P L D 1983 Karachi 613 (PLP)

The defendants Nos. I .and 2 have filed application under section 34 of the Arbitration Act. Briefly the facts are that the plaintiff entered into an agreement, dated 12-4-1983 to purchase vessel "FRATZESCOS M" from the defendant No.

1. The defendant No. 2 is the agent of defendant No. 1 in Pakistan and defendant No. 3 is its Director. The agreement was entered into at Karachi in terms whereof the ship was to be delivered at Karachi not later than 30th May, 1983. However, by consent of the parties the date of delivery was extended to 7th June. It has been alleged that the plaintiff preferred to purchase the vessel over other available vessels as delivery was to be effected on 30th May, 1983 before the' announcement of the budget. The plaintiff has further stated that on 6-6-1983 defendants informed the plaintiff that they were unable to effect delivery on 7-6-1983 and the contract should be treated as cancelled in terms of clause 4 of the M. O. A. The plaintiff, therefore, filed a suit for damages against the defendants. The agreement provides for arbitration in the following terms : "If any dispute should arise in connection with the interpretation and fulfilment of this contract, the same shall be decided by arbitration in the City of London and shall be referred to a single arbitrator to be appointed by the. parties hereto. If the parties cannot agree upon the appointment of a single arbitrator the dispute shall be settled by three arbitrators, each party appointing one arbitrator and the third being appointed by the Chairman of the London Arbitrators Association in London. If either of the arbitrators appointed refuse or is incapable of acting, the party who appointed him shall appoint a new arbitrator on his place. If the party fails to appoint an arbitrator either original or by way of substituting for two weeks after the other party having appointed his arbitrator has sent the party making default notice by mail, cable or telex to make the appointment, the Chairman of the London Arbitrator Association shall after application from the party having appointed his arbitrator, also appoint an arbitrator on behalf of the party making default." The defendants Nos. 1 and 2 have, therefore, prayed that proceeding may be stayed and the matter should be referred to arbitration in terms of the said agreement. The plaintiff in his counter-affidavit has stated that as arbitration clause provides for reference to a foreign Tribunal it is not enforceable. It has further been stated that the contract was entered into at Karachi where it was to be performed, the breach was committed at Karachi where defendants agents are carrying do business and the entire evidence in suit is available at Karachi, therefore, it will be just and convenient to refer the matter to arbitration. Before dealing with the contentions raised by the parties it is necessary to state some facts. The defendant No. 1 is a foreign company carrying on business in Pakistan through its agent the defendant No. 2 stationed at Karachi. The defendant No. 2 for and on behalf of the defendant No. 1 entered into agreement with the plaintiff at Karachi, delivery was to be effected at Karachi on or about 30th May, which was extended upto 7th June, 1983 and the letter of credit was opened at Karachi. The grounds for non-delivery within the stipulated time seem to have been stated in the letter of the defendants, dated 9th June. 1983. According to the defendants due to congestion and strike in Karachi Port, which was beyond their control, the delivery could not be affected within the agreed period. As the plaintiff was not prepared to accept delivery beyond 7th June, the defendant No. 1 treated the contract as null and void without any compensation to either side as contemplated by clause 4 of the agreement. On the other hand, the plaintiff has stated that as the price of scrap vessel was rising the defendants with male fide intentions in spite of the fact that cargo was being .discharged stopped it and purposely delayed discharging to avoid the delivery within the stipulated time. The plaintiff has claimed damages on the basis of the difference in the market price and the contract price and has also claimed further sum he will have to incur now for purchasing similar vessel. The plaintiff has, therefore, sought for a decree against the defendants jointly and severally, Mr. Sajid Zahid relying on Island Textile Mills Ltd., Karachi v. V/O Technoexport and another (1979 C L C 307), has contended that where an arbitration clause is provided in an agreement the parties are bound to adhere to it. On the other hand Mr. Abdul Sattar has referred to Messrs Mercantile Fire and General Insurance Co. v. Arcepey Shipping Co. U. S. A. (P L D 1978 Kar. 273) and M. M. Yaseen v. Messrs Irving R. Boody & Co. (P L D 1957 Kar. 755), wherein it was held that if the Court comes to the conclusion that the exclusive jurisdiction clause is likely to involve plaintiff into unnecessary expense and great inconvenience it has discretion to refuse to stay the proceedings. In support of this view reliance has been placed on Serajuddin & Co. v. Michael Golodetz..( A I R 1960 Cal. 47), Swedish Fast Asia.Co. Ltd. v. Herman Mohatta (Ind). Prv. Ltd. (A I R 1962 Cal. 601). - There seems to be a string of cases where the Courts have refused to stay the proceedings if they come to the conclusion that the foreign exclusive jurisdiction clause or foreign arbitration would be inconvenient. In exercising its discretion the Court is influenced by the facts and circumstances of each case. In the Athene ((1922) 11 L I L R 6), where goods were carried under a French bill of lading which contained a clause to the effect that any dispute arising under it shall be before a Tribunal of Commerce at Marseilles the Court refused to stay action inter alia on the ground that the material facts and evidence were all in England. Fehma-rn ((1958) 1 A E R 333), affirmed the same view. In Serajuddin's case the same view was taken and it was observed that "it is undeniable that the parties are prima facie bound by the arbitration clause arid, normally, they should be asked to keep to their bargain and the suit should be stayed, but that places no insurmountable bar in the way of the party seeking to avoid. arbitration and maintain the suit. It only costs upon him the onus, undoubtedly a heavy one of satisfying that there is sufficient reason why the matter in dispute should not be referred to Arbitration, but that onus can certainly be discharged in proper case. The agreement or contract to refer to arbitration is not necessarily decisive on the point and it created an estopple, so far, at least, as report is concerned ; it only raises a . prima facie case of presumption in favour of a decision by arbitration, but that presumption is certainly rebuttable and is liable to be rebutted by appropriate grounds and circumstances in a particular case". In this case all the evidence necessary for determination of the dispute between the parties was in India and no part of it was in U. S. A. No part of it could even be produced in U. S. A. without considerable, difficulties, loss of time and money. In these circumstances, the suit was not stayed. In M. M. Yaseen's case similar view was taken, but as observed in 1979 C L C 30? there "were other grounds also for refusing to stay the action. However, in 1978 Kar. 273 exclusive foreign jurisdiction clause in the bill of lading provided for settlement of dispute in a Court in Panama. The entire evidence of Shipment and short landing of cargo was available at Karachi or Dubai. It was held.: "Therefore, to enforce the exclusive jurisdiction clause would involve the plaintiff to unnecessary expenses and great inconvenience moreso, when defendants No. 1, the carriers who carried the cargo have their local agent in Karachi and when both are jointly defending the action by filing a joint written statement. The convenience of parties and witnesses have been _ taken into consideration while exercising discretion under section 34 of the Arbitration Act." A review of these cases makes it clear that where there is an arbitration agreement it is to be adhered to by the parties. This view has strongly been expressed in 1979 C L C

