1. ' The defendant has moved an application (C.M.A. No,9388 of 1998) under section 34 of the Arbitration Act for stay of the proceedings on the ground that the relationship between the parties is governed by agreement duly executed by them containing an arbitration clause in respect of any dispute arising out of the agreement. The dispute between the parties is covered by the agreement. The application is supported by the affidavit of Shamsuddin Abro, Administrator of the defendant Society, wherein it is asserted that the relationship between the parties is governed by the written. Agreement containing an arbitration clause providing that any dispute arising between the parties to such agreement shall be referred to the sole arbitrator, Secretary. Transport, Government of Sindh, Karachi. Filing of the suit clearly indicates to avoid referring the matter to the arbitrator, which is against the law and further proceedings may be stayed and parties may be directed to resort to the arbitration proceedings in terms of the arbitration clause.
2. ' The application has been opposed by the learned counsel for the plaintiff through the counter- affidavit filed by Raja Abdul Hussain i,e, the plaintiff though he admits the existence of the agreement but maintains that the relationship between the parties is not governed by such agreement. The agreement was executed prior to the registration of the. Defendant society, as such the agreement executed before the registration is illegal, null and void having no legal entity.
3. ' The present application has been 'tithed in the background that the plaintiff, a transporter and member of the defendant Society has filed the suit for the following reliefs: -- "(A) Directions be issued to the defendant to arrange and provide due protection to the Route Operator (plaintiff) in the smooth operation of his vehicles - on the Route No,16 earlier allotted to him. No other operator be allowed by RTA/PTA to operate buses/coaches on the alignment of Route No,16.
(B) Declare that the defendants have not fulfilled their obligations and/or conditions for which the defendants are bound under such commitments according to the Rules laid down in the Constitution and as such are not entitled to levy and/or recover the Service Charges and further security deposit from the plaintiff.
(C) Declare that a wrongful loss in the sum of Rs,16,50,000 (Rupees sixteen lacs fifty thousands only) has been caused to the plaintiff by the defendant who failed to perform its obligations/duties under the Rules and direct the defendant to pay a sum of Rs,16,50,000 (Rupees Sixteen lacs fifty thousands only) as damages to the plaintiff; or ' ALTERNATIVELY, plaintiff may be allowed to operate his buses on the aforementioned route for 15 years without charging from him the security deposit and/or service charges to set off the Fosses amounting to Rs,16,50,000 (Rupees Sixteen lacs fifty thousand only).
(D) Permanent injunction restraining the defendant from cancelling the route allotted to the plaintiff and/or from interfering or obstructing in any manner in the smooth operation of the route by the plaintiff."
4. ' The case of the plaintiff, as set out in the plaint, is that the defendant is a public transport and Social Education Society, a non-Government organization formed in 1997 the object to improve public transport stem in the city of Karachi and to deal with routes of the city, which have been reacted by the defunct Karachi Transport proration on its closure on the patron of Faisalabad Urban Transport Society. The plaintiff has been operating buses on 16 With capacity of 70 vehicles in Karachi. At the time of joining of KPTS, the plaintiff was required to pay a security to for each vehicle and service charges covered from the route operators at parent rates according to the capacity of the ides. The plaintiff paid Rs,2,50,000 as sec security deposit and service charges to the defendant and plied his vehicles on the granted routes. The route operates are required to observe all the KPTS Rules and regulation and KPTS in lieu of service charges recovered from the route operators is supposed to protect the route operators/ porters from corrupt police' officers to assist in obtaining route permits PTA/RTA and to provide facilities of as stops. The plaintiff has complained mission and inaction on the part of defendant in para. 9 of the plaint against lection of service charges, double policy active regarding the same, non-execution the agreement and due to such acts, he has loss of Rs,16,50,000.
5. ' The learned counsel for the defendant in support of the application, has maintained that the existence of agreement is the disputed. The legal proceedings are in respect of the matter agreed to be referred under the arbitration clause. The defendant is not taken any step in the proceedings and the defendant is/or at the commencement of the proceedings ready and willing to do all the things necessary to proper conduct of the pit ration.
