' Briefly stated the facts giving rise to this revision petition are that Builders Associates Limited-the petitioner filed a suit in the civil Court at Lahore on 18-10-1983 against six respondents inter alia seeking declaration to the effect that the three bank-guarantees stand fully discharged and released in favour of the petitioner and for the issuance of a permanent injunction by way of consequential relief restraining the respondents from encashing them. Recovery of a sum of Rs, 25,755,185.15 was also claimed from respondents Nos. 2 to 5 on various counts. A part of it was also claimed from the Federation of Pakistan respondent No, 1 as well. In this suit respondents Nos. 2, 3 and 4 are the American Companies namely, L. T. V Corporation, Kentron International Incorporation and Kentron Pakistan Incorporation. These respondents submitted three applications under Order 1, rule 10 lead with section 151, C. P. C seeking deletion of their names from the array of defendants.
The L. V Corporation in its application submitted that it is a non-resident foreign company having its registered office and principal place of business at L. T. V. Tower, Dallas, Texas, United States of America and has no place of business at Lahore or any other place in Pakistan and has no agent or Branch office here nor it has submitted to the jurisdiction of the Courts in Pakistan and as such the Civil Courts at Lahore have no jurisdiction over it. It was also added that the plaint neither discloses any privity of contract between the parties nor any cause of action against the petitioner and the said respondent. The Kentron International Incorporation and Kentron Pakistan Incorporation respondents Nos. 3 and 4 in their separate applications under section 21 read with Order VI, rule 11 and Order 1, rule 10, C. P. C submitted that the said companies do not carry on business in Pakistan and as such are outside the territorial jurisdiction of the Civil Court ; that the plaint neither specifies the interest and liability of nor discloses any cause of action against the respondents; that the suit based on the alleged breach of contract appears from the statement in the plaint to be barred by law as there is no private of contract between them and the petitioner and that the contract on which the suit was presumably based provided for an arbitration of the dispute. The said respondents also reserved the right to seek stay of the proceedings if it is determined that the said respondents are a party to the said contract. The petitioner in to these applications submitted that the relevant facts on which the cause of action to the petitioner arose and for which the respondents are liable to rectify the wrong and pay damages to the petitioner have stated in the plaint supported by the relevant documents establishing the involvement and liability of each of the respondents. It was further averred that the respondents have neither so far filed the written statements rebutting the contentions of the petitioner nor they have given their version of the transaction nor have made out any case justifying the deletion of their names from the plaint At this stage it is pertinent to hat respondent No, 4 in its application asserted that it does not reside in Pakistan and as such is outside the territorial jurisdiction of the civil Court. This respondent thus did not assert that it has no place of business at Lahore or any other place in Pakistan. The respondents Nos. 3 and 4 did not assert that they have no Agent or Branch Office here or have not submitted to the jurisdiction of the Courts in Pakistan as was done by L. T. V. Corporation.
2. Learned Civil Judge after hearing the parties accepted the applications of these three respondents vide orders dated 30-1-1985 and resultantly their names were directed to be deleted from the array of the defendants and the suit as against them was thus dismissed. The reason given for accepting the application of respondent No, 2 was that the plaint does not disclose any cause of action against it and as this is a foreign company, the Court has no jurisdiction to proceed against the said company. The application of respondent No, 3 was accepted observing that a careful study of the record reveals that no privity of contract exists between the petitioner and the said respondent and that the plaint fails to disclose any cause of action against it and that neither the Court has any jurisdiction nor the said respondent is a proper or necessary party to the suit. The reasons for deleting the name of respondent No, 4 recorded in the impugned order are that the documents riled with the plaint including the agreement regarding the issuance of performance bond in favour of Pakistan Railway's do not disclose any cause of action against respondent No, 4 in respect of the amount claimed in the suit and that no privity of contract exists betweeen the petitioner and respondent No,
4. It was also observed that no other agreement finds mention in the plaint which may show that respondent No, 4 had entered into any contract which. Was not kept by it thereby giving rise to a cause of action. These orders so passed on 30-1-1985 have been assailed by filing this revision petition.
