' This suit is in nature of an application under section 20 read with section 8 of the Arbitration Act, 1940 with the prayers that the defendants be directed to file agreement dated 28-6-1995 and that the matter be referred to arbitration as provided in clause 67 of the said agreement. Alongwith this suit, an application under section 41 of the Arbitration Act, 1940 (hereinafter referred to as the Act 1940) has also been filed by the plaintiff seeking prohibitory injunction against defendant No,3, namely, Deutshe Bank, from encashing performance Guarantee bearing No,789/10-14810 dated 28- 6-1955 for Rs,23,815,617.
2. I have heard Mr. Khawaja Bilal, Advocate for plaintiff, Mr. Badar Alam, Advocate for defendants Nos.1 and 2 and Mr. A.H. Mirza, Advocate for defendant No,3 Mr. Badar Alam has raised objections to the maintainability of this suit on the ground, firstly, that it is barred under Order XXIII, Rule 1(3) read with Order H, Rule 2, C.P.C. (sic) Secondly, that the suit is without cause of action as the prior condition is provided in clause 67 of the said agreement was not fulfilled by not referring (sic) this matter first to the Engineer and, lastly, that there exists no dispute between the parties. Before proceeding further, it would be pertinent to consider clause 67 of the agreement as amended, which reads as follows:-- "67. If any dispute or difference of any kind whatsoever shall arise between the Employer and the Contractor or the Engineer and the Contractor in connection with or arising out of the Contract, or the execution of the Works, whether during the progress of the Works or after their completion and whether before or after the termination, abandonment or breach of the Contract, it shall, in the first place, be referred to and settled by the Engineer who shall, within a period of ninety days after being requested by either party to do so, give written notice of his decision to the Employer and the Contractor. Save as hereinafter provided such decision in respect of every matter so referred shall be final and binding upon the Employer and the Contractor and shall forthwith be given effect to by the Employer and by the Contractor, who shall proceed with the execution of the Works with all due diligence whether he or the Employer requires arbitration as hereinafter provided, or not. If the Engineer has given written notice of his decision to the Employer and the Contractor and no claim to arbitration has been communicated to him by either the Employer or the Contractor within a period of ninety days from receipt of such notice, the said decision shall remain final and binding upon the Employer and the Contractor. If the Engineer shall fail to give notice of his decision, as aforesaid, within a period of ninety days after being requested as aforesaid, or if either the Employer or the Contractor be dissatisfied with any such decision, then and in any such case either the Employer or the Contractor may within ninety days after receiving notice of such decision, or within ninety days after the expiration of the first-named period of ninety days, as the case may be required that the matter or matters in dispute be . Referred to arbitration as hereinafter provided.
All disputes or differences in respect of which the decision, if any, of the Engineer has not become final and binding as aforesaid shall be finally settled under the rules and provisions of Pakistan Arbitration Act of 1940 by one or more arbitrators appointed under such rules. The said arbitrator/s shall have full power to open up, revise and review any decision, opinion, direction, certificate or valuation of the Engineer. Neither party shall be limited in the proceedings before such arbitrator/s to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision. No decision given by the Engineer in accordance with foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitrator/s on any matter, whatsoever relevant to the dispute or difference referred to the arbitrators as aforesaid. The reference to arbitration may proceed notwithstanding that the Works shall not then be or be alleged to be complete, provided always that the obligations of the Employer, the Engineer and the Contractor shall not be altered by reason of arbitration being conducted during the progress of the Works."
3. It is an admitted position that the plaintiff filed an earlier application under section 20 of the Act, 1940, which was numbered as Suit 474 of 1997 praying for the same reliefs as of instant suit, which was subsequently withdrawn under Order XXIII, Rule 1, C.P.C. On the ground that the parties were ready to settle their dispute outside the Court. It is pertinent to note that the said application for withdrawal of suit was jointly filed by the plaintiff and defendants Nos.1 and 2 who along with their counsel signed the same.
