1. The plaintiff has filed suit for declaration and permanent injunction seeking the following relief: "(a) A declaration that the demand Tor carrying charges by the defendant No.1 is unlawful and hence null and void.
(b) Permanent injunction restraining the defendant No.1, its agents, representatives, assigns, officers or any other person/persons acting directly or indirectly through it from recovering any amount as carrying charges.
(c) Permanent injunction restraining the defendant No.1, its agents, representatives, assigns, officers or any other person/persons acting directly or indirectly through it from seeking the encashment of the Bank guarantees and against the defendant No.2 from encashing the same."
2. The defendant through an application under section 34 of the Arbitration Act, 1940, has prayed that, in view of the arbitration clause in the agreements, with the plaintiffs, the proceedings may be stayed and the plaintiff may be directed to initiate the arbitration proceedings. The defendant No.1 has taken plea that, the issue raised by the plaintiff in the suit is in the nature of dispute, which is covered by the arbitration clause of the agreements, executed between the plaintiffs and defendant No. 1.
3. In reply the plaintiff has submitted in the counter-affidavit that, there is no privity of contract between the plaintiff and the defendant No.2, therefore, the plaintiff has no alternative but to file this suit to restrain the defendant No.2 from enchasing the performance guarantees. The plaintiff has not denied the arbitration clause in the agreement which is the effect that, "save and except that is expressly provided hereinabove and overleaf this contract is subject to the Rules and Regulations of the Liverpool Cotton Association Ltd. Place of Arbitration: Liverpool".
4. The plaintiff has averred that neither the plaintiff nor its agent "Messrs Central Commodities" are members of the Liverpool Cotton Association and hence they are not governed by the rules and regulations of the said association more particularly for arbitration. It is further contended that, resort to arbitration would be improper and inconvenient as well as impracticable. According to plaintiff, the standard contracts were entered in Karachi and entire evidence of both the parties in the case is at Karachi. The nature and volume of evidence is such that, it is impossible and impracticable for the plaintiff to produce it before the arbitration forum at. Liverpool England. It is further alleged that, it would not be possible to take all the witnesses to Liverpool to prosecute the arbitration proceedings on account of huge expenses involved. It is further urged that, the discretion to stay the suit may be refused as direction to hold arbitration proceedings in Liverpool would amount to denial of justice, as it would not be possible for the plaintiff to take all the witnesses to Liverpool and effectively prosecute the proceedings. It is further contended that the plaintiff had its representative/agent in Karachi, who has executed the contract on behalf of plaintiff. The defendant No.1 is also a Pakistani company and shall not be put to any disadvantage or inconvenience, if the instant suit proceeds at Karachi. It is further averred that, the dispute between the parties centres around the point as to which party is responsible for the delay in the shipment of goods, in view of the delayed amendment sought by the defendant No.1 in the L.Cs.
5. The officers of defendant No.1 and the employees of the plaintiff's agents whose evidence is required to be recorded are stationed at Karachi.
6. ' The defendant No.1 has not filed any rejoinder and the learned counsel for the defendant No.1 has stated that, he is prepared to argue the application under section 34 of the Arbitration Act, without filing any affidavit-in-rejoinder.
7. Mr. Salman Hamid, learned counsel for defendant No.1 has contended that, the factum of arbitration clause in the contract between the plaintiff and the defendant No.1 is admitted and, therefore, the plaintiff should not be allowed to defeat the arbitration clause with the aid of Court.
8. He has proceeded on to argue that, when the arbitration clause in a contract is admitted, the Court should not lightly release the parties from their bargain. He has further submitted that, the parties entered into the agreement having full knowledge of the consequences and, therefore, .the plaintiff should not be allowed to defeat the arbitration clause, simply for the reason that, the stay of proceedings by the Court is discre tionary and resort to arbitration shall be inconvenient and expensive. In support of his contention he has placed reliance on the judgment of a learned Single.