3. Mr. M. A. Rahman, learned counsel for the petitioner argued that though respondents Nos. 2 and 3 are non-resident foreign companies but these respondents were functioning and conducting business in Pakistan through their agent respondent No, 4 which had established its office at Lanore and this office was functioning at Lahore at the time of the institution of the suit.. The respondent NO. 4 also got itself registered with the Registrar of Companies as a Foreign Company under the Companies Act, 1913. It was added that respondent No, 2 had given at Lahore the written assurances to the effect that respondent No, 4 was its fully owned subsidiary and that the managerial skill and financial resources of L. T. V Corporation will be used for the completion of the contract ultimately entered into with the Pakistan Railways and that respondent No, 2 has also paid a huge amount to the Pakistan Railways as damages on account of the abadoning of the contracted project. Learned counsel also submitted that in the replies to the applications submitted by the petitioner reference was made to the averments con ained in the plaint which fully disclosed the circumstances and facts constituting cause of action against the respondents and that the plaint as well as the documents attached thereto also prima facie established the existence of privity of contract between the petitioner and respondent No,
4. It was added that respondents Nos. 2 to 4 for all practical purposes are one and the same company and to establish this, sufficient basis was laid in the plaint for lifting the veil of incorparation. Mr. M. A. Rahman further argued that the banker 1. e. Respondent No, 6 on the request of and against the securities provided by the petitioner had furnished the performance bond in favour of Federation of Pakistan for the benefit of respondent No, 4 so as to meet the requirements and terms of the contract, which contract in turn was entered into executed and project allotted on account of the assurances given by respondent No,
2. It was contended that respondent No, 4 represented itself to be the company of L. T. V. Corporation respondent No, 2 as is apparent from the documents attached to the plaint.
He added that the Guarantees and the Performance Bond submitted by the banker of the petitioner were ultimately encashed as the respondents in breach of the contract had abandoned the project. According to the learned counsel the averments contained in the plaint prima facie established the accrual of cause of action and existence of privity of contract between the petitioner and these respondents. It was urged that the mere assertion of respondents Nos. 3 and 4 that they did not reside in Pakistan was not sufficient in law for holding that the civil Court had no jurisdiction that the applications submitted by all these three respondents were not supported by any affidavit and as such the assertions made in these petitions could not have been accepted on their face value; that the applications could not be accepted summarily without affording the petitioner opportunity to produce evidence in support of its assertions on the question of jurisdiction of the Court; that the civil Courts at Lahore are competent and possess necessary jurisdiction to proceed with the suit as the cause of action admittedly, arose within the jurisdiction of the civil Court at Lahore and neither nationality nor the residence of the respondents are relevant factors for determining the question of jurisdiction. It was argued that section 20 (c), C. P.
C. Confers jurisdiction on the Courts within whose jurisdiction the cause of action arose to determine the suit and that the decree passed by this Court will be recognized and enforced in Texas, United States of America, in view of the provisions contained in Uniform Foreign Country Money Judgments Recognition Act.
1981. Learned counsel for the petitioner referred to the Article titled: Obtaining Recognition and Enforcement of Foreign-Country Judgments in Texas published in the Texas Bar Journal of March, 1982 wherein the aforenoted Texas Act, 1981 has been discussed.
4. Ch. Fazal-e-Hussain, learned counsel for the Federation of Pakistan submitted that L. T. V.
Corporation was the parent company of Messrs Kentron Pakistan Incorporation at the time of signing of the contract and that L. T. V. Corporation agreed to provide necessary financial and management backing and assistance to Kentron Pakistan Incorporation. He added that after abandonment of the project by Messrs Kentron Pakistan Incorporation the ma:ter was taken up with L. T. V. Corporation which ultimately agreed to make payment of 10 Million U. S. Dollars to the Federation of Pakistan and that this amount has been paid in full and final settlement of the claim of Pakistan Railways against L. T. V. Corporation. He further added that no dialogue whatsoever was held with Kentron Pakistan Incorporation and the Pakistan Railways reserves its right to seek legal remedy against Kentron Pakistan Incorporation if the need so arises after assessment of the loss suffered on account of the breach of the contract. Syed Najamul Hassan Kazmi counsel for Dobai Bank stated that the Dobai Bank was deleted from the array of the defendants on the application of the petitioner itself by the trial Court and as such the bank has been unnecessarily impleaded in the revision petition. He, therefore, claimed costs from the petitioner. Learned counsel for Messrs Zimpex Limited respondent No, 5, however, did not address any arguments for or against the questions involved in this petition.
