1. In this suit for permanent injunction plaintiffs have moved an application under Order XXXIX, Rules 1 and 2, read with section 151, C.P.C., (C.M.A. No,5450 of 2002), seeking interim orders. The defendants have also moved an application under Order VII, rule 11, C.P.C. Seeking rejection of the plaint (C.M.A.
2. No,5730 of 2002). When the above applications were being heard, an objection was raised by the learned counsel for the defendants that the application under Order XXXIX, rules 1 and 2, C.P.C, seeking interim orders, cannot be allowed as it amounts to granting of the main relief in suit by way of an interim relief. However, as the entire suit is based on admitted record, the learned counsel conceded that under the circumstances, in case this Court comes to the conclusion that the plaintiffs are entitled to the relief, the entire suit may be disposed of alongwith the interlocutory applications. The facts of the case are that defendant No,1, a limited company engaged in trading activities, invited tenders for import of sugar on 5-5-1996. None of the tenders submitted was accepted. In the revised tenders, the plaintiffs offered the lowest rates of US$ 383 per metric ton and deposited 2% bid money for supply of 50,000 white granulated sugar of Indian origin, on behalf of their principals M'/s. EURO Equity (UK) Limited. Later the plaintiffs changed their principals to Bags Handles Ges M.B.H., Vienna. The defendant No,1 issued letter of intent in favour of the plaintiffs, as per terms of the contract, the plaintiffs were required to furnish a performance bond equivalent to 5% of the total amount of the contract in favour of defendant No,1 within seven days, whereafter defendant No,1 was to establish a letter of credit. However, supply of sugar from India, as per contract, was not possible as export of sugar is a monopoly of Indian Sugar and General Industry Export Corporation Limited (hereinafter referred to ISGIEC) and, the plaintiffs had not made the necessary arrangement with ISGIEC. Offer to supply sugar of Brazilian origin, was not accepted by defendant No,
1. On failure of the plaintiff, the defendant No,1 entered into a contract with an Indian company for import of sugar from ISGIEC at the price company for import of sugar from ISGIEC at the price of US$ 390 per metric ton. In the meantime, the bid bond, provided by the plaintiffs, was encashed by the defendant No,1 on the ground that the plaintiffs failed to submit the performance bond within the stipulated time. The plaintiffs challenged this action of the defendant No,1 through a Writ Petition (No,2586/97) before the Lahore High Court, Rawalpindi Bench which was allowed vide order dated 23-10-1998. Petition for leave to appeal preferred by defendant No,1 before the Supreme Court was also dismissed, on the ground of limitation. The defendants in the meantime approached this Court by way of Suit No,1114 of 1998, presently pending, for recovery of Rs,28,928,782 against the plaintiffs as well as their substituted principals to recover damages as follows: I Difference between agreed and price (US$391 /390, IT for 5000 MT).Rs,17,140,865 I IAdministrative expenses @ 0.5 % of C&F up to tendering as being-- claimed from GCP for tendering.Rs,4,168,179 Amount of Loss suffered: Rs,21,300,864 I I IMark-up charges @ 16.5% on Rs,21.301 (M) from June, 1996 till payment of claim (calculated up to July, 1998).Rs,7,617,918 Total claim up to July, 1998 Rs,28,926,782 On 23-4-2002, the defendant No,1 informed the plaintiffs about invoking the Arbitration in pursuance to the terms of arbitration agreement under the rules of defendant No,2. Plaintiffs, being aggrieved by this act of the defendant No,1, have instituted this suit with the following prayer:
(a) This Honourable Court may kindly be pleased to pass a decree for permanent injunction in favour of the plaintiff-Company against the defendants restraining the defendants permanently from initiating or continuing any arbitration proceedings in pursuance of the Clause 12 of the contract/tender dated 5-5-1996 between the plaintiff-Company and the defendant No,1 or in any manner acting in pursuance thereof.
(b) Any other relief which this Honourable Court deems just and proper may also kindly be ordered.