9. Judge of this Court in the case of Manzoor Textile Mills Ltd. v. Nichimen Corporation (2000 MLD 641).
10. In this judgment the learned Single Judge, while allowing the application under section 34 of the Arbitration Act, 1940 has observed that: "It was well-established principle that the Court should not lightly release the parties from their bargain, that follows from the sanctity which the Court attaches to contracts."
11. It was further observed in the cited that: "a foreign firm is involved, which entered into the contract in question on the basis that in case of any dispute the same would be adjudicated, upon as per arbitration clause but the plaintiff wishes to defeat the above clause with the aid of the Court."
12. It was further observed that: "In order to acquire a respectable place in the community of nations, not only the Government, but even the individuals are expected to honour their commitments."
13. On the other hand, Ms. Sana A. Minhas, learned counsel for the .plaintiff has submitted that, although there is an arbitration clause in the contract entered into between the plaintiff and the defendant No.1 but at the same time the stay of proceedings is discretionary with the Court and the question whether the proceedings should be stayed or not, should be decided keeping in view the facts and circumstances of each case. She has submitted that, the convenience of the parties and the availability of evidence at a particular place is a very relevant consideration in determining the issue.
14. In support of her contention, she has placed reliance on a Single Bench judgment of this Court in the case of Akbar Cotton Mills Ltd. v. Messrs VES/Ojuanoji Obedience Tech/Amesh Export (1984 CLC 1605). In this case it was observed that: "Although the plaintiff was aware at the time when he entered in an agreement with defendant that in event of a dispute or a claim by them in respect of agreement, dispute is to be referred to arbitral, tribunal in Moscow, yet plaintiff was entitled to show in application under section 34 of the Arbitration Act filed by the defendant for stay of their suit, that commission of arbitration proceedings in foreign country would result in an ex parte decision against them as all evidence in respect of dispute is available at place where legal proceedings have been filed and that either by reasons of impracticability or restrictions imposed by Government in matter of providing foreign exchange to individual citizen, it would be impracticable and impossible for them to produce evidence before foreign arbitral tribunal."
15. It was further observed that: "Although a party applying under section 34 of the Arbitration Act, 1940 does not have absolute right to obtain stay of legal proceedings in Court, such an order is purely discretionary and in appropriate cases the Court may refuse to stay the proceedings in spite of an arbitral clause in the agreement between the parties which provided for reference of dispute to arbitration."
16. It was further observed that: "No doubt the Court has to exercise this discretion in a judicious manner but the discretion conferred on the Court can neither be curtailed nor circumvented by means of agreement between the parties."
17. It was also observed that: "It is true that ordinarily when a party has entered into an agreement of which the arbitral clause is an integral part, he should not receive assistance from the Court if he resiles from it but this does not mean that even in a case where the Court is satisfied that the very purpose and object of arbitration would be frustrated or it is not likely to be achieved it will still stay the legal proceedings and direct the parties to have recourse to arbitral clause."
18. Ultimately the application for stay of proceedings was rejected for the reason that all the witnesses to depose about the issues under consideration were in Karachi. The witnesses were large in number residing in Karachi and if arbitration proceedings before the foreign Tribunal takes place all these evidences cannot be taken to Moscow both for reasons of impracticability as well as on account of restrictions of foreign exchange and involvement of heavy expenditure. It was also observed that, the allegations in the counter-affidavit of the plaintiff have gone absolutely unchallenged as no rejoinder affidavit-in-rebuttal was filed by the defendant.
19. This Single Bench judgment was challenged in appeal before a Division Bench of this Court and the view taken by the learned Single Judge was upheld. The appeal was dismissed vide judgment reported as Messrs V/O Techmash-Export v. Messrs Akbar Cotton Mills Ltd. (1987 MLD 600).
