' This suit under section 5 of the Arbitration (Protocol and Convention) Act, 1937 (hereinafter referred to as the Act), has been filed by the plaintiffs, who have their office at Yorkshire House, 18 Chapal Street, Liverpool, England for the enforcement of a foreign award. In the above suit the plaintiffs have prayed for the following relief:--
(a) Pronounce judgment in terms of the said award.
(b) Pass decree according to the award and other enforcement of the decree and award.
(c) Grant interest.
(d) Award costs of the suit to the plaintiffs.
(e) Order other relief as this Court may deem fit in the circumstances of the case.
2. The facts leading to the filing of the above suit are that plaintiff and the defendant entered into a written contract, dated 18th May, 1994 whereby the plaintiff agreed to sell and the defendant agreed to buy about 375 M. Tons of CIS Raw Cotton 1993/94 type Tanya at 82.00 US Cents per Lb.
Shipment June/July. Payment under the contract was to be effected by letter of credit, to be opened and fully operative by 1994. It is the case of the plaintiffs that the contract was specially subject to the Bye-laws and Rules of the Liverpool Cotton Association Limited of which parties are members and the contract is on standard form of contract. Some dispute arose between the parties and were referred to Arbitration in Liverpool in accordance with the Bye-laws and Rules of the Liverpool Cotton Association as mentioned in clause (15) of the contract. The award, dated 14th December, 1995 was made by a Tribunal constituted in the manner agreed upon by the parties and the conformity with the law governing the arbitration procedure. The award made and announced on 14th December, 1995 is in favour of plaintiff and against the defendant; annexed as "A". No appeal has been filed, it became effective, final and binding.
' It was further pleaded that plaintiff had appointed Mr. W.D Farrar as their Arbitrator, whereas, on refusal of the defendant to appoint their Arbitrator on the ground of non-existence of an arbitration agreement, as Arbitrator was appointed on their behalf by President of Liverpool Cotton Association in terms of rule 340(4)(b) of the Bye-laws of the association namely G.H Crone.
3 The defendant failed to perform their obligation under the contract with plaintiff. The arbitrators under the rules, directed the defendant to pay a sum of US $ 53,675.38 with interest which has been calculated by the plaintiff in the sum of US $6924.23. The award made in Foreign Award within the meaning of section 2 of the Act, which is enforceable under section 7 of the Act as all the conditions have been fulfilled/satisfied. Copy of contract, dated 18th May, 1994 and relevant rules have been annexed as "B" and "C". Affidavit of Nigel Neredith Jones, a Director of the plaintiffs Company has been filed in support of the plaint. On the basis of the above assertions the plaintiffs have prayed for the reliefs already quoted hereinabove.
4. The defendant have filed written objections, wherein inter alia, it has been averred that there was no arbitration clause between the plaintiff and the defendant. The plaintiff has not approached this Court with clean hands. The award is without jurisdiction, coram non judice. It was averred that the plaintiff through its agent at Karachi. Messrs Universal Enterprises offered to sell 500 tons of CIS raw cotton to the defendant, the contract was finalized in terms of Order No,QTM/IMP/301/94, dated 20- 5-1994 by the defendant. Annexure "A". The plaintiff through its agent confirmed the above contract by letter, dated 24-5-1994 Annexure "B". However, in this Contract No,7385 was mentioned. The defendant was not aware of it and believed same to be plaintiffs internal reference number to the defendant's order. Binding contract was created by order, dated 20-4-1994 and parties are bound by their specified terms which was accepted by the plaintiff, who was to supply 500 tons of CIS raw cotton, shipment in June, 1994 letter of credit was to be opened by defendant. Inspection of weight was to be done by the buyers (defendant) representative. If shipment was not made for any reasons, the contract shall be settled at par. There was no reference to L.C.A. Rules or arbitration.
Letter of credit was to be opened by 8-6-1994, as per plaintiffs' confirmation letter, dated 24-5- 1994. The date for opening of L/C was further extended by plaintiff up to 30-6-1994. The L/C was opened by defendant on 16-4-1994 which specifically referred to Contract No,301 with other terms.
