' This first appeal by Ferro Alloys Pakistan Ltd. Co. Under Section 39 of the Arbitration Act is from the order of learned Senior Civil Judge, Lahore, dated 22-7-1989 by which he accepted the application of M/s. Toyo Menka Kaisha Ltd., under section 20 of the Arbitration Act (X of 1940) (hereinafter shortly stated the 'Act') and directed the appellant to file the agreement dated 18-5-1985, supplemental agreement dated 5-2-1986 and Addendum dated 28-11-1986 in the Court and further directed the parties to nominate one arbitrator each in accordance with the Arbitration clause.
2. The material facts to be noted are; that Toyo Menka Kaisha Ltd., a private limited Company of Japan (hereinafter referred to as 'Supplier') entered into a contract with Ferro Alloys Pakistan Ltd.
(hereinafter described as 'Purchaser') for the supply of Machinery/equipment and for furnishing installation, erection, drawings, diagrams instructions and other necessary data. The contract was executed at Lahore on 18-5-1985. Subsequently the atorenoted supplier and purchaser entered into a supplemental agreement on 5-2-1986. Thereftcr an addendum was made by which the supplier reduced the contracted value from 1,360 million to 1,326 million Japanese Yen. In accordance with the terms of the contract, the first shipment of machinery valuing Japanese Yen 1,116 was despatched by the supplier and received by the purchaser. There is no dispute about it. The second consignment worth 210 Japanese Yen, was sent by the supplier in February, 1987. It was off- loaded at Karachi Port and kept in Custom Bonded-Warehouse at Karachi. The purchaser declined to receive this consignment by taking up the plea that the supplier had wilfully and deliberately breached clause 3.7 of the agreement dated 18-5-1985 as modified by supplemental agreement and addendum. The precise objection was that the supplier had sent the consignment without resorting to pre-inspection at site in Japan. In terms of this claim, the purchaser claimed Japanese Yen 105,354,708 and asked his banker United Bank Ltd. To collect aforesaid amount in Pakistan Currency from the Bank of America who had executed an agreement of performance-guarantee on behalf of the supplier in favour of the purchaser. This was executed on 9-8-1986 by the Bank of America. Resultantly the Bank of America intimated the claim of purchaser to supplier. Pursuant to this intimation, lengthy negotiations were held between the parties. These negotiations, however, proved abortive. Consequently on 28-6-1987 the supplier lodged an application under Section 20 of the Act in the Court of Senior Civil Judge, Lahore, alleging therein that the dispute/differences with respect to interpretation of clause 3.7 had arisen between the parties and prayed that the purchaser be commanded to file agreement noted above and disputes/differences/constroversies be referred to the arbitration.
' This application was contested. In reply it was pleaded that the application was filed by a person who had no legal authority to institute the same; that the applicant had come to Court with unclean hands as the supplier had made amendment/alterations in the agreement noted above unilaterally; that under arbitration clause in the agreement the supplier was enjoined to give a 30 days' of arbitration. On facts the position was taken that the performance-guarantee agreement executed by the Bank of America was autonomous and independent contract and so on the question of encashment of Bank-guarantee, no arbitation could be resorted to within the meaning of arbitration clause.
3. The pleadings of the parties were put into as many as five issues. The parties led both oral as well as documentary evidence in support of their respective pleas. Upon consideration of the evidence so adduced by both the parties, the learned Civil Judge allowed the application by coming to conclusion that the differences have arisen between the parties with respect to interpretation of clause 3.7, directed the supplier to file aforenoted agreements in Court and invited the parties to appoint one arbitrator each in consonance with the arbitration clause.
4. The learned counsel appearing on behalf of the appellant raised the following points:
(i) That the learned first Court had fallen into error of law by holding that Mr. Yuji Egami was not legally authorised to file the application. According to him, it was boundened duty of the supplier/applicant to prove on record that he was authorised by the Company to initiate action.
According to the learned counsel the respondent was a limited Company registered under the law of Japan and the person who filed the application was required to place on record the resolution of the Company.
' That the learned original Court had committed error of law by confounding arbitration-clause 25 in the contract with the Bank-guarantee Agreement Ex.P4. According to the learned counsel the latter agreement was independent, autonomous between the purchaser and the Bank of America.
