1. The brief facts leading to this suit as reflected from the pleadings are as follows:
1. Masood Asif and his wife Nasreen Akhtar (plaintiff Nos.1 and 2) are carrying on business through Messrs Jenice Limited (plaintiff No.3), a company incorporated in England whose shares are wholly owned by them (hereinafter referred to as 'Jenice'). Plaintiffs Nos.1 and 2 allege that they are nationals of Pakistan residing in England, where they are doing business of Import, Export, Manufacture, Sale and Marketing of various kinds of leather goods. Jenice had been earlier using the services of former B.C.C.I. as their banker; however, in 1990, on the inducement of the officers of United Bank Limited (U.B.L.), Jenice shifted its business to the said bank.
2. They further allege that on account of the conduct of U.B.L., the plaintiffs suffered economic losses, whereupon the plaintiffs filed a suit in the High Court of Sindh at Karachi for Declaration, Permanent Injunction and Recovery of damages amounting to Pounds Stg.10.945 million (Suit No.1198 of 1997).
3. The plaintiffs also filed an interlocutory application to restrain U.B.L. from appointing administrative receiver of Jenice pursuant to Debenture, dated 2-8-1990 on which the Court ordered Notice against which they filed a petition directly in the Supreme Court of Pakistan (C.P. No.1018 of 1997), which was withdrawn on 4-2-1998. The plaintiffs also filed Civil Petition No.2 of 1998 against another interlocutory order of the High Court, dated 24-12-1997. The Supreme Court without deciding the question of maintainability of the petition which was challenged by the defendant, disposed of the same with the direction that if the plaintiffs deposited with U.B.L. within one week from 5-2-1998 a sum of Pounds 3 Million, the undertaking given by the Bank before the High Court of Sindh in Suit No.1189 of 1997 would remain operative until disposal of C.M.A. 6254 of 1997 and if the plaintiffs did not do so, the undertaking given by the Bank before the High Court in the civil suit shall stand discharged. Thereafter, plaintiff filed Review Petition No.1 of 1998 against the aforesaid order, which was dismissed on 11-2-1998. It transpires that on 16-2-1998, the parties executed a settlement in England whereby the plaintiffs agreed to pay a sum of Four Million Pounds as against the agreed debt of Pound Sterling 6,570,774.25 due from the plaintiffs to the Bank at the close of business on 11- 2-1998 within a period of 60 days from the date of the deed. Thereafter, on 23-2-1998, the plaintiffs withdrew Suit No.1189 of 1997 from this Court without any condition. It further transpires that on 14- 5-1998, the parties entered into a supplementary deed whereby U.B.L. agreed that in case Jenice paid a sum of Pounds 80,000 to it on or before 25-5-1998, the time for payment of the settled amount would stand extended to 1-6-1998. The plaintiffs allege that they paid the stipulated sum of Pounds 80,000, thereby leaving an outstanding balance' of Pound 3,420,000. They further allege that subsequent to 1-6-1998, lengthy discussions and negotiations regarding settlement of the outstanding amount took place between the parties and U.B.L. agreed to extend the time for payment. However, in spite of promise,. the terms of the agreement arrived at between the parties on 28-1-1999 were not put in writing and U.B.L. placed Administrative Receivers of Jenice and Receivers of the mortgaged properties. The plaintiffs further allege that the reason why U.B.L. reneged from their agreement was U.B.L.'s problem with the Bank of England which is the regulatory authority for banking in U.K. As U.B.L. is a Banking Company incorporated under Pakistan Law and has its registered office at I. I. Chundrigar Road, Karachi, the plaintiffs filed the present suit on 6-12- 1999 seeking, inter alia, the following reliefs:-- "(a) Declaration that the appointment of the receivers over the assets and personal properties of plaintiffs Nos.1 and 2 who are the sole share-holders of plaintiffs' company, by the defendant, its officers, functionaries, representatives, agents and solicitors be declared illegal, unconscionable mala fide, arbitrary, void and of no legal effect, without lawful authority and ineffective as regards properties and assets of plaintiffs Nos.1 and 2 and assets of the plaintiffs' company.
4. (b)Mandatory injunction requiring the defendant to remove directly or acting through its officers, functionaries, representatives, agents and solicitors, the receivers over the personal properties of plaintiffs Nos.1 and 2 and assets in the name of plaintiffs' company.
5. (c)Perpetual injunction restraining the defendant directly or through its officers, functionaries, representatives, agents and solicitors and the receivers, from dealing with in any manner, or disposing of, the personal properties of plaintiffs Nos.1 and 2 and the assets and business of the plaintiffs' company.