The plaintiff was also informed that officer of inspection is ready and awaiting for arrangements by the plaintiff. The plaintiff kept the delaying the matter and kept changing the port of shipment, weightment certificate was a requirement of the L/C but same could not be done due to failure of the plaintiff to arrange visa and also kept changing the place of weightment/shipment from Baku to Illychevsk and then Odessa, whereby causing of the L/C to expire. The defendant, thereafter it was compelled to act, so as to ensure mitigation of losses caused by the plaintiffs breach, thus instead of further wasting time by extending L/C and thereby aggravating losses, the defendant accepted the plaintiffs breach of contract so as to bring the primary obligation of the parties to an end. It was the case of the defendant that the contract Form I. Annexed with the plaint is only signed by plaintiff, is for the member of the L.C.A. Defendant is not the member of the Liverpool Cotton Association and is not bound by its rules and regulations. The plea of the defendant was that the arbitration proceedings was illegal without jurisdiction, Annexure "D" is the letter of protest to arbitrator, against the proceedings.
5-A.Mr. Khalid Javed Khan learned counsel for the defendants in opposition to the award has argued the following points:--
(i) That there had been no agreement for arbitration between the plaintiff and the defendant as such, the award cannot be enforced.
(ii) The defendant is not a member of Liverpool Cotton Association and in absence of an agreement between the plaintiff and the defendant, the arbitrations, under such bye-laws and rules cannot be enforced against the defendant.
5-B. Mr. Muhammad Arif Khan, learned counsel for the plaintiff has refuted the above contentions of the learned counsel for the defendant, which I will deal while considering the respective contentions.
6. In order to appreciate the contentions raised by the learned counsel for the parties, it will be appropriate to know the extent of jurisdiction of this Court in relation to a foreign award. In this regard, it may be advantageous to reproduce hereinbelow section 7 of the Act, which reads as follow:-- "7. Conditions for enforcement of foreign award.---(1) In order that a foreign award may be enforceable under this Act it must have--
(a) been made in pursuance of an agreement of arbitration which was valid under the law by which it was governed,
(b) been made by the Tribunal provided for in the agreement or constituted in manner agreed upon by the parties,
(c) been made in conformity with the law governing the arbitration procedure,
(d) become final in the country in which it was made,
(e) been in respect of a matter which may lawfully be referred to arbitration under the law of Pakistan, next para. And the enforcement thereof must not be contrary to the public police or the law of Pakistan.
(2) A foreign award shall not be enforceable under this Act if the Court dealing with the case is satisfied that---
(a) that award has been annulled in the country in which it was made, or
(b) the party against whom it is sought to enforce the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case, or was under some legal incapacity and was not properly represented, or
(c) the award does not deal with all the questions referred or contains decisions on matter beyond the scope of the agreement of arbitration: ' Provided that if the award does not deal with any questions referred the Court may, if it thinks fit, either postpone the enforcement of the award or order its enforcement subject to the giving of such security by the person seeking to enforce it as the Court may think fit.
(3) If a party seeking to resist the enforcement of a foreign award proves that there is any ground other than the non-existence of the conditions specified in clauses (a), (b) and (c) of subsection
(1) or the existence of the conditions specified in clauses (b) and (c) of subsection (2) entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse to enforce the award or adjourn the hearing until after the expiration of such period as appears to the Court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by competent Tribunal."
7. Subsection (1) of above-quoted section 7 provides that a foreign award may be enforceable if made in pursuance of an agreement for arbitration which was valid under the law, by which it was governed and has been made by a tribunal provided in the agreement or constituted in the manner agreed upon by the parties, in conformity with the law governing the arbitration procedure in respect of a matter which may lawfully be referred to arbitration under the law of Pakistan and the award has become final in the country in which it was made. Whereas, subsection (2) of section 7 provides the following three grounds rendering foreign award unacceptable--
(a) that award has been annulled in the country in which it was made, or
(b) the party against whom it is sought to be enforced was not given notice of the arbitration proceedings in sufficient time or was under some legal incapacity:
(c) the award does not deal with all questions referred to or contain decision on matter beyond the scope of the agreement.
