, the beading of which is "Plaint". The "written statement" is, therefore, the statement filed by the defendant in answer to the plaint and constitutes his defence in the suit. In the present case, the document dubbed as "written statement" is, as is clear from the title of the document as well as from its contents, nothing more than a reply to the application under Order XXXIX for a temporary injunction. It, therefore, needs no argument to hold that a "written statement" has not been filed in the case so far. The objection of learned counsel for the appellant on this ground, therefore, holds no water.
20. Learned counsel for the appellant, however, strangely enough, did not advert to the other milestone mentioned in section 3 of the Act of 1937 and section 34 of the Act of 1940, i.e., "or taking any other steps in the proceedings". Not only does a defendant disentitle himself to the protection of these sections if he does not take his stand before filing a written statement, the situation is not any the different if he takes any other step in the proceedings before taking the objection. The intention of the statute is that the defendant who wants to tale advantage of an arbitration clause must without any ado and before submitting to the jurisdiction of the Court inform the Court in unequivocal terms that he is going to insist upon the implementation of the arbitration clause.
21. Reference in this connection may be made to a decision of the Chancery Division in Zalinoff v.
Hammond ((1898) 2 Ch. 92). It was an action for dissolution of partnership. The plaintiff gave a notice of motion for the appointment of a receiver. The affidavits supporting it charged the defendant with misconduct. Notice of motion was served. The defendant appeared and filed affidavits in answer to these charges. After two hearings, on which the case was not taken up, the defendant sought shelter under sec--petition 4 of the Arbitration Act, 1889 praying for stay of proceed--ings. Objection was taken on the ground that since the defendant had filed affidavits in answer to the motion for a receiver he had taken a "step in the proceedings" and had, therefore, crossed the stage when he could have applied for the stay of the suit. Stirling, J., who delivered the judgment, held, dismissing the objection,- "What has happened is this. The plaintiff gave notice of motion for the appointment of a receiver. In support of it he filed certain affidavits. Those were answered by the defendant, and not until after the motion had come on and been ordered to stand over once or twice did he give notice of his motion to refer to arbitration. The question is whether he has taken a `step in the proceedings' within the meaning of the Act, so as to render his notice of motion to refer to arbitration too late. I quite agree as to the importance of applications to stay proceedings being made speedily. That is the meaning of the Act; but the question is, what is a `step in the proceedings' which will preclude a party to the action from moving to refer the case to arbitration?
It seems to me that the mere filing of affidavits in defence to a motion for a receiver is not in the nature of an application to the Court, and consequently not a `step in the proceedings' within the meaning of the section. By such a step is meant a substantive step taken by a party. It may be that a very limited application to the Court-such as taking out a summons for extension of time-would be enough. That has been so decided in Ford's Hotel Co. v. Bartlett (1896) A C 1,
4. In Brighton Marine Palace and Pier, Limited v. Woodhouse (1893) 2 Ch. 486, before North, J., the motion was ordered to stand over to the trial, and it does not appear whether affidavits had been filed or not. But I do not think in this case the defendant has taken a `step in the proceedings' within the meaning of the Act, and therefore I think I ought to make an order in accordance with the application."
22. In the present case, the respondent contested the application under Order XXXIX, rule 2 by filing a "written statement" the very first paragraph of which contains this objection. It, therefore, demonstrates that the respondent did not loose any time in seeking protection under the "stay" section.
23. Learned counsel for the appellant then submitted that no application under section 34 was ever made by the respondent at all and, therefore, the question of stay did not arise. There is no particular form of application provided in section 34 and, therefore, if it can be demonstrated that the respondent made it clear to the Court that he was refusing to submit its jurisdiction because there was a subsisting arbitration agreement between the parties, which required that submission of the F particular dispute to arbitrators, the respondent would be deemed to have discharged his duty of making an application. Such an intention was clearly notified to the Court by the first few paragraphs of the so-called "written statement". There is no doubt, however, of the fact that the respondent did not present a separate application under section 34 but there is no indication whatsoever in this section requiring such a step to be taken.
24. Learned counsel for the appellant did make half hearted attempt to try to submit that instead of making a prayer for the stay of proceedings the respondent had, in the "written statement" said that the suit could not be proceeded with and that it was bad under the law. It has already been stated above that it is the non-submission to the jurisdiction which has to be made plain to the Court and there is no doubt that the words used in the aforesaid paragraphs do perform this function adequately. The mere fact that the respondent said that the suit was bad and could not be proceeded with because of the arbitration agreement would not take the averments out of the scope of the "stay" sections.
25. In this context it may be stated that the making of the application as such is after all a procedural matter and the rules of law relating to procedure have always to be construed so as to suppress the mischief and advance the remedy and are not to be utilised as clogs in the way of advancing the cause of justice. We are, however, not be understood as stating that rules of procedure are not meant for being obeyed, for all that we have said is that such rules have to be interpreted and construed in such a manner that they become aids to the dispensation of justice and not tools for dispensing with justice.
26: It was also vehemently argued before us that the present dispute did not fall within the purview of the arbitration agreement. The short answer to this submission is contained in clause 111 (2) of the Memorandum of Association which has already been reproduced in extenso above and which provides that the company shall, inter alia, manufacture, purchase, sell or otherwise near in products which are at present or in future will be manufactured by Messrs G. M. Pfaff A. G. And/or by certain other companies mentioned in that paragraph. The dispute in the present case relates to the sale of products said to have been manufactured by Messrs G. M. Pfaff A. G. After there being assembled into a sewing machine. This action, therefore, relates to the business of Kayser-Sartaj Company Limited. Article 180 of the Articles of Association, which also has been reproduced above, relates to disputes between the company on the one hand and, inter alia, to the share-holders on the other touching the true intent or construction, or the incidence or consequences" of the Memorandum of Association etc. Etc. The dispute, therefore, eminently falls within the scope of Article 182 and it is not correct to say that there is no subsisting arbitration agreement with regard to the point in dispute between the parties.
27. We, therefore, hold that-
(a) there is a subsisting arbitration agreement between the appellant and Kayser-Sartaj: Company Limited respondent to refer certain disputes to arbitration,
(b) the dispute raised in the present litigation falls within the scope of that agreement,
(c) the agreement does not violate the provisions of section 152 of the Companies Act or the Arbitration Act, 1940 particularly in view of the provisions of the Arbitration (Protocol and Convention) Act (VI of 1937),
(d) the respondent did make an application which is covered by the provisions of sections 3 of the Act VI of 1937 and 34 of the Arbitration Act, 1940, and
(e) that the application was made before filing "a written statement or taking any other steps in the proceedings."
The learned lower Court, therefore, acted rightly in staying the suit so far as the present appellant and Kayser-sartaj Company are concerned.
28. The second part of this appeal is concerned with the temporary injunction. The grant of a temporary injunction is the exercise of a discretion vested in the learned Court and it is not normal for an appellate Court to interfere with this exercise unless it could be shown that the same is based on other than sound judicial principles. The learned lower Court has declined to continue the injunction granted by it at the initial stage ex parte. In view of the provisions contained in Paragraph 2 (t) of the Memorandum of Association it cannot be said and this is subject to the evidence that might be produced before the arbitrator, that the appellant has a prima facie case.
We would not go into the details of this aspect of the matter because by doing so we might inadvertently make observations which might influence the arbitrator one way or the other. Since we are of the view that one of the three essentials for the grant of a temporary injunction is non-- existent in the present case, we need not discuss the other two because it is the presence of all the three conditions which can lead to the grant of a temporary injunction.
29. The appal is, therefore, dismissed but the parties are left to bear their own costs.