' In this admiralty suit, which has been passed on to me under orders of the Honourable Chief Justice, there are several, applications, most of which were lastly fixed for orders on 24-9-1990, whereafter, copies were supplied in Court to the opposite parties and counter-affidavits etc. Have been filed. As such, they were taken up for hearing on 27-9-1990 and today. In the meantime, C.MA.
No, 2225 of 1990 was also filed by the defendant No,2, and, on waiver of notices, copies were supplied to the other parties. That application is, therefore, also for hearing.
2. The facts relevant to the hearing of listed applications, as available on the record, are that on 18- 4-1988 the plaintiff herein entered into an agreement with the defendant No,2, whereunder, the defendant No,1 vessel, which had been purchased by the defendant No,2 from Messrs Age In-trade, Dubai, for an agreed consideration of U.S. $ 2,40,000, on behalf of the plaintiff, was, in turn, agreed to be purchased by the plaintiff from the defendant No,2 on Hire Purchase basis for U.S. $ 3,90,000, payable in 24 equal monthly instalments, commencing on the completion of the first month from the date of the referred agreement. Each instalment was to be in the sum of U.S. $ 16,250, and in no case the duration of payment was to exceed 24 months aforesaid. Such agreement evidences that, in virtue of the same, the defendant No,1 vessel came to be held on the exclusive loss/profit' of the plaintiff and the defendant No,2 maintained 'the title of the vessel on Registry only for security purposes', subject to an immediate and unconditional transfer on full payment of U.S. $ 3,90,000.
The irrevocability was conditional upon clause 4 alone of the agreement. The plaintiff, additionally, also allowed mortgage with the defendant No,2 of vessel m.v. Tranky' against such payment of U.S. $ 3,90,000, which mortgage was to be released automatically upon recovery of the hire-purchase value. At the relevant time the defendant No,1 was named and styled as m.v. `Bismillah'. Clause 4, above referred, was in the following terms:-- "In the event the second party defaults payments of three consecquitive (sic) monthly instalments the first party has every right to take necessary action he deems fit to recover his dues in full."
' As a consequence, the possession of the vessel was made over to the plaintiff and the plaintiff was to run the same entirely at its discretion, according to normal commercial practices, with rights to engage the master and the crew, to collect freight, release, bills of lading, incur or settle all expenses, cargo claims etc. In case of any dispute between the parties the matter was to be referred to Arbitration.
3. It is the case of the plaintiff that, persuant to the agreement aforesaid, it handed over 24 post dated cheques to the representative of the defendant No,2 and, correspondingly, all relevant documents of the vessel were handed over to the plaintiff on 20-4-1988. As a follow up, the plaintiff engaged its own master and crew and started operating the defendant No,1 vessel. Subsequently on 18-5-1988, the plaintiff gave away the said vessel on charter hire. It is claimed in the plaint that from June, 1988 to July, 1989, eight instalments, through post-dated cheques, were recovered from the plaintiff. However, another 4 cheques having remained unpaid, the plaintiff paid two instalments in cash and another two through Messrs Aero Maritime. The plaintiff claims to have made total payments in the sum of U.S. $ 1,96,800. The plaintiff also claims to have incurred additional expenses having, allegedly, paid U.S. $ 13,625 to the previous owner, Messrs Age In-trade, at the time of purchase of the vessel, DHS 75,000 towards insurance premium and yet another amount of DHS 1,25,000 was disbursed towards the repairs carried out on the vessel. It is next urged that due to financial constraints arising out of problems relevant to the operation of the vessel the plaintiff could not arrange for adequate funds to back the remaining post-dated cheques and because of threats from the representative of the defendant No,2 had to leave UA.E. And go to Singapore in December, 1989, at which time the defendant No,1 vessel was detained at the port of Aden on account of some claims. In this situation, the representative of the defendant No,2, allegedly, taking advantage of the fact that the registry of the vessel stood in the name of the defendant No,2 illegally took over the possession of the same and had it removed to some other destination. Thereafter, the plaintiff avowedly could not locate the whereabouts of the vessel and came to know suddenly, in the first week of September, 1990, that such vessel had berthed in Karachi Port but its original name of m.v. `Bismillah' had been altered to that of `Ghantout'. As such, the present suit was filed on 9-9-1990 and the case was laid before me on the same date. On that date an ad interim order for arrest of the defendant No,1 was passed to operate till further orders but subject to the plaintiff's depositing an amount equivalent to the admitted defaulted dues equivalent to 12 outstanding instalments. This amount was not paid and, subsequently, on due serrvice having been effected there have been a spate of applications from all sides, including the intervenor Messrs Ghantout Trading Est., which claims to be the present owner of the defendant No,1 vessel, having allegedly purchased it from the defendant No,2 after that defendant had resumed its possession.