8. I am of the view that grounds of attack to a foreign award mentioned in section 7 are not only different but the scope is limited as compared to the award tendered under the Arbitration Act, 1940, inasmuch as under section 30 of the Arbitration Act, "an award" can be set aside on the grounds that arbitrator or Umpire has misconducted himself or that award has been improperly procured or is otherwise invalid. Whereas, these grounds do not find place in section 7 of the Act.
9 Reverting to the first contention that there is no agreement to arbitration between the parties it may be observed that Mr. Khalid Javed has pointed out the contract, dated 18th May, 1994 Annexure "A" to the plaint and contract dated 20-5-1994 Annexure "A" to the objection. Contract dated 18th May, 1994 is the basis of plaintiff's claim for arbitration. This document is not signed by the defendant. It may be observed that clause 15 of the above contract (which is on a printed form) contains provision for arbitration reads as follows:-- "15(a). This contract incorporates the Bye-laws and Rules of the Liverpool Cotton Association Ltd. In force at the date when this contract was entered into, and
(i) all quality disputes as defined by such Bye-laws and Rules:
(ii) all disputes other than quality disputes touching or arising out of this Contract (delete if inapplicable). Shall be referred to Arbitration in accordance with such Bye-laws and Rules and shall be resolved by the application of English law. The obtaining of an Arbitration Award shall be a condition precedent to the right of either party to start legal proceedings in respect of any arbitrable disputes."
' The defendant plea is that contract dated 20-5-1994 was a concluded contract between the parties and confirmed by plaintiff's agent at Karachi, do not contain arbitration clause. The defendant has denied the existence of the contract, dated 18-5-1994; not in the objections but before the arbitrator as well by letter (d), dated 30-1-1995 addressed to George H Crone Esqr. The arbitrator, by the defendant, more particularly in paras. 2 and 5, wherein the defendant has denied the existence of an agreement to arbitration. The same reads as under:-- "We are glad that you have noticed our preliminary objection and stand that no arbitration lies in the matter. The contract in question did not include and nor was it subject to the L.C.A Rules of Arbitration or any other. The reference in question has been made without any basis whatsoever.
5. Messrs A Meredith Jones & Co. Ltd. (the seller), through their Karachi local agents, Messrs Universal Enterprises (the agent) between 15th and 20th May, 1994, offered to sell 500 tonnes of CIS cotton shipment up to 30-6-1994. The contract was finalized in terms of our formal Contract Order No,QTM/IMP/301/94, dated 20-5-1994, (hereinafter referred to as the Contract No,301)."
' The learned arbitrators have recorded the defendant (buyers) contentions at page No,3 of the award as follows:-- "There was no contract which included or provided for any arbitration or that the contract was being made under L.C.A. Rules.
' That the contract, so far as they are concerned is number 301 which does not mention or contain any clause or stipulation relating to reference or incorporation of L.C.A. Rules or to disputes being referred to arbitration under L.C.A. Rules.
' Contract number 301 contains no arbitration provision . But an independent stipulation in clause
(7) that if shipment was not made, for any reason, the contract shall settled at par."
' The opinion, on above contention, was recorded at page No,8 in clause No,(8) of the award.
(8) The arbitrators had sight of the Seller's contract and the Buyer's purchase confirmation.
10. Mr. Khalid Javed Khan. Learned counsel for the defendant has very frankly conceded that it is not necessary that an agreement containing arbitration clause should be signed by the parties and it is sufficient, if the terms are recorded to writing and the agreement of the parties thereto is established. All that is required is that there should be an agreement and the agreement is recorded to writing and which is accepted by both parties. Such acceptance may be in writing or oral. The agreement may be in the form of a signed document by the parties consisting of the terms, or a signed document by one party consisting the terms and plain acceptance either signed or by conduct. Thus the agreement of the parties should be established so that they can be held to be bound by it, which is a condition precedent for consensual jurisdiction.