' The said application reads as follows:- "It is respectfully submitted on behalf of the parties that this Hon'ble Court may kindly be pleased to allow the plaintiff to withdraw the above noted suit, the application under section 20 and the application under section 41 read with Order 39, Rules 1 and 2 and section 151, C.P.C. As the parties are ready to settle the dispute, subject matter of this suit, outside the Court by negotiations amicably. The application may kindly be allowed in the interest of justice."
4. It was argued by Mr. Badar Alam while referring Order XXIII, Rule 1, C.P.C. That there a plaintiff withdraws his suit without permission as referred in sub-rule (3) to Rule 1 of Order XXIII he shall be precluded from instituting any fresh suit in respect of the same subject-matter or such part of the claim as relinquished earlier. In support, he has placed reliance on the following cases:- ' Karam Chand v. Uma Datt Hans Raj and others AIR 1930 Lahore 755; Karim Bakhsh v. Jan Muhammad PLD 1977 Lahore 1033; Muhammad v. Additional Secretary, N . -W .F.P. And 8 others 1989 SCMR 995 (wrongly printed as page 995); this case appears at page 1773; Muhammad Yousuf Memon v. Karachi Stock Exchange Limited 1995 CLC 183; Achar and another v. Abu Baker Modi and another 1995 CLC 465 and Muhammad Bakhsh v. Member, Board of Revenue Lahore and 2 others PLD 1992 Lahore 420.
5. It is settled law that where plaintiff withdraws unconditionally a suit without first obtaining leave of the Court to file a fresh A suit on the same cause of action, such plaintiff is precluded from filing a fresh suit on the same cause of action. Thus it is not necessary to discuss the rule laid down in the cases cited by Mr. Badar Alam. Even otherwise, facts of this suit are quite distinguishable from the facts of the above reported cases. In the instant case, the withdrawal of the previous suit was not simple withdrawal but it was conditional. It is pertinent to note that application was jointly signed by the plaintiff and present defendants Nos.1 and 2 (WAPDA) where all the parties to the said application duly consented for settling their dispute outside the Court which dispute was declared by them to be the subject matter of the suit. Thus it, appears from the conduct of the defendants Nos.1 and 2 that on their understanding that the dispute would be settled outside the Court, the plaintiff agreed for withdrawal of earlier suit. On query from the Court as to why defendants/WAPDA had signed the application under Order XXIII Rule 1 C.P.C. And why it agreed for settlement of dispute outside the Court, Mr. Badar Alam has, very innocently replied that it was done because the plaintiff was withdrawing its previous suit unconditionally. This act of defendant/WAPDA contains an element of misrepresentation which entitled the plaintiff to maintain a second application under section 20 of the Act, 1940. I would not like to go into the merits of the claims of either parties which have led to filing of the present suit.
' Suffice to say that the previous suit was withdrawn on 24-4-1997 and after a lapse of nearly one month this present suit was filed on 26-5-1997 on the allegations that the defendants Nos.1 and 2 have again failed to settle the dispute as agreed earlier. This allegation has been denied by Mr. Badar Alam who attempted to argue that it is the plaintiff who has abandoned the site and, therefore, they are not entitled in law to invoke the provisions of section 20 of the Act, 1940. Since in earlier suit it was agreed by the plaintiff and defendants Nos.1 and 2 that they will settle their dispute outside the Court and since the matter was not settled as agreed upon earlier, in my view this gives a fresh cause of action to the plaintiff to repeat this application under section 20 of the Act 1940. The proceedings under section 20 of the Act 1940 is to be treated as a civil suit vide subsection (2) of section 20. It is not a fullfledge civil suit in stricto senso, it is a legal proceedings with limited scope. (See Muhammad Abdul Latif Faruqi v. Nisar Ahmad and another PLD 1959 (W.P.)
