1. ' This is an application under section 34 of the Arbitration Act, whereby it is prayed by the defendant No,1 that the suit be stayed in view of the fact that the dispute raised in the plaint is covered by an Arbitration clause. The Arbitration clause in the contract between the parties is as follows: - "40.1. All disputes of any nature arising out of this agreement or in connection with it, which cannot be settled amicably within three (3) months may be submitted by either party to arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Paris and with the following provisions: 40.2. The Arbitration Court will consist of three Arbitrators as follows: each party will appoint one Arbitrator and these two Arbitrators will appoint the third Arbitrator who will be also their Chairman.
2. Should the two arbitrators appointed by the parties not agree upon the nomination of 'the third arbitrator within 30 days after their nomination the third arbitrator will be appointed by the President of the International Chamber of Commerce in Paris at the request of one of the parties.
3. ' The parties desiring to submit a. Dispute to arbitration will give a written notice of this desire to the other party mentioning the name and address of the arbitrator appointed by it. The party who receives such a notification will appoint an arbitrator within one month (1) from the receipt of the notification or otherwise the second arbitrator will be appointed at the request of the first party by the President of the International Chamber of Commerce in Paris.
4. 40.3. The Arbitration Court will decide by majority vote. The Arbitrators will take into consideration any dispute or difference arising between the parties and their award will give the reason for their decision and the arbitrators will endeavour to give their award within three (3) months after. The appointment of the Arbitration Court.
5. 40.4. The decision of the Arbitration Court is final and binding.
6. 40.5. The Arbitration Court, will be seated in Paris. However, no Arbitration or legal proceeding arising under this Article will be started by the Sub-Contractor until the MECHANICAL ACCEPTANCE or the termination of this Agreement.
7. 40.6. Notwithstanding the commencement of arbitration proceedings the parties shall continue to perform their obligations with due diligence under this Agreement.
8. ' It is further stated that the defendant No,1 was at the time of commencement of proceedings and is still willing and ready to do and perform all things and acts necessary for the enforcement of the arbitration clause and the proper conduct of arbitration proceedings thereunder.
9. ' The application was opposed by the plaintiff. It was alleged that the same was made only to delay the passing of the decree and to bypass the contractual obligation. The venue of arbitration, being at Paris and French law to regulate the contract, an arbitration was neither feasible nor just in the circumstances. It would on the contrary be abortive on account of the location of the work at Karachi where all the witnesses are available and the large number of documents on recard including those pertaining to third parties are locally located.
10. ' Before proceeding further it will be useful to re-produce the brief facts of this case:- M/s. Attock Cement Pakistan Limited, defendant No,2 is a Pakistani Corporation engaged in the setting up of a Cement Plant at Lasbella. In pursuance to an invitation for executing the above project, defendant No,1, M/s. Uzin Export & Import Enterprizes Firm submitted their proposal which was accepted by defendant No,2 and a building contract was executed between them. Defendant No,1, later on entered into an admissible sub-contract with, inter alia, the plaintiff Macdonold Lyton and Company Limited. The plaintiff claims to have executed major part of the building contract and was expected to complete it within the specified time. He, however, alleged that the defendant No,1 had not paid him the contractual dues and had also created difficulties in the execution of the contract, perhaps with a view to shake off some of the liabilities towards the defendant No,2 on the Plaintiff. Hence this suit for declaration and injunction against re-entry and recovery of Rs,3.15 crores as well as interest."
11. ' The suit has been contested both by defendant No,1 and defendant No,2, who have filed separate written statements. Defendant No,1 has admitted having taken the contract of construction from defendant No,2 and having given the same on sub-contract to the plaintiff, after the previous sub- contractor MIC failed to successfully carry out the same. He however denies to have put any obstacles in the way, of the plaintiff or to have withheld his payments. He also denies his liability for damages. He on the contrary alleges that the plaintiff is liable for damages on account of delay in the completion of work. He has admitted that the plaintiff has now completed the work though after the scheduled date. Defendant No,1 has alleged that defendant No,2 has unlawfully and forcibly effected re-entry and having taken over possession of the project is driving benefits of the plaintiff's work.
12. ' He has also taken over the machinery brought by persons of sub-contractor MIC at the instance of defendant No,l. Hence the defendant No,2 is liable to make payments to the plaintiff. He has alleged that he is not liable to make any payments to the plaintiff. His main contention was that the suit could not proceed in this Court as there was an arbitration clause provided in the contract.
