' SAJJAD ALI SHAH, J.---This appeal with leave of the Court is directed against judgment, dated 24- 10-1985 of High Court Sindh, Karachi, whereby High Court Appeal No,5 of 1985 is dismissed upholding order passed by learned Judge in the Chamber to the effect that appellant had abandoned their right of choice of forum and their application for stay under section 34 of the Arbitration Act, 1940 had been rightly dismissed.
2. Briefly stated the relevant facts giving rise to this appeal are that Attock Cement Company of Pakistan Limited entered into a turnkey contract with M/s. Uzin Export and Import Enterprises (to be referred hereafter as appellants) for construction/completion and successful operation of Cement Plant. Contract was signed by the parties on 11-5-1981 and clauses 2, 4, 26 thereof provided for the appointment of sub-contractors to carry out various works subject to approval of Attrock Cement Company. Appellants appointed M/s. Iftikhar & Co. Ltd. (to be referred hereafter as respondents) for carrying out Civil Engineering, erection works and clearance and inland transport of Romanian supplies of the Cement Plant in accordance with Annexure 7 to the said Main Contract. Clause 20 of the contract between appellants and respondents is reproduced as under:- "All constructional plants, temporary works and materials "provided" by the sub-contractor shall when brought on the site be deemed to exclusively intended for the construction and completion of the works and the sub-contractor shall not remove the same or any part thereof (save for the purpose of moving it from the one part of the site to another) without the consent in writing of the contractor which shall not be unnecessarily withheld.
' The sub-contractor shall at all times keep the constructional plant and equipment exempt from claims of third parties and from legal attachment and shall not alienate/change or assign the same or any part thereof or allow any lien to arise thereon.
' The sub-contractor may remove any constructional plant, temporary works and surplus materials brought at site and belonging to the subcontractor only if the same are no longer required for the works."
3. Appellants paid to the respondents an amount of Rs,64.5 million on account of advance mobilisation charges for purchase and import of constructional plant and other machinery and vehicles necessary for expeditious and satisfactory performance of the contract. Respondents wanted to remove the constructional plant/machinery/vehicles to some other place/work, hence appellants filed Suit No,559 of 1983 against respondents claiming relief of injunction. Respondents filed written statement in the suit on 4-10-1983 making therein counter-claim with respect to generation of electricity. Application for interim injunction and application for amendment of counter-claim were fixed for orders on 3-11-1983, when the matter was adjourned and notice of the said amendment application was waived by the counsel for the appellants. On 10-11-1983 application for interim injunction was disposed of by a compromise. Application under section 34 of the Arbitration Act, 1940 was filed on behalf of the appellants praying for stay of proceedings in respect of respondents' counter-claim on the ground that the dispute raised in the counter-claim was covered by the Arbitration Clause.
4. Para. 3 of compromise arrived at between the parties in the above Suit No,559 of 1983 on 10-11- 1983 reads as follows:--- "The defendant will file an amended counter-claim, if any, as soon as possible. The plaintiff, however, reserves all its rights and defences in respect of the counter-claim as it has not joined issues/proceedings on the point nor adverted to it during the hearing of the Injunction Application."
5. Subsequently appellants withdrew their Suit No, 559 of 1983 of 27-5-1984. In view of this order respondents' counter-claim was re-numbered as Suit No,383 of 1984. Appellants filed application praying that their application filed in Suit No,559 of 1983 under section 34 of the Arbitration Act, 1940 be transferred and brought on the record of Suit No,383 of 1984 for hearing and disposal according to law. This application was opposed by the respondents and was dismissed by learned Judge in the Chamber, vide his order, dated 24-10-1984 on the ground that accepting notice of respondents' application for amendment of their counter-claim and by presenting the compromise application, appellants have taken steps in the proceedings within the meaning of section 34 of the Arbitration Act. Feeling aggrieved appellants filed High Court Appeal which has been dismissed by Division Bench of the High Court in terms stated above. It would be pertinent at this stage to reproduce Article 40 of the Contract between the parties providing for arbitration as under:--
(a) Any dispute relating to the execution, performance of this contract shall be amicably settled by the parties. In case the parties shall not reach an agreement the disputes shall be referred to arbitration of the International Chamber of Commerce in Paris.
(b) The parties agree that the arbitration should settle the disputes according to the rules of the arbitration procedure of the International Chamber of Commerce Paris. The applicable material law being the French material law.
(c) The arbitral decision is final and executory but it may be overruled or cancelled under the circumstances and the conditions stipulated under the legal proceedings rules valid in the country where the dispute is arbitrated.
(d) The parties undertake to comply with the arbitration decision forthwith and with no other formality.
(e) In case of failure to comply with the arbitration decision the same shall be fulfilled either.
