' NAIMUDDIN, J.-The respondent filed a suit, being Suit No, 374 of 1983, against the appellants for recovery of Rs, 24,60,522 together with interest and costs for breach of contract dated 12-4-1983, whereby appellant 1 through appellant 2 agreed to sell to the respondent motor vessel "Fratzescos M" of about 7,194 gross tons and 4,097 net registered tons with light displacement understood to be about 5,077.2 metric tons or, 4,997 long tons and agreed to deliver it not later than 30th May, 1983, which period of delivery was extended to 7th June, 1983.
2. On failure of the appellant to deliver the vessel, the respondent filed the suit on the original side of this Court, as stated above.
' On service of the summons, the appellants filed an application under section 34 of the Arbitration Act, 1940, for stay of the proceedings in the suit relying on arbitration agreement contained in the contract which is in the following terms :- "If any dispute should arise in connection with the interpretation and fulfilment of this contract, the same shall be decided by arbitration in the City of London and shall be referred to a single arbitrator to be appointed by the parties hereto. If the parties cannot agree upon the appointment of a single arbitrator the dispute shall be settled by three arbitrators, each party appointing one arbitrator and the third being appointed by the Chairman of the London Arbitrators Association in London. If either of the arbitrators appointed refuse or is incapable of acting the party who appointed him shall appoint a new arbitrator in his place. If the party fails to appoint an arbitrator either original or by way of substituting for two weeks after the other party having appointed his arbitrator has sent the party making default notice by mail, cable or telex to make the appointment, the Chairman of the London Arbitrators Association shall after application from the party having appointed his arbitrator, also appoint an arbitrator on behalf of the party making default."
3. In support of the application one Muhammad Saleem, the Managing Director of appellant 2, who is the local agent and attorney of appellant 1, filed an affidavit stating that the respondent agreed to arbitration and it could be in the interest of justice and equity that the dispute alleged by the respondent be referred to arbitration and that appellant 1 was ready and willing to do all things 'necessary for proper conduct of arbitration of the dispute alleged by the respondent.
4. In the counter-affidavit filed on behalf of the respondent it was inter alia stated that the contract was entered into and was sought to be performed at Karachi and the appellant also committed its breach at Karachi. Appellant 1 was represented by an agent, the appellant 2, who is in Karachi. The evidence required was also available at Karachi. It was further pleaded that it would be convenient and in the interest of justice, if the suit proceeded at Karachi. It was further stated that in view of fraudulent conduct of the appellants in not disclosing the true title to the vessel at the time of entering into contract, it would not be just and equitable to stay the proceedings in the suit.
5. The learned Single Judge by the order dated 10-7-1983, impugned in this appeal, refused to stay the proceedings for the reasons that the contract was entered into at Karachi where appellant 2 reside and carry on their business permanently and where delivery of the vessel was to be made and the letter of credit was opened and all other formalities were completed. He also considered the reasons stated by the appellants for failure to deliver the vessel and rescinding the contract.
According to the appellants the reasons were congestion and strike at the Port of Karachi and other local conditions due to which the goods could not be discharged from the vessel. It may be stated that the vessel was to be delivered after the discharge of the cargo which she had brought to Karachi.
6. The reasons which weighed with the learned Single Judge for refusing to stay the proceedings in the suit are (1) that the entire evidence of both the parties is at Karachi, (2) that appellant 1 has its agent at Karachi who is permanently stationed here and who looked after its business and who has been joined as a defendant to the suit.And against whom the respondent has also sought decree jointly and severally, (3) that it would be most inconvenient and expensive for both the parties to have recourse to arbitration in London, and (4) that appellant 2 is not a party to the arbitration agreement and in view of the relationship between appellant 1 and appellant 2, the learned Single Judge proceeded to observe "which though by itself might not be strong ground for refusing to stay, but the fact remained that in the circumstances of the case, the foreign arbitration was not a safe or convenient forum for deciding the dispute between the parties." It has been further observed that to compel the respondent to seek his remedy at that forum might lead to denial of justice.
7. Aggrieved by the order the appellant has filed this intra-Court appeal.
8. We have heard Mr. Sajid Zahid learned counsel for the appellants and Mr. Abdul Sattar Osman Memon learned counsel for the respondent at length on two dates on the regular sitting of this Division Bench and on several dates thereafter at the end of normal sittings.
9. The first point for consideration in this appeal is 'whether the learned Single Judge has exercised his discretion in refusing to stay the proceedings on relevant consideration for it is not questionable that under section 34 of the Arbitration Act, 1940, he has discretion to stay or not to stay the proceedings and it is settled that an Appellate Court will no substitute its own discretion for that of the trial Judge except where the discretion is exercised arbitrarily or perversely Rehmatunnisa Begum an others v. Price and others (1), or where the discretion is exercised contrary to the legal principle S. S. Miranda Ltd. v. The Chief Commissioner, Karachi and another (2) and also following the observations of Lord Halsbury L. C., in the case of Susannah Sharp v. Wakefield and another (3).
"An extensive power is confined to the justices ilk their capacity as justices to be exercised judicially; and 'discretion' means when it is said that somthing is to be done within the discretion of the authorities that something is to be done according to the rules of reason and justice, not according to private opinion Or where the discretion is exercised on the basis of the assumptions not borne out by the record Serajuddin and Company v Michael Golodetz and others (4).
