1999CLC 1018 (PLP)

This is a suit to enforce a Foreign Arbitration Award under section 5 of the Arbitration (Protocol and Convention) Act, 1937, (hereinafter referred to as the Act). The facts of the case are that the plaintiff and defendant No. l both Members of Liverpool Cotton Association Limited (hereinafter referred to as L.C.A.) entered into a Contract, dated 7‑11‑1993 subject to L.C.A. rules and by‑laws, whereby the defendant No. l agreed to sell 1050 bales of cotton to the plaintiffs. The defendant No. l shipped 582 bales by mid‑January, 1994 and for the balance plaintiff and defendant No. l mutually agreed to extend the date of execution to 7‑2‑1994. The plaintiffs on their part made it absolutely clear to the defendant No. l vide their fax of 24‑1‑1994 that unless they receive shipping advice by 7‑3‑1994 the Contract would be closed out on that day on the basis of market differences on that date. However, the defendant No. l were unable to ship the required bales of cotton by the stipulated date of 7‑2‑1994, allegedly for the reason that the Government of Pakistan had temporarily suspended the export of cotton on 19‑1‑1994 due to poor crop of cotton. The plaintiffs refused to accept this excuse and served a formal notice, dated 29‑6‑1994 on the defendant No. l of their intention to proceed to arbitration to close out the unfulfilled part of the contract as per rules of L.C.A. and went on to appoint an arbitrator. Since in response to this notice the defendant No. l did not appoint any arbitrator the plaintiffs applied to President L.C.A. to appoint an arbitrator on behalf of the defendant No. l as per rules of L. C. A. Miss H.S. Anderson was accordingly appointed the arbitrator on behalf of the defendant No. l The arbitration was fully participated in by defendant No. l and the Arbitrators finally gave their award on 23‑6‑1995, whereby they directed the defendant No. l to pay a sum of U.S. $52,211.25 plus interest and also directed the plaintiff to pay the cost of the award being L375 i.e. a total of L2;875 and then recover it from the defendant No.

1. Even though the defendant No. l were entitled to file an appeal against the Award before the Technical Appeal Committee of L.C.A. and they did serve notice of appeal but failed to pay the requisite fees for filing an appeal within time and as such the appeal was dismissed. Through this suit the plaintiffs filed the Award in the Court and prayed i for it to be made Rule of this Court: The defendant No. l have filed objections to the Award wherein the main thrust was that in view of the fact that the Government had temporarily suspended the export of cotton on 19‑1‑1994 due to poor crop of cotton the contract had been frustrated and hence the defendants A had no liability for the non‑delivery of the balance cargo. The defendants also contended that due to such frustration.of the contract the force majeure clause in the Agreement came into effect which rendered contractual clauses invalid including the arbitration clause and, thus, the defendants were not bound by any Award issued pursuant to the said agreement. The defendants emphasized that since they were prevented by the Government from exporting the balance quantity of cotton, if they had attempted to do so such act would have been A contrary to law and public policy and hence illegal under section 23 of the Contract Act. According to them the Contract could, thus, not be performed which resulted in its frustration. the defendants in support of their contention relied on the case of Muhammad Ismail v. Musarat Zamani PLD 1985 SC 1986, E.A. Even v. Ashraf PLD 1964 SC 536 and Muhammad Aslam Chattha v. K.B.C.A. 1998 MLD

544. When confronted with the question as to why they did not pursue the appeal before the Technical Committee, L.C.A. for which they had served notice, they had no answer except to say that they did not do so because of the fees that had to be paid for filing of such appeal, even though no protest to this appeal was made by them to the Technical Committee of L.C.A. They further stated that in law they were entitled not to avail of the remedy of appeal if fee was prescribed for filing an appeal. In support of this contention of theirs they relied upon the case of Abdul Rahim and others v. U.B.L. PLD 1997 Kar.