3. C.M.A. No,5730 of 2002: Mr: Samiuddin Sarni, learned counsel for the defendant No,1, in support of the application under Order VII, rule, 11, C.P.C. Advanced multi fold arguments which were vehemently opposed by Mr. Mansoorul Arifin, learned counsel for the plaintiff. The specific contentions are discussed in detail hereunder in support whereof the learned counsel has relied on the following cases: (1). Nathulal Khunilal v. Beharilal Bisheshwerlal (AIR (39) 1952 Nagpur 65),
(2) Awan Industries Ltd. v. Executive Engineer (1992 SCMR 65),
(3) M/s. Muhammad Amin-Muhammad Bashir v. Zafar Cotton Ginners (PLD 1974 Note 4 at p.30),
(4) M/s. Mitsui Bussan Kaisha Ltd. v. Tataram Bhagwandas and M/s. Bhoorji Bhagwandas (AIR 1924 Sindh 146),
(5) Sitla Din v. Mohan and another (AIR 1937 Oudh 183),
(6) Mohindra Supply Co. v. Governor-General-in-Council (AIR 1954 Punjab 211),
(7) S.Ghous Mohiuddin v. National Refinery Ltd. (PLD 1968 Karachi 652),
(8) Municipal Board v. P. Electric Supply Co. Ltd. (AIR 1958 Allahabad 506),
(9) Amir Chand v. Buti Shah and another (AIR 1930 Lahore 195),
(10) Hirachand Succaram Gandhy and others v. G.I.P. Ry. Co. (AIR 1928 Bombay 421),
(11) Madhura Krishnamurthy Sastri v. Yerra Ramamurthi and others (AIR 1957 Andh. Pra. 654),
(12) In re: All India Groundnut Syndicate Ltd. (AIR (32) 1945 Bombay 497),
(13) Mst.Hawabai v. Abdul Shakoor and others (PLD 1970 Kar. 367),
(14) Abdul Shakoor and others v. Mst.Hawabai and others (1982 SCMR 867),
(15) Sardaraz Khan and others v. Amirullah Khan and others (PLD 1995 Pesh. 86),
(16) Salaman Rais v. Maj. (Retd.) Shaikh A. Naeem and another (1989 MLD 3550),
(17) Hasan Ali & Co. (Pvt.) Ltd. v. Poly Cotton SA and others (1994 CLC 1812),
(18) Abdul Karim v. Mirza Bashir Ahmed (PLD 1974 SC 61),
(19) Muhammad Hussain v. Akbar Hussain (1995 SCMR 73),
(20) Trading Corporation of Pakistan v. M/s. Nidera Handlescompagnie B.V. And another (2001 SCMR 646),
(21) Afaq Ahmed Ansari v. Zamir Hasan Ansari and another (PLD 1955 Sindh 282),
(22) Gulf Iran Co. And another v. Pakistan Refinery Ltd. And others (PLD 1976 Kar. 1060),
(23) Mst. Parbha v. Lala Swraj Bhan and others (AIR 1935 All. 157),
(24) Karachi Development Authority v. Evacuee Trust Board and others (PLD 1984 Kar. 34),
(25) S. Tariq Hussain v. The Estate Officer and another (1988 CLC 473),
(26) Abdul Rahim v. Karachi Development Authority (1988 CLC 1207),
(27) Brady & Co. Pakistan Limited v. M/s. Sayed Saigol Industries Ltd. (1981 SCMR 494),
(28) WAPDA and others v. Main Ghulam Bari (PLD 1991 SC 780), and
(29) Miss Shah Begum v. Ashraf Ali Naz (PLD 1993 Kar. 151). Mr. Mansoorul Arifin, learned counsel for the plaintiff, submitted that when the Writ Petition, filed by the plaintiffs before the Lahore High Court was allowed and the amount of bid bond, forfeited by the defendant No,1, was refunded to the plaintiffs, the defendant No,1 availed all the remedies available to it, up to Supreme Court, and failed. Therefore, now, it is not open to them to file fresh proceedings in arbitration with respect to the same subject-matter. He submits that no illegality was committed by the plaintiffs when changes were made in the plaint which was returned by Senior Civil Judge, Lahore. He relied on the case of Abdul Shakoor and others v. Mst. Hawabai and others (1982 SCMR 867). He also stated that the law laid down in the case of Mst.Hawabai and others v. Abdul Shakoor and others (PLD 1970 Karachi 367) was set aside by the Supreme Court.