' Reference to the following cases on the point will not be tout of place:
(1) AIR 1917 P C 116 (2) PLD 1959 SC (Pak.) 134
(3) (1891) A C 171 (4) AIR 1960 Cal. 47 ' The Primers (Mysore) Private Ltd. v. Pothan Joseph (1), Union of India v. Messrs Hind Galvanizing and Engineering Co. PVT. Ltd. (2) and Hanuman Chamber Ltd Commerce Ltd., Delhi v. Jassa Ram Hiru Nand (3) :
10. In the first mentioned case the Supreme Court of India at p. 1158 observed as follows :- "7. Section 34 of the Act confers power on the Court to stay legal proceedings where there is an arbitration agreement subject to the conditions specified in the section. The con ditions thus specified are satisfied in the present case, but the section clearly contemplates that, even though there is an arbitration agreement and the requisite conditions specified by it are satisfied, the Court may nevertheless refuse to grant stay if it is satisfied that there are sufficient reasons why the matter should not be referred in accordance with the arbitration agreement. In other words, the power to stay legal proceedings is discretionary (emphasis supplied) and so a party to an arbitration agreement against whom legal proceedings have been commenced cannot by relying on the arbitration agreement claim the stay of legal proceedings instituted in a Court as a matter .
Of right. It is, however, clear that the discretion vested in the Court must be properly and judicially exercised. Ordinarily where a dispute between the parties has by agreement between them to be referred to the decision of a domestic tribunal the Court would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. As in other matters of judicial discretion, so in the case of the discretion conferred on the Court by section 34, it would be difficult, and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. No test can indeed be laid down the automatic application of which will help the solution of the problem of the exercise of judicial discretion. As was observed by Bowen, L. J., in Gardener v. Jay (1885) 26 Ch. D. 50 at p. 58), that discretion, like other judicial discretion, must be exercised according to common sense and according to justice."
11. The learned Judges also laid down some . Guiding principles in granting and refusing stay and it would be pertinent if we quote the principles laid down by them herein below which appear at page 1159 of the report :- "8. In exercising its discretion under section 34 the Court should not refuse to stay the legal proceedings merely because one of the parties to the arbitration agreement is unwilling to go before an arbitrator and in effect wants to resile from the said agreement, nor can stay be refused merely on the ground that the relations between the parties to the dispute have been embittered or that the proceedings before the arbitrator may cause unnecessary delay as a result of the said relations. It may not always be reasonable or proper to refuse to stay legal proceedings merely because some questions of law would arise in resolving the dispute between the parties. On the other hand, if fraud or dishonesty is alleged against a party it may be open to the party whose character is impeached to claim that it should be given an opportunity to vindicate its
(1) AIR 1960 SC 1156 (2) AIR 1973 Cal. 215
(3) Al R 1948 Lah. 64 character in an open trial before the Court rather than before the domestic tribunal, and in a proper case the Court may consider that fact as relevant for deciding whether stay should be granted or not. If there has been a long delay in making an application for stay and the said delay may reasonably be attributed to the fact that the parties may have abandoned the arbitration agreement the Court may consider the delay as a relevant fact in deciding whether stay should be granted or not. Similarly, if complicated questions of law or constitutional issues arise in the dacision of the dispute and the Court is satisfied that it would be inexpedient to leave the decision of such complex issues to the arbitrator, it may, in a proper case, refuse to grant stay on that ground ; indeed, in such cases the arbitrator can and may state a special case for the opinion of the Court under section 13 (b) of the Act. Thus, the question as to whether legal proceedings should be stayed under section 34 must always be decided by the Court in a judicial manner having regard to relevant facts and circumstances of each case.
9. Where the discretion vested in the Court under section 34 has been exercised by the trial Court the appellate Court should be slow to interfere with the exercise of the said discretion. In dealing with the matt raised before it at the appellate stage the appellate Court would normally not be justified in interfering with the exercise of discretion under-. Appeal solely on the ground that j it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised, by the trial Court 'reasonably and in a judicial manner the fact that the appellate Court would have taken a different view may not justify interference with the trial Court's exercise of discretion (emphasis supplied). As is often said, it is ordinarily not open to the appellate Court to substitute its own exercise of discretion for that of the trial Judge ; but if it appears to the appellate Court that in exercising its discretion the trial Court has acted unreasonably or capriciously or has ignored relevant facts and has adopted an unjudicial approach then it would certainly be open to the appellate Court and in many cases it may be its duty to interfere with the trial Court's exercise of discretion. In cases falling under this class the exercise of discretion by the trial Court is in law wrongful and improper and that would certainly justify and call for interference from the appellate Court. These principles are well-established ; but, as has keen observed by Viscount Simon L. C. In Charles Osenton and Co. v. Johnston ((1942) A C 130 at p. 138) the law as to the reversal by a Court of appeal of an order made by a judge below in the exercise of his discretion is well-established and any difficulty that arises is due only to the application of well-settl principles in an individual case."