13. Defendant No,2 has not denied the above facts.
14. ' His main defence is that since there was no privity of contract between him and the plaintiff, therefore, he was not liable to pay anything to the plaintiff. Now let me revert to section 34 of the Arbitration Act which reads as under:- "34. Power to stay legal proceedings where there is an arbitration agreement. Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings, and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may mare an order staying the proceedings."
15. ' It was first contended by Mr. Nasim Farooqui that the plaint in this suit was filed on 23-12-1985.
16. Thereafter, the defendant No,1 had taken several steps in these proceedings. The first is the filing of vakalatnama on 21-4-1986. The defendant No,1, then made an application under section 151, C.P.C.
17. Being C.M.A. No,2438 of 1986 on 6-5-1986. Simultaneously the defendant filed a statement in writing in the Court on 5-5-1986. Then he filed an application under Order VII, Rule C.P.C. (C.M.A. No,2612 of 1986) on 13-5-1986 for rejection of the plaint on various grounds. All these applications were filed before the present application under section 34 of the Arbitration Act was filed by the defendant No,l.
18. ' He further submitted that after filing of the application under section 34 of the /Arbitration Act also the defendant No,1 had filed its written statement on 30-5-1988 and had taken many other steps in the proceedings.
19. ' Mr. Nasim Farooqui contended that 'waking the above applications and statement amounted to taking of steps in the proceedings which according to section 34 of the Arbitration disentitled the defendant No,1 from making a request to the Court for stay of the proceedings for a reference to arbitration.
20. ' I am afraid I cannot persuade myself to agree with the contention of Mr. Nasim Farooqui. Filing of a vakalatnama does not by any stretch of argument amount to the taking of a step in the proceedings within the meaning of section 34 of the Arbitration Act. Application under section 151 (C.M.A. No,2438 of 1986) contained a request by the defendant No,1 for vacating ex parte orders prohibiting the plaintiffs from encashing of the bank guarantee and performance bond. It was pointed out in that application that the defendant had engaged lawyers who had been seeking copies to file counter-affidavit or to take such other steps as were necessary while the plaintiff fraudulently and by misrepresentation obtained these ex parte orders. Such an application also, therefore, cannot be treated as a step in the proceedings. Application under Order VII, Rule 11, C.P, C.
21. (C . M.A. No,2612 of 1988) is an application for rejection of plaint wherein one of the grounds is that suit is barred by the Arbitration Act while the other two are that the plaint does not disclose any cause of action and the relief claimed is against the law, Hence this application does not display an intention on behalf of defendant No,1 to proceded with the suit. The statement dated 5-5-1986 is an intimation to the Court that necessary papers were delivered by the plaintiff to the counsel for defendant No,1 and therefore he was not pressing the application under section 151, C.P.C, and requested for time to file counter-affidavit to the injunction application which also does not amount to a step in the proceedings. Thereafter, the stay application was filed on 30-5--1988. After the stay application the written statement was filed by defendant No,1.
22. ' It may be stated that the steps taken by a parry after the filing of the application under section 34 of the Arbitration Act do not disentitle him to ask for a stay of the proceedings is only the steps which are taken before making of an application under section 34 of the Arbitration Act that could disentitle the party to ask for a stay. Hence the written statement which was filed after the filing of section 34 application would not debar the defendant from seeking the stay. Reliance in this connection was placed on a ruling :rom Indian jurisdiction, reported in AIR 1978 Cal. 520 (Brige Gopal v. S. Mukerjee) wherein it was held that steps taken after filing of an application under section 34 of the Arbitration Act were irrelevant for consideration in an application for stay of the suit thereunder. Now let us examine whether the above applications and statements which were made before the filing of section 34 application amount to steps in the proceedings.
23. ' The principle underlying this section is to force a contumacious party who had agreed to arbitration from resorting to any sort of proceedings other than an arbitration and grant relief to a party who is sincere and anxious to resort to the arbitration proceedings and is not ready and willing to submit to any other form of proceedings. Thus, the true test for determining whether an act is a step in the proceedings or not would be as to whether it displays an unequivocal intention to proceed with the suit and to give up the right to have the matter disposed of by arbitration.
24. Reference in this connection may be made to PLD 1981 SC 553 (P.I.A. v . Pak Saaf Dry Cleaners), where it has been held that the defendant must make it abundantly clear that he wants to avail of the provision of stay under this section at the earliest possibly opportunity, so as to leave no manner of doubt that he wishes to have resort to arbitration proceedings. If he hesitates in this regard or allows the suit to proceed in any manner, the conduct would indicate that he has abdicated his claim to have the dispute decided under the arbitration clause, and to have thereby forfeited his right to claim stay of the proceedings in the Court. The true test is that the contents of the application as well as surrounding circumstances leading the party concerned to make application should display an unequivocal intention to proceed with suit and to give up right to have matter disposed of by arbitration. Hence this contention of Mr. Nasim Farooqui, Advocate cannot prevail as none of above applications or statements displays an intention to proceed with the suit.
