' SAJJAD ALI SHAH, J.---This appeal with leave calls in question judgment, dated 9-12-1985 of Division Bench of the High Court of Sindh at Karachi, whereby High Court Appeal No,61 of 1983 is dismissed maintaining order passed by learned Judge in chamber, refusing stay of suit as contemplated under section 34 of the Arbitration Act, 1940. Briefly stated the relevant facts in the background are as under:---
2. Respondent herein namely Muhammad Hanif executed agreement, dated 12-4-1983 with appellant herein namely Messrs ECKHARDT & Co., a foreign company with registered office in Hamburg, West Germany, through their agent namely Ecomar (Pakistan) Limited, stationed at Karachi, for purchase of motor vessel "FRATZESCOS M" Ex-"NELSON" to be delivered at Karachi on 30th May, 1983, which time was extended up to 7th June, 1983. Letter of Credit was opened at Karachi. Vessel could not be delivered within extended time as mentioned above, for the reason that there was congestion and strike in Karachi Port, hence buyer had right to cancel the contract as contemplated by clause 4 of the agreement but he claimed that seller was intentionally delaying discharging of cargo so that vessel be not delivered within stipulated time. Claiming damages on the basis of difference in the market price and the contract price of the vessel and further sum as expense to be incurred for purchase of similar vessel for the purpose of scrap, buyer filed Suit No,347/1983 in the High Court of Sindh on original side for decree jointly and severally against sellers and their agents at Karachi.
3. During pendency of the suit, defendants Nos.1 and 2 filed application under section 34 of the Arbitration Act, 1940, for stay of suit proceedings on the ground that there is arbitration clause in the contract executed between the parties providing for arbitration proceedings to take place in London in the manner as prescribed in clause 8. This application was supported by affidavit.
Application for stay of suit was resisted and plaintiff/buyer filed counter-affidavit in which stand was taken that reference to a foreign Tribunal was opposed to public policy and laws relating to contract and arbitration in Pakistan and further that whole evidence to be required would be available at Karachi, hence it would be convenient to proceed with suit at Karachi. Affidavit-in- rejoinder was also filed and ultimately after hearing the parties, application under section 34 of the Arbitration Act was dismissed by the learned Judge in chamber vide order, date 10-7-1983.
Concluding paragraph therefrom with assessment of material and reasons is reproduced hereunder:--- "As stated above in the present case the contract was entered into at Karachi where defendant's agents reside and carry on their business permanently. The delivery of the vessel was to be made at Karachi, letter of credit was opened at Karachi and all other formalities were to be completed at Karachi. The reasons given for rescinding the contract are the circumstances beyond the control of the defendants which include congestion and strike at Port of Karachi and other local conditions due to which the goods could not be discharged from the vessel. It is therefore, clear that the entire evidence of both the parties is at Karachi. In these circumstances to carry the entire burden of this litigation to London before the arbitrators will be most inconvenient and expensive for both the parties. One of the factors which has impressed is that the defendant No,1 has its agent at Karachi, who is permanently stationed here and looks after its business and further it has been joined as defendant No,2 against whom the plaintiff has sought decree jointly and severally. This defendant No,2 is not a party to the arbitration agreement. In view of the relationship between defendant No,1 and defendant No,2 this may not by itself be a strong ground for refusing to stay, but the fact remains that in the circumstances of the case the foreign arbitration would not be a safe or convenient forum for the decision. To compel the plaintiff to seek his remedy at that forum may lead to denial of justice."
4. Aggrieved against the decision of learned Judge in chamber, defendants Nos.1 and 2 in the suit filed High Court Appeal, as mentioned above, which is dismissed by Division Bench vide judgment after detailed discussion on case-law for and against the proposition and arriving at the conclusion as stated below:--- "In any case we cannot substitute our view for the view of the learned Single Judge even if a different view of the matter was possible so long as we find that the learned Single Judge has exercised his discretion on relevant consideration."