12. In the case of Hanuman Chamber of Commerce a Division Bench of Lahore High Court consisting of Abdul Rashid, C. J., and Mahajan. .J., laid down the criteria for interference with the discretion by the trial Judge, in paragraph 9 of the judgment which appear at pages 65 and 66 of the report and we quote here the observations :- "Section 34, Arbitration Act, on the basis of which this application was grounded, towards its concluding portion enacts that 'such authority may make an order staying the proceedings'. The jurisdiction conferred by the section is of a discretionary nature, and the first question for determination is whether any grounds have been made out for interfering with the discretion that has been exercised by the trial Judge and the exercise of which has been held valid by a learned Single Judge of this Court. It seems to me that in a Letters Patent Appeal interference with the exercise of a discretion should not be made unless the exercise of discretion is capricious or arbitrary (emphasis supplied). This case certainly falls outside the rule."
' In this connection reference may be made to a case decided by Buckley L. J. This is the case in Freeman & Sons v. Chester Rural District Council (1). At page 790 the following observations occur which may be quoted in extenso : "1 so entirely agree with the robust good sense of Bowen L. J.'s language in Jackson v. Barry Ry. Co.
(1893) 1 Ch. 238 that if this matter had been for my judgment alone I should have been of opinion that this appeal ought to be allowed an order made to stay proceedings. I cannot find that Mr. Priest 'has done anything to unfit himself to act, or render himself incapable of acting, not as an arbitrator without previously formed or even strong views, but as an honest judge of this very special and exceptional kind.' To succeed the contractors must, in the language of Lindley L. J., in Ives and Barker v. William (1894) 2 Ch. 478 attack the character of engineers to such an extent, and in such a manner, as to show that the engineers will probably be guilty of some misconduct in the matter of the arbitration ; that they will not act fairly. "There is, I think, no such evidence in this case."
"But the matter does not turn solely upon an investigation whether under the terms of the contract the parties are bound to accept the contractual 'arbitrator. It remains that section 4, Arbitration Act, 1889, gives a discretion, and that in two ways, namely, (1) the words are permissive, not imperative, for the verb is 'may make,' not 'shall make' and (2) the jurisdiction to stay the proceedings arises if the Court is 'satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission.' Over and above the contractual rights, therefore, there exists this discretion in the Court. The Master of the Rolls is not satisfied that there is no sufficient reason why the matter could not be referred. Under these circumstances I do not think that the fact that another Judge of co-ordinate jurisdiction thinks otherwise establishes that ,there is no sufficient reason when one Judge of the Court of Appeal is not satisfied on the point. From this point of view, I can concur with the order which the Master of Rolls has proposed."
13. We may also refer to a passage from Craies pn Statute Law, 6th Edition, page 272, wherein criteria for exercise of judicial discretion invested in a Court of justice by Act of Parliament is succinctly stated. It reads : "that discretion," said Bowen L. J., in Gardener v. Jay, (2)" like other judicial discretions, must be exercised according to common-sense and according to justice, and if there is no indication in the Act of the ground upon which the discretion is to be exercised, it is a mistake to lay down any
(1) (1911) 1 K B 783 (2) (1885) 29 Ch. D 50, 58 rule with a view to indicating the particular grooves in which the discretion snould run." See : Emma silver Mining Co. v. Grant (1). But, as Lord Blackburn said as to the exercise of discretionary power by a Court of equity, "the discretion is not to be exercised according to the fancy of whoever is to exercise the jurisdiction of equity, butts a discretion to be exercised according to the rules which have been established by a long series of decisions." Doherty v. Allman (2). Therefore, as Wines, J., said in Lee v. Bude etc., Ri'. (3), if it is intended by the legislature that a discretion should be exercised, what is meant is "a judicial discretion regulatedl according to the known rules of law, and not the mere whim or caprice of the person to whom it is entrusted on the assumption that he is discreet."( Holland v. Worley (4) Pearson, J. "Discretion , said Lord Mansfield in R. v. Wilkes (5), when applied to a Court of justice, means sound discretion guided by law. It must be governed by rule, .
Nor by humour ; it must. Not be arbitrary, vague and fanciful, but legal and regular".
14. We have already mentioned in paragraph 6 of this judgment the grounds on consideration whereof the learned Single Judge refused to stay the proceedings. It may be mentioned that in the letter dated 14-5-1983, addressed by appellant 2, as local agent of appellant 1, to the respondent, in reply to a telex dated 13-6-1983, followed by the letter of the same date the stand taken by the appellant was that the vessel arrived at Karachi on 15-5-1983, but on account of strike and resulting congestion the vessel was unable to secure a berth to discharge its cargo. Accordingly, the respondent was informed that these were the factors beyond the control of the appellants due to which t e delivery of the vessel was not possible by the due date, i,e, 30-5-1983, fixed by the terms of the contract. Therefore, on the issue whether the delivery of the vessel by the due date was due to port strike and congestion at Karachi Port has to be decided on the evidence which should be available in Karachi. This evidence, if the suit was stayed had to be produced before the Arbitrator in London which was likely to involve delay in the proceedings and that too not without expenses. Now, the question is whether the consideration of these factors in refusing the stay is relevant or not. There is no doubt it is. A number of cases were cited on this point and it would be appropriate if the same are referred to here.