Karachi 446; United Cotton Factory v. Ahmad Khan PLD 1960 (W.P.) Karachi 774; Bhima Ram and others v. Bhagat Thakardas Tikkenlal and Sons AIR 1933 Peshawar 18 and Lal Chand and another v.
Sri Ram AIR 1930 Lahore 1066. It is also evident from record that the plaintiff in compliance with the clause 67 of the agreement, has referred this matter to the Engineer vide letter dated 7-2-1997 (Annexure 'E' to the plaint) and the Engineer was required to settle the same within a period of 90 days which stood expired on 6-5-1997 and present suit was filed on 26-5-1997. This aspect of the case has not been denied by the WAPDA. The earlier suit was filed prior to expiry of 90 days which is one of the pre-condition of clause 67, thus it was premature and incompetent. The expiry of 90 days without reaching any settlement with Engineer gives fresh cause of action to the parties of the arbitration agreement. It is not the case of either party that after withdrawal of earlier suit, the proceedings pending before the Engineer were also withdrawn. In my considered view the plaintiff has fully complied with the pre-condition as stipulated in clause 67 as far as present suit is concerned. Therefore, provisions of Order XXIII, Rule 1, C.P.C. Is not attracted in this case for the foregoing reasons.
6. It was further contended by Mr. Badar Alam that in order to refer a matter to arbitration it is necessary and that it is one of the pre-condition that there must be a dispute. According to the learned counsel, at present there is no dispute between the parties. He has referred to clause 63 of the agreement and contended that after plaintiff has abandoned the project, they cannot maintain an application under section 20 of the Act, 1940. He further repeated that there was another precondition in clause 67 of the agreement which envisages that first the matter is to be referred to the Engineer and in case of his failure to settle the dispute within 90 days, only then the matter could be referred to arbitration under the provisions of the Act, 1940. In respect of the second contention, I have already held that vide Annexure 'E' to the plaint the matter was referred by the plaintiff to Engineer on 7-2-1997 who failed to give any decision all 6-5-1997 and, therefore, the pre-condition of clause 67 was complied with by the plaintiff. Mr. Badar Alum has also referred to the cases Sanad Associates v. General Manager T & T 1989 CLC 386; B.R. Harman v. Ghee Corporation of Pakistan Limited Karachi 1980 CLC 1226 and Messrs Electric and Radio Corporation v.
Messrs Pakistan Steel Mill Corporation 1982 CLC 679 where it was held, inter alia, that unless the pre-condition as provided in arbitration clause is fulfilled, a party is not entitled to invoke the provisions of section 20 of the Act, 1940. It is settled law that a party who intends to invoke section 20 of the Act, 1940, is first required to show that there exists an arbitration agreement between the parties prior to filing of the suit; that there exists a dispute between the parties which subject matter is covered by the said arbitration agreement and lastly, such party has not invoked earlier any provision of Chapter IT of the Act, 1940. In the instant suit, it has not been denied that there exists arbitration agreement prior to filing of this suit and that the plaintiff has not of proceeded earlier under Chapter II of the Act. (See Manzoor Construction Co. Limited v. University of 'Engineering and Technology Taxila 1984 CLC 3347.
7. As far as the plea of defendants Nos.l and 2 that there is no dispute between the parties is concerned, I would like to refer paras 11, 12, 19 and 21, of the plaint where a clear dispute has been alleged by the plaintiff. In this regard, it was argued by Mr. Badar Alam that the allegations contained in the plaint show only a false and sham dispute as it is based on mala fides of the plaintiff. Be that as it may, this Court is not required to evaluate the merits or de merits of plaintiff's claim or of alleged dispute while hearing an application under section 20 of the Act, 1940. A Court is required to see whether there exists a genuine dispute which could be referred to the agreed arbitration and whether it falls within the purview of an arbitration agreement. A dispute implies an assertion of a right by one party and repudiation thereof by another. In the instant case, the scope of dispute is very wide as the phrase "if any dispute or difference of any kind whatsoever" is mentioned in the beginning of clause 67 of the agreement which covers all conceivable situation suggesting a dispute. In case any reference is needed, please see Lahore Stock Exchange Limited v.