4. ' The learned counsel further contended that in terms of the order of the High Court, consent of the parties was necessary for decision of the dispute within one month. As no consent was given by the plaintiffs, therefore, reference to arbitration after one month is beyond the time allowed and as such illegal. His third contention is that the relief claimed before the Arbitrator is in respect of damages and before determination of this point determination of the question regarding jurisdiction of the High Court and the Supreme Court cannot now be adjudicated upon by the arbitrator and the same is to be decided by this Court. Referring to the words 'other mode' in the order of the Lahore High Court, according to him, means suit, which should be acceptable to them and as the cause of action accrued to the plaintiffs only when the arbitration was notified, therefore, the suit is not time-barred. He submitted that the suit was valued on the basis of amount of damages claimed by the defendant No,1, therefore, increase in the valuation of the suit is not a valid ground for rejection of the plaint. Reliance was 'placed on the case reported as In re: of Arbitration between Ghulam Ahmed and others PLD 1959 (W.P.) Kar.43. The first contention of Mr.Samiuddin Sami is that the plaintiff did not comply with the provisions of Order VII, Rule 10, C.P.C. But filed afresh plaint which is liable to rejection. In support of his contention, he relied on the case of Mst. Hawabai v. Abdul Shakoor and otheis PLD 1970 Kar.
367. Mr.Mansoorul Arifin, learned counsel for the plaintiff, stated that the present suit, filed with the same prayer but with different valuation, is maintainable as it is a new suit with different valuation based on the claim of the defendant No,l. The finding of the learned Single Judge in the case of Hawa Bai (supra) was reversed in appeal by a Division Bench of this Court in the case reported as Hawabai v. Abdul Shakoor PLD 1981 Kar. 277 and the Arne was upheld by the Hon'ble Supreme Court in the case Abdul Shakoor and others v. Mst. Hawabai and others 1982 SCMR 867, Following conclusion was reached by the Division Bench of this Court: "In view of the above discussion, we have reached the conclusion that after a plaint is returned to plaintiff by Court under Order VII, Rule 10, C.P.C. He may adopt any of the following courses:
(i) He may challenge the order returning the plaint for presentation to the proper Court by filing an appeal against such order, or
(ii) he may present the same plaint after its return to him to a Court having jurisdiction in the matter, or
(iii) he may amend the plaint by giving up a part of the relief or by reducing the valuation, so as to make it cognizable by the Court, which returned the plaint and then present the same to the same Court or amend the plaint and present it before a Court having jurisdiction in the matter, or
(iv) he may file a fresh suit in the Court having jurisdiction in the matter. Therefore, in view of the law laid down by a Division Bench of this Court in the case of Hawa Bai (supra), and upheld by the Hon'ble Supreme Court in the case of Abdul Shakoor 1982 SCMR 867, I hold that the objection has no force. The second contention of Mr. Samiuddin Sami is that the suit is barred by section 32 of the Arbitration Act, 1940 as an arbitration agreement or an award cannot be challenged by institution of a suit and, therefore, not maintainable. In support of his contention the learned counsel relied on the cases of Awan Industries Ltd. v. Executive Engineer 1992 SCMR 65 and Trading Corporation of Pakistan v. Messrs Nidera Handles compagnie B.V. And another 2001 SCMR 646. In order to appreciate this contention, it would be advantageous to reproduce section 32 of the Arbitration Act, which reads as under: "32. Bar to suit contesting arbitration agreement or award.--Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act."
5. There is no cavil with the proposition that after coming into force of the Arbitration Act, 1940, the mechanism provided therein is to be adopted for challenging the validity of an arbitration agreement or award. But the provisions of section 32 of the Arbitration Act are only attracted in case existence, effect or validity of an arbitration agreement or award is involved. The present suit, as is clear from the prayer itself, does not challenge existence, effect or validity of an arbitration agreement or award but it pertains to entirely different question of grant of injunction on the basis of the facts of the present case as disclosed in paragraphs 17, 18, 19, 20 and 23 of the plaint. It is pertinent to point out here that the defendant No,1 itself has filed a Suit (No,1114 of 1998) before this Court for recovery of damages having nexus with the contract forming subject-matter of this suit.