15. The first case in this regard to be noticed is the case of the "Athenee" (6) of the Court of Appeal.
In this case Lord Justice Bankes in giving the judgment said :- "I think the learned Judge was justified, upon the materials before him, in refusing to exercise his discretion. It is not disputed that this contract is one of the class in which a Judge of the Courts of this country has a discretion as to whether he will or will not stay the action to enable the parties to go to the tribunal which they selected. The learned Judge, in my opinion, is entitled to take all the circumstances into account, particularly the fact that the vessel is under arrest, and the fact of the dispute being in reference to the condition of the opions on arrival, and the .Fitness of the ship to carry them. Apparently there has been a survey at which both
(1) (1879) 11 Ch. D 918, 926 (2) (1878) 3 App. Cas. 709, 728
(3) (1878) LR6CP 576, 580 (4) (1884) 26 Ch. D 578, 584
(5) (1770) 4 Burr. 2527, 2539 (6) (1922) 1 LLR 6 parties were represented ; and the witnesses of the material facts are all in this country. I think there was an abundance of material upon which the learned Judge, if he thought right, could have exercised his. Dircretion in the way he did."
' It would be of great advantage, if a passage, from separate opinion of Lord Justice Atkin in this very case is also quoted here. The learned Lord after quoting a passage from the judgment of Lord Moulton in the case of Bristol Corporation v. John Aird & Co. (1) said : "I think that applies to a case of this kind. The question arises in respect of a clause to refer to a foreign tribunal as to a clause to refer to "a domestic tribunal, whether there are proper reasons for not enforcing it. To my mind there were ample reasons for the learned President not enforcing it in this case. I think the balance of convenience and the substantial advantage which the plaintiffs have by suing in this country (and which they lose by not being able to proceed in rem against this ship), and many other advantages such as in respect of proof of loss, a matter which any Commercial tribunal would wish should be decided, if possible, having .Regard to the evidence obtained at the time by inspection of the vessel and so on-all those grounds seem to me to afford ample reason for the learned President coming to the conclusion that, in the circumstances of this particular case, the clause in the contract should not be given effect to."
' The above-cited case has been followed in the case of "Fehmarn" (1958) 1 W L R 159, which is also a decision of Court of Appeal. In this case the facts as taken from the headnote of the report wee that the plaintiffs, as English Company and the holders of a bill of lading which acknowledged the shipment at a Russian Port, in apparent good order and condition. Began an action against the owners of the German vessel in which the tame-tine was carried for damages arising out of a dispute under the bill of lading that all claims and disputes arising thereunder "shall be 'judged' in U.S.S.R.". One of the main factors that was taken into consideration in this case was as to where the evidence of the condition of the good; was when the goods arrived, and I may quote the words of Lord Denning "it depe,ds on evidence here as to the condition of the goods when they arrived here in L. Radon and on evidence of the ship, which is a frequent visitor to London." Hodson, L. J., who agreed with Lord Denning referred to the decision in the case of "Athenee" and observed as follows :- "Looking at the facts in the Athenee (1922) I t Llyod's Law Report 6, I am bound to say that it makes the argument for the defendants very difficult when an attempt is made to distinguish that case.
Because the application for a stay was made to the President and, in exercising his discretion in refusing to stay the action, he refereed to matters which come under the heading. 1 think, of convenience and the Court of Appeal (Bankes and Atkin L. JJ., Warrington L. J.. Agreeing with Bankes L. J.) referred to matters of the same kind as those which the Judge had to consider in the- present csae namely, the dispute being as to the condition of the cargo on arrival and the fitness of the ship to carry them and there having been a survey, at which both parties were represented.
It is true that in the .4thener (ibid) it was said that all the witnesses were in this country. Wherrali
(1) (1911) A C 241 ' In this case it is clear that there will be witnesses or may be witnesses some of whom will not be in this country."
16. It will be seen from the above-cited cases that the ground of availability of evidence in the country where the goods or vessel was to be delivered has not only been considered by the English Courts as the relevant factor but it is also considered so in other foreign jurisdictions namely, India and Canada and it would be of advantage, if I refer to the cases from those jurisdictions.
17. In the case of Michael Golodetz and others v. Serajuddin and Co. (I) the Supreme Court of India also considered the availability of evidence in India as a relevant factor. Facts of that case as taken from the headnote were that an agreement between an Indian Firm and an American Company for supply of manganese are provided for arbitration of their disputes is New York according to American Arbitration Association Rules. On arising of a dispute the Indian Party filed a suit in Calcutta High Court. The defendant Company applied for stay of suit under section 34, Arbitration Act. The law applicable to the dispute was Indian Law. All evidence was in India and there were difficulties in respect of foreign exchange which practically made it impossible to the Indian firm to attend or to take their witnesses to New York. The proceeding in New York would thus be in effect ex parte and result in injustice to the Indian party". On these facts it was observed that "(4) The High Court addressed itself to the question, whether the pleas raised by the respondents constituted sufficient reason within the meaning of the Arbitration Act, and pointed out, and in our judgment it was right in so doing that the statement made in the affidavit of the respondents had remained practically unchallenged, that all the evidence in the case relating to the dispute was in India and that was a strong ground for not exercising the discretion in favour of the appellants, (emphasis supplied). It must be observed that having regard to the severe restrictions imposed in the matter of providing foreign exchange to individual citizens it would be impossible for the respondents to take their witnesses to New York and to attend before the arbitrators at the arbitration proceedings to defend the case against them and the proceeding before the arbitrators would in effect be ex parte. That would result in injustice to the respondents.