4. The first application, which may conveniently be taken up is Miscellaneous No, 2188 of 1990. Such is an application by the plaintiff for joining the alleged present owner of the defendant No,1 vessel as a party to the suit. No counter-affidavit to this application has, admittedly, been filed by the defendant No,2, even though copy of the same was supplied, while such counter-affidavit has been filed by the intervenor-present owner. During the course of arguments, however, even the intervenor did not object to the grant of this application. Accordingly, Miscellaneous No,2188 of 1990, under Order I Rule 10, C.P.C., is allowed by consent of all present. Amended plaint citing the present intervenor, as defendant No,3, to be filed by the plaintiff within three weeks with advance copies of the same to the defendants, who then may file their written statements, if they so choose.
5. Miscellaneous No, 2142 of 1990, under Order VI, Rule 17, C.P.C., filed by the plaintiff, for amendment sought pertains to the rights of the defendant No,2 and the newly-added defendant No,3, as the same reflect on the rights of the plaintiff. Similar consequential amendments would now, in the ordinary course, be made persuant to the grant of the application under Order I, Rule 10, C.P.C.
Resultantly, this application has served its purpose and has become infructuous. It is dismissed accordingly.
6. Miscellaneous No, 2143 of 1990 is yet another application through which, on the appearance of the intervenor--new owner on the scene, as a disputant of plaintiff's rights, it is prayed that the dispute as to ownership of the vessel may be tried as a preliminary issue in the suit. For the present, no more need be said on the subject than that this application because of the joinder of that intervenor, as defendant, in the suit is rendered premature because what issues are to be framed in the case and which of them, if any, can be considered as preliminary are matters which, in all fairness, must await the point of time when the matter is ripe for and comes up for that purpose in Court. Subject, therefore, to the plaintiff raising such or other equivalent pleas, at the relevant time, this application also is dismissed, as it is adjudged before its time.
7. This takes me to Miscellaneous No, 2141 of 1990, an application filed by the defendant No,2, seeking that the present suit be stayed, pending reference to arbitration in the face of an arbitration agreement between the plaintiff and the defendant No,2. This application is opposed by the plaintiff.
8. All things being equal and even where the disputes in a suit are fully covered by an arbitration agreement, one of the essential requirements of section 34 of the Arbitration Act for stay of proceedings in the suit is an obligation attaching to the Court to address a qurey to the party seeking stay of the suit whether or not such party-applicant was, at the time the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration. Such an approach to the matter, as legislatively recognized under section 34 aforesaid, is itself based, pre-eminently, on principles of equity, justice and good conscience. Only such a person can successfully claim stay of the suit on pleas founded upon an arbitration clause, who is and has been ready and willing himself to go to arbitration, at all relevant times, preceding and subsequent to the filing of the suit. In cases where this mandatory condition is not satisfied, by an applicant under section 34 of the Arbitration Act, the suit, under law and in equity, cannot be stayed. Having examined the record placed before me, I am constrained to find that the defendant No,2, applicant here, before the institution of this suit, fully subscribed to the emergence and existence of disputes between it and the present plaintiffs. It did not choose to invoke the arbitration clause and, admittedly, though according to it for good reason, opted to itself taking over possession of the vessel in question. The matter does not stop there.
It is further evident that the defendant. No,2 has also chosen to invoke the criminal jurisdiction of the Court in the UA.E. Against the plaintiff. Having found that the defendant No,2 itself got round the arbitration clause in the agreement inter partes it is abundantly clear that such defendant does not fulfil the referred requisites in section 34 of the Arbitration Act and, in consequence, cannot now insist on stay of the suit, in favour of the claimed recourse to arbitration.
