' MAMOON KAZI, J.---This appeal is directed against the order passed by a learned Single Judge of this Court dated 2-9-1990 dismissing the appellant's application filed under section 34 of the Arbitration Act.
2. The facts of the case, briefly stated, are that the respondent was an employee of the appellant's predecessor namely Lipton (Pakistan) Limited having joined its service in 1956. Under a scheme of amalgamation duly approved by this Court vide its judgment dated 23-1-1989 passed in J.M.
No,60/88 the said company was merged with the present appellant. Subsequently, the respondent and the appellant's predecessor entered into an agreement dated 17-2-1988, inter alia agreeing that the respondent would cease to be in the said company's employment with effect from 31-8- 1987 and the former would be paid his salaries and other allowances including L.PA. Balance and U.B.F.F, balance amounting to Rs,83,334 after deducting Rs,47,511 on account of income-tax car loan, etc. In clause 4 of the said agreement it Was provided as follows:- "4. Every dispute, difference or question which may at any time arise between the parties hereto or any person claiming under them touching or arising out of or in respect of this agreement or the Service Agreement or the subject-matters thereof shall be referred to the arbitration of an arbitrator to be appointed by the Chairman for the time being of the Board of Lever Brothers Pakistan Limited and Lipton (Pakistan) Limited and the decision of the arbitrator shall be final and binding between the parties."
3. On or about 9-10-1989 the respondent filed Suit No,1148/89 against, the appellant in the Court for recovery of Rs,7,65,935 being due on account of the salary and other dues and benefits for the period from 1-9-1987 to 31-8-1989 with interest at 14% per annum from the date of institution of the suit till realization of the aforesaid amount. The case of the respondent was that in normal course he would have retired from the Company's service on 19-1989 on attaining the age of 60 years.
4. On 29-11-1989 the appellant through an application filed under section 34 of the Arbitration Act requested the Court to stay further proceedings in the aforesaid suit and refer the matter to arbitration in terms of clause 4 of the aforesaid agreement dated 17-2-1988. The respondent filed objections to the said application, pleading that the said agreement dated 17-2-1988 was void, illegal and unenforceable. A plea was also raised by the respondent that the question of gratuity was beyond the scope of the aforesaid arbitration agreement and hence was justiceable by this Court.
5. The learned Judge in chambers who disposed of the said application under section 34 of the Arbitration Act held that the aforesaid agreement between the parties was not a valid agreement as contemplated by section 2 (e) of the Contract Act, as although there was a promise made by Lipton (Pakistan) Limited to pay certain dues to the respondent but there was no corresponding counter promise by the respondent forming consideration for the said promise. Consequently, the learned Judge came to a conclusion that there was no valid agreement between the parties to which section 34 of the Arbitration Act could be attracted. It was further held by him that in any case the arbitration agreement did not cover the claim of the respondent on account of gratuity.
The application was, therefore, dismissed.
6. We have heard Mr. Nizam Ahmed, learned counsel for the appellant and Mr. Iqbal Ahmed, learned counsel for the respondent.
7. Mr. Nizam Ahmed has assailed the findings of the learned Judge in chambers on the ground that they are neither supported by facts nor law. Mr. Iqbal Ahmed, on the other hand, apart from fully supporting the order passed by the learned Judge has raised a number of legal objections to which we now propose to advert. It has firstly been argued that the dispute in the suit was not set out by the appellants in the application filed by them under section 34 of the Arbitration Act and hence the application was liable to be dismissed on such ground alone. Reliance in this respect has been placed by the learned counsel on Muhammad Yousuf Burney v. S. Muhammad Ali 1983 CLC 1498, Syed Arshad Ali v. Sarwat Ali Abbasi 1988 CLC 1350 and Mst. Zohara Begum v. Messrs Abdul Razak & Co. 1984 CLC 1643. The next contention of Mr. Iqbal Ahmed was that the agreement in question had been obtained by the appellants from the respondent through coercion and misrepresentation and the appellant was not a consenting party. It has been further contended that the respondent for the first time became aware of the alleged agreement only when its copy was delivered to his counsel. Consequently, according to him, since validity of the agreement had been questioned by the respondent in the objections filed before the learned Single Judge in chambers the order on the application under section 34 of the Arbitration Act could not have been passed by him unless the questions raised in this regard were first determined. Reliance in this respect was placed by the learned counsel on Messrs Agricides (Pvt.) Ltd. v. Messrs Ali Agro Supply Corporation Ltd. 1988 CLC 59, Asian Mutual Insurance Co. Ltd. v. Pakistan Insurance Corporation PLD 1982 Kar. 778 and Avari Hotels Ltd. v. Hilton International Company PLD 1985 Kar.
445.