6. However, this suit has been filed after the judgment of a Division Bench of Lahore High Court in Writ Petition No, 2586 of 1997 wherein it was held as under:-- "In the tight of the above discussion, the encashment/forfeiture of bid bond money of the petitioner by respondent No,2 and the rejection of his representation for the refund of said money by respondent No,1 through letter dated 23-7-1997 is declared illegal and to be of no effect and consequence. Hence, the matter is sent back to respondent No,1 for decision of the representation of the petitioner afresh in accordance with the clause 12 of the contract for referring the matter to the arbitrator after hearing the parties or decision of the dispute between them through any other mode with their consent acceptable to them as the case may be within one month and respondent No,2 will deposit Rs,1,38,95,000, the amount 'of Bank Guarantee provided by the petitioner in the National Bank of Pakistan within the said period. The amount in question shall be paid to the party, which will be found entitled thereto at the finalization of the matter through the Arbitration as provided in the contract or in any other manner acceptable to the parties and if the needful is not done by the respondents within the abovesaid period, the amount of bid bond will stand refunded to the petitioner with interest. This writ petition is allowed accordingly with no order as to costs."
7. Against this judgment, Civil Petition for Leave to Appeal No,410 of 1999 was filed which was dismissed by the Hon'ble Supreme Court on 27-10-1999 on the ground of limitation. Thus, the judgment of the Lahore High Court attained finality. The proceedings before the Arbitrator cannot be allowed to be carried out to consider the effect of the judgment/order of our superior Courts by a foreign Tribunal. Admittedly, the defendants have referred the matter pertaining to the amount of earnest money, the subject-matter in the writ petition before the Lahore High Court (No,2586 of 1997), and their costs incurred on the litigation before the two Courts. This suit has been filed to enforce the rights acquired by the plaintiffs and to restrain the defendants by way of an injunction to re-agitate the same matter which has already been decided by our Superior Courts and the matter cannot now be re-agitated afresh before a foreign domestic Tribunal. The cases relied upon are therefore distinguishable on facts and are, therefore, not relevant. The third contention of Mr. Samiuddin Sami is that the suit as instituted by the defendant No,1 does not affect the initiation of . The arbitration proceedings as that suit is instituted against two defendants and the subject-matter of the suit also does not pertain to the claim lodged before the Arbitrator. In support of his contention the learned counsel relied on the case of Gulf Iran Co. And another v. Pakistan Refinery Ltd. And others PLD 1976 Kar.
8. 1060. In that case a learned Division Bench of this Court declined to stay the suit under section 34 of the Arbitration Act on the ground that possibility of conflict of decisions existed if dispute between plaintiff and one of the defendants was referred to arbitration. In the instant case, no application under section 34 of the Arbitration Act has been tiled. The prayer in this suit is based on the judicial pronouncements. Therefore, the cited case is also not relevant for the purpose of the instant case. The fourth contention of Mr. Samiuddin Sami is that the plaintiff has deliberately overvalued the suit to place it before this Court. He contended that a similar suit, on identical set of facts, in which the plaint was returned by the Civil Judge, Lahore was valued at Rs,50,000 while the present suit, instituted on the same set of facts, is valued at Rs,Two Crores with the object to deprive the lower Court from exercising its legitimate jurisdiction. In support of his contention, he relied on the cases of Mst. Parbha v. Lala Swraj Bhan and others AIR 1935 All. 157 and Amir Chand v. Buti Shah and another AIR 1930 Lah.
