MALIK MUHAMMAD QAYYUM, J.-- This application has been filed by respondent No. 2 under Section 3 of the Arbitration (Protocol and Convention) Act, 1937 praying that in view of arbitration agreement between the parties, proceedings before this Court in the petition brought by Water and Power Development Authority, petitioner against M/s. Kot Addu Power Company Limited and 2 others, under Section 290 of the Companies Ordinance, 1984, be stayed.
2. It is asserted in this application that respondent No. 2 and the petitioner are parties to a share- holder agreement and share-purchase agreement and as the petitioner has prayed that all or any of the transactions and agreements or any part thereof prejudicial to the interest of the Company or the petitioner or the public may be held to be inoperative and ineffective, the proceedings before this Court should be stayed in view of Article 7 of the share-purchase agreement which provides for resolution of disputes through arbitration. According to Article 7.3 of the share-holder agreement, any dispute arising out of or in connection with the agreement shall be settled by arbitration in accordance with the I.C.C. Rules. Same provision is contained in Article 6.3 of the share-holder agreement.
3. Mr. Makhdoom A.I Khan, learned counsel for the applicants/respondents has argued that in view of the arbitration agreement between the parties no proceedings can be taken by this Court but the same deserve to be stayed. He emphasized that it is the policy of the law that the parties should be left to have resort to the dispute resolution mechanism provided in the agreement. It was also emphasized by Mr. Makhdoom A.I Khan, Advocate for the applicant/respondent, that respondent No. 2 was a Company incorporated in England and was not subject to the jurisdiction of this Court as it is not a Company within the meaning of the Companies Ordinance, 1984 as provided in Section 2(7) thereof.
4. Mirza Mahmood Ahmad, Advocate, on the other hand, has maintained that the jurisdiction under Section 290 of the Companies Ordinance, 1984 was special and statutory in nature and as such the proceedings under Section 290 of the Companies Ordinance, 1984 cannot be referred to arbitration and have to be decided by this Court. Various judgments were referred to by the learned counsel in support of his arguments.
5. It cannot be doubted that Section 290 of the Companies Ordinance, 1984 is a special provision and vest statutory jurisdiction in this Court to take certain measures described therein in order to resolve the dispute inter se the share-holders or Directors of the Company. The nature of the order which this Court is competent to pass under Section 290 clearly shows that the jurisdiction under this provision was to be exercised by the Court itself and by no one else and the petition falling under the aforesaid section was not capable of being referred to, to the arbitration.
6. This question does not appear to have been examined in any case by the Courts in Pakistan.
There are, however, two judgments from the Indian jurisdiction to which reference may be made with advantage. The first judgment was delivered in the case of Surendra Kumar Dhawan and another v. R. Vir and others (1977) (47 Comp. Cases 276 (Delhi)) in which it was observed that any article providing that a difference between the company and its directors or between the directors themselves or between any members of the company or between the company and any person shall he referred to arbitration cannot debar the jurisdiction of the Court in the matter of a petition under Section 397 or 398 which correspond to Section 290 of the Companies Ordinance, 1984. It was further held that the Court will not stay a petition under Section 397 or 398 on an application under Section 34 of the Arbitration Act, 1940, based on the arbitration clause. The second case is the case of O.P. Gupta v. Shiv General Finance (P) Ltd. And others (1977) (47 Comp. Cases 279)
(Delhi). In that case also it was held that merely because there is arbitration clause contained in the articles of association of the company, the Court will not stay a petition under Section 397 or 398 of the Companies Ordinance, 1956, for relief against mismanagement or oppression in the affairs of the company. Such an article cannot be called into play for the purpose of staying proceedings under Section 397 or 398. The provisions of Sections 397, 398 and 434 give exclusive jurisdiction to the Court and the matter thereby cannot be referred to arbitration.
7. It is also pertinent to refer to a judgment of the Lahore High Court delivered in Orix Leasing Pakistan Ltd. v. Colony Thal Textile Mills Ltd. (PLD 1997 Lah. 443) where the question before the Court was as to whether proceedings for winding-up can be stayed in view of arbitration agreement clause between the parties. This Court came to the conclusion that jurisdiction enjoyed by the Court under Section 305 of the Companies Ordinance, 1984 was exclusive and statutory and as such the matter can only be dealt with by the Court and neither arbitrator nor anyone else can grant relief under Section 305 of the Companies Ordinance, 1984.
8. The learned counsel for the respondent attempted to distinguish this precedent on the ground that it related to the question of winding-up of the company while in the present case the dispute has arisen out of proceedings under Section 290 of the Companies Ordinance, 1984.
9. The distinction being pointed out by the learned counsel is specious. Although it is correct that the dispute in the aforesaid case related to winding-up of the company but the matter was decided with reference to the nature of jurisdiction enjoyed by the Court under the Companies Ordinance, 1984, as would be obvious from the following paragraph of the aforesaid judgment:- "It is true that Section 34 speaks of stay of legal proceedings and not suits alone. Similarly it is also correct that there can be proceedings which may not be in the nature of a suit which if taken in derogation of arbitration agreement between the parties must be stayed. However, the wide amplitude of the words "legal proceedings", is hedged by one condition mentioned in the provision under discussion itself which is that the legal proceedings must be in respect of any matter agreed to be referred to the arbitration. The question which therefore, arises is as to whether winding-up is a matter which can be referred to arbitration even if the parties so agreed. In the present cases, arbitration agreement did not specifically provide for reference to the dispute regarding winding- up of the Companies to arbitration but even if there was such a provision in the arbitration agreement it would not have made any referenced as I am of the view that by its very nature the winding-up is a matter which has to be decided by this Court in the exercise of its special statutory jurisdiction and cannot be subject-matter of arbitration nor can order of winding-up be passed by Arbitrator. Section 305 of the Companies Ordinance, 1984 confers exclusive jurisdiction to wind-up a company, upon the Court, which according to the Ordinance means the High Court and not any other Court. Such a power cannot, therefore, be assumed by Arbitrator or any other Court."
10. As a consequence of above, this application fails and is dismissed.