' This is not all on the question touching the applicability of section 34 of the Arbitration Act. There is yet another compelling reason why the present suit may not be stayed. In the first place, where there are several inter-linked questions involved in a suit, some of which can be referred to arbitration under the relevant arbitration agreement but others cannot be so referred, a possibility of conflict in the findings of the two forums thus becoming seized of the matter cannot be ruled out. In such matters it is neither desirable nor proper to make or allow the making of a reference to arbitration forcing parties to subject themselves to two concurrent forums, one domestic and the other established by law. Preferably, all such disputes should be decided in the suit itself. Reference on the point may be made to the opinion of Durab Patel, J., In State Bank of Pakistan v. Naqson PLD 1970 Kar.
490. Here, in this suit, with the impleading of the intervenor, which induction has taken place by consent, the dispute is no longer limited between the plaintiff and the defendant No,2. It has become a tripartite controversy between the plaintiff and the defendants Nos. 2 and 3 the second defendant having itself assumed a secondary role with the appearance of the defendant No, 3 on the scene. The newly-added defendant No, 3 obviously, is not subject to any arbitration agreement as between itself and the plaintiff. In fact, even without the induction of the defendant No,3, as a party to the suit, the situation may not have been very different, because the defendant No,1 a seafaring vessel is being proceeded against in rem, a jurisdiction exclusive to a Court of Admiralty.
Questions as to the rights of ownership and possession of such vessel manifestly involve more than one disputants, all of whom are not subscribers to the arbitration agreement under consideration.
The rule that where all the contestants in a suit are not subject to arbitration the matter may not be referred to arbitration is not one of universal applicability. Nevertheless it is a salutary principle. In cases where, upon allowing a reference to arbitration of parts of disputes in a suit, relevant only to some of the parties thereto and not others, conflict of decisions between the two forums thus emerging may not only be possible but can even be anticipated then it would be futile nay meaningless to stay the suit to countenance a reference. The principle finds support on the dicta in Seafarers Inc. v. Province of East Pakistan reported as (1968) 20 DLR (SC) 225, a decision from the Supreme Court jurisdiction. Such view was followed by a Division Bench of this Court in Gulf Iran Co. v. Pakistan Refinery Ltd. PLD 1976 Kar.
1060. Mr. Arif Bilal, on his part, however, makes reference to another judgment of this Court in Island Textile Mills v. Technoexpert 1979 CLC 307, wherein a suit was stayed under section 34 of the Arbitration Act, in spite of the fact that an insurance company, which was not a party to the claim for damages,was also one of the defendants in the suit, there having been no arbitration agreement between the plaintiff and the said insurance company. The reason finding favour for stay of the suit, as regards the main contestant under section 34 aforesaid, may be found in the fact that the liability of the insurance company was consequential upon and co-extensive with the liability of the other defendant and the insurance company had no role whatever in the dispute between the plaintiff and the other defendant. In the present case the claim pertains to a dispute as to the ownership of the defendant No,1 vessel and it is to be seen whether that vessel was lawfully taken possession of from the plaintiff and, further, whether the sale to the newly-added defendant No,3 is a bona fide one, for value and without notice. It is a dispute where, necessarily, findings have to be given as regards entitlement to ownership and possession of the defendant No,1 and such determination is inseparable from the cause of action for this suit between the plaintiff and the defendants Nos. 2 and 3. For the foregoing reasons, reference to arbitration for part of the dispute and for some of the parties to the suit alone cannot be made. I do not see any merit in Miscellaneous No, 7141 of 1990 and dismiss it.
8. This leaves us with the consideration of Miscellaneous No, 2079 of 1990, an application under Rule 731 of the original side Rules of this Court, filed by the plaintiff for arrest of the defendant No,1 vessel.
Miscellaneous No, 2144 of 1990 has also been filed by the plaintiff. It is for modification of the order, dated 9-91990, requiring deposit by the plaintiff of the admitted balance dues payable to the defendant No,2. Miscellaneous No, 2145 of 1990 under Rule 743 of the original side Rules of the Court, moved by the defendant No,3 (then intervenor) seeks recall of the order of arrest dated 9-9-1990 to which the defendant No,1 is currently subject. All these applications are being taken up together.