Fredrick, J. Whyte Group (Pak.) Limited and others PLD 1990 SC 48. However, it would be open to the defendants to test the plaintiff's a claim on merits before the Arbitrator.
8. Mr. Badar Alam insisted that there is another pre-condition in the arbitration clause which stipulates that the decision of Engineer shall be final and binding upon the Employer and the Contractor and it shall be given effect forthwith by the employer and by the contractor "who shall proceed with the execution of the works with all due diligence whether he or the employer requires arbitration as hereinafter provided or not." This provision of arbitration clause pertains to, a decision given by the Engineer which shall be binding on both the employer as well as the Contractor. It, further envisages that irrespective of such decision either party shall continue with the work with all diligence. In the instant case, no decision was given by the Engineer and therefore, this clause is not attracted. Further reliance was placed on the last para of clause 67 of the agreement which provides that the obligations of the employer, the Engineer and the Contractor shall not be altered by reason of arbitration being conducted during the progress of work. This particular clause was considered by my learned brother Mushtaq A. Memon, J. In Suit No,875 of 1997 (China International Water and Electric Corporation v. Pakistan Water and Power Development Authority and another). It was stated by both the advocates that the arbitration clauses in both the cases are similar. The relevant portion of the said judgment is reproduced as follows:-- "17. At this stage, it is pertinent to take into account the last portion of clause 67 of the Conditions of Contract (Agreement) dated 26-5-1996 which is as follows:-- "The reference to arbitration may proceed notwithstanding that the works shall not then be or be alleged to be complete, provided always that the obligations of the Employer, the Engineer and the Contractor shall not be altered by reason of arbitration being conducted during the progress of the Works."
' It seems that the parties had visualised disputes inter se but were mindful of the importance of the project assigned to the plaintiff. The purpose of the above quoted term seemingly is that despite reference of any dispute to Arbitration, the execution of works should continue and the obligation of the plaintiff, the defendant No,1 and the Engineer were agreed to be performed by every one of them. Indeed, during the hearing of the matter I had adjourned the proceedings for sometime to enable the parties to recommence the work on the project and complete it through mutual consensus. However, all such efforts, did not get any result. In the circumstances, I am inclined to restrain the defendants from encashment of the Mobilisation Guarantee provided the outstanding Running Bills of the plaintiff die certified, with or without modifications and cleared by the defendant No,1 within 30 days from the date this order whereupon the plaintiff, may re-mobilize the site within next 15 days and complete remaining work on the project according to the Contract.
Such arrangement shall, however, be without prejudice to the arbitration proceedings which may be continued in terms of the order with a view to ensure substantial justice and to minimise the losses as may be suffered by the parties who are expected to adopt every possible course for mitigation; thereof. Moreover, the project, known as "Rato Dero Pump Station" may also see light of the day, should the parties agree to fulfil their respective obligations:"
' It is needless to observe that the contractual obligations of plaintiffs are not altered by reason of invoking of the arbitration clause. There are other clauses in the agreement which govern and controls the contractual relationship between the parties and it is always open to either party to plead such obligation before the arbitrator. However, this term as referred by Mr. Badar Alam is not a condition precedent for invoking arbitration clause. The present proceedings, as stated earlier, is not a real suit. It cannot be converted into a suit for specific performance where the Court is competent to direct a defendant to perform his contractual obligations. For present, suffice to say that plaintiff has fulfilled all the pre-requirements of section 20 of the Act, 1940 while defendant/WAPDA was not able to show any reasonable cause why this application should not be dismissed. With this view, I direct defendants Nos.1 and 2 to file arbitration agreement in the Court and refer this matter to the sole arbitration of Mr. Justice (Retd.) Saleem Akhtar, as suggested, but subject to his concurrence. Parties would be at liberty to negotiate the fee with learned arbitrator.