5. Mr. Raza Hussain Shamsi, learned counsel for respondents Nos. 2 to 4 argued that section 20 (c), C. P. C. Provides for the jurisdiction of the civil Court with reference to the cause of action only and from this provision the jurisdiction of the Court over the parties which are otherwise beyond its territorial jurisdiction cannot be inferred. He explained that the principle of extra-territorial jurisdiction is an exception to the rule of Municipal Law providing for jurisdiction with reference to cause of action. It was added that the principle laid down by the Privy Council in the case of Sirdar Gurdyal Singh v. H. H. The Raja of Faridkot (I) still holds the field and as such civil Courts have no jurisdiction over a non-resident foreign company which has neither eny agent nor any business office within the territorial jurisdiction of a Court. According to him accrual of cause of action within the territorial jurisdiction of a Court is not recognized as
(1) 1894 P R 430: (1994) A C 670 sufficient basis for conferring jurisdiction on Municipal Court by International Law unless the Court has also personal jurisdiction over the defendant. It was added that the decree sought in the suit will not be recognized and enforced in 1 eras even under the aforenoted enactment as the civil Courts at Lahore have no personal jurisdiction over the respondents. In support of the plea that the principle laid down in Gurdyal Singh's case still holds the fields despite the fact that exceptions were taken in special circumstances in some cases learned counsel cited Smith v. Indian Textile Co. (1), Naiappa v. Rangasami (2), Gaekwar Railway v. Hufiz Habib-ul-haq (3), Brajmohan v.
Kishorilal (4), Bhagwan v. Rajaram (5), Ramkisan v. Harnlukhart (6) and Moloji Nar Singh Rao v.
Shankar Saran (7). In the case of Gurdval Singh their Lordships of the Privy Counsel observed as under :- "All jurisdiction is properly territorial, and 'extra-territorium jus dicenti, impune non paretur'
Territorial jurisdiction attaches (with special exceptions) upon all persons either permanently or temporarily resident within the territory, while they are within it; but it does not follow them after they have withdrawn from it, and when they are living in another independent country. It exists always as to land within the territory; and it may be exercised over movables within the territory; and, in questions of status or succession governed by domicile, it may exist as to persons domiciled, or who when living were domiciled, within the territory. As between different provinces under one sovereignty (e. g. Under the Roman Empire) the legislation of the sovereign may distribute and regulate jurisdiction, but no territorial legislation can give jurisdiction which any Foreign Court ought to recognize against foreigners who owe no allegiance or obedience to the power which so legislates. In a personal action, to which none of these causes of jurisdiction apply, a decree pronounced 'in absentem' by a Foreign Court, to the jurisdiction of which the defendant has not in any way submitted himself, is by International Law an absolute nullity. He is under no obligation of any kind to obey it, and, it must be regarded as a mere nullity by the Courts of every nation, except (when authorized by special local legislation) in the country of the 'forum' by which it was pronounced."
I do not propose to deal with other precedents cited by the learned counsel as in all these cases the principle enunciated in Gurdyal Singh's case was followed. However, those precedents wherein the aforenoted principle was explained or elaborated may be noted. In the case of Brujmohan v.
Kishorilal Chaturvedi, J. After noticing the decision of the Privy Council in the cases of Gurdyal Singh and Girdhar Damodar v. Kassigar Hiragar (8) observed that :- "It is obvious that the 'cause of action' referred to above means only that cause of action that arises in connection with a business carried
(1) AIR 1927 All. 413 (2) AIR 1933 Mad. 393
(3) AIR 1938 P C 165 (4) AIR 1955 Madhya Bharat I
(5) AIR 1951 Born. (6) AIR 1955 Nag. 103
(7) A 1 R (962 SC 173' (8) 17 Bomb 667 on by the agent in foreign territory and should not be confused with the general 'cause of action' mentioned in section 20 (c), Civil Procedure Code".