5. We have heard at length Mr. Sajid Zahid, ASC for appellant and Mr. Faizanul Haq, AOR for respondent. When asked why from two defendants in the suit, decree against whom is sought jointly and severally and who jointly filed High Court Appeal, which failed, only one (Messrs Eckhardt & Co.) filed petition for leave to appeal, which was allowed and converted into appeal, Mr. Sajid Zahid could not give satisfactory reply except that according to him main responsibility fell upon foreign company which is impleaded as appellant, hence he dropped the name of agent and second defendant in the suit in the memorandum of petition for leave to appeal. This point was not pressed further because of its academic nature and was left at that because this omission would not stand in the way of disposal of appeal on merits.
6. In the contract of sale which is available at page 89 of the paper-book, clause 8 relates to arbitration and the same is reproduced as under:--- "If any dispute should arise in connection with the interpretation and fulfilment of this contract, the same shall be decided by arbitration in the City of London and shall be referred to a single arbitrator to be appointed by the parties hereto. If the parties cannot agree upon the appointment of a single arbitrator the dispute shall be settled by three arbitrators, each party appointing one arbitrator and the third being appointed by the Chairman of the London Arbitrators Association in London. If either of the arbitrators appointed refuses or is incapable of acting, the party who appointed him shall appoint a new arbitrator in his place. If the party fails to appoint an arbitrator either original or by way of substituting for two weeks after the other party having appointed his arbitrator has sent the party making default notice by mail, cable or telex to make the appointment, the Chairman of the London Arbitrators Association shall after application from the party having appointed his arbitrator, also appoint an arbitrator on behalf of the party making default.
' The award rendered by the Arbitrator Court shall be final and binding upon the parties and may, if necessary, be enforced by the Court or any other competent authority in the manner as a judgment in the Court of justice and the English Law to apply."
7. Our attention is drawn to last part of the quote stated above, and on that basis argument is built by learned counsel for the appellant to the effect that both parties had intended and expressed that intention specifically that English Law would apply and English Courts would have jurisdiction to the exclusion of jurisdiction of local Courts at Karachi. Last paragraph of the arbitration clause is inseparable from the main part and is to be read in conjunction with main part. Reading of the arbitration clause as a whole shows that parties intended in the contract that arbitration would take place in London and if that is allowed to happen, automatically English law would apply.
8. Main contention raised by the learned counsel for the appellant before us is that both parties have voluntarily entered into a contract in which it is agreed by them that if there is a dispute in connection with interpretation and fulfilment of the contract, the same shall be decided by arbitration in London, hence request of defendants in the suit for stay of proceedings in Karachi and for reference of matter to arbitration in London was just, legal and proper and should have been accepted. Mr. Zahid further submitted that request for stay of proceedings was opposed in prefunctory manner in the counter-affidavit filed by plaintiff in the suit on the ground that evidence to be produced would be available at Karachi, hence it would be convenient if the suit proceeded at Karachi. It was further submitted by the learned counsel for appellant that apart from the parties, only one witness is to be taken to London, who could explain congestion and strike at the port of Karachi, hence without much difficulty or unnecessary expense, arbitration clause in a contract with a foreign party could be honoured.
9. Contention raised on behalf of appellant as stated above, is rejected by the two forums in the High Court on the ground that the Court is satisfied that there is no sufficient reason for reference of the matter for arbitration to Tribunal in London as it would not be a safe and convenient forum for the reason that contract was entered into at Karachi and whole evidence is available at Karachi. It has been done so as allowed under section 34 of the Arbitration Act which provides that the Court has discretion to grant stay or not and in this case stay is not granted with justification and for sound reasons.
10. Interpreting section 34 of the Arbitration Act, learned counsel for the appellant argued that under the said provision, no doubt the Court has discretion but that discretion should be exercised in favour of reference of matter to the forum of arbitration chosen by the parties and mentioned voluntarily in the contract. In support, he cited a large number of rulings starting with the judgment in Rungta Sons Private Ltd. v. Jugometal Trg. Republike and another AIR 1959 Cal.