The supplier was not party to this contract and, therefore, had no right to challenge the encashment of Bank-guarantee.
' It was lastly pointed out that the bare reading of the application showed that it did not pinpoint any difference/controversy/dispute, between the parties. As such this application suffered from vagueness on the face of it. According to the learned counsel on the basis of this application no reference could be made to arbitration. Reliance was placed on Pakistan National Construction Co., Karachi v. State Bank of Pakistan and another (PLD 1977 Karachi 838) and Sirafi Trading Establishment v. Trading Corporation of Pakistan Ltd. (1984 CLC 381).
5. On the contrary the learned counsel for the respondents raised the following points in reply: ' It was contended that the order was passed on 22-7-1989 by the First Court. The appellant filed an appeal in the Court of District Judge, Lahore on 19-8-1989. It was on 10-14990, when respondent No, 1 moved an application under Section 39 of Act read with Section 18 of Civil Courts Ordinance, praying that the appeal was filed before the Court which had no pecuniary jurisdiction to adjudicate the appeal. The appellant resisted the application claiming that the application was misconceived, mala fide and intended to mislead the Court. In alternative it was prayed that the memo. Of appeal be returned to the appellant for presenting it to the High Court. The learned Addl.
District Judge by Order dated 3-6-1990 partly allowed the application, returned the appeal under Order VII, Rule 10, C.P.C. For its presentation before the High Court. Pursuant to this order the appeal was filed in this Court on 9-6-1990. On the strength of these facts, it was contended that the appeal was filed before a wrong forum and was barred by 210 days and was thus barred by law. Reliance was placed on Muhammad Amin v. Afzal Ahmad alias Afzaal Ahmad and another (1986 CLC 126), Manzoor Hussain and others v. Muhammad Ali. And others (PLD 1982 Lab. 632), Mst. Mahmooda Begum and others v, Major Malik Muhammad Ishaq and others (1984 SCMR 890) and Nek Muhamamd v. A.C., Jhelum and others (1986 SCMR 1493).- ' That the respondents supplier had encashed the Bank guarantee within the meaning of clause 3.7 of the contract; had declined to receive the delivery of the second consignment which is rotting in the Custom Bonded Warehouse and is so not performing his part of the contract. According to the learned counsel these circumstances clearly and visibly established the differences/disputes having been arisen between the parties within the meaning of clause 25 of the Contract.It was lastly represented that if the appellant purchaser was prepared to receive the delivery of the second consignment, the supplier was ready and willing to abide by the clause of continuing performance-guarantee for the machinery supplied to purchaser.
6. In exercise of the right of reply on the question of limitation, the learned counsel for the appellant stated that on account of bona fide mistake he had filed the appeal before the wrong forum. As such the time spent in prosecuting the appeal before the Court of learned Addl. District Judge be condoned and the appeal be treated as within time. He fairly conceded that if it was not done, the appeal was barred by time.
7. I have heard the learned counsel -for the parties at a considerable length. I have gone through the record minutely with capable assistance of both the learned counsel. Fortunately most of the facts are not in dispute. The execution of the agreement noted above and guarantee agreement by the Bank of America in favour of the purchaser is not is dispute. Arbitration clause is also uncontested. It is a common ground between the parties that in case of the differences/disputes/controversies regarding the interpretation/operation of the contracts noted above, the parties had agreed to get the matters decided/determined by arbitrators in consonance with arbitration clause. The main stress of appellant has been two-fold: firstly that the arbitration clause embodied in agreement noted above had no application whatsoever to right of encashment of guarantee by supplier under the performance-guarantee executed by the Bank of America. According to the learned counsel it was independent, and autonomous contract and secondly, that the application did not disclose any difference within the meaning of arbitration clause 25. As such this encashment eposide cannot be referred to arbitration.