Undoubtedly the appellants would be put to some inconvenience if they are required to defend the suit filed against them in India, but the High Court has considered the balance of inconvenience and the other circumstances and has come to the conclusion, and in our judgment that conclusion is right, that the facts established make out 'sufficient reason' for not granting stay."
18. There is no doubt that in this case one of the other factors that was considered was that the law applicable to the contract was Indian law. Nontheless the availability of all evidence in India was considered to be a relevant factor.
19. Here reference to yet another case from the Supreme Court of India would be useful. In Ramji Dayawala & Sons (P) Ltd. v. Invest Import (2), wherein the Supreme Court of India considered the following circumstances as relevant for refusing stay of the proceedings : "(a) At the time of institution of the suit the entire evidence both of
(1) A R 1963 SC 1044 (2) 1982 P SC 12 the appellant and the respondent was in this country ; the contract as a whole was executed and carried out in this country ; the claim as a whole arose in this country ; the appellant is a company incorporated in this country and the respondent is having its office in this country.
(b) The cost of arbitration to be held at Paris would be so disproportionately high to the amount claimed in the suit that forcing the appellant to go to arbitration would be denial of justice.
(c) There are restrictions on availability of foreign exchange. The judicial approach is not whether the appellant would get necessary foreign exchange but the approach is should this valuable national asset of foreign exchange be frittered away for resolving a petty matter which can be conveniently resolved even in this country ?".
20. Now, we may refer to a decision from Canadian jurisdiction which is a decision of the Federal Court of Canada (Trial Division) in Distillers Co. Ltd. And others v. M. V. "Agelosraphael" and others (1). In this case the facts as taken from the headnote were that on or adoutl 31st October, 1976, a cargo of grain was loaded at Toledo, Ohio, on the first defendant motor vessel "Agelosraphael", which was owned by the second defendants, a company incorporated in panama and under a time charter-party to the third defendants who were also a foreign incorporated company for delivery at Leith, Scotland. .
' She was operated by a Greek company with its principal place of business in London. Her officers and engineers were Greek and had their homes in a Greece. The bill of lading contained an arbitration clause. Stating that any dispute arising Wider it should be referred to arbitration in London and should be governed by English Law. On 6th November, 1976, the vessel collided with another ship in the St. Lawrence River and sustained damage to her bow. She proceeded to Lauzoa for repairs. After being repaired she left the shiprepairer's yard under tow by three tugs on 22nd December, 1976. She grounded and water entered four of her holds. She was refloated the next day, and on 6th January, 1977, was towed to a berth in the harbour of Quebec City. The cargo, of which the plaintiffs were the consignee, was inspected and found to be damaged.
' The plaintiffs brought an action against the defendants claiming damages and got the vessel arrested.. The defendants applied (i) for leave to file a conditional appearance to contest the jurisdiction of the Court and the arrest of the vessel, or (ii) to have the plaintiffs' action suspended or dismissed, because of the arbitration clause in the bill of lading.
' The defendants contended that one of the plaintiffs' expert witnesses was from New York and another from England, and that the Managing Directors of the vessel were in London. On the other hand the abandonment of the voyage took place in Canada and the grounding to the vessel occurred while the vessel was under tow in Canada with the result that the principal evidence would be in Canada. Further. The tugs and the Pilot were Canadian, and there was nothing to indicate that the officers and crew would be more readily available for evidence in arbitration proceedings
(1) (1978) I L P.1(2.-* in England than they would be at the trial of the action in Canada since they had already left the vessel and had scattered. On consideration of these facts it was held that :-
(1) the arbitration clause did not have the effect of depriving the Court of jurisdiction to entertain the action ;
(2) there was no doubt that full effect should be given to an arbitration clause and that the parties should be bound by it unless there was strcng reason to conclude that on the balance of convenience it was better that the matter should be decided in the Court in which the action was brought ; and
(3) on the evidence in the present case, the balance of convenience was. In favour of the proceedings being continued in Canada rather than being submitted to arbitration in England.
21. We shall now refer to some cases from our own jurisdiction. The first judgment to be noticed is by Saeeduzzaman Siddiqui, J., in the case of Akber Cotton Mills Ltd. v. Messrs VeslOjuanojo.Objedinenije Tech! Amesh Export and another (1). In this case the facts that all evidence was available at Karachi and the nature and volume of evidence made it impossible and impracticable for the plaintiff to produce it before Arbitrai tion Tribunal in Moscow were considered as relevant factors and the stay of the proceedings in the suit was not granted. The judgment was affirmed in intra-Court appeal by us although on a different ground namely, that the defendants had taken steps in the proceedings before filing an application for stay of the proceedings.
22. In the case of Messrs Mercantile Fire and General Insurance Co. Of Pakistan Ltd., Karachi v.
Messrs Arcepey Shipping Co., U. S. A. And another (2) one of us namely, Mr. Justice Naimuddin had the occasion to say that the convenience of the parties and witnesses have always been taken in- o consideration while exercising the discretion under section 34 of the Act, 1940. Reliance was placed on South East Asia Co., Ltd. v. H. & M. (Ind.) P. Ltd., (3) and M. M. Yaseen v. Messrs Irving R.
Boody & Co. (4).
