1. ' This is an application filed by the defendant No,1 under section 34 of the Arbitration Act in the following circumstances. The plaintiffs are the owners of a certain number of shares in Bahawalpur Textile Mills Limited (the defendant No,13). By agreement dated the 14th May, 1987, between the plaintiff "and his family", on the one hand, and the defendants Nos.1, 2, 4, 7, 11 and 12, on the other hand, the plaintiffs agreed to sell those shares to the abovementioned defendants on the terms and conditions mentioned therein. Subsequently, a supplementary agreement dated the 26th August, 1987, was entered into between the plaintiffs and the defendants Nos.1 to 6 for the sale of those shares. The first agreement i.e. the agreement dated the 14th May, 1987, was signed only by the plaintiff No,1 and the defendant No,1 respectively but it is common ground between the counsel that the terms thereof are binding on the plaintiffs and the defendants Nos.1 to 6 by virtue of clause
(1) of the supplementary agreement, which provides, "the parties hereby expressly re affirm and ratify the above agreement dated 14-5-1987". It is alleged that in consideration for the transfer of "about" 50,000 shares, the defendants Nos. 1 to 6 were obliged to pay the plaintiffs a sum of Rs,25 lacs and to discharge the plaintiffs' liability amounting to Rs,6 crores; and that, in consideration for the agreement to sell the remaining shares, the defendants Nos.1 to 6 were obliged to discharge the liabilities of the plaintiffs to the banks to whom the shares had been pledged. It is further alleged that the defendants Nos.1 to 6 paid the plaintiffs, in respect of the 50,000 shares, a sum of only Rs,17.5 lacs and have failed to pay the remaining amount of Rs,7.5 lacs; and that the defendants Nos.1 to 6 have failed to take delivery of the remaining shares from the banks and discharge the liability of the plaintiffs to those banks, and that, in consequence of their failure to do so, the banks have filed suits for recovery of the moneys due to them, in consequence of which the plaintiffs have suffered damages to the extent of Rs,2 crores. The case of the plaintiffs is that, in these circumstances, there has been a complete failure of consideration and, in _ consequence, the contract between the parties "came to an end and was otherwise discharged, cancelled and rescinded". It is further the case of the plaintiffs that they continue to be the owners of the shares, except the 50,000 shares transferred to the defendants Nos.1 to 6 and were, therefore, entitled to participate at the annual general meeting of the defendant No,13 and to contest elections for directors of the defendant No,13 but that the defendants Nos.1 to 6 forcibly prevented them from participating in the meeting at which the defendants Nos.7, 8, 9 and 10 were elected as directors. It is alleged that the defendants Nos.7 to 10 are not entitled to act as directors of the defendant No,13.
2. ' On the above allegations, the plaintiffs have sought declaration that the agreement between the plaintiffs and the defendants Nos.1 to 6 stands rescinded, injunction to restrain the defendants Nos.1 to 12 from acting as directors of the defendants Nos.13 and 14 and from disposing of the assets of the defendant No,13, a declaration that the annual general meeting of the defendant No,13 was illegal, and for damages and for compensation from the defendants Nos.1 to 6.
3. ' Mr. Mansoorul Arfin, the learned counsel for the defendant No,1, submits that the parties are bound to refer the dispute to arbitration in terms of Article VIII of the agreement dated the 14th May, 1987, which provides for reference to arbitration of "any difference or dispute arising between the parties hereto relating to the execution, interpretation, performance or breach of this agreement or any provision thereof'. He submits that the disputes in the suit are covered by the aforesaid article and that the further proceedings in the suit should be stayed. Mr. Iqbal Kazi, the learned counsel for the plaintiffs, objects that the suit cannot be stayed because, out of the defendants, only defendants Nos.1 to 6 are parties to the arbitration agreement. Mr. Mansoorul Arfin, on the other hand, contends that the defendants Nos.7 to 15 are the superfluous and that merely because the plaintiffs have chosen to include those defendants also in the suit that is no reason for not staying the proceedings in the suit and not enforcing the agreement between the parties to refer the dispute to arbitration. He relies on the case of Messrs Haji Muhammad Ibrahim & Sons and others v. Karachi Municipal Corporation and others PLD 1960 (W.P.) Kar.