8. So far as the agreement dated 17-2-1988 is concerned, over which the entire controversy has revolved, a perusal of the same indicates that vide clause 2 thereof the respondent in consideration of certain sum of money paid to him on account of salary, allowances etc. Had agreed to release the said Company Messrs Lipton (Pakistan) Limited from all claims and demands under the service agreement or under any other express or implied term or condition of service with the company. The agreement further shows that the parties had agreed to refer every dispute, difference or question which may at any time arise between them to arbitration and the decision of the arbitrator was to be final and binding on the parties. The agreement, therefore, clearly shows that the same was valid as in consideration of the promise made by the respondent to release the company of all claims which may be made by him in future he was paid a total sum of Rs,83,334 less Rs,35,823 payable on account of income-tax, car loan balance etc. It was further mutually agreed between the parties to refer the matter to arbitration as pointed out earlier. We are, consequently, unable to agree with the findings of the learned single Judge in chambers that the agreement is not in accordance with section 2 (c) of the Contract Act or that the same is invalid. It is not the case of the respondent that the dues payable to him under the said agreement were not paid to him by the respondent. In fact, the respondent acknowledges in para. 8 of the plaint filed , by him in this Court that he was paid his salary and other dues upto 31-8-1987.
' We are, therefore, of the view that the agreement was a valid agreement and binding on the parties.
9. So far as the next finding given by the learned Single Judge is concerned, viz., that the agreement does not cover the respondent's claim on account of gratuity, although the learned Judge appears to be right because no reference can be found in the said agreement to any gratuity but that does not mean that if a claim is brought by the respondent against the appellants in respect of gratuity the arbitration clause in the agreement cannot be invoked by the latter. As has been pointed out earlier, the respondent agreed to receive the aforesaid benefits from the company and further promised not to make any claim against the company either under the service agreement or under any other express or implied term or condition of service. The claim for gratuity now made by the respondent was, therefore, certainly hit by the said clause of the agreement and it would be erroneous to assume that the arbitration clause in the agreement was not attracted to it. The said clause clearly stipulated that the respondent would not make any additional claim over and above what he had agreed to receive from the company and his claim for gratuity being a claim made upon the company over and above what he had already accepted from it appears to be clearly covered by the said agreement. It is also pertinent. To point out here that the arbitration clause refers to every dispute, difference or question which may at any time arise between the parties. It, therefore, extends to all such claims which may be made by the respondent against the appellants at any time after signing of the said agreement. We are, therefore, of the view that the claim for gratuity made by the respondent is fully covered by the arbitration agreement.
10, Turning now to the legal objections raised by Mr. Lqbal Ahmed his first contention, as pointed out earlier, is that the dispute which the appellants had sought to refer to arbitration, had not been set out in the application-under section 34 of the Arbitration Act. No doubt, the three cases relied upon by Mr. Lqbal Ahmed, reference to which has been made earlier, do support the learned counsel's contention to a large extent but it may be further pointed out that a copy of the arbitration agreement dated 17-21988 had been filed by the appellants clearly setting out the terms of the arbitration agreement between the parties, Since the dispute raised by the respondent was already set out in his plaint, the requiments of section 34 of the Arbitration Act appear to have been substantially complied with. What section 34 appears to be requiring is that the Court should be satisfied first that there is an agreement to refer disputes arising between the parties to arbitration and secondly that the suit relates to a matter agreed to be referred. We are, consequently, of the view that the presence of the plaint and the arbitration agreement on the record of the case was sufficient for the satisfaction of the Court in regard to the aforesaid requirements of law but in any case we find that this question has been raised by Mr. Lqbal Ahmed for the first time before us and the same was not raised by him either in the written objections filed by him or at any subsequent stage of the proceedings either before the learned single Judge or this Bench. Consequently, we cannot permit the learned counsel to take such objection at this belated stage of the case and take the learned counsel for the other side completely by surprise. No doubt, a legal objection can be taken at any stage of the case but not so as to cause prejudice to the other side. If we allow Mr. Iqbal Ahmed to take this objection now the same is bound to cause prejudice to the appellants. We are, therefore, unable to consider the first objection of Mr. Iqbal Ahmed.