6. Before going into the merits of this case, it would be pertineht to reproduce hereunder contents of section 34 of the Arbitration Act: "Power to stay legal proceedinss where there is an arbitration agreement.---Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings.'
7. Perusal of section 34 of the Arbitration Act as reproduced above clearly shows that if in a contract there is provision of resolution of dispute between the parties by way of arbitration and parties have agreed to such forum, then such forum is to be resorted to and given preference over filing of suit. If one of the parties to the contract by-passing forum of arbitration files a suit, then the other party can file application for stay as contemplated under section 34 of the ArbitratiOn Act and if the Court is satisfied then order of stay of proceedings in the suit can be passed to enable resolution of dispute between the parties by way of arbitration. Conditions precedent for grant of stay are that the party applying for stay has not filed written statement or taken any other steps in the proceedings indicating that right to invoke arbitration clause is intentionally abandoned in favour of Court proceedings. Whether to grant stay or not is dependent upon satisfaction of the Court and such order is to be passed by the Court only when it is satisfied that all the requirements and preconditions enumerated have been fulfilled. The Court has to satisfy itself that the party applying for stay has not relinquished or abandoned his right of invoking arbitration clause after filing of suit. In coming to such conclusion the facts and circumstances of each particular case are to be examined in the light of pleas and other steps taken by the parties. Facts and circumstances of two cases may not be alike and may differ.
8. Appellants herein filed first Suit No,559 of 1983 in the High Court of Sindh against respondents for permanent injunction. Facts are stated above and need not be repeated. It would suffice to say that from perusal of the plaint (page 64 of the paper book), it appears that under clause 20 of the Contract between the parties to the suit, respondents were to provide material and constructional plant required for the expeditious and satisfactory completion of the works and they were further required not to remove constructional plant and materials unless the same were no longer required for works. According to the Appellants they had to pay to the respondents an amount of Rs,64.5 millions on account of advance mobilisation charges for purchase and import of constructional plant and other machinery and vehicles. It was agreed between the parties that the work had to be completed before 10-2-1984 and appellants were not satisfied with the speed with which the works were being executed by respondents who were also under financial strains as is stated in paragraph 19 of the plaint. Appellants came to know that respondents initiated to remove the machinery from the site before completion of work and wanted to dispose it of. Respondents further informed appellants vide letter dated 31-8-1983 that they had disposed of Batching Plant. In such circumstances suit was filed seeking relief of injunction restraining respondents. From removing machinery from the site before completion of works. Perusal of the plaint does not mention anywhere presence of arbitration clause in the contract.
9. Respondents before us as defendants in the suit filed 19 pages long Written statement denying allegations levelled by the appellants. Admitting terms and conditions of the contract stand was taken that constructional plant, machinery and vehicles were purchased by respondents from their own resources prior to the execution of the contract. Allegation of removal of machinery before completion of work was denied. Clause 20 of the Contract was interpreted as allowing removal of plant and machinery when not required for completion of work. Delay and faults in the execution of work were imputed to the appellants. It was averred that amount of Rs,64 million was reduced and adjusted against the running bills and the entire amount was secured by bank guarantees. It was also denied that entire amount was advanced for the purchase of machinery. Furthermore in the written statement counter-claim was made. Paragraphs 37 and 38 of the written statement mentioning cause of action for the counter-claim are reproduced as under:- "37. That the cause of action arose to the defendant when the electricity generation bill dated March 16, 1983 was not paid and when the plaintiff by its letter dated 2-9-1983 unreasonably and unlawfully purported to restrain the defendant from removing the EMM 30 Concrete Batching Plant and continues with each day that the defendant's bill balance remains unpaid and until the Batching Plant can be delivered to the purchaser.
38. That the defendant's present claim is for the sum of Rs,13,54,539 for unpaid electricity generation bills and Rs,3,00,000 for damages suffered by the defendant as the direct result of wrongful detention of the EMM 30 Concrete Batching Plant by the plaintiff and court-fees of Rs,15,000 is paid accordingly."
10. Prayer in the written statement is that plaint be dismissed and suit be decreed in favour of defendant for a sum of Rs,16,54,539 with interest and costs. It is therefore, clear that so far plaint is concerned the only relief sought was with regard to the injunction to restrain the respondents from removing machinery from the site. Excepting that no other dispute was raised with regard to the execution and performance of the contract. Seemingly for that reason arbitration clause was not mentioned in the plaint. For the first time in the written statement counter claim was made raising dispute which pertains to the execution and performance of the contract. Keeping in view the nature of dispute and prayer in the counter claim filed by the respondents, appellants/plaintiffs in the suit filed application under section 34 of the Arbitration Act, praying for staying of proceedings of counter claim on the ground that dispute mentioned in the counter claim is covered by arbitration clause. This application was opposed and affidavit was filed by Salim Adil on behalf of respondents. Application was also filed for amendment of counter claim.