8. I have given my anxious consideration to these two contentions. They seem to me to be contrary to each other. There is no cavil with the proposition that pre-condition of pre-inspection in Japan was contained in the original agreement between the parties as modified by the supplemental agreement and addendum. The claim of the purchaser was that the supplier had violated this essential condition of the agreement and so he was entitled to encash the security. The reply on behalf of the supplier was that purchaser had in fact waived this condition in bilateral negotiations; that the parties have agreed to inspection of machinery in Pakistan; that the purchaser was in fact trying to blackmail the supplier for the purpose of receiving 50 million Yen at Dubai. This position was completely reflected in para. Nos.5 and 6 of the application. It would be advantageous to reproduce paras. Nos.5 and 6 of the application which are as under:- "5. That the defendant No,1 has invoked clause 3.7 of the agreement dated 18-5-1985 as modified by Supplemental Agreement dated 5-21986 and raised claim on the basis that the defendant No,1 has been wrongly denied inspection by the plaintiff before the second shipment in Japan. In this regard, Rana Muhammad Sarwar Khan, Chairman of the Defendant No,1, visited the plaintiff's office in Japan and it was agreed upon by the parties that keeping in view the letter and spirit of the Addendum dated 28th November, 1986 to the said agreement and supplemental agreement, the pre-shipment inspection was no longer required and the inspection made by the Engineers of the plaintiff before its shipment, was adequate. Nevertheless, it was agreed that the inspection could then be carried out in Pakistan in the presence of the. Engineers of both the parties (i,e,, the plaintiff and the defendant No,1), in order to ensure that the second shipment was in order.
' That surprisingly, Rana Muhammad Samar Khan, Chairman of the defendant No,1, raised a claim of Japanese Yen 105,354,708 on behalf of the defendant No,1, on his return from Japan. He directed his Banker, United Bank Ltd., to collect receipts in Pak rupees of the said amount, from Bank of America (defendant No,2), who had given Letter of Guarantee dated 19th August, 1986 on behalf of the plaintiff to the defendant No,1 as Performance Guarantee under the said Agreement of 18th May 1985 and Supplement Agreement of 5th February 1986. The Bank of America (Defendant No,2), informed the plaintiff about the claim of the defendant No,1 and the plaintiff sent its representative for negotiations with the defendant No,l. The defendant No,1 vide letter dated 14-6-1987 addressed to defendant No,2, suspected the encashment of the said amount of Japanese Yen 105,354,708 upto 30-6-1987, but reiterated its right to encash it thereafter.
' Copies of the letter to Manager of defendant No,2 from United Bank Ltd. Dated 2-6-1987, letter from defendant No,1 to the Manager United Bank Ltd. Dated 2-6-1987, certificate dated 2-6-1987, from defendant No,1, the letter from defendant No,1 to the Manager of defendant No,1 dated 2-6-1987, letter from defendant No,1 to United Bank Ltd. Dated 14-6-1987 and letter of guarantee dated 19th August, 1986, are appended herewith as Annexures D/1, D/2, D/3, D/4, D/5 and D/6 respectively."
' The aforenoted paragraphs were denied and the position of the purchaser was restated in the reply.
9. From the examination of para. Nos. 5 and 6 of the application and reply of supplier and the arguments of the parties, I have no hesitation in concluding that the dispute had arisen with respect to the performance of the contractual obligation arising out of aforenoted contract, it is hardly necessary to state that dispute means the assertion of claim by one party and the denial by the other. The assertion and denial when cumulatively examined constitute the dispute. Judged from this angle I wonder as to what is the precise formulation of respondent No,1. Undeniably the Bank of America executed performance guarantee at the initiative of the supplier in order to secure the fulfilment of the contract. From the aforesaid resume of the facts and circumstances it is evident that the agreement noted above and the performance guarantee agreement executed by the Bank of America are interlinked with each other, creative of obligations/liabilities of the executants. There can be no dispute with the proposition that the guarantee agreement executed by the Bank of America is the autonomous agreement--as far as encashment of the guarantee is concerned but as regards the mutual liability, it is evidently connected with the aforenoted agreement. On this conclusion of law I am fortified by the enunciation of law in Messrs Jamia Industries Ltd. v. Messrs Pakistan Refinery Ltd., Karachi (PLD 1976 Kar. 644). In this case M/s. Jamia Industries Ltd., filed an application under section 20 of the Arbitration Act claiming therein that the differences had arisen between the parties and prayed for an order to file the agreement and referred the dispute to arbitrator., The application was opposed by M/s Pakistan Refinery Ltd., by taking plea that the dispute as contemplated by section 21 of the Arbitration Act has not arisen after examination of the argument of the parties. It was held: "From the above resume of the rival accounts of both the parties it would appear that each accused the other of breach of contract. But irrespective of the question as to which party was guilty of the breach, the fact remains that the contract was not performed, in so far as no supplies were given or taken and no payment was made. However, this brings me to the question of encashment of the bank guarantee, which is perhaps the real bone of contention between the parties."
