1994 PLP 612 (MLD)

By this civil revision the petitioner-Company, which is the plaintiff in the suit, calls in question the judgment, dated 26-2-1992, by which a learned Additional District Judge at Lahore accepting the appeal of the defendant respondent No.1, set aside the order, dated 21-1-1992. By this order a learned Civil Judge at Lahore had issued temporary injunction in the petitioner's suit pending in his Court restraining respondent No.1 from terminating the consultancy agreement, dated 13-6-1988 and assigning the work to any other agency. He also dismissed the application of respondent No.1 made under section 34 of the Arbitration Act for referring the matter to the arbitration as per arbitration clause of the said agreement.

2. In a suit brought by the petitioner-Company it was alleged that respondent No.1, with a view to set up a residential colony over the piece of land measuring 3,500 Kanals situated near Thokar Niaz Beg, Multan Road, Lahore, had availed of the consultancy services of the petitioner for town planning, designing of roads, water supply, sewerage and landscape, vide agreement dated. 13-6-1988 and the petitioner had carried out substantial work in this regard to the satisfaction of the opposite party. But meanwhile a change took place in the office-bearers of respondent No.1 and its new management directed a probe into the matter and required the petitioner-Company to furnish evidence against Brig. Abdus Samad Khan, Ex-Vice-Chairman of the Society (respondent No.2) but the petitioner-Company refused to be a party in this wrangling and annoyed by it respondent No.1 arbitrarily and with a malice unilaterally terminated the said agreement oh 7-12-1991. It was asserted that the new office-bearers., who were illegally appointed, had no authority to terminate the agreement without first paying to the petitioner-Company a sum of Rs.18,00,000 (rupees eighteen lacs) for the work already done by it, nor they could compel it to take recourse to arbitration because they were legally not competent to do so. Alongwith the plaint the petitioner-Company moved an application for temporary injunction, seeking to restrain its opponent from terminating the contract and interfering in the performance of its function as consultants. Meanwhile respondent No.1 put in appearance before the trial Court and made an application under section 34 of the Arbitration Act for staying of proceedings in the suit and reference of the matter to the arbitration according to the arbitration clause of the agreement, dated 13-6-1988.

3. The suit as well as the application for the temporary injunction were contested by respondent No.1 while the application moved by the latter under section 34 ibid was resisted by the petitioner-Company. Both applications were dealt with and disposed of by the learned trial Judge, vide order, dated 21-1-1992, in the manner aforesaid. Aggrieved by it, respondent No.1 went up in appeal and the learned Additional District Judge, by the order now under challenge, set aside the order of the learned trial Judge, compelling the petitioner-Company to invoke the revisional jurisdiction of this Court.

4. It was argued on behalf of the petitioner-Company that it had entered into consultancy agreement, dated 13-6-1988, with respondent No.1 through its previous Secretary and continued to perform its functions to the satisfaction of all concerned, but a change took .place in the office-bearers of respondent No.1 and its new management wanted the petitioner to furnish evidence against Brig. Abdus Samad Khan, the former Vice-Chairman of the Society (respondent No.2) and Major Zaheer-ud-Din, former Secretary of the Society (respondent No.3) but the petitioner refused to participate in this controversy and annoyed by it, the new management of respondent No.1 arbitrarily terminated the agreement and stopped the petitioner-Company from carrying out its work of consultancy and when it filed the suit in the Court of Civil Judge, challenging the legality of the action taken, respondent No.1 brought an application under section 34 of the Arbitration Act for the staying of proceedings in the suit and referring the dispute to the arbitration. According to the learned counsel, the new office-bearers of the Society (respondent No.1) were illegally installed, suddenly replacing the former ones, and this illegality was pointed out even by the Circle Registrar, Cooperative Societies, Islamabad, in his letter dated 29-7-1991 addressed to the Chairman of the Society. He urged that the new office-bearers had no authority to deal with the petitioner-Company because their induction and appointment was illegal and as such the dispute could not be referred to the arbitration in these circumstances, but if at all the same could be referred to the arbitration in terms of Article IX of the said agreement, the work undertaken by the petitioner-Company was to continue even during arbitration proceedings and the payment for the work done by them could not be withheld by respondent No.1. He contended that for the work done by the petitioner-Company a sum of Rs.18,00,000 (rupees eighteen lacs) was due from respondent No.1 and if this amount is paid to it, the matter could be referred to the arbitration even then. .