23. Naimuddin, J., again had occasion to deal with this question in the Admiralty Suit No, 92 of 1977, Messrs Aslo Marine). Ltd. v. M. 7'. Magda and another (decided on 8th December, 1981 now reported in PLD 1985 Kar. 745) and this is what was said :- "The convenience of the parties and witnesses have always been taken into consideration while exercising discretion under section 34 of the Arbitration Act."
24. There are also cases where the question of availability of foreign exchange and expenses involved has been considered to be relevant considerations. (See : S. E. Asia Co. Ltd. v. If. & M. (Ind.)
P. Ltd., Serajuddin & Co. v. Michael Golodetz, Al. M. Yaseen v. Messrs Irving R. Boody -& Co., New England ladu.Tries Inc. v. The Province of Eat Pakistan (5). It is, therefore, clear that the learned.Judge exercised his discretion on relevant consideration.
(1) 1984 C b C 1605 (2) PLD 1978 Kar. 263
(3) AIR 1962 Cal. 128 (4) PLD 1957 Kar. 755
(5) 20 D L R 226 (S Cl
25. The learned counsel for the appellant however, submitted that in dealing with commercial contracts, effect must be given to the obvious intention in agreement of the parties. In other words, he submitted that the parties should be made to stick to their bargain. In support of the submission, he relied on a number of decisions from foreign jurisdiction and of our own Court, wherein the proceedings were stayed. These are Sinith v. Pearl Assurance Company Li nited (1), Ford v. Clarkson. Holidays Limited (2), Distillers Company Limited v. m. v. Agelos Raphael, Tzorizis and another v. Moaark Line .918 (3), The Cap Blanco (4), Birks Crawford Limited v. The Ship Stromboli (5), Rungta Sons Private Limited v. Jugometal Trg. Repiiblike and another (6), The Universal Life and General Insurance Comyany Limited, Lahore v. Ejaz Mahmood (7), Haji Soomar Haji Hagan v.
Muhammad Amin Muhammad Bashir Limited (8), Sweedish East Asia Co., Limited v. B. P. Herman and Mohatta (India) Private Limited (9), Island Textile Mills Limited, Ka achi V. .V10 Te -hnoerpert and attother (10), Mrs. Rashida Sayeed v. Metropolitan. Development Corporation Limited and another
(11) and Serajuddin and Company v. Michael Golodetz.
26. We regret that such a broad proposition cannot be accepted. In support we may refer to contracts containing eAclusive jurisdiction clause which has not been accepted in any country being derogatory to the sovereignty of an independent country. However, such a clause is given effect to as an arbitration clause which come within the exceptions to section 28 of the Contract Act.
27. It would be of advantage if reference is made here to the following dictum of I4amoodur Rahman, C, J., in M. A. Chowdhary v. Messrs - Mitsui 0. S. K. Ltd. And 3 others (12) which appears at page 393 of the report :- "My examination of the treatment given to such foreign jurisdiction clauses by Courts in different countries leads me to the irresistible conclusion that nowhere have the Courts gone to the same extent as . The Courts in East Pakistan. In no country has any Court accepted that such a foreign jurisdiction clause in a contract can legally oust the jurisdiction of the municipal Courts of the country, but the tendency actually seems to be that such a foreign jurisdiction clause, which is derogatory to the sovereignty of an independent country, should not be recognized. Even in Great Britain the British Maritime Law Association Agreement of 1st August, 1950 has now, inter alia, provided that in the event of any claim being contested by legal process, the ship-owner will not rely on any provision in the contract of carriage stipulating that claims must be referred to tribunals outside the United Kingdom. This is significant change."
(1) (1939) 63 LLR 1 (2) (1971) 3 A E R 454
(3) (1978) 1 LLR 405
(4) (1913) Folio 184 C A Pro. Div. Pp. 130 to 136
(5) (1953) Ex. C R I (6) AIR 1959 Cal. 423
(7) PLD 1978 Lah. 475 (8) 1981 SCMR 129
(9) AIR 1962 Cal. 601 (10) 1979 CLC 307
(11) 1982 CLC 1039 (12) PLD 1970 SC 373 ' Proceeding further the learned Chief Justice observed "I am of the opinion that in order to preserve the sanctity of contracts I ought also to hold, as was done in the earlier cases in Great Britain that such foreign jurisdiction clauses, even when they purport to give jurisdiction to a Court in a foreign country, are really in the nature of arbitration clauses which come within the exceptions to section 28 of the Contract Act and, therefore, should be dealt with in the same manner as other arbitration clauses."
28. It was further submitted that since arbitration proceedings were to be held in England, therefore, the Law of England would apply to the contract and in case the suit is allowed to proceed in Karachi, the appellant will be deprived of a valuable right. In reply it may be stated that in 'cases where the parties enter into a contract they also impliedly agree that in a case a suit is filed in this country the. Provisions of the Arbitration Act including section 34 thereof would be applicable and in such a case the question that a party to the contract would be deprived of the benefit of foreign law is firstly, based on an assumption which may or may not be correct, secondly, it is implied term of the contract that the law of the land to which the contract is closely related would apply and as such this argument has no validity. I quote a passage from the opinion of Lord Denning in the case of The Fehmarn which reads as follows :- "It has been said by Mr. Roche that this contract is governed by Russian law and should be judged by the Russian Courts, who know that law. And the dispute may involve evidence from witnesses in Russia about the condition of the goods on shipment. Then why, says Mr. Roche, should not it be judged in Russia as the condition says ?