11. The moot point which requires consideration is to whether agreement between the parties has been established in respect of the contract, dated 18-5-1994 (an unsigned document by the defendant). It may also he observed that "agreement for arbitration" is one of the conditions for enforcement of a "foreign award" under the provisions of section 7 of the Act, particularly section 7(i)(a).
12. Mr. Khalid Javed, learned counsel for the defendant has vehemently contended that "agreement to arbitrate" has not been established by the plaintiff as such the award cannot be enforced. Ile contended that neither the contract, dated 20-5-1994 of the defendant (a) nor the pro forma invoice, dated 24th May, 1994, which has reference of Contract No,7385, dated 18-5-1994 can establish the confirmation of the contract dated 18-5-1994 on the basis of which the plaintiff has claimed arbitration. In fact the pro forma invoice dated 24-5-1994 can be treated as acceptance of defendant offer for purchase 500 Tons of cotton (Guardian Insurance Co. Ltd. v. Thakur Shiva Mengal Singh AIR 1937 All. 208).
13. Mr. Muhammad Arif Khan learned counsel for the plaintiff has argued that the arbitrations have given the findings about the existence of "agreement to arbitrate". The award has become final in absence of appeal provided under the rules as such, this being question of fact cannot be challenged. He also referred pro forma invoice, dated 24-5-1994 and maintained that the same has reference of main contract as such, consensus between the parties to arbitrate has been established.
' He contends that it is not necessary that the agreement should be signed by the parties. The agreement in writing is sufficient. He referred the cases of (i) Ralli Brother & Co. Ltd. v. Muhammad Amin Muhammad Bashir Ltd. 1987 CLC 83, (ii) Nan Fung Textiles Ltd. v. Pir Muhammad Shamsuddin PLD 1979 Kar. 762 and (iii) A Merdith Jones Co. Ltd. v.Crescent Board Ltd. 1999 CLC 437.
14. Reverting to the case of Ralli Brothers (supra), the contention on behalf of the defendant was that there was no agreement of arbitration between the parties, therefore, neither the dispute could have been referred to arbitrator nor the arbitrator could have been appointed and proceeded with the matter.
' The admitted position was that the contract between the parties concluded by exchange of cables and the plaintiffs were member of Liverpool Cotton Association whereas the defendants were associate member. The plaintiffs had sent contract notes for signature of the defendants but they refused to sign it. However, on the basis of the contract concluded on exchange of cables, part of the goods were supplied and payments were made by the plaintiff. In the above background, it was held that there was no written agreement, signed by the parties for referring the mater to arbitration but it is not necessary that an agreement for arbitration should be signed by parties. It is sufficient if the agreement is in writing even if not signed, the parties will be bound by it and the matter can be validly referred to arbitration, if the consensus of the parties is established.
15. In case of Nan Fung PLD 1979 Kar. 762, one of the objections taken was that there was no contract between the parties and the respondents. The above objection was raised on the plea that the agent who had signed the contracts on behalf of the respondent, has no authority on the date, when same was signed. The contention was repelled on the basis of material produced by observing that even if it is to be conceded that the agents did not have the requisite authority on aforesaid dates, in my view the respondents had rectified the aforesaid two contracts through their above letter, dated 6-10-1972 and the letter, dated 9-10-1972.
16. In above cases, the agreement to arbitration was established. The parties were member and associate member of Liverpool Cotton Association. Article 140 of the Association of Liverpool Cotton Association, provides that where any difference arises between the member, associate member or registered member concerning anything connected with the cotton trade or any transaction therein would be referred to arbitration in accordance with rules. Thus cases referred to above are distinguishable with facts of the present case. In case in hand, the facts that the agreement to arbitrate the defendant being member or associate member, have been denied.
