' Through this order, I intend to dispose of two applications, one filed by the defendant No,2 under Order VII, Rule 11, C.P.C. (CMA-6804/95) as well as application under Order XXXIX, Rules 1 and 2, C.P.C. (CMA-6426/95) filed by the plaintiffs. The plaintiffs are Private Limited Company incorporated in Pakistan and have filed this suit for declaration and permanent injunction against four defendants who are not residing in this country.
2. Brief facts as stated in the plaint are that sometime in the month of November, 1993, the defendant No,1 approached the plaintiffs for purchase of cotton from Pakistan which was agreed by the plaintiffs and vide agreement, dated 20-11-1993 the parties agreed to certain conditions for the sale of 10,000 bales of raw cotton weighing about 3,750 lbs. At the price of US Cents 50 per lb F.O.B. Karachi including the following term (vide Annexure 'A' to the plaint):--- "Save and except what is expressly provided herein above and overleaf, this contract is subject to the Rules and Regulations of the Liverpool Cotton Association Ltd. Place of Arbitration: Liverpool."
3. Case of the plaintiffs is that the Federal Government vide its Notification dated 19-1-1994 (Annexure 'C' to the plaint) temporarily suspended all export of cotton by private sector in view of critical shortage of cotton in the country. It was in these circumstances, as alleged by the plaintiffs, that they were not able to abide by the terms of the contract as it became incapable of performance due to "Force Majure". As a result of non-supply of the raw cotton by the plaintiffs, the defendant No,1 referred the matter for arbitration to the defendant No,2 namely Liverpool Cotton Association Limited, the U.K. Which, in turn, appointed defendants Nos.3 and 4 to act as Arbitrators.
Plaintiffs pleaded inability to perform its part of agreement because of Force Majeure in view of the ban imposed by the Federation of Pakistan. The grievance of the plaintiffs is that the learned Arbitrators did not consider such plea of the plaintiff and in utter haste pronounced Award on 16-11- 1995. In view of this background; the plaintiffs have filed this suit with the following prayers:--- "(a) Declare that in view of the Notification, dated 19-1-1994 issued by the Government of Pakistan the contract was incapable of performance and due to Force Majuere conditions was void and not binding.
(b) Declare that the rules and regulations of defendant No,2 are inconsistent with statutes in force in Pakistan.
(c) Declare that the Award delivered by defendants Nos.3 and 4 on 16-11-1995 is mala fide, illegal and contrary to law and not enforceable and binding on the plaintiffs.
(d) Set aside the Award delivered by the Arbitrators, defendant Nos.3 and 4, dated 16-11-1995 as it is mala fide, illegal and contrary to law and in violation of Pakistan law.
(e) Direct that no action directly or indirectly be taken on the said Award.
(f) Grant a permanent injunction against the defendants Nos.1 to 4" their agent and/or servants restraining them from declaring the plaintiffs as defaulters and/or enforcing the said Award and dirrectly or indirectly taking any action on the said Award.
(g) Restrain the defendants Nos.1 to 4 and/or their servants, agents from publicising in any manner directly or indirectly that the plaintiffs have failed to implement the said Award or in any manner influencing directly or indirectly other contracts to be negotiated by the plaintiffs."
4. It would be pertinent to reproduce the operative portion of the Award, dated 16-11-1995:--- "We hereby Award and direct as follows:---
(a) As to the matters in dispute that:
(1) The buyers shall invoice back to the sellers 10,000 bales, or the equivalent of 3,750,000 lbs net being the entire contract quantity, at the unit price of 89 U.S. Cents per lb.
(2) The sellers shall in consequence of the foregoing direction, pay to the buyers the sum of U.S. $ 1,837,500 (One million eight hundred and thirty-eight thousand five hundred point zero zero dollars) being a difference between the contract value of the said 10,000 bales, or the equivalent of 3,750.000 lbs. And the market value on 14th June, 1995.
(3) The sellers shall also pay to the buyers the sum of U.S. $ 68,276..97 (Sixty-eight thousand two hundred and seventy-six point nine seven dollars) being interest on U.S. $ 1,837,500 (One million eight hundred and thirty-seven thousand five hundred point zero zero dollars) at the rate of 8.75 (Eight piont seven five) per cent. Per annum from 14th June, 1995 to 16th November, 1995, the date of this our Award.
(4) The sellers shall also pay to the buyers interest on the sum of U.S. $ 1,905,776.97 (One million nine hundred and five thousand seven hundred and seventy-six point nine seven dollars), being the cumulative total of the amounts referred to in directions (2) and (3), herein at the rate of 2
(Two) per cent. Per annum over the New York Prime Interest Rate or, as appropriate, the calculated average thereof, prevailing from 7th December, 1995, until the date of payment of that sum to the buyers.