423. In the reported case, one of the contracting parties was in India and the other in Yugoslavia and they had bargained that venue of arbitration would be Switzerland. It was held that in the absence of special reason, parties were bound by bargain and Court would enforce it by staying the suit. It was further observed that there was no reason why the reasonable evidence could not be produced at Zurich in the event of arbitration being held at that place. The mere fact that parties may have to incur larger costs in the event of the arbitration at Zurich is not a sufficient ground for refusing the stay. The difference between the reported case and the instant case is that in the reported case, one party was in India and the other was in Yugoslavia and venue of arbitration was set in Switzerland, but in the instant case, vendor company is German but is represented by agent at Karachi and the buyer is also at Karachi and the contract was executed at Karachi, but venue of arbitration is set in London.
11. Second case cited is judgment in Swedish East Asia Company Ltd. v. B.P. Herman and Mohatta (India) Private Ltd. AIR 1962 Calcutta 601), in which it was held that though the contract did not rob the Court of its jurisdiction, it would be in consonance with justice and fairplay to stay the suit in India pending institution and disposal of proper proceedings in Sweden. In that reported case, there was contract of affreightment of certain goods to be carried to Calcutta in which both parties were Swedish and a bill of lading was issued by shipping company to a shipper and contract was entered into in Sweden providing that any dispute arising out of the contract would be decided in Sweden according to Swedish law.
12. Third case cited is Michael Golodetz and others v. Serajuddin & Co. AIR 1963 Supreme Court 1044, in which it is held that power enunciated by section 34 of the Arbitration Act is inherent in the Court and the Court insists, unless sufficient reason to the contrary is made out, upon compelling the parties to abide by the entire bargain, for not to do so, would be to allow a party to the contract to approbate and reprobate, and this consideration may be stronger in cases where there is an agreement to submit the dispute arising under the contract to a foreign arbitral tribunal. In the reported case party in Calcutta exported consignment to a party in New York by contract in writing which provided for settlement of dispute by arbitration in New York according to the rules of American Arbitration Association. On account of dispute, action was filed in the High Court of Calcutta on the original side claiming a decree that contract be adjudged void and cancelled.
Importer filed application under section 34 of the Arbitration Act for stay of proceedings which was allowed and parties were directed to contest arbitration proceedings in New York. However, in appeal the decision was reversed. Supreme Court did not interfere and maintained decision in appeal in High Court by observing that appellants/importers would be put to some inconvenience if they are required to defend the suit filed against them in India but the High Court has considered the balance of inconvenience and other circumstances and has come to the conclusion and in their judgment that conclusion is right and the facts established make out 'sufficient reason' for not granting stay.
13. In the Supreme Court of Pakistan in the case of Haji Soomar Haji Hajjan v. Muhammad Amin Muhammad Bashir Ltd. 1981 SCM R 129, question of stay of suit under section 34 of Arbitration Act came up for examination but not involving forum of arbitration in another country. It was held that if parties to agreement expressly choose through an arbitration clause a forum other than Court of law for settlement of their dispute, then neither of such party should normally be allowed to avoid that forum. The sole purpose of Arbitration Act is to curtail litigation in Courts and to promote the settlement of disputes amicably through persons in whom, both parties repose their trust. In that case one party wanted to wriggle out from the arbitration clause on the ground of fraud and filed a suit. Learned Single Judge of the High Court on application under section 34 of the Arbitration Act, stayed the suit. Against that decision, Letters Patent Appeal failed. Supreme Court dismissed the appeal and observed that ordinarily suit be stayed even if there is allegation of fraud unless the party against whom there is allegation of fraud wants the matter to be decided through public enquiry or by a Court of law. However, if that party does not wish the dirty linen to be washed in the public, the proceedings in the trial should be stayed.