' I do not regard the choice of law in the contract as decisive. I prefer to look to see with what country is the dispute most closely concerned. Here the Russian element in the dispute seems to me to be comparatively small. The dispute is between the German owners of the ship and the English importers. It depends on evidence here as to the condition of the goods when they arrived here in London and on evidence of the ship, which is a frequent visitor to London. The correspondence leaves in my mind, just as it did in the Judge's mind, the impression that the German owners did not object to the dispute being decided in this country but wished to avoid the giving of security.
I think the dispute is more closely connected with England than Russia, and I agree with the judge that sufficient reason has been shown why the proceedings should continue in these Courts and H should not be stayed. I would, therefore, dismiss the appeal."
29. Now, remains the cases cited by the learned counsel for the appellant to be considered. It may be stated that each case is to be decided on its own facts and generally the facts of two cases are seldom similar.
However, the principles generally speaking for granting or refusing stay of the proceedings in view of the arbitration agreement have been after reviewing the earlier decisions succinctly stated in "The Eleftheria", (1969) 2 A E R 641, which has been cited with the approval by the Supreme Court of Pakistan in M. A. Chowdhury v. Mistsui S. K. Lines Ltd. An 3 others. These principles are : "(1) where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court and the defendants apply fo stay, the English Court, assuming the claim to be otherwise within it jurisdiction, is Dot bound to grant stay but has a discretion whether to do so or not ;
(2) the discretion should he exercised by granting a stay unless strong cause for not doing so is shown ;
(3) the burden of proving such a strong cause is on the plaintiff ;
(4) in exercising its discretion the Court should take into account all the circumstances of a particular case ;
(5) without prejudice to (4) above the following matters, where the arise can properly be taken into account ;
(a) in what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts ;
(b) whether the law of the foreign Court applies and, if so, whether differs from English law in any material respects ;
(c) with what country either party is connected, and how closely ;
(d) whether the defendants genuinely desire trial in the foreign count,-or are only seeking a procedural advantage ;
(e) whether the plaintiffs would be prejudiced by having to sue in the foreign Court, because they would-
(1) be deprived of security for that claim ;
(ii) be unable to enforce any judgment obtained ;
(iii) be faced with a time bar not applicable in England ; or
(iv) for political, racial, religious of other reasons be unlikely to get a fair trial."
30. In view of the above stated principles we have to see what principles are attracted in a given case and on consideration whereof stay of proceedings should or should not be granted. It is, therefore, not necessary to discuss the cases cited by Mr. Sajid Zahid in detail. However, we may yet discuss some of the cases cited befors us. First we would take up English decisions.
(i) In Ford v. Clarkson Holidays Ltd. (1), the ground that a reference would entail more expense than would be necessary if the matters came before the Court was not considered to be sufficient reason on the authority of Denton v. Legge (2). And in the case on hand the main ground on consideration whereof the stay of proceedings was refused was that the entire evidence in support of the defence plea was in this country.
(ii) Considering the case of Tzortzis and another v. Monark Line A/B (3) it may be stated that in this case it was held that "although apart from the arbitration clause the contract had its closest and most real connection with Sweden, the parties by choosing the City of London as the place of arbitration had impliedly chosen English Law as the proper law of the
(1) (1971) 3 All E R 454 (2) (1895) 72 I. T 626
(3) (1968) 1 W L R 406 contract." In this case however, Lord Denning M. R., was of the view that "if there is an express clause in a contract providing what the proper law is to be, that is conclusive in the absence of some public policy to the contrary. Where there is na-express clause, it is a matter of inference from the circumstances of the case." In the case on hand there is no express clause in the contract and no part of the contract was to be per-formed in England or anything else was to be done there except that the venue of arbitration was fixed In London and in case of dis-agreement of the parties on the appointment of single arbitrator each party was to appoint one arbitrator and the third arbitrator was to be appointed by the Chairman of the London Arbitrators Association in London. Therefore, the cited case and the argument based thereon are of not much help.
(iii) In Smith v. Pearl Assurance Co. Ltd. (1), the Court of Appeal held that "plaintiff's poverty was not a sufficient ground for exercising any discretion that the Court might have to refuse to order a stay". This case is again of no help as no such point is involved in the case under appeal.
31. So far as Indian cases are concerned it may be stated that in Serajuddin and Co. v. Michael Gr,lodetz and others, in paragraph 36 of the judgment it was observed as follows :- "36. It is undeniable that the parties are prima facie bound by the arbitration clause and, normally, they should be asked to keep to their bargain and the suit should be stayed but that places no insurmountable bar in the way of the party, seeking to avoid arbitration and maintain the suit. It only casts upon him the onus, undoubtedly, a heavy one, of satisfying the Court that there is sufficient reason why the matter in dispute should not be referred to arbitration, but that onus can certainly be discharged in a proper case. The agreement or contract to refer to arbitration is not necessarily decisive on the point and it creates no estoppel, so far, at least, as the Court is concerned ; it only raises a prima facie case or presumption in favour of a decision by arbitration, but that presumption is certainly rebuttable and is liable to be rebutted by appropriate grounds and circumstances in a particular case."