(b) As to the costs of this Award that:
(i) The sellers shall bear and pay Pounds 8,000 (Eight thousand pounds sterling) and the buyers shall bear and pay Pounds 8,000.00 (Eight thousand pounds sterling).
(ii) Each party shall bear its own costs of the reference."
5. I have heard Mr. Noorullah A. Manji, Advocate for the plaintiff. Mr. Qamar Abbas, Advocate for defendant No,1 and Mr. S.A. Sarwana, Advocate for defendant No,2.It is contended by Mr. Noorullah A. Manji that the Award made by the Arbitrators is illegal and contrary to law as it is in conflict with the Pakistani law as well as against the direction issued by the Government of Pakistan. He has further contended that the Award is also illegal and contrary to law as the Rules and Regulations of Liverpool Cotton Association Ltd. Are in conflict and inconsistent with the Arbitration Act, 1940. He has argued that the said Award is not sustainable in law being contrary to the principles of Contract Act, 1872. He has also taken a plea that the plaintiffs were not properly heard by the learned Arbitrators. He has referred to the case of M/s. Rupali Polyester Ltd. v. Dr. Nael G. Bunni and others (PLD 1994 Lah.525).
6. Mr. Qamar Abbas has raised objection as to the maintainability of this suit on the grounds that the Award in question is a foreign award and that the provisions of Arbitration Act, 1940 are not attracted and that in the instant case, the provisions of Arbitration (Protocol and Convention) Act, 1937 are applicable. According to the learned counsel for the defendant No,1 all the factual controversies and legal objections raised by the plaintiff can be. Considered after the proceeding under section 5 of the Act, 1937 is initiated. He has referred to the case of Ralli Brothers & Coney Ltd. v. Muhammad Amin-Muhammad Bashir Ltd. (1987 CLC 83) and the case of Marines Limited v.
Aegus Shipping Co. Ltd. And 4 others (1987 CLC 1299). Mr. S.A. Sarwana, Advocate for defendant No,2 has also objected on the maintainability of this suit on the grounds that the defendants are not carrying on business within the jurisdiction of this Court nor they are residents and that no cause of action has accrued to the plaintiff in Pakistan. That the plainiff has voluntarily accepted the forum of arbitration to be held at Liverpool, U.K. And that now they cannot turn back and file this suit while he has contested and participated in the arbitration proceedings at Liverpool, U.K.
7. The term 'foreign award' has been defined in section 2 of the Arbitration (Protocol and Convention) Act, 1937. The award which is the subject-matter of the present suit comes within the definition of a foreign Award. This Court in several cases has treated awards given in accordance with the rules and regulations of the Liverpool Cotton Association Limited as a foreign Award. For any reference, see the case of Nan Fung Textile Ltd., Hong Kong v, H. Pir Muhammad Shamsuddin (PLD 1979 Karachi 762) and Nan Fung Textiles Ltd. v. Sadiq Traders Ltd. (PLD 1982 Karachi 619).
Therefore, I am of the considered view that the Award made by the defendants Nos.3 and 4 is a foreign Award and that the provisions of Arbitration (Protocol and Convention) Act, 1937 are fully attracted.
8. The rule laid down in the case of M/s. Rupali Polyester Ltd. (PLD 1994 Lahore 525) is of no help to the plaintiff as in the said case the Award was held to be a non-foreign Award and the proceeding filed by the petitioner before the Court of Senior Civil Judge, Sheikhupura was under sections 14 and 17 of the Arbitration Act, 1940. It was held by a learned Single Judge of the Lahore High Court that the provisions of Arbitration (Protocol and Convention) Act, 1937 were not applicable. But in the instant case, the Award given by the defendants Nos.3 and 4 at Liverpool, U.K. Amounts to a foreign Award. The case of Rani Brothers & Coney Ltd. (1987 CLC 83) is closer to the circumstances of the instant case. This was also a case arising out of Articles of Association of Liverpool Cotton Association Limited. In this reported case, the plaintiffs filed a suit for filing of Award given by arbitrators appointed by the Liverpool Cotton Association Limited with the prayer that the judgment and decree be passed against the defendants in terms of the Award. In the case of Marines Limited (1987 CLC 1299) the Award was made in London and it was held that it falls within the definition of foreign Award as defined by section 2 of the Arbitration (Protocol and Convention)
Act, 1937. In the last reported case, the petitioners filed a petition under sections 30 and 33 of the Arbitration Act, 1940 challenging reference to the arbitration in London as well as challenging the Award, dated 10-4-1994. It was held by this Court as follows:--- "The grounds for challenging the Award and its enforceability are specifically mentioned in section 7 of the Act. Section 7 only enumerates the grounds on which the validity and enforcement can be challenged. It does not provide for granting declaration that the Award is not enforceable. A perusal of the provisions of the Arbitration Act, 1940 lends support to this observation. Section 30 of the Arbitration Act enumerates the grounds for challenging the Award while section 33 of the Arbitration provides that any party to an arbitration agreement challenging existence or validity of an arbitration agreement or any award or to have the effect or either determined shall apply to the Court and the Court shall decide the question on affidavits. No such provision has been made in the Arbitration (Protocol and Convention) Act, 1937. Therefore, unless proceeding has been taken by any party for filing foreign award in Court seeking its enforcement the objection as provided by section 7 cannot be pressed in service by an independent proceeding under this section seeking declaration that the Award is not enforceable."