195. This is not a case of undervaluing the suit for the ulterior purpose of saving court-fee.
9. Admittedly, the damages claimed by the defendant No,1 are about Rs,2 Crore. Therefore, based on the amount of damages claimed, the suit has been valued at Rs,2 Crore. The case-law relied upon by the learned counsel is of no help to him as the valuation is neither whimsical nor without any basis. On the contrary, it is based on the amount of claim of the defendant No,1 itself. Furthermore, clauses (b) and (c) of Order VII, Rule 11, C.P.C. Are not applicable to the High Courts. Therefore, this objection is also not tenable. The fifth contention of Mr. Samiuddin Sami was regarding allegation of mala fide against the plaintiff was mentioned but not pressed during arguments by the learned counsel. The sixth contention of Mr.Samiuddin Sarni is that no cause of action arose to the plaintiff at Karachi, therefore, this Court has no jurisdiction to entertain this suit. He submitted that for deciding the question of cause of action, averments in the plaint only are to be considered. He relied on the cases of Karachi Development Authority v. Evacuee Trust Board and others PLD 1984 Kar. 34 and S. Tariq Hussain v. The Estate Officer and another 1988 CLC 473. The plaint in the suit, initially filed before the Civil Judge, Lahore, was returned to be presented before the Court having jurisdiction.
10. Therefore, the suit was filed in Karachi. It is also F relevant that the notice for initiation of the arbitration was also received at Karachi. Furthermore, the admitted fact is that the principal/registered office of the defendant No,1 is at Karachi and a suit against it can be tiled at Karachi. In view of the above, this objection is also not sustainable. As regards the ground of limitation, it may be mentioned that the suit is filed for permanent injunction restraining the defendants from initiating or continuing any arbitration proceedings. This injunction is sought in pursuance to the notice dated 23-4-2002, from defendant No,1 to the G plaintiffs for invoking arbitration under clause 12 of the Contract. Therefore, the limitation will start from the date of the notice of defendant No,1, and not from the date of the contract. The upshot of the above discussions is that defendant No,1 has failed to establish that this suit is barred by any law. C.M.A. No,5730 of 2002, filed under Order. VII, rule 11, C.P.C. Has no merit and is accordingly, dismissed.
11. C.M.A. No,5450- of 2002 under Order XXXIX, Rules 1 and 2, C . P. C . Through this application, the plaintiffs seek interim orders restraining the defendants from initiating or continuing any arbitration proceedings in pursuance of Clause 12 of the Contract/tender dated 5-5-1996. Learned counsel for the plaintiffs, in support of this application, submits that the defendant No,1 has tiled a Suit (No,1114 of 1998) before this Court with the same prayer as sought in the arbitration proceedings and the defendant No,1 has also availed all the legal remedies before proper forums of law and therefore, proceedings before the arbitratot would be an exercise in futility. He also submits that since the Lahore High Court, in its judgment in Writ Petition No,2586 of 1997, had provided an opportunity either to approach the arbitrators or to decide the dispute between the parties, with their consent, through any other mode, within one month and this opportunity was not availed by the defendant No,1, therefore, now the matter cannot be referred to the arbitrator, more so, when a suit between the parties for the same remedy as sought before the arbitrator, is pending before this Court. Mr. Mamnoon Hasan, learned counsel for the defendant No,1, while adopting the arguments advanced by Mr. Samiuddin Sarni, Advocate, contended that since the main suit is not maintainable, therefore, the stay application is also not maintainable. He further contended that no prima facie case has been made out by the plaintiffs for grant of interim relief a proceedings have already been initiated. His next contention was that no irreparable loss will be caused to the plaintiff as the loss, if any, is determinable in money terms. He also contended that the balance of convenience is also not in favour of the plaintiffs. He submitted that all the objections can be raised before the arbitrators and the remedy to resist the award is at the stage of its enforcement by way of objections to the award is the only remedy. He also stated that the arbitration proceedings may be allowed to continue and objections, if any, may be raised by the plaintiff before. The Arbitrator.
12. In support of his cotentions/submissions, the learned counsel relied on the following cases:
(1) Euro Distributors Establishment v. Bank of Credit and Commerce International (1982 CLC 2369),
(2) Shahzada Muhammad Umar Beg v. Sultan Mehmood Khan and another (PLD 1970 Kar. 139),
(3) Trading Corporation of Pakistan v. M/s. Nidera Handlescompagnie B.V. And another (2001 SCMR 646),
(4) Trading Corporation of Pakistan v. M/s. Nidera Handlescompagnie B.V. And another (1998 CLC 1610),
(5) Choudhry Rasheed .Ahmed v. Muhammad Akbar Samoon and others (PLD 1997 Kar. 262), and
(6) Century Link Development Corporation v. Habib Bank Limited (PLD 2000 Kar. 269).
