FAKHRUDDIN G. EBRABIM, J.-These are two applications, one by the plaintiffs under Order XXXIX, rules 1 and 2, C. P. C. And the other by the defendant No. 2 under section 34 of the Arbitration Act, 1940.
2. The circumstances giving rise to these applications are that in November, 1971 the defendant No. 1 an oil refinery at Karachi invited offers for supply of crude oil for the period beginning 1-4-1972 to 31st December, 1973. The defendant No. 2 submitted his offer. In the meanwhile the plaintiffs who are the prime producers of oil became interested in supply of crude oil to the defendant No. 2. The defendant No. 2 in the context of offer received by him from the plaintiffs, revised his own offer made earlier to defendant-Refinery which was accepted by the latter on 1-3-1972. This was followed by the agreement dated 23-3-1972 between the plaintiffs and the defendant No. 2 and the agreement dated 5-4-1972 between the defendants Nos. 1 and 2. The plaintiffs under their agreement with defendant No. 2 dated 23-3-1972 agreed to supply 600,000 long tons of crude oil in the year 1972 plus or minus 10 % at the buyer's option and 700,000 long tons in the year 1973 with similar 10 % option to the buyer at the price of U. S. Dollars 1.902 per barrel F. O. B. Kharg Island, Iran payable by establishment of irrevoca--'be letter of credit fifteen days before each tanker was expected to load. The agreement among other things provided for price escalation, force majeure and arbitration. The agreement recited that the defendant No. 2 had agreed to purchase this crude oil for the sole purpose of re-sale to the defendant No. 1 Refinery. In the agreement between the defendant No. I Refinery and the defendant No. 2 the price of crude oil per barrel was agreed at the C & F price of U S $ 2.127 per barrel plus Rs. 11 per long ton. The price was inclusive of the F. O. B.
Element U S $ 1.9.2 per barrel for which the Refinery as nominee of the buyer, the defendant No. 2, was to establish irrevocable letter of credit fifteen days prior to the loading of each tanker. The price escalation and the force majeure clauses in the agreement between the Refinery and the defendant No. 2 were identical as those between the plaintiffs and the defendant No. 2.
3. In the year 1972 the plaintiffs made supplies of crude oil totalling 69,000 long tons and in the year 1973 a total of 5,87,314 tons. Further ship--ments were due before the end of the year 1973 and it is the case of the defen--dant No. 2 that he made arrangements for taking delivery at Kharg Island for which purpose two tankers Mirabella III and Michael L were despatched to lift the cargo in terms of his agreement with the plaintiffs. About that time the defendant No. 2 received a communication from the plaintiffs that if for some reasons no supplies were made or the supplies of the agreed quantity for the year 1973 was not made before December 1973. The defendant No. 2 would be liable to pay 1974 prices on account of the expected rise in the price of crude oil by O. P. E. C. The vessel Mirabella III completed loading of 1,37,949 barrels on 2-1-1974. The vessel Michael L left without collecting any cargo and in its place another vessel Second was sent in January 1974 and a cargo of 1,34,276 barrels and the loading completed on 28-1-1974. The pre--vailing international prices of crude oil in December 1973 was $ 3,750 per barrel which jumped to $ 9,717 tier barrel in January 1974. The plaintiffs in this suit seek to recover the increased price for the aforesaid two cargoes for which purpose they rely on the price escalation clause in the agreement. This claim is resisted on the ground that defendant No. 2 had made the necessary arrangements to lift the cargo before 31st December, 1973 but the plain--tiffs with a view to extract more, did not effect the deliveries until after the advent of the year 1974. The plaintiffs have neither received the Decem-- ber price nor the January price for the aforesaid two consignments for the letter of credit opened by the defendant-Refinery was amended only partially so as to enable shipments to be made in January 1974 but its unit price remained the same at Dollars 3.75 per barrel which price did not correspond with the plaintiffs' invoices at Dollars 9,717 per barrel. The total claim of the plaintiffs at 1974 price is Rs. 2,67,14,933.20 and if calculated at 1973 price it comes to Rs. 1,01,74,937.50.