Again in the case of Raj Ratendra Sardar Moloji in the majority judgment it was observed that the judgment of the Gwalior Court could not be regarded as having extra-territorial validity because firstly the person sued was not the subject of Ci\\alior. Lie did not owe any allegiance to the Ruler of Gwalior and'. Theretore. He was not under obligation to accept the judgments of the Court of that State. Secondly, he was not resident in that State when the suit was instituted. Thirdly, he was not temporarily present in that State when the process was served on him. Fourthly. He did not in his character as plaintiff in the foreign action himself select the forum where the judgment was given against him. Fifthly, he did not voluntarily appear in that Court. Sixthly. He had not contracted to submit to the jurisdiction of the foreign Court. The Gwalior Court, therefore, was not Court of competent jurisdiction. The judgment of Gwalior Court was, therefore, a nullity outside the United States (Madhya Bharat). On the basis of the decree passed, therefore, no action could be brought in what was British India, the decree being of a Court not of Indian State. It was further observed that a decree passed by the Court at Gwalior was in the international sense a nudity outside Madhya Bharat even though according to the law in that State it was not so. It was not correct to say that the decree suffered only from the defect of enforceability by execution. That decree suffered from a more fundamental defect of being a nullity. In Buhna Mor & Co v. Modern Trading Co. (1) it was held that where a foreign company not resident of Pakistan entered into a contract with the local company through an agent lesiding in Pakistan but whose extent of authority was not such as to indicate that the foreign company did business by them. In a suit based upon such contract the foreign company was not amenable to the jurisdiction of the Courts in Pakistan although the foreign company as principal was admittedly bound by the terms of the contract made on their behalf and by their authority. In Narayanganj Co. (Private) Ltd. v. Al. S. Simon (2) it was held that the plaintiff's claim was a claim in per.Conam and in a personal action the Court of the country in which the defendant resides will have jurisdiction to hear the claim and that there is nothing in section 20, C. P. C. Which makes an exception as regards a foreigner if the other conditions are fulfilled.
6. At the time of decision (1894) of Privy Council in Gurdyal Singh's case the doctrine of obligation (i. e. Where a foreign Court of competent jurisdiction has adjudicated a certain sum to be due from one person to the other, the liability to pay that sum becomes a legal obligation that may be enforced in other country) propounded in 1842 had gained recognition but since then nations and the International Law have marched forward by entering into bilateral and multinational conventions and by creating institutions like European Court of Justice and have thus transcended over the barriers created by tl'e traditional concept of national sovereignty. But where bilateral arrangements, treaties or multinational conventions or international institutions are not operating, the princip7es laid down in the precedents noted above still hold the field despite increase in the commerce conducted across the continents and beyond the frontiers
(1) P I D 1960 Dacca 66s (2) P I D 1959 Daoca 480 of countries as under International Law lack of jurisdiction of foreign Court over the parties or subject-matter of the suit is a well recognized reason for not recognizing a foreign judgment.
7. The personal jurisdiction or jurisdiction over the parties will lie if a defendant is domiciled in the country in which he is sued when the suit was instituted, or if a defendant-corporation has its principal place of business or was incorporated in the country or if the defendent has a business within the country and the cause of action arises out of business done through that office or the defendant has an agent residing in the country and the cause of actiL n arose out of the business done through that agent or if the defendant operates a motor-vehicle or aero plane in the country and the cause of action was connected with that operation. In addition another principle gaining recognition in international law is that the jurisdiction is proper if the defendant was personally served in the country of the judgment. This principle is based on the old concept of presence. The important aspect of this principle is that one who is served with a process while passing through a State may now be subject to the Court's jurisdiction only if his presence in the State is connected with the plaintiff's cause of action.
8.
