' This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, arises out of the suit for recovery of Rs,61,503,875 filed by the present petitioner against the respondents, in which the proceedings were stayed by the Banking Tribunal vide its order, dated 12th of August, 1996 under section 34 of the Arbitration Act, 1940 in view of the arbitration agreement between the parties.
2. In support of this petition it has been urged by the learned counsel for the petitioner that the Banking Tribunal has failed to appreciate that only the petitioner and respondents Nos.1 and 2 were parties to the arbitration agreement while in the suit apart from respondent No,2, respondents Nos.5 to 6 had also been impleaded as defendants. It has also been argued that as the parties the arbitration agreement and the suit were not the same, the trial of the suit could not have been stayed under section 34 of the Arbitration Act, 1940.
3. There is considerable merit in the contention raised by the learned counsel for the petitioner. A perusal of the agreement, dated 24th of December, 1992 shows that it was executed between the National Development Leasing Corporation Ltd. (petitioner) and M/s. Bright Textile Mills Ltd.
(respondent No,2). However, in the suit in addition to defendant No,2 four other defendants had been impleaded as guarantors in the suit. The parties to the suit being different from the parties to.
The arbitration agreement the Banking Tribunal has acted illegally in staying the proceedings of the suit. In the judgment reported as Hadayatullah and 10 others v. Shamimuddin and 14 others (1993 MLD 993) it was held that where only some of the defendants were parties to the arbitration agreement the trial of the suit cannot be stayed even against those defendants who were parties to the arbitration agreement, for, if the suit is allowed to proceed against the defendants who were not parties to the arbitration agreement and the arbitrator is called upon to decide the matter between the plaintiff and those defendants who were parties to the agreement, there is likelihood to conflict of decisions and, as such, discretion vested in the Court under section 34 of the Arbitration Act, 1940 could not be exercised in favour of the person asking for stay of proceedings. It was so held in the judgment reported as Gulf Iran Co. And another v. Pakistan Refinery Ltd. And others (PLD 1976 Karachi 1060) and in the case of Hidayatuilah (supra). In the Gulf Iran Company's case (supra) following observations of the Supreme Court of Pakistan in the case of Seafarers Inc. v. Province of East Pakistan and others were relied upon in support of their view that where some of the defendants were not parties to the arbitration agreement trial of the suit cannot be stayed:-- "In the present case, even if the action taken by the second defendant were to be ignored as creating as 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 as anomaly to permit the cases to proceed in two different from 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 and 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 discretion properly and judiciously in disallowing the appellants' applications under section 34 of the Arbitration Act."
4. Be that as it may it is also to be noted that the Banking Tribunal was exercising special jurisdiction vested in it by the Banking Tribunals Ordinance, 1984 and, as such, the proceedings taken under aforesaid Act could not be stayed. If any authority is needed, reference may be made to the case reported as Orix Leasing Pakistan Ltd. v. Colony That Textile Mills Ltd. (PLD 1997 Lahore 443), in which it was ruled that the proceedings under the Companies Ordinance, which was special law, could not he stayed under section 34 of the Arbitration Act as the dispute was not referable to. The arbitration and could only be decided by the Court.
In view of what has been discussed above this petition is allowed, the impugned order, dated 12-8- 1996 is declared to be without lawful authority and of no legal effect. The suit of the petitioner shall be proceeded in accordance with law. There is no order as to costs.