4. Following the aforesaid dispute there was considerable correspon--dence exchanged between the parties but for the purpose of the present application only two further developments are relevant. In July 1974 a settlement was arrived at between the plaintiffs and the defendant No. 2 that . Maribella III cargo will be paid for at 1973 price and Seconda cargo at 1974 price, that the defendant No. 2 will receive from the plaintiffs US $ 62.542.45 towards his outstanding claim for demurrage and that the plaintiffs will treat the contract between them and the defendant No. 2 as one between principal to principal and cancel the demand made on the Refinery directly to pay the price of crude oil delivered. The plaintiffs' case is that this settlement was brought about by coercion and misrepresentation, and that in any event the settlement was not acted upon by the defendant No. 2 for he allegedly failed to open the letter of credit towards payment of the price agreed to under the settlement. The defendant No. 2 then approached the Government of Pakistan to enable him to open or cause to be opened by Refinery the letter of credit in favour of the plaintiffs in terms of the aforesaid settlement. The Government's instructions or directions are contained in their letter dated .13-9-1974 which reads as follows:- "In accordance with the understanding given by you to Government that fu, you will try to secure further reduction in the payment to be made to Gulf Oil Trading Company it has now been decided that you should negotiate and settle this long outstanding dispute regarding payment to be made to Gulf Oil Company for the two crude oil cargoes imported on 2-1-1974 and 29-1-1974 for P R L, Karachi on the basis of a price of I1. S. $ 6.40 per barrel only as a package deal subject to the condition proposed by you that the amount will be paid through an irrevocable and confirmed letter of credit as before but will be cashable only on the production of a certificate by Gulf Oil from ASLO of Pakistan stating that it has been received renunciation of all claims of all sorts what-- soever from Gulf Oil Trading Company and the amount of letter of credit constitute full and final settlement of all dues realisable by Gulf under Gulf/ASLO contract which expired on 31st December, 1973. You are accordingly requested to approach Gulf Oil Trading Company accordingly and advise the outcome so that further directives to all concerned are issued in this regard."
5. The aforesaid package deal was not acceptable to the plaintiffs which refusal was communicated to the Government by the defendant No. 2 in his letter dated 21-9-1974 in which it was also stated that "Gulf (plaintiffs) continues to maintain that ASLO (defendant No. 2) with the approval of the Government had agreed to 1974 prices in respect of these two cargoes and that they are entitled to it". This was followed by Government's letter dated 28th October, 1974 addressed to the Refinery which is as follows: "You are hereby directed to make immediate payment to ASLO in Pakistani rupees for the above- mentioned two cargoes supplied to you in January 1974 at price applicable on December 31, 1973.
The decision if any, with regard to the payment of 1974 prices in respect of the last cargo namely the "Seconds" cargo will be communicated to you in due course. Messrs ASLO of Pakistan are being advised to indemnify Messrs PLR with regard to any claim in relation to these two cargoes from any quarter whatsoever except to the extent of the payment of difference of the 'Seconds' cargo if the Government so decide."
6. The plaintiffs strongly protested against this decision of the Government of Pakistan. By the present application the plaintiffs seek to restrain the Refinery from making any payment to the defendant No. 2 in terms of the aforesaid directives of the Government. At the hearing of this application both Mr. Sharaf Faridi and Mr. Sharifuddin Pirzada, the learned counsel for the plaintiffs and the defendant No. 2 conceded that irrespective of the, prayer made this Court has not only the power and the jurisdiction, but it is its duty to make such order on this application as will conveniently protect the interest of the parties. Their suggestion was that the defendant-Refinery, be directed to deposit the price which at 1973 prices, comes to Rs. 1.01,74,937.50 in Court to be appropriately invested in Habib Bank Ltd. Mr. Nomani. The learned counsel for the Refinery understandably but without any justification strongly resisted any such order being made. It was contended ,on behalf of the Refinery that money was lying in safe hands and that the defendant- Refinery substantial claims against the defendant No. 2 for his failure to deliver the full agreed cargo in the years 1.972 and 1973 and for ,having recovered price far in excess of the agreed price for the cargo delivered. In so far as the price paid allegedly in excess is concerned the learned counsel conceded that they remain unqualified. The qualified claims are supposed ,to be for the contracted cargo not delivered in the year 1972-1973 at Rs. 9,23,464 shorts quantity discharged at Karachi at Rs. 9,48.614 for excess premium paid at Rs. 6,47,020 and for demurrage amounting to Rs.