(i) Then reference was made to the following observations of Lord Parker of Waddington in Bristol Corporation's case :- ".... The Court has to be satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission. In making up its mind on this point the Court must, of course, give due consideration to the contract between the parties ; but it should, I think, always be remembered that the parties may have agreed to the submission precisely because of the discretionary power, vested in the Court under the Arbitration Act. They may, very well, for, instance, have said to themselves. 'If, in any particular case, it would be unfair to allow the arbitration, we are agreeing to, to proceed, we shall have the protection of the Court."
(ii) Proceeding further the learned Judges in this very case inter alia observed as follows :- "38. In the instant case before us, it is clear from the affidavits and the nature of the disputes between the parties and the facts and
(1) (1939) 1 A E R 95 circumstances, referred to bereinbefore, that, practically speaking, the whole of the evidence, necessary for determining the disputes between the parties, would be in India and no part of it would be in America. At any rate, no part of it can be produced in America without considerable difficulty and loss of time and money. Practically also, it is now the admitted position that the Indian Law of Contract or. In other words, the Indian Contract Act would govern the rights and obligations of the parties in regard to the disputed contract."
' It will be seen that the above observations go a long way to support the view taken by the learned Single Judge.
32. This case was taken to the Supreme Court and the Supreme Court in paragraph 4 of the judgment observed as follows :- "4. The High Court addressed itself to the question, whether the pleas raised by the respondents constituted sufficient reasons within the meaning of the Arbitration Act, and pointed out, and in our judgment it was right in so doing, that the stetement made in the affidavit of the respondents had remained practically unchallenged that all the evidence in the case relating to the disputes was in India and that was a strong ground for not exercising the discretion in favour of the appellants. It must be observed that having regard to the severe restriction imposed in the matter of providing foreign exchange to individual citizens it would be impossible for the respondents to take their witnesses to New York and to attend before the arbitrators at the arbitration proceeding to defend the case against them and the proceeding before the arbitrators would in effect be ex parte. That would result in injustice to the respondents. Undoubtedly the appellants would be put to some inconvenience if they are required to defend the suit filed against them in India, but the High Court has considered the balance of inconvenience and the other circumstances and has come to the conclusion, and in our judgment that conclusion is right, that the facts established make out 'sufficient reason' for not granting stay."
33. In view of this highest authority from Indian jurisdiction, it is not necessary to discuss other cases from Indian Jurisdiction cited by the learned counsel for the appellant.
34. Now, so far as two cases of our own Courts are concerned namely, Island Textile Mills Ltd., Karachi v. V/O Technoexpert and another, Mrs. Rashida Saveed v. Metropolitan Development Corporation Ltd. And another, we may state that in the first named case reliance was placed on the principle that the Court should not lightly release the parties from their bargain that follows from the sanctity which the Court attaches 'to contracts. But this principle cannot be accepted as an absolute rule without qualification and mentioned hereinbefore, particularly in cases under section 34 of the Arbitration Act, in 'view of the discretion vested in Court under the said provisions. It was then pointed out by the learned counsel for the appellant that the evidence would be in Pakistan was not accepted as sufficient ground in the cited case. In this connection reference was made to the 'following observations :- "It was known to the plaintiffs at the time of entering into the contract that in case they would file any claim against defendant No, 1, the arbitration would be through the Foreign Trade Arbitration Commission for the Chamber of Commerce in Moscow. It was also known to the plaintiffs that the subject-matter of the dispute would be at Karachi and that their evidence would be in Pakistan. In my view, a party having entered into an agreement after having the knowledge of the above facts cannot defeat the arbitration clause on the above ground."
(e) I cannot be unmindful of the well-established principle that the Court should not ligntl release the parties from their bargain, that follows from the sanctity wnich the Court attaches to contracts.
In the instance a foreign State owned enterprise is involved, which entered into the contract in question on the basis that in case any claim would be made against them, the same would be adjudicated upon as per aforesaid arbitration clause but the plaintiffs wish to defeat the above clause with the aid of this Court. If Pakistan desires to acquire a respectable place in the community of nations, not only the Government, but even individuals are expected to honour their commitments to the foreign parties."
(i) in regard to the above observations with utmost respect we may state that mere knowledge of the parties that the subject-matter of dispute or the evidence relating thereto would be at certain place would not by itself be conclusive for deciding whether the matter should proceed before the arbitrator or it should proceed in Court. In any case, in the present case the reasons for non- delivery of vessel given by the appellant were that there was congestion and strike at the Port of Karachi. This situation could not in the contemplation of the parties at the time of signing the contract or that the evidence relating to the dispute would be at Karachi.
35. Taking up the case of Mrs. Rashida Sayeed it may be stated that in this case what was urged in support of the plea that the arbitration agreement should not be enforced was (a) that it was vague, uncertain, unenforcible and illegal, (b) that the subject-matter of the suit in any case was not covered by the arbitration clause. Hawever, the learned Judges found that the arbitration agreement was neither vague nor suffered from any of the defect urged by the learned counsel for the appellant and consequently the suit was stayed. There is however, no discussion of any principles under consideration in the case.
36. In any case we cannot substitute our view for the view of the learned Single Judge even if a different view of the matter was possible so long as we find that the learned Single Judge has exercised his discretion on relevant consideration.
37. In conclusion we find no merits in this appeal and accordingly dismiss it, leaving the parties in the circumstances of the case to bear their own costs.