9. Section 7 of the Act, 1937 provides that a foreign Award is enforceable. In Pakistan if following conditions are fulfilled:---
(1) That, if it is made in persuance of agreement for abritration under a valid law.
(2) That, it was made by a Tribunal as mentioned in the agreement and agreed by the parties.
(3) That, it was made in conformity with the law governing the arbitration proceedings.
(4) That, it is to be given in the country in which it was made.
(5) That the award may arise out of a matter which may lawfully be referred to the arbitration under the law of Pakistan, and
(6) That, it must not be contrary to the public policy or the law of Pakistan.
(For further reference see the case of Nan Fung Textiles Ltd., Hong Kong v. H. Pir Muhammad Shamasuddin (PLD 1979 Karachi 762). Subsection (2) of section 7 further provides that a foreign Award shall not be enforceable under the Act, 1937 if the Court is satisfied that such an award was annulled in the country in which it was made or that the Award was made without hearing the other side or it was beyond scope of the agreement of arbitration. In the present case, all the factual controversies and the legal points raised on the foreign award can be easily answered in a proceeding to be filed by the defendant No,1 under section 5 of the Act, 1937. Mr. Noorullah A. Manji was not able to cite any law in favour of the maintainability of this suit. I am unable to follow that how prior to the proceedings to be filed under section 5 of the Act, 1937 a Civil Court has jurisdiction to stay operation of a foreign award or to give a declaration as to validity and legality of the same.
It is also argued by Mr. S.A. Sarwana, Advocate for defendant No,2 that the plaintiff is not entitled to a declaration as prayed in the instant suit in view of section 42 of the Specific Relief Act as neither the legal character nor status of the plainiff is involved in this suit.
10. Section 3 of the Act, 1937 defines procedure for staying the proceedings of a suit if such suit is filed by a party to an arbitration agreement or by any .Person claiming through such party against any other party to the arbitration agreement or any person claiming through or under him in respect of any matter agreed to be referred. The Court may stay the proceedings of a suit on an application filed by the other party after his appearance and before filing a written statement. A plaintiff is required to show for continuance of the suit proceedings:---
(i) That, the agreement or arbitration has become inoperative; or
(ii) that, it cannot proceed; or
(iii) that, there is no dispute between the parties with regard to the matter agreed to be referred.
' In case, if any of the preceding conditions is not shown by the plaintiff the Court is not empowered to stay the suit proceeding. I am of the view that the legal and factual grounds urged by the learned counsel for the plaintiff are not entitled to be considered at present, in a civil suit as of the instant nature. I am fortified in my view by the rule laid down by a learned Single Judge of this Court, Mr. Saleem Akhtar, J. (as his Lordship then was) in the case of Nan Fung Textiles Ltd. (PLD 1982 Karachi 619) which reads as follows:--- "...A foreign Award as defined by section 2 of the Act of 1937 will be enforceable under this Act and not under the Arbitration Act, 1940. In view of this discussion, a ' foreign Award' cannot be challenged under section 26-A of the Arbitration Act nor section 3 of Ordinance XV of 1981 can be pressed in service for remitting a foreign award which is subject-matter of a pending proceedings under the provisions of the Act of 1937... .In case of ' foreign award' the umpire and arbitrators are usually not subject to the jurisdiction of the Court and therefore unless empowered under law a Court cannot exercise extra-territorial jurisdiction and no direction as contemplated by section 3 of the Ordinance XV of 1981 can be issued to such umpire or arbitrators..."
11. The result of the above discussion is that I am of the considered view that this suit is not maintainable and the plaint is liable to be rejected as, at present no cause of action is available to the plaintiff. However, the plaintiff shall be entitled to raise if so advised, all factual and legal grounds as urged in this suit, at any subsequent stage before the competent Court. Consequently, CMA-6804/95 is granted and the plaint stands rejected while CMA-6426/95 is dismissed as it has become infructuous.