3,82,857 conditionally deposited with defendant No. 2. The latter three claims are vehemently denied by defendant No. 2 and it is obvious that even if proved they do not concern the plaintiffs and the defendant-Refinery can--not recover these claims from the plaintiffs. In so far as the Refinery's claims for failure to deliver the agreed quantity of oil and excess price paid are concerned, the defendant No 2 is understandably in difficulty for to concede it would make him liable to the Refinery for his case is that plaintiffs are unconcerned with his agreement with the Refinery. At the best therefore) the Refinery alleges certain claims, but these are yet to be formulated and/or proved. The defendant-Refinery cannot be made arbiter of its own claims and permitted to retain such a large sum of money which incidentally has come by their way through fortuitous circumstances only. The Refinery had parted with this sum for payment to the plaintiffs.
Moreover, this defendant considers itself bound by the Government's directive contained in the letter dated 28th October, 1975 and its case in the counter-affidavit is that they propose to comply with it after obtaining an indemnity supported by a bank guarantee from the defendant No. 2. The order which is proposed by the plaintiffs and defendant No. 2 will, therefore, protect this defendant for more` than an indemnity and a bank guarantee from defendant No. 2.
7. In the circumstances in so far as the injunction application is concerned It is just and proper that the defendant-Refinery is directed to deposit in this Court within two weeks from the date hereof the sum of Rs. 1,01,74,937.50 (Rupees one crore one lac seventy-for thousand nine hundred thirty-- seven and fifty paisas) which sum together with the interest it will accrue will be available for the benefit of such party as may be entitled to. The Nazir on such deposit being made, invest it in Habib Bank Ltd., Court Road Branch, Karachi in Fixed Deposit initially for one year at maximum rate of interest available. Miscellaneous Application No. 3265 of 1974 is disposed of in terms aforesaid.
8. Now I come to the other application under section 34 of the Arbitration Act, 1940 filed by the defendant No. 2. That the arbitration clause in the agreement between the plaintiffs and the defendant No. 2 is sufficiently wide to cover the present dispute between the parties is not denied.
There is also an arbitration clause in the agreement between defendant --Refinery and the defendant No. 2. The arbitration clause in the two agree--ments, however, differ in one respect only; namely, the appointment of an umpire in the event of disagreement between the two arbitrators appointed by the parties. In the agreement between the plaintiffs and the defendant No. 2 the umpire in such an event is to be nominated by the International Chamber of Commerce, Paris while in the agreement between the Refinery and the defendant No. 2 such an appointment is to be made by Chief Justice of Pakistan.
9. M. Sharaf Faridi, the learned counsel for the plaintiff's conceded that the normal rule is that the Court will not interfere with the contractual agreement between the parties to have their disputes settled by a private tribunal and it will be for the plaintiffs to satisfy this Court that there are sufficient reasons for rejecting the present prayer for the stay of the suit.
10. Mr. Sharaf Faridi raised several objections to the grant of the present application. His first contention was that there was no arbitration agreement that the defendant No. 2 was never ready and willing to go to arbitration that the package settlement between the parties dated 22-7-1974 brought into existence a new contract superseding the earlier one containing the arbitration clause, that the matter involves important questions of lave and lastly the arbitration, which is sought only by one of the two defendants, will only, result in conflict of decisions, causing inconvenience and expenses.