13. ' In the case of Euro Distributors Establishment, the dispute related to validity of a contract and a declaration was sought that the breach of term& of the contract was committed by defendant No,3 while the plaintiff did not commit breach of contract, therefore, after breach the benefit of the same could not be taken by the party at fault. Therefore, defendant No,3 is not entitled to encash the bank guarantee. It was held that such a declaration cannot be granted. In the case of Rasheed Ahmed (supra), it was quoted with approval from the case of PIA Corporation v. Hazir (Pvt.) Ltd. PLD 1993 Karachi 190 as under:- "An application for an injunction is an appeal to the extraordinary power of the Court and the plaintiff is bound to make out the case showing a clear necessity for its exercise, it being the duty of the Court rather to protect acknowledged right than to establish new and doubtful ones." In the case of Hassan Ali & Co. (supra), it was held that an award can be contested by an application and not by'a suit. Since in the present suit, the very reference to arbitration is being challenged on the peculiar and distinguishable facts and circumstances of this case, therefore, this case has no bearing on the outcome of this suit. In the case of Shahzada Muhammad Umar Beg (supra), the dispute related to the seniority of some Government servants and one of the Government servant approached the Court for praying for, inter alia, temporary injunction to stay the Government from reverting him. This case is also distinguishable on facts. In the case of Century Link Development Corporation (supra), restraining orders were sought to restrain the Bank from encashing the bank guarantee which were refused. The cases relied upon are thus distinguishable on facts and circumstances and, therefore, are not relevant.
14. The well-settled principles for the grant or refusal of temporary injunctions are, firstly, whether the plaintiff had a prima facie good case, secondly, whether the balance of convenience lies in favour of grant of injunction and, thirdly, whether the plaintiff would suffer irreparable loss if the injunction is refused. These principles are to be applied on the basis of facts and circumstances of each case. In the present case, it is an admitted position that Suit No,1114 of 1998, for recovery of damages arising out of the same contract for supply of sugar, filed by the defendant No,1 in this Court, is still pending and if the plaintiff is able to prove its case, it would be suitably, compensated for the breaches, if any, committed by the plaintiff in this suit. In addition, the opportunity allowed to the defendant No,1, vide judgment in Writ Petition No,2586 of 1997, was not availed by it within the time stipulated therein. As regards the question of irreparable loss is concerned, if the parties are allowed to proceed before the arbitrator and ultimately, this suit is allowed and defendants are restrained permanently from initiating or continuing with the arbitration proceeding, both the parties would suffer irreparable loss as huge amount is to be incurred on the proceedings before the arbitrator in a foreign country. It is for this very reason that I am not inclined to agree with the suggestion of Mr.Mamnoon Hassan, that the proceedings before the arbitrator may be allowed to proceed simultaneously with the proceedings of the suit filed by defendant No,1 (Suit No,1114 of 1998). It would be an exercise in futility to allow the proceedings before two different forums which may result in conflicting judgments. As regards the balance of convenience, it may be stated that at any stage, if it is found that defendant No,1 is entitled to invoke the arbitration clause, the same can be done without any difficulty. However, the plaintiff shall be exposed to inconvenience if the arbitration proceedings are allowed to proceed and then halted. In my view, it would be in the interest of both the parties, if the application under Order XXXIX, rules 1 and 2, C.P.C. Is granted and the arbitration proceedings are. Restrained till the disposal of this suit.
15. Accordingly, C.M.A. No,5450 of 2002 is allowed as prayed. Since, with the consent of the counsel for the parties, it was agreed that the entire suit is based on documents, photo copies of which are available on record, and no further evidence is required, entire suit may be disposed of if a conclusion that the suit is maintainable, is arrived at and case for grant of interim relief has been made out. I, therefore, allow this suit and restrain the defendants from initiating or continuing any arbitration proceedings in pursuance to Clause 12 of the Contract dated 5-5-1996 or acting in any manner in pursuance thereof, as prayed, but with no order as to costs.