9. Alongwith this suit, plaintiff has also filed an application under section 41 of the Act, 1940 (C.M.A.
3714 of 1997) seeking injunction against the defendants Nos.1 and 2 restraining them from encashing the aforesaid Performance Guarantee. It is argued by Kliawaja Bilal that the amount of Mobilisation Guarantee amounting to Rs,35,723,425 was paid by the plaintiff to defendant No,1 after withdrawal of earlier suit but, prior to filing of the instant suit and that the Performance Bond is the subject matter of this application: This Performance Bond was executed by defendant No,3 namely Deutshe Bank on behalf of plaintiff as security for fulfilment of the plaintiffs obligation in accordance with the aforesaid contract with defendant/WAPDA. It is further argued by Mr. Khawaja Bilal that this would be the subject matter of the arbitration and unless, it is decided as to which party was at default, this guarantee is not liable to be encashed. Reliance was placed on the cases Messrs Jamia Industries Limited v. Messrs Pakistan Refinery Limited Karachi PLD 1976 Karachi 644; Messrs Zeenat Brothers (Pvt.) Limited v. Aiwan-e-Iqbal Authority and 3 others PLD 1996 Karachi 183; Messr Mehboob Enterprises v. Karachi Development Authority and another 1997 MLD 3085. While Mr. Radar Alam has placed reliance on the case Messrs National Construction Limited v. Aiwan-e-Iqbal PLD 1994 SC 311. In the case of Messrs National Construction Limited (Supra), a Full Bench of Hon'ble Supreme Court dismissed the appeal and upheld the order of learned Single Judge of Lahore High Court but declined to grant interim stay against tile encashment of Bank Guarantee pertaining to mobilisation advance. Case of Jamia Industries Limited (ibid) was also referred before the Hon'ble Supreme Court but it was found distinguishable on the ground that, the mobilisation advance was not the subject matter in the case of Jamia Industries. The distinction between a Bank Guarantee arising out of mobilisation advance and performance bond was considered by me in the cases Zeenat Brothers (Pvt.) Limited and Mehboob Enterprises where it was held, inter alia, after reference to case law including the case cited by Mr. Badar Alam and while following the rule laid down in the case of Jamia Industries that the defendants were not titled to encash the Performance Guarantee unless it is determined which of the party was at fault which could not be done without recording of evidence. The rule laid down by Zafar Hussain Mirza, J., (as his lordship then was) in the case of Jamia Industries was followed by Lahore High Court in Messrs Hatta Construction Co. (Pvt.) Limited v. Faisalabad Development Authority and another 1995 CLC 1877. In view of the circumstances of this case, I am not inclined to take different view. Therefore, C.M.A. 3714 of 1997 is granted and respondent No,3 is restrained from encashing the Performance Guarantee as mentioned in, the earlier part of this order. The defendant No,3 is directed to keep valid and encashable this Bank Guarantee till further order. This order of interim injunction will remain in operation till next four months in order bind the plaintiff from adopting delaying tactics before the Arbitrator. However, it would be open to the plaintiff to again approach this Court for similar relief in case, of any delay committed on the part of defendant/WAPDA. At this stage, it is stated by Mr. Badar Alain that the plaintiffs are not paying Governments dues like motor vehicle tax and others on the two motor vehicles which are subject matter of this arbitration and which are under use of WAPDA. In such circumstances, I permit the defendant No,1 to pay all Government dues on behalf of plaintiff in respect of two motor vehicles which shall be adjusted from the amount to be recovered from the plaintiff at the time of final defermination of claim. However, it would be open to the parties to prove as to who was liable for such payment. Plaintiffs are further directed to hand over the registration documents of these two motor vehicles to the defendant No,2 within a period of three weeks. Since these two motor vehicles are being used by the WAPDA, it would be necessary for them to maintain the same in good running condition till final decision of the arbitration matter.
10. Consequently, C.M.A. 8332 of 1997 has become infructuous which is dismissed.