20. The learned counsel for the plaintiff has further placed reliance on a Division Bench judgment in the case of M.M. Yaseen v. Messrs Irving R. Boddy & Co. (PLD 1957 Karachi 756). In this judgment also the rejection of application under section 34, Arbitration Act, for the reason that the applicant was residing in Karachi, whereas the venue of arbitration proceedings was New York, was assailed.
21. Because of the plaintiff's residence at Karachi, their Lordships doubted very much that he could find a proper representative in New York. The appeal assailing the rejection of application was dismissed accordingly.
22. The learned counsel for the plaintiff has next placed reliance on the case of Messrs Aslo Marines Ltd. v. M.T. Magda (PLD 1985 Karachi 745). His Lordship Mr. Justice Naimuddin (as he then was) observed that, "Rule that in the wake of arbitration clause the parties should not be allowed normally to avoid the arbitration clause is not absolute, it was held that, it was discretion with the Court". The application under section 34 of Arbitration Act was dismissed with the observation that the evidence was available either at Dubai and/or Karachi but not in Panama where the arbitration was to be resorted to It was observed that, "to enforce the exclusive jurisdiction clause would involve the plaintiff into unnecessary expenses and great inconvenience moreso, when defendant No.1 the carriers, who carried the cargo have their local agent in Karachi".
23. The learned counsel for the plaintiff has referred another Division Bench judgment of this Court in the case of Eckhardt & Company Marine GmbH, West Germany v. Muhammad Hanif (PLD 1986 Karachi 138). In this case appeal was preferred assailing the order of learned Single Judge of this Court whereby the prayer for stay of proceedings was refused for the reason that, the contract was entered into at Karachi, where the appellant was residing and carrying on business permanently and where the delivery of the vessel was to be made and that, the evidence of both the parties was at Karachi and that, it would be must inconvenient and expensive for both the parties to have recourse to arbitration in LOndon. The view held by the learned Single Judge of this Court was upheld and the appeal was dismissed. The matter was taken to Hon'ble Supreme Court and the judgment of the Division Bench of this Court in appeal was upheld by the Hon'ble Supreme Court and the judgment of the Division Bench of this Court in appeal was upheld by the Hon'ble Supreme Court and the appeal was dismissed, vide judgment reported as Messrs Eckhardt & Co. Marine GmbH v. Muhammad Hanif (PLD 1993 SC 42).
24. I have carefully considered the facts and circumstances in this case and the ratio of the judgments referred to above on which the learned Advocates for the parties have placed reliance.
25. As already observed the defendant No.1 he not filed any affidavit-in-rejoinder with the result that, the assertions contained in the counter-affidavit of the appellant have gone unchallenged. The result is that, undisputed factual position is that, the contract was entered into between the plaintiff and the defendant No.1 at Karachi. The entire evidence and the witnesses of both the parties are available at Karachi and the plaintiff, which is the foreign - company, has itself invoked the jurisdiction of this Court. In these circumstances, the observations made by the learned Single Judge of this Court in the case of Messrs Manzoor Textile Mills (supra) are not attracted. The defendant No.1 is a Pakistani Company in public sector and there is no question of betraying the confidence or trust of a foreign company. The assertion that, the direction for having resort to the arbitration proceedings at Liverpool England would be too expensive and inconvenient to both the parties has gone unchallenged. The purpose of arbitration proceedings is to provide expeditious, inexpensive and speedy justice to the parties. If the proceedings are stayed and the parties are directed to resort to the arbitral proceedings at Liverpool, England, this purpose 'would not be served. On the contrary, it would amount to compel the parties to bear huge expenses and to undergo the inconvenience which will not serve the purpose of justice.
26. In the above circumstances, I am in respectful agreement with the views held in the judgments relied upon by the learned counsel for the plaintiff and, consequently, refuse to stay proceedings under section 34 of the Arbitration Act, 1940. The application stands dismissed accordingly.
27. After hearing the learned Advocates for the parties on 23-9-2002, the application was dismissed by short order. These are the detailed reasons for the same.