25. ' The second contention of Mr. Nasim Farooqui was that the defendant No,1 had not specified the dispute in the application and therefore the application under section 34 of the Arbitration Act was not proper. He has relied upon PLD 1958 Lah. 208 (Novelty Cinema v. Firdaus Films) in this behalf. I have gone through this ruling minutely. It does not say that if the dispute is not specified in the application, the application would become infructuous or invalid. Hence the second contention of.
26. Mr. Nasim Farooqui also does not hold any water. Useful reference in this behalf may also be made to an unreported decision in H.C..A. No,111 of 1984 Port Qasim Authority v. Areach (Pakistan), Limited where it was held that it was not necessary to specify the dispute in the application.
27. ' The third and the last contention of Mr. Nasim Farooqui is that the building site is situated at Hub (Lasbella) in Pakistan and therefore it will be inconvenient for the plaintiff to carry the evidence etc. To Paris which is situated in France and is obviously in a country which is outside Pakistan and far away. It will involve foreign exchange as well as passport and visa restrictions for the plaintiff to go all the way to Paris and to contest the suit there. In this connection he relied upon PLD 1986 Kar. 1 (Uzine v. M. Iftikhar) and PLD 1986 Kar. 138 (D.B.) (Eckhard v. Muhammad Hanif).
28. "In the case of Uzine v. M. Iftikhar it was held that filing of suit by plaintiff was a choice of forum and it was for respondents to invoke arbitration clause if they had so desired. Filing of written statement by respondents exhausted arbitration clause for all intents and purposes."
29. ' Mr. Muhammad Sharif who appeared on behalf of the defendant No,1 contended that the plaintiff had agreed to the arbitration clause and the venue of arbitration being at Paris knowing fully well and being fully aware of the difficulties in the foreign arbitration. He therefore cannot be allowed now to contend that he would not abide by the agreement because the venue is in a foreign country. He pointed out that the defendant No,1 was also an alien so far as Paris (France) is concerned. The difficulty, if any, was common to both the parties. The defendant No,1 has no agent in Pakistan and therefore it will be harsh upon them to force them to contest the suit in Karachi. He also submitted that similar arbitration proceedings were going on between the defendant No,1 and defendant No,2 in Paris event at present. He relied upon PLD 1970 SC 373/394 M.A. Chowdhury v.
30. Messrs Mitsui O.S.K. Lines. Ltd. And others wherein foreign jurisdiction arbitration clauses were approved. This ruling does not help the defendant No,1.
31. "In the case under this ruling there was a clause in the Bill of Lading providing that any dispute arising thereunder shall be governed by a foreign law and a foreign Court. It was held by the Supreme Court that this provision must be construed as a submission clause for arbitration and was barred by section 28 of the Contract Act and was however really in nature of Arbitration clauses within exception to section 28 and should be dealt with as such. The burden was, therefore, on the party invoking foreign jurisdiction to satisfy the Court as to justification for stay of proceeding."
32. ' He also relied upon 1979 CLC 307 (Island Textile Mills Limited v. M/o Techno-Expert and another) where it was held by Ajmal Mian, J. (as he then was) sitting alone, that when the plaintiff knew at the time of entering into the contract that in case they would file any claim against the defendant the arbitration would be through Foreign Trade Arbitration for Chambers of Commerce in Moscow while the subject-matter of dispute was at Karachi and their evidence would be in Pakistan. In such a situation the aribitration clause cannot be defeated merely on the ground of inconvenience.
33. ' The above view of Mr. Ajmal Mian, J., was examined by Saleem Akhtar, J., in the case of Muhammad Hanif v. Eckhard & Co. Marine Bmbh reported in PLD 1983 Kar. 613 and was not approved in view* of the following contrary decisions: ' Mercantile Fire and General Insurance Co. Of Pakistan v. Arcepey Shipping Co., U.S.A. PLD 1978 Kar.
34. 273; M,M. Yaseen v. M/s Irving R. Boddy & Co. PLD 1957 Kar. 755; Serajuddin & Co. v. MichaelGolodetz AIR 1960 Cal. 47 and Swedish East Asia Co. Ltd. v. Herman Mohatta (Ind) Pry. Ltd., AIR 1962 Cal.