14. Mr. Zahid learned ASC for appellant has also cited judgment in Ramji Dayawala & Sons v. Invest Import reported in 1982 PSC 12, which is a decision of Supreme Court of India, in which it is held that when the parties had agreed to an arbitration by a foreign arbitral tribunal, the case for stay would be stronger than if there was a domestic arbitration agreement. This proceeds on the assumption that parties not only sought and agreed upon the forum for resolution of dispute but also the law according to which the dispute would be resolved. It is further observed that however, this is not an absolute rule because granting or refusing to grant stay is still a matter within the discretion of the Court. In the reported case, respondent, Yugoslavia-based company entered into sub-contract with appellant company based in Behar State of India, for setting up a thermal power station at Barauni. The sub-contract was executed in Belgrade (Yugoslavia) incorporating an arbitration clause providing for resolution of disputes by International Chamber of Commerce in Paris with application of Yugoslav materials and economical law. Appellant had objected to the arbitration clause in writing but there was no further reaction from the other side. In the suit filed at Calcutta, stay of proceedings was granted. Appeal against the decision was dismissed by the High Court.
Supreme Court allowed appeal. It was held by the Supreme Court of India that power to grant stay of suit is discretionary and dependent upon the circumstances which may influence the Court to refuse to grant stay of suit filed by a contracting party despite existence of an arbitration clause in the contract providing for reference of dispute to a foreign arbitral tribunal.
15. Learned counsel for the appellant submitted that in the case of Akbar Cotton Mills Ltd. v. Messrs VES/Ojuanojo Objedinenije Tech/Amesh Export and another 1984 CLC 1605, suit was not stayed by learned Judge in Chamber in the High Court of Sindh at Karachi and that case is distinguishable for the reason that all evidence was available in Karachi and nature and volume of evidence was such that it was impossible and impracticable for the party to produce it before arbitral tribunal in Moscow. Question of foreign exchange was also involved. Likewise in the case of Messrs V/O ?
Echmash-Export v. Messrs Akbar Cotton Mills Ltd. 1987 M LD 600, legal proceedings in the Court were not stayed for paucity of foreign exchange. It was submitted by the learned counsel that in the instant case neither voluminous evidence is involved nor there is question of heavy expense of foreign exchange or production of large number of witnesses. According to him only one witness could be taken to London apart from the parties for his evidence on the point that vessel could not be delivered within stipulated time on account of strike and congestion at Karachi Port.
16. On the other hand Mr. Faizanul Haq learned AOR for the respondent has supported the impugned judgment and refusal of stay of suit proceedings, which according to him, is supported by solid and cogent reasons. He has further submitted that whole case-law on the subject is supportive of the fact that under section 34 of the Arbitration Act, Court has discretion to stay legal proceedings or not and can refuse stay if there are reasonable grounds to do so.
17. We are of the view that learned Judge in Chamber in the High Court of Sindh has written a well- considered judgment and has given valid reasons in support of refusal of stay on the ground that it would be inconvenient to the parties to go to London with evidence for resolution of dispute by way of arbitration as provided in the contract. The relevant paragraph containing reasons from the judgment of the learned Judge in Chamber has already been reproduced above and need not be repeated. Perusal of plaint shows that defendant No,1 agreed to sell and deliver the vessel through defendant No,2 at Karachi to the plaintiff and plaintiff opened letter of credit and took other necessary steps. Plaintiff had offers of several other vessels but wanted to buy this vessel before announcement of budget after which custom duty was likely to increase on vessels for scrapping.