6. (d)Requiring the defendant directly or through its officers, functionaries, representatives, agents and solicitors to specifically perform the agreement of 28-1-1999 and suitably varied as aforesaid, the price being adjusted, mutatis mutandis for moneies already received.
7. (e)Decree for rupees of equivalent GBP 5,200,000 as damages to the plaintiffs against the defendant
2. The plaintiffs filed two interlocutory applications under Order XXXIX, Rules 1 and 2, C.P.C., requesting the Court, among others to restrain U.B.L. directly or through its agents, functionaries and receivers from disposing of or dealing with any property of the plaintiffs Nos.1 and 2, the business of Jenice and directing U.B.L. to allow time of 90 days to pay off a sum of Pound 3,470,000 pursuant to oral agreement, dated 28-1-1999. By order, dated 19-1-2000, a learned Judge was pleased to dismiss both interlocutory applications for temporary injunction filed by the plaintiffs against which they filed a petition in the Supreme Court which is apparently pending there.
8. Meanwhile, on 29-12-1999, U.B.L. filed an application under section 10 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, for grant of leave to defend the suit without prejudice to their challenge to the jurisdiction and competency of the Court. In the said application for leave to defend, U.B.L. has challenged the maintainability of the suit, inter alia, on the following grounds:--
(1) That the plaint arises from the deed of settlement, dated 16-2-1998 which specifically states that the deed shall be governed and construed in accordance with the laws of England and that the parties submit to the exclusive jurisdiction of the High Court of Justice of England. This Court, in the circumstances, therefore, does not have jurisdiction to decide the dispute between the parties.
9. (ii)That the plaintiffs Nos.1 and 2 are British Nationals while plaintiff No.3 is incorporated in England.
10. All the plaintiffs are residing and carrying on business in England where their immovable properties which were given as security to U.B.L. are situated. Further, all banking transactions between the parties took place exclusively in London where all the evidence in relation to the suit is available and consequently, the suit in this Court is hit by the doctrine of Forum non conveniens.
11. (iii)The present proceedings are barred under the principle of res judicata as the plaintiffs commenced and continued with the same claim against U.B.L. in England up to the Court of Appeal.
3. In reply to the aforesaid objections, Mr. M. Akram Shaikh, learned counsel for the plaintiffs submitted as follows:-- (i)As the Head Office of U.B.L. is situated in Pakistan an,action can be filed in this Court though other ingredients of jurisdiction may be absent. Pakistan is the most suitable place to file a suit in view of the judgments reported in PLD 1960 SC 202, 1981 SCM R 494 and PLD 1991 SC 780.
12. (ii)The deed of settlement, dated 16-2-1998 allowed a refinancing period of 60 days which was extended up to 1-6-1998. The time for payment up to 1-6-1998 was not the assence of the contract as U.B.L. did insist on it and did not take any action to enforce the contract by taking any steps for appointment of a receiver and continued to discuss the question of payment and orally agreed to further extension of time; however, they reneged from their promise and on 6-4-1999, got receivers of the properties of the plaintiffs appointed which was in violation of law. The claim of U.B.L. included penalty which issue cannot be raised in U.K. but can only be raised in Pakistan under section 74 of the Contract Act, 1872 and, therefore, this Court has competent jurisdiction to entertain the claim and decide the issues raised in the suit.
13. (iii)The law of contract in Pakistan is different from English Law. Both the plaintiffs and defendant (U.B.L.) are citizens of Pakistan and are accordingly bound by the law of Pakistan which prohibits charging of interest which is contrary to Islamic Law. The rights guaranteed under Articles 4 and 5 of the Constitution are sacrosanct and all citizens are entitled to have their disputes decided in accordance with Pakistani Law no matter where they may be residing and any agreement to the contrary is void; Consequently, this Court should entertain the claim of the plaintiffs and decide the same in accordance with Pakistani Law. (PLD 1975 SC 383, 394).
14. (iv)Under Article 29 of the Constitution of Pakistan, U.B.L. is a person or authority performing functions in connection with the affairs of the Federation which can only be sued in Pakistan for enforcement of the rights guaranteed by the Constitution and referred to 1998 SCM R 2268 in this respect.
15. (v)In England no leave to defend the suit was granted to the plaintiff, the matter was decided under summary procedure, there has been no adjudication in England on merits and substantial questions of law including those of section 74 of the Contract Act, 1872 and charging of Ribah ought to be decided by this Court. The judgment does not meet the requirements of section 13, C.P.C. and is, therefore, not binding and conclusive between the parties.