' As observed earlier, the order of arrest was a conditional one though it was operative till further orders. The plaintiff, currently, is unable to arrange for the balance amount, inter alia, for the reason that the defendant No,2 unlawfully and imporperly as well as in a highhanded manner deprived the plaintiff of the possession of the defendant No,1 vessel, thereby, allegedly precluding the performance of the Hire Purchase agreement between these two parties, which could be observed only if the vessel was allowed to ply under control of the plaintiff, for in no other way the payment could be made. Maximum time for payment was 24 months much before the expiry of which period of time the plaintiff was, apparently, divested of possession. It is urged that the defendant No,2 could make resort to the additional security of m.v. Franky, mortgaged by the plaintiff with it.
Alternatively, any other lawful course could be resorted to. There was, it is claimed, no warrant for the defendant No,2 to take law in it's own hand and deprive the plaintiff not only of possession of the vessel but also of the sole avenue through which the contract of instalments was to be honoured namely, the plying of the defendant No,1 the vessel. It is also maintained that the sale projected between the defendant No,2 and the newly-added defendant No,3 is a fictitious one. It is pointed out that in addition to there being no sale whatsoever in fact, none of these defendants can show that there was a bona fide transaction for consideration between them without notice of plaintiff's rights and interest. Correspondingly, the learned counsel for the defendants have contended that the ownership of the disputed vessel never passed on to the plaintiff and that all that such claimant could lay a claim upon was an equitable lien on the vessel and no more.
Besides, it is urged that the plaintiff, admittedly, is a defaulter and is not entitled to any relief, all the more so because it has failed even to comply with the terms of the order of this Court, dated 9-9- 1990.
9. It goes without saying that the present is not an ordinary suit. It has been filed invoking the Admiralty jurisdiction of this Court, which arises under the Admiralty jurisdiction of High Courts Ordinance, XLII of 1980, and, which in turn, is regulated by the original side Rules of the Court. Such jurisdiction, inter alia, extends to rights IN REM in sea-faring vessels. In this jurisdiction, essentially, disputed claims as to ownership and possession of ships can be determined. Such has been found to include equitable rights and liens attaching to sea-faring vessels. In most cases falling in the Admiralty jurisdiction, one or more of the parties have no assets within the jurisdiction of the Court and in a large number of cases, all that can be reached may not be more than the disputed vessel itself and to that too the writ of the Court does not effectively extend except when the vessel can be shown and found located within the territorial waters encompassed by the jurisdiction of the Court.
Once these latter contingencies exist, and enforceable relief, one way or the other, can be granted, no effort with a view to do justice, within the ambit of law is to be spared. I am unable to discover any criteria more firmly embedded in the exercise of the Admiralty jurisdiction.
10. Reverting to the merits of the controversy, while the plaintiff alleges to have paid, in all, 12 instalments totalling U.S. $ 1,96,800 to the defendant No,2, that defendant in its counter-affidavit, has not squarely, specifically and unequivocally denied such position. The defendant No,2 was required to state expressly whether the first 8 post-dated cheques were honoured, as claimed by the plaintiff, or the 4 additional dishonoured cheques had been paid for in the manner and form claimed in the suit. In the relevant counter-affidavit, while the defendant No,2 has hardly made any statement as to what specific amount or amounts were realised by it, such defendant has adopted a somewhat equivocal course by maintaining that a sum of U. S. $ 2,76,250 remained outstanding against the plaintiff, compelling this Court to make a calculation of its own, on deducting from the total contractual consideration of U.S. $ 3,90,000 the alleged outstandings of U.S. $ 2,76,250 and thereupon arriving at the figure of U.S. $ 1,13,750, as having been paid by the plaintiff. This, to put it very mildly, is hardly a fair attitude.
' It has been denied by the defendant No,2 that it took over the possession of the disputed vessel forcibly. However, taking over of possession while the vessel, allegedly, stood arrested at the Port of Aden is not denied. Nor is it stated as to how the possession was taken over, strengthening plaintiff's contention of forcible or, at least, a unilateral take over.