17. Mr. Khalid Javed Khan rightly pointed out that in cases like the present one, if the terms and conditions are printed on any unsigned documents, attention must be drawn to it in most explicit way. Reference of Contract No,7385, dated 18-5-1994 in pro forma invoice cannot be an explicit notice to bind the defendant. The case of Hakim All v. Muhammad Saleem 1992 SCM R 46 can be referred, wherein the effect of unsigned terms and conditions in contractual documents was examined. Mr. Justice Naimuddin (as he then was) has concluded as under:-- "It is correct that if terms and conditions are printed on any unsigned documents and one of them is unusual or unusually onerous, attention must be draw to it in the most explicit way. This in my opinion, will further be subjected to the condition, as laid down by Lord Denning, that it must further be shown affirmatively that is a contract document and accepted by the party affected."
On the basis of material produced by the parties referred to above, I am of the view that the agreement between the parties to arbitrate has not been established on the basis of contract, dated 18-5-1994. The letter, dated 20-5-1994 (document "A") of the defendants (proposal) and the pro forma invoice dated 24-5-1994 (Annexure "B" with objection) signed by the plaintiffs agent at Karachi (acceptance) were the basis of concluded contract for supply of 500 tons of raw cotton, between the parties which has no such clause.
18. The second contention raised by Mr. Khalid Javed was that the defendant is not member of the Liverpool Cotton Association, as such, he is not bound by the arbitration in absence of the agreement to arbitrate. The case of the plaintiff is that the plaintiff and the defendant are the members of the Liverpool Cotton Association Ltd. If the parties are members associate or registered member in absence of an agreement in writing, the parties are bound to arbitrate in terms of the rules, refer cases of (i) Ralli Brother & Co. Ltd. v. Muhammad Amin Muhammad Bashir Ltd. 1987 CLC 83 and (ii) A Merdith Jones Co. Ltd. v. Crescent Board Ltd. 1999 CLC 437.
' The plaintiff in para. 2 of the plaint have pleaded that "the contract was made specifically subject to the Bye-laws and Rules of the Liverpool Cotton Association Limited of which the parties are members and the Contract is on standard form of Contract".
' The defendant in para. 9 of the written statement has stated that the defendant is not a member of Liverpool Cotton Association and is not bound by the rules and regulations.
19. Onus lies on the plaintiff to prove that the defendants are members of Liverpool Cotton Association to bind them for the arbitration. Affidavit of Niol Meredith Jones filed in support of the plaint is silent on this point. The defendant cannot be asked to lead negative evidence. It was very easy to the plaintiff to obtain and produce membership certificate from Liverpool Cotton Association. Thus, it can be safely concluded that the defendants are not members of L.C.A. And are not governed by the rules of the said association more particularly for arbitration.
20. Reverting to the contention of Mr. Muhammad Arif Khan learned counsel for the plaintiff that once the defendants have participated in the proceedings they have acquiesced with the proceedings of arbitration and cannot turn back to say that there is no "arbitration agreement".
It is well-established that one of parties appearing before Arbitrator object to jurisdiction, they do not waive their right by proceeding with the case before the arbitrator and defending themselves as best as they may. Continuing to take part in the proceedings after protest does not amount to consent. Lord Selborne L.E. In Himalya v. Bellerly (1880) 68 (D.B) 63 said, in arbitration where a protest is made against jurisdiction, the party protesting is not bound to retire, he may go through the whole case, subject to the protest he had made.
21. The last question to be addressed is the jurisdiction of this Court to examine the question of existence of the agreement for arbitration, once the same has been dealt with by arbitrator. I cannot do better than to quote the view expressed by Tutmapurkar, J., in case of Renusagar Power Co. Ltd. v. General Electric Company and another AIR 1985 SC 1156: "The scheme of the Act emerging from a combined reading of sections 3 and 7, clearly show that so far as the question of existence, validly and effect (scope) of the arbitration agreement are concerned, the determination thereof by the arbitration is subjected to the decision of the Court and that this decision of the Court can be had under section 7 even after the award is made and filed in the Court but before it is made enforceable. Section 7(1)(i) and (iii) shows that the award can be challenged on these grounds which implies that the arbitrators have decided those questions while making their award."
' In view of what has been stated above, the agreement of the parties for arbitration has not been established, which is one of the conditions for enforcement of foreign award under section 7 of the Act, therefore, the suit of the plaintiff is dismissed, however, with no order as to costs.