16. I have heard the arguments of Mr. Sajid Zahid, learned counsel for the defendant (U.B.L.) on his preliminary objection challenging the jurisdiction of the Court which are also the grounds on which leave to defend the suit has been sought by U.B.L. and Mr. Muhammad Akram Shaikh, learned counsel for the plaintiffs, who vehemently opposed the same.
17. At the outset Mr. Sajid Zahid conceded that in view of the provisions of section 20, C.P.C. this Court is competent to hear the matter on the ground that U.B.L. against whom relief is claimed has its Head Office at Karachi; however, he challenged the jurisdiction of the Court to hear the matter, requested rejection of the plaint under Order VII, Rule 11, C.P.C. or in the alternative stay of the proceedings and advanced his arguments on the grounds stated above.
18. It is an admitted position that plaintiffs Nos.1 and 2 who are holders of all the shares of Jenice, a company incorporated and existing under the Laws of England, are carrying on business in that country for the last several years, that Jenice obtained a loan from U.B.L. and after differences developed between the parties the plaintiffs filed Suit No.1189 of 1997 in this High Court wherein, inter alia, they sought to restrain U.B.L. from appointing any Receiver or Liquidator of their properties. The application for temporary injunction was decided against the plaintiffs who went to the Supreme Court of Pakistan against the said order. Ultimately the dispute between the parties was settled by a deed of settlement, dated 16-2-1998 and consequently, on 23-2-1998 the said suit was dismissed as withdrawn with no orders as to costs. The deed, dated 16-2-1998 which was executed by all the plaintiffs and U.B.L. clearly states that the agreed debt due from the plaintiffs at close of business on 11-2-1998 was pounds 6,570,774.25 and that U.B.L. had agreed to accept a sum of pounds 4 million (agreed amount) in satisfaction of the debt on the condition that the plaintiffs would deposit within seven drays of the date of the deed a sum of pounds 400,000 on account of the agreed amount and the balance of pounds 3,600,000 within sixty days from the date of the deed.
19. The agreement further provided that U.B.L. shall not be under any obligation to accept the agreed amount in full satisfaction of the debt if the plaintiffs committed breach of any of the terms of the deed which included payment as stated above. The deed also provided that "Time shall in all respects be of the essence of this Deed" (Clause 12). The clause relating to Governing Law and Jurisdiction provided as follows:-- "The borrower and the Bank agree that this deed shall be governed and construed in accordance with Laws of England and that they submit to the exclusive jurisdiction of the High Court of Justice England in relation to any dispute between them arising out of this deed and/or the banker customer relationship between the parties. (Clause 13)."
20. The deed of settlement further provided that:-- "This deed construes the entire agreement between the parties with respect to the matters dealt with in it and supersedes and previous agreement between the parties in relation to such matters. .... No variation of this deed shall be valid or effective unless made by one or more instruments in writing signed by the parties to the deed. (Clause 14.8)."
21. It is also an admitted position that the plaintiffs failed to repay the amount stipulated in the deed of settlement within the agreed period which by supplementary deed of settlement, dated 14-5-1998 was extended up to 1-6-1998. It is alleged by the plaintiffs that U.B.L. verbally agreed to extend the time but instead of acting upon their promise they commenced recovery proceedings against the plaintiffs in terms of the security document executed by them in favour of U.B.L., namely, deed of debenture and personal guarantees. Both, the plaintiffs and the defendant filed their claims and counterclaims in the English Court which litigation apparently culminated in favour of U.B.L. up to the Court of Appeal. The primary objection of Mr. Zahid, learned counsel for U.B.L., is that in view of the exclusive jurisdiction clause referred to above this Court does not have jurisdiction to entertain the suit as both the parties agreed to have their disputes decided in accordance with Laws of England by the High Court of Justice, England. He emphasized that after the parties had expressly agreed to such terms, the plaintiffs cannot invoke the jurisdiction of this Court for resolution of their dispute which must be decided by the English Court. He, however, conceded that the jurisdiction of this Court is not completely ousted because U.B.L. has its Head Office in Karachi but this Court should treat the Exclusive Jurisdiction Clause in the nature of an arbitration clause, stay the proceedings and direct the parties to have their dispute decided by the agreed forum. In support of his contention he relied upon the case of M.A. Chowdhury v. Mitsui O.S.K. Lines Limited and 3 others PLD 1970 SC 373 at 394 wherein the Chief Justice Hamoodur Rahman as he then was, observed as follows:-- "I am of the opinion that in order to preserve the sanctity of contracts I ought also to hold, as was done in the earlier cases in Great Britain that such foreign jurisdiction clauses, even when they purport to give jurisdiction to a Court in a foreign country, are really in the nature of arbitration clauses which come within the exceptions to section 28 of the Contract Act and therefore, should be dealt with in the same manner as other arbitration clauses. In the case of an arbitration it has to be remembered that the jurisdiction of the Court is not altogether ousted, for, the Courts merely stay their hands to allow the parties to resort to the form of adjudication to which they have previously agreed. By only staying the actions before them the Courts still retain to themselves the jurisdiction to resume the case if the arbitration, for any reason, fails or the parties find it impossible to comply with the form of adjudication to which they had agreed."