Plaintiff claims damages. Plaintiff was expected to prove such assertions by evidence of documents and witnesses. As against that, defendants did not disclose their defence in the application for stay but only arbitration clause was invoked. In the circumstances and on the material available on the record, the Court concluded against grant of stay. No interference is warranted with exercise of discretion by learned Judge in Chamber and maintained in appeal which is judicial and for valid reasons. We endorse the view taken by Indian Supreme Court in the case of Ramji Dayawala & Sons (supra), holding that when the parties had agreed to an arbitration by a foreign arbitral tribunal, the case for stay would be stronger than if there was a domestic arbitration agreement. Proper and legal justification in support of this view is that parties of their own volition and free will and with their eyes open enter into agreement in writing providing for arbitration, hence in all propriety and fairness they should be allowed and compelled to go for arbitration. Ignoring arbitration clause in the agreement, when a party files a suit in the Court, his burden becomes heavier, when stay application is filed indicating arbitration clause to satisfy the Court that he was justified in doing so. This burden becomes more onerous when there is moral and legal commitment with a foreign party for foreign arbitral tribunal. There is no cavil about the proposition that under section 34 of the Arbitration Act, stay can be refused by the Court if it is satisfied that there is no sufficient reason for making reference to arbitration and substantial miscarriage of justice would take place or inconvenience would be caused to the parties if stay is granted. No hard and fast rule can be laid down or line of demarcation can be drawn to say in what cases refusal can be made. Each case has different facts and grant or refusal of stay is dependent upon peculiar facts and circumstances of each case. The Court can make objective assessm ent and come to the conclusion whether stay of legal proceedings can be granted or refused.
18. Considering legal position stated above, we are of the view that in the instant case no interference is warranted for the reason that discretion is exercised by the Court in refusing stay on cogent grounds and additionally, we are of the view that non-performance of the contract for reason of congestion and strike at Karachi Port was beyond contemplation of the parties at the time of contract. In such circumstances, whole evidence on this point has to come from Karachi composed of documents and oral evidence and taking of such evidence to London would be inconvenient to the parties and also would be expensive. For facts and reasons so stated above, we find no merit in this appeal, which is hereby dismissed with no order as to cost.
' AJMAL MIAN, J.--I agree with the conclusion but I have appended hereto a separate note.
AJMAL MIAN, J.---I have had the advantage of reading the judgment proposed by my learned brother, Sajjad Ali Shah, J. In the above appeal. Though I am inclined to agree with the conclusion that the above appeal merits dismissal, as the two Courts below have exercised discretion under section 34 of the Arbitration Act against the appellant by refusing to stay the suit and since the above exercise of discretion cannot be said to be perverse or arbitrary or capricious, this Court cannot interfere with the same even if it would have taken a different view in the matter. However, I would like to add a few lines.
' I may observe that while dealing with an application under section 34 of the Arbitration Act in relation to a foreign arbitration clause like the one in issue, the Court's approach should be dynamic and it should bear in mind that unless there are some compelling reasons, such an arbitration clause should be honoured as generally the other party to such an arbitration clause is a foreign party. With the development and growth of International Trade and Commerce and due to modernization of Communication/Transport systems in the world, the contracts containing Such an arbitration clause are very common nowadays. The rule that the Court should not lightly release the parties from their bargain, that follows from the sanctity which the Court attaches to contracts, must be applied with more vigour to a contract containing a foreign arbitration clause. We should not overlook the fact that any breach of a term of such t contract to which a foreign company or person is a party, will tarnish the image of Pakistan in the comity of nations. A ground which could be in contemplation of party at the time of entering into the contract as a prudent man of business, cannot furnish basis for refusal to stay the suit under section 34 of the Act. So the ground like, that it would be difficult to carry the voluminous evidence or numerous witnesses to a foreign country for arbitration proceedings or that it would be too expensive or that the subject-matter of the contract is in Pakistan or that the breach of the contract has taken place in Pakistan, in my view, cannot be a sound ground for refusal to stay a suit filed in Pakistan in breach of a foreign arbitration clause contained in contract of the nature referred to hereinabove. In order to deprive a foreign party to have arbitration in a foreign country in the manner provided for in the contract, the Court should come to the conclusion that the enforcement of such an arbitration clause would be unconscionable or would amount to forcing the plaintiff to honour a different contract, which was not in contemplation of the parties and which could not have been in their contemplation as a prudent man of business.
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