1. ' The plaintiff has filed this suit under Rule 22 of the Sindh Chief Court Rules (O.S.) for the recovery of Rs,13,55,610, together with mark-up thereon at the rate of Rs,0.43 (forty-three) per Rs,1,000 per day from 1-3-1991 till payment against defendants, jointly and severally by, inter alia, sale of the mortgaged properties.
2. ' The claim of the plaintiff is that the parties entered into an agreement dated 10-10-1988 at Karachi in terms whereof the defendant No,1 agreed to supply to the plaintiff their entire production of the cotton ginned and fully pressed during year 1988-89. In consideration of the agreement to supply, the cotton as agreed upon, the plaintiff advanced Rs,1,00,000 to the defendant and as security for the repayment of the said amount the defendant No,1, through its partner, defendant No,2, executed a Promissory Note dated 14-11-1988 for Rs,10,00,000 in favour of the plaintiff. The defendants Nos.3 to 6 as security, also deposited the original documents of their agricultural lands as mentioned in para. 6 of the plaint. They also mortgaged their property by executing a Memorandum of deposit of title deeds dated 14-11-1988 as mentioned in para. 7 of the plaint. The defendants defaulted as neither they supplied full quantity of the cotton nor repaid the balance of the said advance to the plaintiff.
3. ' The defendants filed an application for leave to defend which came up for hearing on 8-8-1994 and order was passed that the application will be treated as an application under Rule 23 of the Original Side Rules. The defendants filed their written statement on 20-10-1994 taking the following legal objections:-- "(i) That this Hon'ble Court has got no territorial jurisdiction to entertain and adjudicate upon the present suit under Rule 22 of the Sindh Chief Court Rules (O.S.) as mortgage properties and defendants are not residing/situated within the territorial jurisdiction of this Hon'ble Court, and as such plaint in the suit is liable to be returned to the plaintiff under Order VII, Rule 10, C.P.C. To be presented before the proper Court.
(ii) The suit of the plaintiff is misconceived, mala fide and is not maintainable as in the agreement there is arbitration under clause No,8 and present suit is not maintainable unless plaintiff first invoke the arbitration proceedings against the defendants and since the plaintiff has failed to do so, the present suit is not maintainable."
4. ' In regard to Objection No,1, it is submitted on behalf of the defendants in the Written Statement that this Court has no jurisdiction as the properties mentioned in the plaint are situated in Punjab. It is also submitted that the Court has no jurisdiction until the dispute between the parties is referred to arbitration in terms of the arbitration clause contained in the agreement. Further, that the Promissory Note does not provide for payment of mark-up/interest. The payment of Rs,10,00,000 by the plaintiff to the defendant is admitted. Mortgage of the two properties as well as the execution of Promissory Note is also admitted. According to the defendants, it was the plaintiff who did not purchase the cotton from the defendants for the agreed season due to which they suffered huge losses and that the defendants are ready even now to supply cotton at the market rate.
5. ' I have heard Mr. Mamnoon Hasan, learned counsel for the plaintiff who has also filed original documents mentioned in the plaint. Mr. Nawaz Jajja, counsel appearing for the defendants, is absent though called twice. Even in the past he has been seeking adjournments on one pretext or the other and on 8-8-1995 last opportunity was given to him and orders were passed that if he failed to proceed on the next date, the suit will stand decreed. Anyhow, the suit is being decreed on merits.
6. ' At the very outset, I may mention that no application under section 34 of the Arbitration Act was filed by the defendants. The arbitration clause contained in the agreement is as follows: "Any dispute/difference touching terms and conditions contained in this contract, failing mutual amicable settlement, shall be referred to Arbitrators one to be nominated by each party (Buyer and Seller). Should the so nominated Arbitrators fail to arrive at an agreement, they (the Arbitrators) will nominate an Umpire whose findings shall be final and binding on both the parties."
7. The clause clearly mentions that the dispute or difference to be referred to the arbitration should be touching the terms and conditions contained in the agreement. The dispute between the parties is not in regard to the terms and conditions of the contract but is outside the same.
8. Secondly, the defendants themselves filed written statement and submitted to the jurisdiction of this Court. In this regard Mr. Mamnoon Hasan, learned counsel for the plaintiff, has relied on an unreported judgment passed by a Division Bench of this Court in High Court Appeal No,135 of 1990.
9. The above appeal was also between the present plaintiff and other borrowers and similar agreement was executed and the wording of the clause regarding 'arbitration was similar to the present one. The learned Division Bench has observed that "a bare reading of this clause clearly indicates that the matter had to be referred to the arbitrators only in case of dispute/difference touching to the terms and conditions contained in the said agreement". In the present case the dispute between the parties being outside the terms and conditions of the agreement, cannot be referred to arbitration.
10. ' As regards the objection about the non-maintainability of the suit in this Court for want of territorial jurisdiction, Mr. Mamnoon Hasan has relied on the case of Habib Bank Limited v. M/s. Pazhong Traders and others (1986 CLC 1086), wherein it was field that the contention raised on the basis of section 16 of the C.P.C. About the non-maintainability of the present suit in this Court is also without force." Section 16 of the C.P.C. Reads as follows: "16. Suits to be instituted where subject-matter situate.--Subject to the pecuniary or other limitations prescribed by any law, suits---
(a) ... ......
(c) for foreclosur, , sale or redemption in the case of a mortgage of or charge upon immovable property;
(d) to (1) ' shall be instituted in the Court within the local limits of whose jurisdiction the property is situate or in the case of suits referred to in clause (c) at the place where the case of action has wholly or partly arisen...."
11. According to the learned counsel for the plaintiff, although the mortgaged properties are situated in Punjab but the agreement and all the mortgage documents were executed at Karachi and as such under section 16(c), C.P.C. The suit is maintainable.
12. ' In view of above the legal objections taken by the defendants are misconceived and are rejected.
13. ' It is admitted fact that the plaintiff had granted an amount of Rs,10,00,000 to the defendants in terms of the agreement and, as security, for the repayment of the same, a Promissory Note was executed and the properties mentioned in the plaint (paras. 6 and 7) were mortgaged in favour of the plaintiff.
14. ' The grounds/pleas taken by the defendants remain unsupported by any evidence. There is no specific dispute/denial/objection to the statement of account filed by the plaintiff as Annexure 'K' to the plaint.
15. In view of the averments made in the plaint and the original documents filed by the plaintiff and in view of the admission of the execution of the documents by the defendants, the plaintiff's claim in the suit is established. The claim amount includes mark-up up to 1-3-1991. As such the suit of the plaintiff is decreed against the defendants, jointly and severally, for Rs,13,55,610 with mark-up as aforesaid i,e, Rs,0.43 per Rs,1,000 per day from the date of the suit till payment, and costs of the suit.
16. It is further declared that the amount due to the plaintiff from the defendants Nos.3 to 6 on the mortgage mentioned in paras. 6 and 7 of the plaint is Rs,13,55,610 with mark-up as aforesaid and cost C of the suit. Let Preliminary Decree in Form VA to the Appendix D' to the First Schedule be prepared against defendants 3 to 6.