62. I have perused the Award and the objections and documents filed by the defendants. From these it is clear that the parties had mutually agreed that the shipping advice for balance cargo would be sent by 7‑2‑1994, failing which the Contract would be closed down on the basis of market difference on that day. In 8 order to appreciate as to what the closing down of the Contract means and as to what it entails, it would be advantageous to reproduce Rule 140 and Rule 141 of the L.C.A. to which admittedly the Contract was subject. Rule 140 If owing to any circumstances whatsoever, any contract has not been or is not to be performed it shall not be treated as cancelled, but shall be closed by being invoiced back to the seller in accordance with the Rules in force at the date of the contract. Rule 141 In all cases where a contract or part of a contract is to be closed by being invoiced back to the seller, the invoicing back price, unless agreed upon between the buyer and seller, shall be fixed by Arbitration, subject to appeal. The invoicing back price shall be determined by the Arbitrators or, in the case of appeal, the Technical Appeal Committee, by reference to the market value of the cotton in accordance with the Rules and/or such other factors as may be considered relevant for adequately compensating the parties. An examination of the notice from the Joint Secretary, Ministry of Commerce through which the export of cotton was suspended would show that it was only a temporary suspension and it was anticipated that the suspension would not last beyond March, 1994. Consequently, it cannot be said that the Contract had become impossible of performance and it in itself had become frustrated at the relevant time, all that had transpired was that due to the suspension there would be a delay In delivery of the consignment. By no stretch of imagination could this notice be construed as a declaration to the effect that export of cotton had become illegal. Nor is it defendant's case that such notice was issued pursuant to sortie Government Notification under a statute. Consequently, reliance on section 23 of the Contract Act by the defendants is misconceived. In so far as the defendants reliance on force majeure clause is concerned, it may be advantageous to reproduce it before considering it. It is, therefore, reproduced below‑ "The "The Sellers are not liable for delay or non‑delivery of goods caused by fire, flood, strikes, riots, civil commotion, accidents and/or war, or any other contingencies beyond the control of sellers." Clearly force majeure clause, as it is framed deals with a situation where a contract while being performed is interrupted by eventualities described in the clause. It does not cater for a situation where a party has no intention of performing the contract as is apparent by the correspondence between parties in this case according to which the defendants had clearly indicated that they were treating the contract as having been frustrated. In such an event Rule 140 of L.C.A. comes into play to which the contract was subject. This Rule clearly shows that the invoicing back of the Contract would automatically take place the moment the contract is not performed regardless of the reasons of the non performance of the contract. The fact that the defendants had agreed to the terms of L.C.A. would mean that they are now estopped from claiming that the Contract could not be invoiced back. It is also significant to note that the defendants purposely and deliberately refrained from pursuing the remedy of the appeal before the Technical Committee of L.C.A., thereby allowing the Award to become final. Having, thus, chosen not to avail of remedy they could not now urge a ground before this Court which they could have easily taken in appeal and may perhaps had succeeded. Their reliance on PLD 1997 Kar. 62 for not pursuing the appeal is also misconceived inasmuch as the right of appeal available in this case is under the L.C.A. Rules to which the defendants had agreed. Right of appeal did not arise under a Statute which would make the payment of fees mandatory regardless of willingness or unwillingness of the concerned party to pay the fees. Consequently, I am of the view that the authority cited by the defendants cannot be relied upon as justification for not filing the appeal. Increasingly, it is seen that the parties who are involved in Transnational or International Agreements agree to an arbitration clause at the time of entering into agreement but when as a result of that agreement an award is made against them they raise frivolous objections and deliberately refrain from seeking remedy of appeal available to them under the agreement or other rules and attempt to delay or avoid payment under the award by simply initiating proceedings in a Court in Pakistan relying on the delays inherent in our system. I do believe this is tantamount to abuse of the process of the Court as is a despicable practice which may lead Pakistan into becoming a pariah in the commercial world. In order to curb such tendency Courts ought not to entertain objections to a foreign Award i.e. executable in Pakistan unless these strictly lie within the four corners of section 7 of Arbitration (Protocol and Convention) Act, 1937 and such assessment should be made from the Award itself. The Award should thus, be interfered with only if the error in it is apparent on the face of the award. Courts ought not to set themselves up as an Appellate Court or to go behind the award to reappraise the evidence. Additionally the Court should decline to entertain the objections to Foreign Awards unless all remedies available under the Arbitration Agreement or Rules, by which the parties are bound, are exhausted. The upshot of the above discourse is that I find no merit in the objections raised by the defendants to the award and, therefore, direct that the Award, dated 23‑6‑1995 be made Rule of the Court and accordingly this suit is decreed against defendant No.l in terms of the Award subject to the plaintiffs filing the original Award, duly attested as per law, in the Court. In so far as other defendants are concerned, their liability is to be determined at the time of execution of the decree depending upon whether they are or were partners of defendant No. l or not. H.B.T./C‑20/K Suit decreed.