35. 601.
36. ' It was held by Saleem Akhtar, J., on the strength of above rulings as well as two English authorities as follows:- "There seems to be a string of cases where the Courts have refused to stay the proceedings if they come to the conclusion that the foreign exclusive jurisdiction clause or foreign arbitration would be inconvenient. In exercising its discretion the Court is influenced by the facts and circumstances of each case. In the Athene, where goods were carried under a French bill of lading which contained a clause to the effect that any dispute arising under it shall be before a Tribunal of Commerce at Marseilles the. Court refused to stay action inter alia on the ground that the material facts and evidence were all in England. Fehma-rn, affirmed the same view."
37. ' The above judgment of Saleem Akhtar, J. Was taken in an inter-Court appeal. A D.B. Consisting of Naimuddin, J. (as he then was) and Ibadat Yar Khan, J. Approved of the views of Saleem, Akhtar, J.
38. In PLD 1986 Kar. 138 (D.B.) Eckhard & Co. Marine Gmbh v. Muhammad Hanif and enunciated following principles for granting or refusing stay of proceedings in cases of foreign arbitration clause: "(1) where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court and the defendants apply for stay, the English Court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant stay but has a discretion whether to do so or not;
(2) the discretion should be 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 they 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 it 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 country, 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--
(i) 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 or other reasons be unlikely to get a fair trial."
39. ' I am therefore satisfied that the provision of foreign arbitration clause in the agreement does not necessarily require the Court to stay proceedings and refer the dispute to the arbitration when it causes inconvenience to the parties and when the evidence is not available in the country where the arbitration is agreed to be held. Admittedly in the present case the contract was entered into in Pakistan where the defendants had agreed to perform the construction work of a huge cement factory. The entire evidence is located in Pakistan. The plaintiff e_s wz=.121 as defendant No,2 both reside in Pakistan. In these circumstances to carry the entire burden of this litigation to Paris before the Arbitrators will be most inconvenient and expensive for both of them. The .Defendant No,1 also does not reside in France. It will also be inconvenient and expensive for him to proceed before the Arbitrators at Paris as admitted by him. The plaintiff has already joined defendant No,2 as a party who will ultimately be the person for whose benefit the cement factory has been constructed and shall have to pay for the same to the plaintiff although through defendant No,1. In these 'circumstances to compel the plaintiff to seek his remedy at -the forum which is situated at Paris.
40. Will not only cause inconvenience, unreasonable expenses and hardship to the plaintiff but will also cause the loss of valuable foreign exchange to Pakistan. Under these circumstances I am of the clear view that the stay of the suit and reference to the Arbitrator in accordance with the agreement would not be in the interest of justice. Hence I do not propose to stay the suit and to refer the matter to the arbitration. C.M.A. No,3727 of 1986 is therefore dismissed.
41. ' I would now take up C.M.A. No,3120 of 1987. By this application the plaintiffs have stated that defendant No,1 has during the pendency of the suit admitted the plaintiff's running dues as per specified payment contained in their letter annexed with the application amounting to Rs,43,99,688. The letter reads as under:- "Messrs MAC Donald Layton & Co. Ltd., Site, Re: Interim Certificate No,21 for December,
86. Dear Sir, ' We submit you hereinafter the 21st Interim certificate for the month December, 1986 for Civil Works, checked and approved for the amount of Rs,43,99,688 which is to be paid to you.
42. ' Thanking you, we remain. Yours faithfully, UZINE EXPORT IMPORT (Sd.)
43. Rusu Ch. M.Sc.
44. 2,83,626."
45. ' The defendant No,1 has contested this application and has stated that letters were not admission of claim but were in discharge of duties in contract. They have further submitted that they have not received the amount from defendant No,2 for being paid to the plaintiff and therefore they cannot be compelled to make payment of this amount to the plaintiff by means of a decree on admission.
46. Moreover, according to them it was within the knowledge of the plaintiff that defendant No,2 was the principal and that the work was being done for his benefit. He has alleged that it was the duty of defendant No,2 to make payments to the plaintiff. Defendant No,2 has pleaded absence of privity of contract between him and the plaintiff. He has stated that these letters are written by defendant No,1 and therefore cannot bind defendant No,2.