11. In support of his first contention the learned counsel referred to the agreement dated 23-3-3972 between the parties which contains the arbitration clause and went on to argue that ,same being unstamped on the date on which the defendant No. 2 filed the present application was ineffective in law and could not be acted upon. The learned counsel referred to my decision to the contrary reported as Mohammad Amin-Mohammad Bashir v. Zafar Cotton Ginners (PLJ 1973 Kar. 285) in which I held that a clause relating to arbitration in a contract of sale and purchase of cotton was only a collateral and subsidiary incident relating to the sale of goods which was the transaction evidenced by the document and such a document was exempt from duty under exemption (a) of Article 5 of the Stamp Act. According to Mr. Sharaf Faridi my attention was not invited to section 5 of the Stamp Act resulting in error of judgment. I am indebted to the learned counsel for their detailed arguments on this question. Since then I have also had the benefit of similar arguments in J. Miscellaneous Application No. 24 of 1975 in which identical question was raised. On detailed examination of all and several decisions cited at the Bar in this and in that case, I have come to the conclusion that the aforesaid case of Mohammad Amin-Mohammad Bashir v. Zafar Cotton Ginners was cor--rectly decided. For the same reasons I find no substance in the present contention, for according to me the arbitration clause is not a distinct matter within the meaning of the expression contained in section 5 of the Stamp Act being part and parcel of a single transaction namely, an agreement for sale of goods exclusively and, therefore, exempt from duty under exemption (a) of Article 5 of the Stamp Act.
12. The second contention of Mr. Sharaf Faridi, the learned counsel for the plaintiffs was that the defendant No. 2 is not entitled to stay sought for he was not ready and willing to go to arbitration.
The learned counsel referred to the conduct of the defendant No. 2 in moving the Government of Pakistan for the settlement of the disputes between the plaintiffs and the defendant No. 2, the directives obtained from the Government of Pakistan vide its letter dated 13-9-1974 and the last order of the Government of Pakistan dated 28th October, 1974, reproduced hereinabove, and went on to argue that this conduct sufficiently indicated that not only the defendant No. 2 was never ready and willing to go to arbitration but that he had .Abandoned any such intention by seeking' recourse to another machinery.
13. Mr. Sharifuddin Pirzada, the learned counsel for defendant No. 2 rightly pointed out that under section 34 of the Arbitration Act the time with reference to which readiness and willingness of a party to go to an arbitration is to be determined is the time when a party brings a suit and the other party is called upon to appear and answer and it is only after the commence--ment of the proceedings that a party can make up its mind whether to apply for stay or not and his choice therefore comes in only after the commence--ment of the proceedings. Not only the plain reading of the section but several decisions cited by Mr. Sharifuddin Pirzada support this contention. The question. However, still remains whether or not the defendant No. 2, notwithstanding his application under section 34 of the Arbitration Act, still remains ready and willing to go to arbitration. Mr. Sharifuddin Pirzada was at pains to point out that the directives of the Government of Pakistan referred to above were under the Regulations of Mines & Oilfields and Mineral Development, Government Control Act, 1948 (XXIV of 1948) and rules framed thereunder, binding on all parties. In fact this is a case of the defendant No. 2 in his counter-affidavit wherein he describes the decision of the Government as valid and binding, Can it then be said that the defendant No. 2 remains ready and willing to go for arbitration? To what purpose will be the arbitration if a valid and binding decision have already settled the plaintiffs' claim in the present suit. To my mind the readiness and willing--ness of the defendant No. 2 to go to arbitration is not conclusively de-1 monstrated by mere filing of an application under section 34 of the Arbitration Act and if the Court comes to the conclusion that this defendant's own C .Assertion indicates a contrary intention both at the time when the present application was made and subsequent thereto, it cannot be said that he con-- tinues to remain ready and willing to go to arbitration.
14. The third contention of the learned counsel that the Package settle--ment, namely, Annexure "E" to the plaint superseded the earlier agreement between the parties containing the arbitration clause, has no substance for more than one reason. Firstly, it is the contents of the plaint which will determine the nature and the scope of the dispute between the parties and, therefore, the applicability of section 34 of the Arbitration Act. Significantly the plaint is not based on this settlement. On the other hand it is the plaintiffs' case that they were coerced into settlement by misrepresentation made by defendant No. 2 and their present claim is based on the original agreement between the parties dated 23-3-1972. Secondly, this settlement was subject to the other obligations of the parties under agreement dated 23-3-1972.