916. In that case, the suit arose from contract between the plaintiff No,1 and the defendant No,1 for construction of a market. The defendant No,1 found that the plaintiff was not carrying out the work and, therefore, took it out of their hands and gave it to the defendant No,4. In that suit, the plaintiffs also impleaded the Chief Engineer and the Executive Engineer of the defendant No,1 as defendants Nos.2 and 3 although no particular relief was sought against the defendants Nos.2 to 4. The defendants' application under section 34 of the Arbitration Act for stay of the suit was opposed, on behalf of the plaintiff, on the ground, inter alia, that the defendants Nos.2, 3 and 4 were not parties to the arbitration agreement. The contention was rejected by A.S. Faruqui, J. on the ground that "the claim of the plaintiff being based upon the breach of the contract which contains the arbitration clause, it really is directed against the Municipal Corporation, and the plaintiff cannot get out of the arbitration clause merely by impleading certain officers of the Corporation or the subsequent contractor to whom the work has now been awarded. If I was to accept this contention, it would amount to nullifying the arbitration clause to which the parties had bound themselves at the time of the contract, and to which they still adhere". While there can be no cavil with the principle cited above, the facts of that case are different from the facts of the present case. In the present case, the basis of the claim against the defendants Nos.1 to 6 is the breach of the contract between the plaintiffs and those defendants and the reliefs claimed against them, namely, for declaration that the agreement stands rescinded and for damages and compensation flow directly from the alleged breach of contract; whereas the remaining reliefs sought in the suit, namely, declaration that the annual general meeting of the defendant No,13 whereat the defendants Nos.7 to 10 were elected as directors was held illegally flows from the allegations that the plaintiffs continue to be the shareholders of the defendant No,13 and were entitled to participate in the election for directors of defendant No,13. There would, thus, appear to be distinct causes of action and distinct reliefs claimed against different set of defendants. Neither of the learned counsel addressed any argument as to whether in these circumstances the arbitration clause in the agreement between the plaintiffs and the defendants Nos.1 to 6 should be enforced. However, in view of the second objection to the application, taken by Mr. Iqbal Kazi, it is not necessary to decide the question.
4. ' The second and the more substantial objection taken by Mr. Iqbal Kazi is that the present application has been made by the defendant No,1 alone and, if it were to be granted, there is a real possibility of conflict of decisions. He submits that the issues involved in the dispute before the arbitrator, between the plaintiffs and the defendant No,1, and the dispute before the Court, between the plaintiffs and the defendants Nos.2 to 6 will be the same, viz. whether the defendants Nos.1 to 6 committed breach of the contract and the consequences of the alleged breach, and that there is an obvious possibility of conflict of decisions if the dispute between the plaintiffs and defendant No,1 is referred to arbitration. He submits that, in these circumstances, the discretion vested in the Court under secction 34 of the Arbitration Act ought not to be exercised in favour of the defendant No,1. He relies on the case of Gulf Iran Co. and another v. Pakistan Refinery Ltd. and others PLD 1976 Kar.
5. 1060. In that case, only one of the defendants had made an application under section 34 of the Arbitration Act, and it was held that the issues which arose in that suit would have to be decided by the arbitrator as between the plaintiffs and the defendant No,2, if the suit were to be stayed, and by the Court as between the plaintiffs and the other defendants and that in those circumstances the possibility of the conflicting decisions was so obvious as to render the whole process futile and self-defeating resulting in unnecessary inconvenience and expenditure. The application under section 34 was, therefore, not allowed. I am in respectful agreement with the principle enunciated in that case and am of the opinion that those principles apply to the facts of this case. The present application, therefore, cannot be granted and is hereby dismissed.