11. In the ordinary course plaintiff in the suit does not apply for stay of proceedings under section 34 of the Arbitration Act for the reason that this facility is available and meant for defendant only. In the instant case, counter claim was made in the written statement, which could be equated with separate counter suit. In the counter claim/suit status of plaintiffs changed and they became defendants and in such circumstances they could file application for stay under section 34 of the Arbitration Act. Appellants as plaintiffs in the main suit cannot be blamed for filing the suit in the first instance without invoking arbitration clause for the reason that it is explained that suit was only for injunction and there was urgent need for such relief from the Court which was not obtainable from Arbitrator as machinery was being removed from the site, which was to be prevented. When written statement-cum-counter claim was filed, it was divulged that defendants in the suit were raising dispute of the nature which could be settled by arbitration, application was filed immediately for stay of suit proceedings on 8-11-1983. In this regard, action of plaintiffs in the suit for filing suit in the first instance and not resorting to arbitration, cannot be held against them as reflection on their conduct in the counter claim/suit.
12. Appellants as plaintiffs in Suit No,559 of 1983 filed application under Order 23, Rule 1, C.P.C. For withdrawal of suit on the grounds mentioned in the letter dated 29-4-1984 annexed with application in which it is stated that purpose for which suit was filed and stay obtained was achieved as the works were completed and during that time batching plant was not removed from the site as ordered by the Court. Withdrawal of suit was opposed by the counsel for respondents/defendants in the suit on the ground that counter claim was peifding. However, suit was allowed to be withdrawn by order, dated 27-5-1984 with observation that withdrawal of the suit would not affect pendency of counter claim which was ordered to be given separate suit number which came to, be registered as Suit No,383 of 1984.
13. In Suit No,383 of 1984, appellants now appearing as defendants in the suit filed application under section 151, C.P.C. Praying for transfer of their application under section 34 of the Arbitration Act from the record of Suit No,559 of 1983 so that the application may be argued and disposed of according to law. This application was opposed and counter-affidavit was filed raising several objections. Rejoinder affidavit was also filed. However, application for stay of suit proceedings filed under section 34 of the Arbitration Act was dismissed on the grounds and for the reasons reproduced from the order as under:-- "On 3-11-1983 Uzin joined Iftikhar in asking the Court for time to work up a settlement in the case and waived notice of application under Order 6, Rule 17, C.P.C.. Filed by Iftikhar for amending the counter claim. On 10-11-1983, Uzin filed application dated 8-11-1983 jointly with Iftikhar in Court which shows as unconditional submission of parties to the jurisdiction of this Court and intention on the part of Uzin to contest the counter claim of Iftikhar. The above actions on the part of Uzin, in my opinion, amounted to taking of steps in the proceedings within the meaning of section 34 of Arbitration Act, which disentitled them to stay of suit."
14. As stated above, under section 34 of the Arbitration Act the Court has to satisfy itself whether stay of suit could be granted or not. Each case has different facts and peculiarities. In the instant case peculiar facts are that appellants filed suit for injunction only which was urgently required. In the written statement, counter claim was made on 3-10-1983 and on 8-11-1983 application was filed under section 34 of the Arbitration Act. In between these two dates, on 3-11-1983 by consent of the parties time was sought for settlement and in that anxiety notice of application for amending counter claim was waived. Notice was waived apparently on optimistic note that amicable settlement would be made. Since this waiver of notice was linked with efforts for compromise, hence in all fairness it should not be held against the appellants. Another step noted by learned Judge in chamber is that on 10-11-1983 joint application earlier dated 8-11-1983 for compromise order on application under Order XXXIX, Rules 1 and 2, C.P.C. Was filed in the Court in which defendants undertook to follow terms of contract. It is also to be considered that on 8-11-1983 application was filed for stay of suit proceedings. Joint application for compromise filed on 10-11- 1983 is not to be considered as a step in the proceedings for the reason that it was filed in the Court after filing of stay application. It appears from the facts of the case that appellants were very anxious for compromise and since efforts failed, application was filed for stay of suit proceedings on 8-11-1983. Even unilateral withdrawal of suit by the appellants cannot be anything else but part of compromise to encourage withdrawal of counter claim. In very peculiar facts and circumstances of this case as stated above, steps taken as mentioned above by the appellants should not be considered as amounting to taking steps in the proceedings within the meaning of section 34 of the Arbitration Act.