8. Keeping in view the aforenoted principles of International Law I proceed to examine the merits of the respective submissions of the parties. In the instant case the jurisdiction of the Civil Court at Lahore over the subject-matter is not disputed. It is the jurisdiction of the Court over the respondents-defendants which is being objected to. The case of L. T. V. Corporation respondent- defendant No, 2 inter alia is ,that it is a nonresident foreign company having no business office or agent in Pakistan or within the territorial jurisdiction of the civil Courts at Lahore whereas the case of respondents-defendants Nos. 3 and 4 is that respondent No, 3 does not carry an business in Pakistan and respondent No, 4 does not reside in Pakistan and that neither there exists any privity of contract between the parties nor any cause of action to sue as against them has been disclosed. The question of non-existence of cause of action or privity of contract is different from the objection of jurisdiction raised by the respondents-defendants. These questions should not have, therefore, been dealt with by the learned trial Court together. The objection that the Court lacked jurisdiction over these respondents-defendants should have been dealt with separately and that too after framing necessary issues and allowing opportunity to the parties to lead evidence as it involved factual inquiry. The mere assertion that a defendant is a non-resident foreign company does not divest a Municipal Court of its power and jurisdiction to take cognizance and try a suit against it. The question whether L. T. V Corporation was in fact carrying on business through Kentron Pakistan Incorporation and that all these three companies were in fact on company when seen after lifting the veil of incorporation are question of fact and require to be determined after recording of evidence and holding a full inquiry. These questions cannot be properly determined summarily as was done by the learned trial Court. Once it is found that the civil Courts at Lahore have jurisdiction over the parties because o existence of any of the factors enumerated above the jurisdiction with reference to cause of action not being disputed the decree passed will be recognizable and enforceable even under the Texas Law referred to above. It may be recapitulated even at the cost of repetition that the case of the petitioner is that respondents- defendants Nos 7 and 3 operated in Pakistan through respondent-defendant No, 4 which had its office at Lahore, which office was functioning at the time of institution of the suit though senior executive had left the country in view of alleged abandonment of the project. Moreover, this fac; cannot be lost sight of that respondent-defendant No, 2 has paid 10 million U. S. Dollars to the Federation as damages on account of non completion of the project by respondent-defendant No, 4 in view of the assurances given. It is also averred in the plaint that the petitioner under the arrangement agreed between the parties was to execute certain works of the contracted projects and the petitioner was also made to furnish guarantees and performance bond in favour of the Federation for the benefit of respondent-defendant No, 4 which was in fact a wholly owned company of respondent-defendant No,
2. In these circumstances, the objection as to non- existence of the privity of contract and non-disclosure of cause of action in view of the averments contained in the plaint should have been left to be decided after the decision of the question of jurisdiction. Once the Court finds that it has jurisdiction over the respondents-defendants the above-noted two objections should then be tried along-with other issues arising on merits out of the pleadings of the parties. It is well established that peacemeal trial of a controversy neither serves the C interest of the parties nor the cause of justice.
9. The above are the reasons for accepting the revision petition vide short order dated 10-2-1986 announced in the presence of the learned counsel for the parties, for setting aside the impugned orders and for directing the learned trial Court to determine afresh the objection as to jurisdiction raised by respondent-defendants Nos. 2 to 4 after providing fair opportunity to the parties to lead evidence in support of their respective pleas, in the light of the observations made above.
10. Before parting with this judgment, I may add that order of transfer of the suit to the Court of Senior Civil Judge, Lahore was passed as learned counsel for the petitioner represented that the suit may be ordered to be tried by a Civil Judge of comparatively higher seniority and of more experience as the questions involved in the suit are complicated and important and as the learned Civil Judge had already expressed his opinion. Learned counsel for the respondents-defendants obviously had no objection to the granting of this request. The suit was, therefore, ordered to be transferred to the Court of Senior Civil Judge, Lahore, before whom the parties were directed to appear on 15-3-1986 in ,order to save time and expense of the petitioner in obtaining fresh service of the parties as the suit which was instituted in 1983 is still at its preliminary stage.
11. The parties in view of the questions involved in the case are left to bear their own costs except respondent-defendant No, 6 which will have its costs from the petitioner as it was impleaded unnecessarily despite deletion of its name from the array of the defendants and as it has claimed its costs incurred in this Court. The record of the case shall be forwarded immediately to the Court of Senior Civil Judge, Lahore.