10. There is yet another aspect of the matter. In the application under section 20 of the Act, the supplier submitted -application for issuance of injunction restraining purchaser from encashing the security. This application was disallowed by the first Court. On appeal the first appellate Cou4 disposed of the appeal of the supplier in the following words: "In the circumstances it is ordered that the performance guarantee may be encashed by respondent No,2 in favour of respondent No,1 to the extent of Yen 105,354,708 and no more on the condition that either respondent No,1 furnishes irrevocable Bank guarantee for the said amount guranteeing to pay back the said amount either in Court or to the Bank of America, respondent No,2, if the case is decided against him or he may pledge the machinery and equipment etc , received by him through the said first shipment and their factory including the site thereof as a security for paying back the amount of guarantee money to the Court or to respondent No,2 in case of his failure in the case. This Bank guarantee or the pledge will hold good till the sante are released by the Court after final disposal of the case. The encashment of the performance guarantee will be allowed to the extent mentioned above and this order will Lot authorise respondent No,1 to encash the remaining amount of performance Guarantee without due course of law. If the said Bank guarantee is not furnished or such a pledge is not made to the satisfaction of the learned trial Court, respondent No,1 shall not be entitled to encash the performance guarantee to any extent. The appeal is disposed of accordingly." This was held in Toyo Menka Kaisha Ltd., Tokyo, Japan v. Ferro Alloys Pakistan Ltd. And another 1988 CLC 418.
11. From the operative portion of the order it is quite clear that the learned First Appellate Court had come to the conclusion that there was a dispute between the parties and the Bank guarantee furnished by the purchaser will come to an end after the resolution of the dispute between the parties. I am in total agreement with the view taken in the above-cited matter and have no hesitation in coming to the conclusion that the contentions of the learned counsel for the appellant-purchaser are wholly untenable and deserve to be rejected. It needs to be noted that admittedly the appellant had encashed the Bank-guarantee in accordance with the aforesaid order. In the light of foregone discussion I have no hesitation in coming to conclusion that on merits the order of the learned, Senior Civil Judge, Lahore dated 22-7-1989 is eminently just and does not suffer from any legal or factual defect.
12. As regards the objection that Mr. Yuji Emagi has no authority to file this application, it is sufficient to note that Mr. Yuji Emagi appeared in the Court and categorically stated that he was authorised by the Company to file this application. In view of this, the objection of the learned counsel for the appellant, seems to be devoid of any force and is accordingly repelled.
13. Equally strong is the argument' of the learned counsel for the respondents that the appeal is awfully barred by time. It is not disputed that the appeal is barred by 210 days. It is stated that the appeal was filed on mistaken view of law. This question came up for consideration in Abdul Ghani v. Ghulam Sarwar PLD 1977 SC 102. It was held therein as under:--.