6. ' Conversely, the learned counsel for the plaintiff maintained firstly that the agreement was prior to the registration as such it is illegal, secondly the details of the dispute are not mentioned in the application, as such the application is not maintainable and proceedings cannot be stayed. In support of his contention, he referred the case of Haji Abdul Aziz Yousafani v. Haji Ali. Muhammad Abdullah (PLD 1967 Karachi 698) wherein the appeal against stay of suit was allowed on the ground that the applicant was unable" to show at, the time when the proceedings commenced that he was willing to do all things necessary to the proper conduct of the arbitration and the arbitration clause stands frustrated on account of forum mentioned in the arbitration clause ceased to exist. The second case is Novelty Cinema v. Firclos Film (mu) 1958 (v.P.) Lahore 208), wherein the application under section 34 of the Arbitration Act was moved without annexing, the agreement containing the arbitration clause and without mentioning the dispute in the application itself. The application for stay of the suit under section 34 of the Arbitration Act was dismissed by the Civil Court, Lahore. Appeal was also dismissed, wherein it was observed that there seems to be general impression that the dispute cannot possibly be specified in the application because the defendant is debarred from filing written statement if he puts in an application for stay, and a statement as to what is the dispute will amount to the filing of a 'written statement. This is misapprehension when a person applies under section 34, he has to satisfy the Court firstly that there is an agreement to refer and secondly that the suit relates to any matter agreed to be referred, that is, there is a dispute between the parties which is covered by the agreement. Unless that is shown the suit cannot be stayed".
7. ' In order to understand the contention raised by the respective counsel, it would be advantageous to reproduce the provisions of section 34 of the Act, which read as under:-- "34. Power to stay legal proceedings 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 where the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of arbitration, such authority may make an order staying the proceedings. "
8. ' The perusal of above provisions spell out the following conditions for stay of the proceedings:--
(i) The proceedings must have been commenced by a party to an arbitration against any other party to the agreement or any person claiming under him;
(ii) the legal proceedings which are sought to be stayed must be in respect of a matter agreed to he referred;
(iii) the applicant must be a party to legal proceedings;
(iv) the request must be before filing the written statement;
(v) the applicant must have taken no steps in the proceedings, after appearance;
(vi) the applicant is and also was at the commencement of the proceedings ready and willing to do all things necessary to the proper conduct of the arbitration.
9. ' There is no denial by the parties about the existence of conditions mentioned in the agreement, which reads as under:-- "19. In the event of any dispute, differences arising between the parties, the matter shall be referred to the Secretary Transport, Government of Sindh, who shall be sole arbitrator and the award given by him as arbitrator shall be final and binding on the parties and shall not be challenged in any Court of law."
10. ' The existence of arbitration agreement, between the parties in suit, subject-matter of the suit is the matter agreed to be referred to the arbitration. The written statement has not been filed.
11. The application has been resisted on two grounds, firstly that the agreement becomes illegal as the Society was registered subsequent to the agreement. Perhaps the reply of the contentions raised lays, in section 34 itself that the proceedings must have commenced by a party to the arbitration against any other party to the agreement or any person claiming under him. The subsequent registration of the society will not make an agreement between the parties as illegal agreement. The agreement is not hit by the provisions of section 23 of the Contract Act.
12. ' So far as the contention is concerned that the dispute has not been mentioned in the application, the agreement has been produced. All the subject-matter of the suit in fact touches the matter agreed between the parties, which contains arbitration clause, as such the case of Novelty Cinema is distinguishable with the present case and the same has no application.
13. ' It has been further contended by the learned counsel for the plaintiff that the defendant's Chairman has been named as arbitrator. This objection has been met by he learned counsel for the defendant that the defendant Society is being managed by the Administrator and the Secretary Transport, Government of Sindh is an independent person and agreed to be the Arbitrator between the parties, as such the plaintiff cannot object that Secretary Transport cannot act as the Arbitrator.
14. ' The next and the last point, which under the aforesaid section, a duty has been cast upon the Court to examine whether the application under section 34 of the Act, is ready and willing to do all things necessary to roper conduct of the arbitration. The defendants in their application have shown their readiness and willingness to submit to the arbitration and the affidavit filed in support of the application also contains the name fact that has not been challenged rebutted in the counter-affidavit filed by the plaintiff.
15. In view of the above discussions, the application under section 34 of the Act is allowed and the proceedings of the suit are stayed and the parties are directed to resort to arbitration proceedings in terms of clause 19 of the agreement.