15. The fourth contention raised was that the matter raises important question of law and therefore, a matter not fit for determination by, lay arbitrators. Merely, because a question of law is raised is not. By itself sufficient to deprive the arbitrators of their jurisdiction, though of course it is still open to the Court to exercise the judicial discretion against the defendant if the nature of dispute between the parties is of such a character as can be more satisfactorily disposed of by Court than an arbitrator. The question of law arising in this matter, according to the learned counsel, was the legal effect of the directives given by the Government of Pakistan in settlement of the parties dispute, purporting to be under Ac XXIV of 1948 and Rules framed thereunder. To my mind the question involved is merely the application of the said Act and its meaning and there--fore, of not such a nature so as to divest the arbitrators of their jurisdiction to decide the same.
16. I come to the last and what is to my mind the most important objection raised by Mr. Sharaf Faridi and that is the anomaly that would be created if the dispute between the plaintiffs and the defendant No. 2 is referred to arbitration and the suit continues only against the defendant -- Refinery. In so far as the plaint is concerned the dispute is as regards the price payable, for the cargo loaded in January 1974, by either or both the defendants. In so far as defendants are concerned their grievance is that the plaintiffs have received price far in excess of their entitlement for the cargo delivered in the years 1972 and 1973, whether or not the price claimed is due to the plaintiffs, either by the defendant No. 1 or defendant No. 2 and if only by the latter, recoverable by him from the defendant-Refinery, would depend upon meaning and the effect of the escalation clause which are identical in both the agreements. It, therefore, follows that there is in the present case a serious probability of conflict of decisions if the present suit of the plaintiff is stated in so far as the defendant No. 2 is concerned. What is the price due to the plaintiffs for the cargo delivered in 1974 and from whom? Have the plaintiffs charged price in excess of their entitlement for the years 1972 and 1973 cargo. These are the issues which will have to be decided by the arbitrators as between the plaintiffs and the defendant No. 2, if the suit is stated and by this Court as between the plaintiffs and defendant-Refinery. The possibility of the conflicting decisions are so obvious that in the words of Sajjad Ahmad Jan, J, in the case of Seafarers Inc. v. Province of East Pakistan and others ((1968) 20 D L R 225), as "to render the whole process futile and self-defeating" resulting only in unnecessary inconvenience and expenditure. For these very considerations the Supreme Court refused to stay the suit. Mr. Sharifuddin Pirzada, the learned counsel for defendant No. 2 sought to distinguish the Supreme Court case on the ground that the liability of the two defendants in that case was joint and several, while in the present case the liability between the defendant who is seeking stay and the defendant against whom the suit will continue is distinct and independent.
The answer to that is that the question whether or not the liability is joint or distinct between the two defendants herein will be an issue not only before the arbitrators as between the plaintiffs and the defendant No. 2 but also an issue in the present action between the plaintiffs and the defendant-Refinery. Moreover, the observations of the Supreme Court of Pakistan to my mind are entirely independent of the con--sideration as to whether or not between the two defendants one of whom alone had sought stay of the suit, was joint and several. The observations regarding the liability of the defendants being joint and several in that case are only relevant for that part of judgment where the question was as to the effect of obtaining time for filing written statement by the agent defendant on the principal defendant's application for grant of a stay under section 34 of the Arbitration Act. The observations of the Supreme Court reproduced hereunder are quite independent of that aspect of the case:- "In the present case, even if the action taken by the second defendant were to be ignored as creating an impediment in the way of the first defendant to file an application under section 34 of the Arbitration Act, it would have been an improper case of the discretion to allow the prayer for staying the proceedings. It would have created an, anomaly to permit the cases to proceed in two different forums before' the Arbitration Tribunal as far as the first defendants are concerned and before the Court as regards the Second defendant. A possibility of a conflict of decisions on the fate of the cases between the two, cannot be ruled out, which will render the whole process as futile and self-- defeating. The other consideration about the heavy expenditure an& the hardship that the arbitration proceedings would entail in a foreign country for the respondent, if the. Court proceedings were stayed under section 34 of the Arbitration Act, which has weighed with the Courts below in declining to exercise their discretion in favour of the appellants, is also not without merit in the circumstances of these cases. We, therefore, hold that the Courts below have exercised their discre--tion properly and judiciously in disallowing the appellants' applications under section 34 of the Arbitration Act."