307. However, the arbitration clause or foreign jurisdiction clause in an agreement cannot completely oust the jurisdiction of the court and by mere reference to the arbitration clause action cannot be stayed. The grant of stay depends upon the discretion of the Court which is exercised to maintain balance and see that justice is not denied to the parties. In Bristol Corporation v. Aird (John) & Co. (1913 A C 214 (260)),I Lord Parker maintaining the sanctity of a contract goes on to explain why it y. should not be enforced. Held: "In making up its mind on this point, the Court must, of course, give due consideration to the contract between the parties ; but it should, I think, always be remembered that the parties may have agreed to the submission precisely because of the discretionary power, vested in the Court under the Arbitration Act. They may, very well, for instance, have said to themselves, if in any particular case, it would be unfair to allow the arbitration we are agreeing to proceed; we shall have the protection of the Court." Lord Moulton at page 257 of the same report observed "it must be remembered that these arbitration clauses must be taken to have been inserted with due regard to the existing law of the land, and the law- of the land, applicable to them is, as I have said, that it does not prevent the parties corning to the Court, but only gives to the Court the power to refuse it. S. in proper- cases. Therefore, to say that when we refuse to stay action we age not carrying out the bargain between the paries does not fairly describe the position, we are carrying out the bargain between the parties because that bargain to substitute for the Courts of the land a domestic tribunal was a bargain into which was written, by reason of the existing legislation; the condition that it should only be enforced if the Court thought it a proper case for its being so enforced." It, therefore, seems clear that by providing an arbitration clause in the agreement, the jurisdiction of the Court is not barred, nor such clause can rob off the Court of its jurisdiction. It is entirely in the discretion of the Court to give its assistance or stay the action. Such discretion can be exercised by looking into the facts and circumstances of the case which may differ from case to case. In 1979 C L C 307 the arbitration clause was of a very peculiar nature, which provided that it action is against the defendant a Russian Company, then the arbitration will be in the U. S. S. R.. but if the claim is made against the plaintiff a Pakistani Company, then the arbitration will he in Pakistan. If the claim is made by both the parties then against each other then respective Chamber of Commerce in Pakistan and Moscow will evolve a formula 'or the settlement of dispute. This arbitration clause seems to have maintained a balance between the parties and the claims On the other hand in all other cases the arbitration clause or foreign jurisdiction clause provided for a forum in a foreign country. There seems to be consensus hat if no part of the evidence is available in a country where arbitration is to be held and where production of evidence is of a great burden and inconvenience to the parties, the Court have thought it proper not to stay the action. As stated above in the present case the contract was entered into at Karachi where defendant's agents reside and carry on their business permanently. The delivery of the vessel was to be made at Karachi, letter of credit was opened at Karachi and all other formalities were to be completed at Karachi. The reasons given for rescinding the contract are the circumstances beyond the control of the defendants which include congestion and strike at Port of Karachi and other local conditions due to which the goods could .not be discharged from the Vessel. It is, therefore, clear that the entire evidence of both the parties is at Karachi. In these circumstances to carry the entire burden of this litigation to London before the arbitrators will be most inconvenient and expensive for both the parties. One of the factors which has impressed is that the defendant No. 1 has its agents at Karachi, who is permanently stationed here and look after its business and further it has been joined as defendant No. 2 against whom the plaintiff has sought decree jointly and severally. This defendant No. 2 is not a party to the arbitration agreement. In view of the relationship between defendant No. I and defendant No. 2 this may not by itself be a strong ground for refusing to stay, but the fact remains that in the circumstances of the case the foreign arbitration would not be a safe or convenient forum for the decision. To compel the plaintiff to seek his remedy at that forum may lead to denial of justice. The learned counsel for the plaintiff contended that the defendants were not ready and willing to refer the matter to dispute. Considering the facts of the case, the development and events that have happened and as the suit was filed within few days of rescision of contract, the contention has no force. In the result the application is dismissed. M. Y. H. Appeal dismissed.