1. This is an application under section 41 of the Arbitration Act filed by the Advocate for the defendant No.2 wherein it is prayed that the plaintiff and/or their employees, against attorneys, servants acting through or under them, directly or indirectly be restrained from changing the status of the property bearing No.1, Messrs Pak Shelters, Builders and Developers, Saba Apartment, Rizwan Cooperative Housing Society, Sector 38-A, Scheme No.33, University Road, Karachi. It is further prayed that they may be restrained from announcing booking of flats, raising any construction and/or creating third party interest or rights till the decision of the Sole Arbitrator. In support of this application an affidavit has been filed by one Amina Khatoon, who incidentally is the only defendant, wherein she has urged that in Civil Suit No.553 of 1997, Justice Retired Dr. I. Mahmood had been appointed as sole arbitrator to enter into the reference and make an award within four months. Furthermore, she has pointed out in detail the various stages the matter has gone through and that the proceedings before Arbitrator are almost on the verge of finalisation but the plaintiff opened a site office and started announcing the booking of flats in the said property. According to her if this is allowed to continue then her interest and/or right before the arbitrator shall be seriously prejudiced.
2. A counter-affidavit has been filed by the plaintiff, wherein they have shown in detail the facts leading to the dispute. They have inter alia pointed out that both Mst. Zubaida Kaleem and Amna Khatoon had entered into a deed of settlement and surrender of their rights with the plaintiff. This settlement had been entered into by the son and husband of the respective ladies, and initial payment was made. Thereafter, Mst. Zubaida Kaleem withdrew after obtaining 750,000 (Rupees seven hundred and fifty thousand only). Hence the suit against defendant No.1 was withdrawn. The plaintiff furthermore points out that he is in possession, which was confirmed by the Nazir who had conducted an inspection on 12-3-1997.
3. The plaintiff has also stated in the affidavit that the defendant has claimed damages to the tune of Rs.10 crore on the investment of Rs.750,000 (Rupees seven hundred and fifty thousand only). In fact this 10 crores is part of the claim registered with the sole arbitrator by Amna Khatoon. The plaintiff has taken various other pleas in support of his contention that this application for stay need not be granted. He has also pointed out that after inspection of site stay was confirmed and no appeal has been preferred against that order.
4. The rejoinder has been filed by Amna Khatoon who has denied the contents of the counter- affidavit, however, she has admitted the deed of settlement and surrender of rights and deed of partnership dated 22-12-1996. According to her the plaintiff has failed to fulfil their part of the bargain as envisaged in the deed of. Settlement. She has also challenged, the notice dated 21-4- 1998, which has been produced by the plaintiff as Annexure "C". In this notice Mst. Zubaida has written to Mst. Amna Khatoon, notifying that she has withdrawn from the partnership. According to this letter the partnership stands dissolved as per clause 3 of the partnership deed.
5. At the outset the learned counsel for the defendant commenced his arguments by stating that he in effect was bound by the order of status quo and injunction granted by this Court. He was following the proceedings before the Arbitrator. His only concern was the advertisement given by the plaintiff in the papers which called for sale of flats. According to -him if this was allowed to be done and third party interests were created then his client shall be seriously prejudiced and suffer loss.
6. The plaintiff on the other hand has pleaded that he was in physical possession of the property which was worth a lot of money and that in order to safeguard his rights he was well within his right to advertise and offer for sale flats. According to the counsel, since damages to the tune of Rs.10 crores had been demanded from the plaintiff by the defendant, therefore, no prejudice and loss shall be caused to her. In case she ultimately succeeds then adequate compensation by way of damages was available to her. He felt that if any stay would be granted at this juncture by the Court, serious loss and injury shall be caused to his clients.
7. Before I conclude 1 would like to reproduce section 41 of the Arbitration Act: "41. Procedure and powers of Court.--- Subject to the provisi#J of this Act and of rules made thereunder:
(a) The provisions of the Code of Civil Procedure, 1908 shall apply to all proceedings before the Court, and to all appeals, under this Act, and
(b) The Court shall have, for the purpose of, and in relation to arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court: Provided that nothing in clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making order with respect to any of such matters."
8. I reproduce Order 39, Rules 1 and 2, C.P.C.
9. "
1. Cases in which temporary injunction may be granted . ... Where in any suit it is proved by affidavit or otherwise . ...
(a) that any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or
(b) that the defendant threatens, or intends, to remove or dispose of his property with a view to defraud his creditors, the Court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal or disposition of the property as the Court thinks fit, until the disposal of the suit or until further orders."
10. The Second Schedule of the Arbitration Act relates to section 41 and deals with powers of Courts in connection with interim injunction etc. It has been observed that powers of the Court under Second Schedule to the Arbitration Act can be exercised even in a case where reference to Arbitration has been made by intervention of the Court. The effect of the provision of section 41(b) of the Act is to clothe the Court with the same powers in relation to the Arbitration proceedings and to issue interim order for the preservation and safety of the subject-matter of the dispute. In this respect I am fortified by the observation made in the case of Asadullah Khan & Company Ltd. v. Karachi Shipyard and Engineering Works Ltd. 1979 CLC 625. The relevant portion is reproduced as under:-- "4. Respondent No.1 has raised several objections to this application. The first one is as to the maintainability of the application. It is contended by Mr. Samiuddin Sarni that an application under section 41 could be made win if there are any proceedings pending before the Court or before the arbitrators.
(b) the Court shall have for the purpose of and in relation to arbitration proceedings, the same power of making orders in respect of any of the matters set out the Second Schedule as it has for the purpose of and in relation to any proceedings before the Court.
11. Provided that nothing in clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect of any of such matters. Para. 4 of Second Schedule to the Arbitration Act gives power to the Court to issue interim injunction or appoint receivers in cases covered by section 41 of the Arbitration Act. It will be noticed that the powers conferred on the Court under the Second Schedule to Arbitration Act could be exercised only if any proceedings were pending before the Court. "
12. I am fortified also by the case of Island Textile Mills Limited, Karachi v. Technoexport and another 1979 CLC 307: "It may be observed that section 41(b) of the Arbitration Act provides that the Court shall have for the purpose of and in relation to arbitration proceedings, 'the same power of making orders in respect of any of the matters set out in the Second Schedule of the Act as it is for the purpose of and in relation to the proceedings before the Court. It also provides that nothing in the aforesaid clause (b) shall be taken to prejudice any power which may be vested in an Arbitrator or Umpire for making order with respect to any such matters. The Second Schedule to the Arbitration Act inter alia empowers the Court to grant interim injunction or to appoint a receiver etc. It is, therefore, clear that the Arbitration Tribunal in the instant case does not have the power to deal with the grant of an ad interim injunction which was prayed for by the plaintiffs in the present suit and, therefore, this Court was to deal with the injunction application even if the suit would have been stayed under section 34 of the Act."