15. So far legal aspect of the case is considered, the question arises for consideration whether jurisdiction of the local Courts would be barred in view of foreign arbitration clause in the agreement executed between the parties in this case in Pakistan. Question came up for consideration in the case of M.A. Chowdhury v. Messrs Mitsui O.S.K. Lines Ltd. And others PLD 1970 SC 373, whether jurisdiction of Courts in Pakistan could lawfully be barred on account of clause in Bill of Lading providing for reference of dispute arising thereunder to be governed by foreign law and to be decided by a particular foreign Court. It was held by this Court at page 394 of the report, the relevant part from which is reproduced as under:--- "Having said this, however, I am of the opinion that in order to preserve the sanctity of contracts I ought also to hold, as was done in the earlier cases in Great Britain that such foreign jurisdiction clauses, even when they purport to give jurisdiction to a Court in a foreign country, are really in the nature of arbitration clauses which come within the exceptions to section 28 of the Contract Act and, therefore should be dealt with in the same manner as other arbitration clauses, In the case of an arbitration it has to be remembered that the jurisdiction of the Courts is not altogether ousted, for, the Courts merely stay their hands to allow the parties to resort to the form of adjudication to which they have previously agreed. By only staying the action before them the Courts still retain to themselves the jurisdiction to resume the case if the arbitration, for any reason, fails or the parties find it impossible to comply with the form of adjudication to which they had agreed. This was also the view taken in the case of Malik Ali Akbar, which I approve."
16. In support of what is held by this Court as stated above, reference can also be made with advantage to the case of A.M. Qureshi v. Union of Soviet Socialist Republics and another PLD 1981 SC 377 in which a citizen of Pakistan entered into contract with the USSR for supply of jeeps and trucks to the Government of Pakistan on commission and alleging breach of contract filed suit for damages in which on behalf of USSR bar to jurisdiction of domestic Courts was pleaded on the ground of diplomatic immunity. It was held that none of such statutes, conventions, doctrines, treaty or Diplomatic certificate bestows immunity from jurisdiction in a commercial and trade transaction entered into between a Pakistan citizen and USSR and its Trade Representation.
17. In the case of Messrs Eckhardt & Co. Marine GmbH v. Muhammad Hanif PLD 1993 SC 42 in Civil Appeal No,257-K of 1986 decided by this Court vide judgment, dated 12-4-1992, question came up for consideration whether stay of suit could be granted under section 34 of the Arbitration Act in presence of foreign arbitration clause in the contract. Agreement was executed between foreign company with registered office in Hamburg through their agent stationed at Karachi and Muhammad Hanif for purchase of motor vessel which could not be delivered within stipulated time due to congestion and strike at Karachi Port. Buyer filed suit in the High Court on the original side for decree. Stay of suit proceedings was prayed on the ground of foreign arbitration clause providing for. Arbitration proceedings to take place in London. Stay was refused by the two forums in the High Court. After examination of case-law on the subject, this Court did not interfere in peculiar facts of that case for the reason that non-performance of the contract was for reason of congestion and strike at Karachi Port . Which was beyond contemplation of the parties at the time of contract.
Secondly, whole evidence on the point had to come from Karachi composed of documents and oral evidence, which could not be taken to London as it would be inconvenient to the parties and also would be expensive. With regard to the discretion of the Court under section 34 of the Arbitration Act, it was observed as under:- "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 assessment and come to the conclusion whether stay of legal proceedings can be granted or refused."
18. In this case on account of peculiar facts and circumstances as stated above, we are of the view that stay should have been granted to allow the parties to have their dispute as mentioned in the counter claim decided by the forum of arbitration. It appears that appellants filed suit for injunction which was dire need for the reason that they did not want the machinery to be removed and execution of work to be hampered. Such relief could not be granted in arbitration proceedings.
After filing of counter claim appellants made efforts for compromise and withdrew their suit and asked for stay of suit proceedings in the counter claim on the ground that dispute was covered by arbitration clause. For facts and reasons mentioned above we stay suit proceedings. In this case in the contract there was provision for arbitration of International Chamber of Commerce in Paris.
This provision does not oust the jurisdiction of Courts in this country and this clause is to be treated at par with provision for arbitration within the country. In this case the main contract is between Attock Cement Company of Pakistan and appellants for construction and completion and successful operation of cement plant which provides for appointment of sub-contractors.
Resultantly, respondents entered into contract as sub-contractor with appellants. Contract from which present proceedings arise. Was executed in this country and the works had also to be executed here.
' In the circumstances arbitration proceedings cannot be allowed to be taken to Paris which would be inconvenient to the parties and also would prove to be expensive. We, therefore, allow stay of suit proceedings and leave the parties to take steps for having their dispute decided through arbitration proceedings with venue at Karachi. With regard to the mode and other incidental matters, steps can be taken as contemplated under the Arbitration Act. There will be no order as to costs.