11. The next contention of Mr. Iqbal Ahmed is that the agreement dated 17-2-1988 was obtained from the respondent by coercion, misrepresentation and without his free consent. It has been contended that on 17-2-1988 the respondent was asked to sign a formal paper before the payment of his dues and he being unaware of the facts and the nature of the paper signed it under an impression that the same was only a formal acknowledgement of the amount paid to him and nothing more. Mr. Iqbal Ahmed has, therefore,. Argued that the said agreement is invalid and consequently the question of stay of proceedings in the suit did not arise. Learned counsel in this regard has placed reliance upon two Division Bench judgments of this Court reported as Asian Mutual Insurance Co. Ltd. v, Pakistan Insurance Corporation and Avari Hotels Ltd. v. Hilton International Company, reference to which has already been made in this judgment. In the first case it was observed by Naimuddin, J. (as he then was), who delivered the judgment of the Division Bench, as follows:- "In our view whenever a question as to the existence or validity of an arbitration agreement or to have its effect determined, is raised by way of an application under section 33 of the Arbitration 'Act before a Court, the Court is bound to decide the same and to such proceedings, the provisions of section 34 of the Arbitration Act would not apply, for the language employed in section 33 is couched in mandatory terms. Even otherwise under section 34 of the Arbitration Act a Court can stay the proceedings only after holding, if the existence of an arbitration agreement or its validity is challenged, that the same exists or is valid. It, therefore, follows that section 34 of the Arbitration Act could not apply to the same question when it is independently raised by proceedings under section 33 of the Arbitration Act."
' In the next case cited by the learned counsel, another Division Bench while dealing with a similar question has observed as follows:- "On a consideration of the case-law on the point and even on principle of interpretation, we are left in no doubt that, in cases, where fraud is alleged, or, where legal validity of the agreement, containing the arbitration clause itself, is challenged, the Court would not leave these matters to be decided by the arbitrators The validity of an arbitration clause is sine qua non to remitting of the case to the arbitrators This is mainly for the reason that verily an arbitration clause may be in violation of law, or, is hit by the principles stated in the Contract Act, which enable one party to avoid a contract. These are generally questions of law, and are hardly ever left for decision of the arbitrators It would indeed be a meaningless exercise, if, at the very initial stage, when no evidence is recorded, and even a written statement is not filed, that a matter is referred to arbitration. It may well be putting the cart before the horse, for, if the arbitrator proceeds to decide the dispute, and the award is challenged again before the Court on the point of invalidity of the agreement itself on the basis of fraud, or misrepresentation, or, illegality, the Court will have no pption, but to set aside the award on that ground alone. It will then appear that the entire exercise before the arbitrator was an exercise in futility. We are, therefore, of the view that, if substantial and bona fide. Points are raised on the basis of an agreement being void on ground of being in violation of law, or, having been obtained by fraud, or, misrepresentation, the proper forum would be decision of the Court, and not remitting the case to an arbitrator."
' There can of course be no cavil with what has been observed by the two learned Division Benches of this Court. It may, however, be pointed out that the facts of the first case. (Asian Mutual Insurance Co. Ltd.'s case) were quite distinguishable as in the said case an application under section 33 of the Arbitration Act, challenging the validity of an arbitration agreement was already pending before the Court when an application under section 34 of the said Act was filed by the appellant requesting the Court for stay of proceedings under section 33 of the said Act. Such application was dismissed and out of the order of dismissal the said appeal had arisen. In the second case (Avari Hotels Ltd.'s case) the Court had found that substantial and bona fide points had been raised in regard to the arbitration agreement being void on the ground of being in violation of law or having been obtained by fraud or misrepresentation. Consequently, it was held that proper forum for determination of such questions would be the Court rather than the arbitrator. Be that as it may, but it is pertinent to point out that in no case an application under section 34 of the Arbitration Act would be liable to be dismissed merely on the ground that a party by way of defence has alleged misrepresentation, coercion or fraud. No doubt, such allegations would be required to be established first by the Court' but in no case an application under section 34 can be dismissed on that account. However, in order that such allegations be determined by the Court a prima facie case must be made out by a party challenging the validity of the arbitration agreement. We would like to point out that as is evident from the judgment of the learned Single Judge, this question does not appear to have been raised by the learned counsel for the respondent before him. The respondent also appears to have taken no steps to challenge the validity of the said agreement although he could file an application under section 33 of the Arbitration Act before the Court. In ILR 1951 Cal. 438 it was held that section 33 of the Arbitration Act has no application to a case where only a defence is raised challenging the existence only or the validity of an arbitration agreement. In A.I.R. 1964 Mys. 238 it was observed that "the scheme of the Arbitration Act is to prevent the parties to an arbitration agitating questions relating to the arbitration in any manner other than that provided by the Act". Mr. Nizam Ahmed, learned counsel for the appellant has further argued that the contention raised by the respondent in respect of misrepresentation and coercion ex facie appears to be absurd because it is highly improbable that the respondent would sign an agreement without even looking at the contents thereof when admittedly he was not an illiterate person and had held the position of a manager in the company.
We are, consequently, inclined to hold that the said ground raised at this belated stage cannot be of much avail to the respondent. No other question has been raised by the learned counsel for the respondent.
12. In the result, we set aside the judgment passed by the learned Single Judge and stay further proceedings in Suit No,1148 of 1989 filed by the respondent against the appellant.