22. To reinforce the above argument he also referred to the case of Messrs Eckhardt & Co. v.
23. Muhammad Hanif PLD 1993 SC 42 at page 52 where Ajmal Mian, J. as he then was, in his separate note observed as follows:-- "The rule that the Court should not lightly release the parties from their bargain, that follows from the sanctity which the Court attaches to contracts, must be applied with more vigour to a contract containing a foreign arbitration clause. We should not overlook the fact that any breach of a term of such a contract to which a foreign company or person is a party, will tarnish the image of Pakistan in the comity of nations. A ground which could be in contemplation of party at the time of entering into the contract as a prudent man of business, cannot furnish basis for refusal to stay the suit under section 34 of the Act."
24. In reply Mr. Muhammad Akram Shaikh, learned counsel for plaintiffs, submitted that there was no arbitration clause in the deed of settlement, dated 16-2-1998 and, therefore, the present proceedings could not be stayed for referring the matter for decision as contended by U.B.L. Mr. Shaikh further contended that as a citizen of Pakistan he relied upon section 74 of the Contract Act, 1872 which prohibits imposition of any penalty in case of breach of contract and according to which the claimant has to prove the loss arising from the breach before he can recover it and added that under the terms of the deed of settlement a penalty had been imposed upon the plaintiffs which is contrary to section 74 of the Contract Act, 1872. Further under English Law he would be liable to pay interest which cannot be recovered in Pakistan which defenses would not be available to the plaintiffs in the English Courts. He further submitted that the deed of settlement dated 16-2-1998 was executed under economic duress and therefore, it was not a valid document as described in the judgment of this Court in the case of Abdul Rahim v. U.B.L. PLD 1997 Kar. 62.
25. The answer to the objections raised by Mr. Shaikh are simple. Undoubtedly, there is no arbitration clause in the deed of settlement, dated 16-2-1998, but it is not the case of U.B.L. that there is an arbitration clause or that the Supreme Court of Pakistan in case of M.A. Chawdhury held that there has to be an arbitration clause in the agreement between the parties before the proceedings can be stayed. What the Honourable Supreme Court has held and what Mr. Zahid has argued is that the foreign jurisdiction clause is in the nature of an arbitration clause and, therefore, the judgment of the Supreme Court of Pakistan in the case of M.A. Chawdhury, is applicable. The argument that by deed of settlement dated 16-2-1998 plaintiffs are required to pay a penalty in case of breach of the agreement is misconceived. The deed clearly states that the agreed amount is pounds 6,570,774.25 and U.B.L. agreed to accept pounds 4 million in satisfaction of the debt provided certain conditions were fulfilled. The difference between the debt amount and the amount agreed to be accepted in final satisfaction of the debt is not a penalty but a concession or indulgence given by U.B.L. to the plaintiffs if the latter paid pounds 4 million according to the agreed terms on schedule. Further, it is an admitted position that Jenice, a company incorporated in England, is carrying on business in England, borrowed money under English Law and in the deed of settlement dated 16-2-1998 the plaintiffs agreed that "this deed shall be governed and construed in accordance with laws of England and that they submit to the exclusive jurisdiction of the High Court of Justice England in relation to any dispute between them arising out of this deed and or banker customer relationship between the parties". The plaintiffs are residing and carrying on business in England where all their activities without exception are subject to English Law and they cannot in their daily lives contract out of English Law and insist that if they have any dispute with a Pakistani it must be decided in accordance with Pakistani Law and the English Court on their application stay the Court proceedings to enable them to have their dispute decided by Pakistani Courts in accordance with Pakistani Law especially because transactions based on interest are prohibited in Pakistan being contrary to the principles of Islamic Finance. Assuming for the sake of argument that there is no express intention to apply the English Law, such a request*. if made, would be rejected by all Courts because the system of law with which the transaction has the closest and most real connection in the English Law (see Dicey and Morris on "The Conflict of Law", Eleventh Edition, 1987).