' Next comes the matter of sale to the newly-impleaded defendant No,3. Such defendant had to establish a bona fide purchase, for consideration and without notice of any equities or other rights in the vessel. All that the documents supporting such sale show is a consideration of U.S. $ 70,000 and that too in the shape of a mere bank guarantee. Alleged claims, at the "Maximum" for U.S. $ 60,000, $ 1,40,000 and $ 45,000 are stated to be the responsibility of the buyer. This totals U.S. $ 2,45,000 and the responsibility, for what it may be worth, and, if any, has been incurred apparently without reference to the plaintiff. For the rest the sale is free from all encumbrances. No notice of such sale, even a public one, is established to have been served on the plaintiff. Above all, for an alleged balance against the plaintiff of U.S. $ 2,76,500 the sale to the defendant No,3 is claimed to have been made only for a net consideration of U.S. $ 70,000. To say the least, the sale transaction, as regards the plaintiff, seems to be extremely doubtful. It is a transaction, which in the ordinary course of business, may not have been entered into. In such regard the bona fides, the consideration and the element of previous notice are all open to serious doubt. On the other hand, the defendants Nos. 2 and 3 have pleaded or shown no assets in Pakistan. Plaintiff has established substantial payments towards its own rights. An equitable lien on the vessel is also undeniably there. An arguable and prima facie case has thus been clearly established by the plaintiff.
11. As recounted above, the plaintiff has failed to meet the conditions of the referred ad interim order of arrest in that it has made no deposit required of it under such order. Some explanations on that score have been given. This, however, is the stage of finally disposing of the application under Rule 731 of the Original Side Rules as also to finally dispose of plaintiff's subsequent prayer of modification in the ad interim order aforesaid together with for due consideration of the application under Rule 743 of the quoted rules for recall of the ad interim order in question. In short three applications, interconnected with one another, have to be conjointly dealt with. The whole matter of interim relief, accordingly, reopens for examination and a just and fair order touching all such applications has to be passed.
It has already been seen that the plaintiff has established a prima facie case. It has also been seen that the defendants Nos. 2 and 3 have no assets in Pakistan except the defendant No,1 vessel and the whole suit may be frustrated if appropriate orders to protect the rights of the plaintiff are not passed. Balance of convenience thus lies in favour of the plaintiff. Likewise, plaintiff's loss, if the defendant No,1 is allowed to sail away, though calculable in terms of money, would become irreparable as the ship may never show up within the territorial waters of this country, once it leaves the same.
' Accordingly, on a thorough examination of this case I am of the view that the defendant No,1 vessel should continue to remain arrested during the pendency of this suit. However, a Court of law is required to do complete justice between the parties. The plaintiff claims that it has paid U.S. $ 1,96,800 to the defendant No,2, while according to that defendant no more than U.S. $ 1,13,750 have been paid to it. Besides, plaintiff also claims to have incurred further expenses on the defendant No,1 vessel to the tune of D.H.S. 1,25,000 for repairs, D.H.S.75,000 towards insurance premium and a sum of U.S. $ 13,625, as payment to the previous owner. As such, according to the plaintiff very substantial amounts far in excess U.S. $ 1,96,800 have been paid by the plaintiff for acquiring and running the defendant No,1 vessel. In my view, however, interests of justice would be served if the plaintiff's current tentative entitlement subject to proof, is determined as U.S. $ 1,50,000 in relation to the equities attaching in the defendant No,1 vessel. Resultantly, while the defendant No,1 ship would continue to remain arrested during the pendency of this suit, the same may be released if and when the defendants Nos. 2 and 3 or any of them or anyone on their behalf or on behalf of the defendant No,1 vessel deposits in this Court a sum of U.S. $ 1,50,000 which amount, if and when deposited, would be invested by the Nazir in relevant securities approved under the Foreign Exchange Regulations. Such amount, if any, would ensure to the benefit of the plaintiff, if it succeeds in the suit or be returnable to the person, who deposits the same, in the event the claim in suit fails. This disposes of all the above applications.