47. ' Mr. Muhammad Sharif who appeared for defendant No,1 relied upon PLD 1966 Kar. 75 (Kassamali Alibhoy v. Abdul Sattar) where it was held that in order to base a decree thereupon the admission should be unqualified and absolute. In another ruling reported in AIR 1944 Cal. 190/192 Gobind Dad Bhatter v. Fajanand Pandey it has been held that the admission should be clear and should show that the money was due and irrevocable in the suit. Mr. Muhammad Sherif has also placed reliance on a case from English jurisdiction reported in 55 Law Times Report 42-43 where it was admitted that the sum was due but plea was taken that time was still there for payment, hence the Court "did' not pass a decree on admission. He also relied upon 55 Indian Cases 836 and AIR 1927 Sind 25 Devsi Narain Patel v. Hassan and another in support of this contention.
48. ' Finally he relied upon PLD 1960 Kai.. 885 (Pakistan Development Corporation v. Bank of Bahawalpur) and 1973` C M R 228.
49. ' Ice former ruling was to the effect that an admission was not binding unless it amounted to an estoppel, whereas in the latter ruling it was held that no decree was to be passed on an admission of claim by one of the defendants if cause of action of the suit itself was false.
50. ' There can be no cavil with the rulings cited by counsel for the defendant No,1, and the principles of law enunciated therein. It may be pointed out that this is a suit against a contractor and an owner for recovery of amount due on account of construction work done by a sub-contractor. The first letter is quite clear and unequivocal admission of his partial liability by the defendant No,1 towards the plaintiff. .There is no condition or reservation regarding the payment or the liability. 'Even in the second letter dated 28-7-1987 the defendant No,1 has checked and approved for net payable amount of the said 22nd final bill for civil work done at Attock Cement Plant Lasbella in favour of the plaintiff for Rs,40,50,752. The admission amounts to an estoppel. The cause of action is not false.
51. Hence on facts these rulings are not applicable to the present case. It was then contended that the provisions of Order XII, Rule 6 no doubt are discretionary and not mandatory and it is not incumbent on the Courts in all cases to pass a judgment upon admission. If a case involves questions which cannot conveniently be disposed of on an application under this rule or if the case is such that it is not safe to pass a judgment on admission, the Court may in exercise of its discretion refuse the motion: Reference in this connection may be made to (1877) 5 Ch. Div.
52. 342/344 Melbor v. Side Bottom, AIR 1962 J & K 66(67) Union of India v. Messrs Feroze & Company AIR 1918 C 467/470 (Prem Suk v. Udairam). There can, be no cavil to the above proposition of law, but it may be reminded that the discretion has to be exercised judicially and on equitable principles and should not defeat the ends of justice.
53. "In Union of India v. Messrs Feroze & Co., it was held that a judgment on admission under Order" 12, Rule 6 is a matter of discretion and not a matter of right and the Court would not entertain an application for such a judgment when the case involves question which cannot be conveniently deal with in a motion under the rule. In this case the admission was to the effect that the plaintiff was entitled to certain securities deposit subject to production of No Demand Certificate. The condition, it was held, could not be ignored, as being void under section 28 of the Contract Act. The ruling therefore cannot be applied to this case.
54. ' In the case of Prem Suk v. Udairam a judgment was passed on admission by the defendant in respect of a portion of claim and the plaintiff was given the liberty to prove the claim in respect of the remaining claim in the suit in the ordinary claim. It was held that a judgment on admission by the defendant under Order 12, Rule 6, C.P.C. Is not a matter of right, it is in the discretion of the Court.
55. If a case involves question which could not be conveniently disposed of on a motion under the rule, the Court may in exercise of discretion refuse the motion. It was further held that the discretion was a judicial one and an erroneous exercise thereof was open to correction by a Court of appeal which will be slow to interfere unless either of the parties have been manifestly and unfairly prejudiced."
56. ' Both the defendants admit that the plaintiff was given the sub-contract and that the plaintiff has by now completed the work of this project. Neither the defendant No,1 nor defendant No,2 has denied that the plaintiff, has to be paid for this work: The defence of both these defendants rests on attempts to throw the liability for payment on one another. Defendant No,1 who is liable, for payment primarily is a Romanian firm which has practically no assets in Pakistan. In these circumstances it will be in the interest of justice to pass a partial decree on admission, so that on the one hand some relief is provided to the plaintiff while on the other hand it is ascertained as to whether the defendant No,1 is, bona fide defending the suit and will satisfy the decree if it is eventually passed against him, or is protracting the proceedings with some ulterior motives.
57. ' I, therefore, allow C.M.A. No,3120 of 1987 and pass a partial decree for Rs,40,50,752 on admission against the defendant No,1. The defendant No,2 can make payment of this amount to the plaintiff on account of defendant No,1, as he had been doing in the past.
58. Suit partially decreed.