26. In their international business dealings where the plaintiffs have a choice of law including the present one, the plaintiffs chose not to exercise such option and in the deed of settlement expressly agreed that they would have all their disputes arising out of the. deed and/or banker customer relationship settled in accordance with English Law and exclusively by the High Court of Justice, England. After having given such an undertaking it does not behave the plaintiffs to contend that the dispute between the parties should be decided in Pakistan and under Pakistani Law. Moreover, the plaintiffs are professing to be good Muslims. They must therefore, fulfil their obligations/covenant which they undertook in the deed of settlement dated 16-2-1998. (Surrah V, Al-Maidah, Ayat 1 and Surah XVII, Al-Isra, Ayat 34).
27. Further, 'it is well established that where there is no express choice of the proper law, it is open to the Court to determine whether there is any implied or inferred choice of the proper law in the contract and where the parties agree that any dispute shall be submitted to the Court of or arbitration in a particular country, the question of choice does not arise and the intention of the parties must be implemented (Karachi Gas Company Limited v. Hasham Issaq PLD 1981 Kar. 197).
28. The parties having agreed to have their dispute decided by English Courts under English Law by agreement dated 16-2-1998, the plaintiffs are bound by the agreement and cannot back out from the same. As far as the defence of economic duress in relation to the execution of the deed of settlement is concerned, suffice it to say that the said judgment is in consonance with the principles of English Law and the plaintiffs are and would be free to take such defence in the English Courts.
29. It would not be out of place to mention here that in accordance with the provisions of the deed of settlement dated 16-2-1998, U.B.L. filed an action in the High Court of Justice, Queen's Bench Division, and the Court after considering the cases of both parties in accordance with the applicable law and procedure rejected the defences put forward by the plaintiffs and Master Eyre passed an order in favour of U.B.L. on 29-6-1999. In the said case the plaintiffs had also filed a counterclaim against U.B.L. which was also rejected by Master Eyre on the same day. It appears that the plaintiffs then filed an appeal against the order of Master Eyre before Mr. Justice Wright which was dismissed on 27-7-1999. Thereafter, the parties apparently filed appeals in the Court of Appeal (Civil Division) against the judgment of Justice Wright which was decided by Lord Justice Thorpe and Lord Justice Mantell against the plaintiffs by judgment, dated 11-2-2000. It is, therefore, evident that the plaintiffs have already been pursuing their remedy in the form and the agreed forum of adjudication provided in the deed of settlement. After the judgment of the Court of appeal the plaintiffs can file further appeal in accordance with English Law.
30. The argument of Mr. Shaikh, learned counsel for the plaintiffs, that the judgment given by the English Courts do not meet the requirements of section 13, C.P.C. and accordingly it cannot be enforced in Pakistan is irrelevant. It would not be proper to comment upon the judgment pronounced by the English Court in the present dispute between the parties as U.B.L. has not so far invoked the jurisdiction of this Court to enforce the same. This Court would look into the validity. of the English judgment at the appropriate time when it is brought to this Court for execution. The remedy of the plaintiffs, if any, at this point of time, is in the English Courts as agreed by them in the deed of settlement dated 16-2-1998. The suit is not bona fide and this Court cannot at this stage restrain U.B.L. from proceeding with their claim in accordance with English Law in the English Courts as agreed by the parties.
31. In light of the judgment of the Supreme Court of Pakistan in case of M.A. Chowdhury, it is a fit case in which this Court should stay the proceedings and direct the plaintiffs to resort to the form of adjudication which they had agreed to in the deed of settlement. Having reached the conclusion that the proceedings in the suit should be stayed, it is not necessary to discuss the other points raised by both learned counsel.
32. As discussed above the defendant has raised serious and bona fide dispute; accordingly, their application for leave to defend is granted and they are directed to file their written statement within 90 days. Following the law laid down in M.A. Chawdhury's case the proceedings in the present suit are stayed and the plaintiffs are directed to agitate their dispute in England in accordance with English Law and get it decided by the English Courts as expressly agreed by them.
33. The plaintiffs may approach this Court for revival of the proceedings, if they find it impossible to comply with the form of adjudication to which they had agreed. In such event, U.B.L. shall have the right to file an amended, revised or further written statement and defend the proceedings in accordance with law.
34. In view of the above discussion it is apparent, that the plaintiffs' opposition to defendant's application for leave to defend the suit, the request for stay of proceedings in Pakistan and direction to the plaintiff to pursue his remedy in the agreed form were patently vexatious.
35. Consequently, the plaintiffs shall pay special costs of Rs.15,000 to the defendant.