17. Mr. Sharifuddin Pirzada then invited my attention to a decision of Court of appeal reported as W.
Bruce Ltd. v. J. Strong ((1951) 1 All E R 1021). This case con--cerned a mercantile contract for the supply of figs which had been sold down through a chain of merchants and only two people in the chain were mem--bers of the trade association and, therefore, subject to an arbitration clause.
The stay was sought on behalf of one of the merchants in the chain which was refused by the trial Judge but granted by the Court of Appeal not with--standing the objection that the same subject- matter of dispute would have to be litigated in the proceedings in the High Court as would have to be considered before the Arbitrator. I will not pretend to understand the reasoning behind this decision. However this decision, which was described as not an authority on the way discretion should be exercised" and as "a very special case" was not followed in the subsequent decision of Taunton Collins v. Cromis and another ((1964) 2 All E R 332). In this case the plaintiffs bad employed an architect and contractor to build a house. The building contract contained an arbitration clause. The plaintiffs found the house unsatisfactory. He used the architect, who in his defence partly blamed the contractors. The plaintiffs joined the contractor as the co-defendant who applied for stay which was refused on the ground that it was most undesirable that there should be two proceedings in two separate Tribunals one between the plaintiffs and architect before the Referee to whom the action was referred to by the Court and the other between the plaintiffs and the contractors before an arbit--rator to decide the same question of fact. The Court observed that if the two proceedings should go on independently there might be inconsistent find--ings and the decision of the official Referee might conflict with the decision of the arbitrator. The Court of Appeal followed the Pine Hills case ((1958) 2 LLR 146). This was a shipping case. There was an arbitration clause in a charter party but no arbitration clause in the bill of lading. There was a claim for general average contribution. The ship-owners brought an action against the bill of lading holder and the charterers. The charterers relying on the arbitration clause applied to stay the proceedings against them, McNair, J., held that they should not be stayed as there was risk of in consist--Rent findings of fact and everything should be dealt with in one action.
18. Mr. Sharifuddin Pirzada then referred to two more decisions in which the Court granted stay under section 34 to only one of the several defendants.
The first is the decision of Faruqi, J., in Messrs Haji Mohammad Ibrahim & son and others v. Karachi Municipal Corporation and others (PLD 1960 Kar. 916) and the other from the Indian jurisdiction reported in Messrs Srivenkateswa ra Constructions and others v. The Union of India (AIR 1974 A P 278). In the Karachi case the plaintiffs had filed suit against the Karachi Municipal Corporation and joined certain subordinate officers of the Karachi Municipal Corporation and subsequent contractor to whom the work had been awarded as defendants but against none of them any relief was claimed. The arbitration clause operated only between the plaintiff and the Karachi Municipal Corporation and this Court held that the suit was really directed against Karachi Municipal Corporation and the plaintiffs cannot get out of .The arbitration clause merely by impleading certain officers of the Corporation or the subsequent contractor to whom the work had been awarded. In the Indian case, too in similar circumstances the Court granted section 34 application by one of the several defendants. These cases are, therefore, clearly distinguishable.
19. For reasons aforesaid I am of the view that this is a proper case in which judicial discretion be exercised in favour of the plaintiffs and disallow the application made by defendant No. 2 under section 34 of the Arbitration Act, C.M.A. No. 76/75 (1940) which is dismissed with cost to the plaintiffs.
S. A. H. Application disallowed.