"In any event, the conduct of other parties cannot help the petitioner to make out sufficient cause under section 5 of the Limitation Act. It is true that this section does not define sufficient cause but the meaning of this expression is too well-known to need recapitulation, and we would only refer here to the observations of Kaikaus, J, on this question in Ata Ullah v. Custodian Evacuee Property PLD 1961 SC. 236 "Under section 5.... There has to be finding.Of sufficient cause. In prepartition India sufficient cause had been defined as circumstances beyond the control of the party and I do not know of any case wherein this definition of sufficient cause had been rejected." We re-affirm these observations and we may explain here that the burden is on the appellant to prove his delay in filing his appeal was on account of circumstances beyond his control, because, as observed by Sir George Rankin in Kunwar Rajendra Bahadur Singh v. Rai Rajeshwar Bali and others AIR 1937 PC 276 in applying section 5 (of the Limitation Act)....The analogy of Section 14 (which applies only to suits) is an argument, of considerable weight." Section 14 permits the exclusion of time only for proceedings "prosecuted in good faith", therefore, in order to make out sufficient cause under section 5 an appellant must prove that he had acted in good faith in presenting his appeal in the wrong Court. Good faith has been defined in clause (7) of section 2 of the Limitation Act as 'good faith': nothing shall be deemed to be done in good faith which is not done with due care and attention it means that the presentation of the appeal in the wrong Court was on account of circumstances beyond his control. No doubt, what such circumstances are must depend on the facts and circumstances of each case, and in Kunwar Rajendra Bahadur Singh's case, Sir Goerge Rankin set aside the finding of the Chief` Court that the appellant's Advocate had been very negligent in filing the appeal in the wrong Court because the facts relevant to the question of the Court in which the appeal was to be filed were very complicated. Similarly, an appellant can bring his case under section 5 if he can show that there is some ambiguity in the law governing the forum in which the appeal is to be filed. Or, to take another example, an appellant can rely on Section 5, if he can show that he was misguided by the practice of the Court or by an erroneous judgment of the Court. But, in the instant case, the provision of section 18 of the West Pakistan Civil Courts Ordinance are plain beyond any doubt and as there is also no complication whatsoever about the facts relevant to the question of the proper forum for filing the appeal, it is clear that the presentation of the appeal in the District Court was an act of gross negligence."
' The learned Judge further held--- "However, the petitioner's case is supported to the hilt by a judgment of a learned Single Judge of the Sindh and Baluchistan High Court reported in Farid Majid and another v. Muhammad Nawab PLD 1976 Kar.
891. The facts in this case were that a suit arising out of an application to make an award the rule of the Court was dismissed. The amount claimed in the suit far exceeded the pecuniary appellate jurisdiction of the District Court yet the appeal was presented in the District Court and, when it came up for hearing the respondent challenged the maintainability of the appeal. This objection was allowed and the appellant was permitted to represent his appeal in the High Court. As in the instant case the appeal was represented long after the expiry of the period of limitation and was supported by an application under section 5 of the Limitation Act. The respondent opposed this application and relied on the judgment of the Baghdadul-Jadid High Court in Said Muhammad v.
Goma etc. PLD 1952 BJ 8 and Mirza Habibullah v. Mahmooda Begun' PLD 1952 BJ 43 because in both these cases the appellants had to file their appeals in the High Court but had on the advice of their Advocates filed the appeal in the District Court, with the result that the period of limitation had expired when the appeals were presented in the High Court, therefore, in each case the appellants had filed applications for condoning the delay under section 5 of the Limitation Act. The learned Judges of the Baghdad-ul-Jadid High Court, were conscious of the hardship that would be caused to the appellants by the dismissal of their applications under section 5, but they dismissed them in view of the judgment of the Judicial Committee in Kunwar Rajendra Bahadur Singh's case and the judgments of the High Courts of the Sub-continent for more than two decades. Unfortunately, the learned Single Judge of Sindh and Balochistan High Court did not consider it necessary to examine these cases and condoned the appellants' delay with the observation: "No doubt, the Advocate for the appellants who had presented the appeal to the District Court had made a mistake but I am not satisfied that it was due to gross negligence of counsel." With respect, the question was far too important to be disposed of by an ipse dixit, the moreso, as the result of this ipse dixit, was to unsettle the settled law. It also escaped the attention of the learned Single Judge, that his view was contrary to the law declared by the Privy Council in Kunwar Rajendra Bahadur Singh's case.... "
' This principle was reiterated in Mst. Mahmooda Begum and others v. Maj. Malik Muhammad Ishaq and others 1984 SCMR 890 and Nek Muhammad v. AC., Jhelum and others 1986 SCMR 1493.
14. Applying this principle/enunciation of law, to the facts and circumstances of this case it is clear that the appellant had filed an appeal before a wrong forum notwithstanding the fact that in the earlier round of litigation the appeal was decided by this Court; that the appellant resisted the objection to the jurisdiction of forum in which appeal was filed. In view of this, I have no doubt in my mind that the application for condonation of time in filing the appeal is without any cogent reason and ground. The application is accordingly rejected. The appeal is held to be barred by time and is dismissed on this ground also.
15. In result this appeal is found to be without any merit and is accordingly dismissed leaving the parties to bear their own costs.