5. On the other hand, it was argued on behalf of respondent No.1 that Brig. Abdus Samad Khan, Ex-Vice-Chairman of the Society (respondent No.2) and Major Zaheer-ud-Din, Ex-Secretary of _ the Society (respondent No-3) being in collusion with the petitioner-Company, jointly misappropriated lacs of rupees of the Society and despite transfer from their previous posting in Army, by virtue of which they were working as office-bearers of the Society, continued to cling thereto for digesting more funds and did not leave the charge until Chief of Army Staff intervened, as it appears from the letter dated 4-10-1990, directing Brig. Abdus Samad Khan, the outgoing Director-General, E.M.E. for handing over the charge of the Society to his successor, Major-General Javed Anwar Hashmi. According to the learned counsel, the petitioner-Company was in fact playing the game of respondents Nos.2 and 3 with whose blessings it illegally earned lacs of rupees without doing any substantial work on the project and it could not challenge the authority of the new office-bearers of respondent No.1 who had lawfully replaced the former ones because even from them it had received some payment by means of cheques for the work already sanctioned by its collaborators. The counsel contended that an inquiry was going on against respondents Nos.2 and 3 for the defalcation of accounts of the Society and misappropriation of its huge funds in collusion with the petitioner- Company and to save their skins from law the latter, at the instance of the former, had thought proper to involve the new office-bearers in protracted civil litigation, despite the fact that the arbitration clause in the consultancy agreement could easily be availed of by it and in these circumstances it could neither be allowed to work on the project, nor it could demand Rs.18,00,000 (rupees eighteen lacs) as pre-condition for arbitration proceedings as in fact it has, with the connivance of its former patrons, received heavy amount which was not due to it and in the arbitration proceedings it would have to refund the same for the Society.

6. The consultancy agreement, copy of which is available on the paper book of this Court, indicates that it was signed on behalf of the E.M.E. Cooperative Housing Society Ltd., respondent No.1 herein, by Brig. Raja Aziz ur-Rehman (Retd.) as its Adviser, Executive Director Development/Secretary while Brig. (Retd.) Iqbal-ur-Rehman Sharif signed it as Managing Director of the petitioner-Company. It appears that respondents Nos.2 and 3, particularly the latter, became office-bearers of the Society subsequently and with them the petitioner-Company was quite happy. By this time, as this Court has been informed by the learned counsel for the petitioner Company during the course of arguments, it has already received from respondent No.1 Rs.31,00,000 (rupees thirty-one lacs) for the consultancy work allegedly done by it. Out of this amount, it has received some amount even from the present office-bearers of the respondent .Society whose appointment or induction it has now challenged through the suit brought by it. This being so, the petitioner Company is apparently estopped from challenging their authority to ask for arbitration proceedings even if there was any illegality or irregularity in their appointment or induction as such. I am inclined to agree with contention of the learned counsel for respondent No.1 that the petitioner-Company is playing the game of respondents Nos.2 and 3 with whom it appeared to be hand in glove for some financial gain, and they all want to avoid a probe into the financial affairs of the Society being conducted by the new management of the Society concerning alleged misappropriation of funds by them. In this respect there can be no escape for respondents Nos. 2 and 3 and the petitioner-Company but the proper course for them would be to first take recourse to arbitration proceedings as it is the agreed mode of settling the dispute between them.

8. Similarly, there is no substance in the demand of the petitioner Company put forth by its counsel that before entering into arbitration proceedings it should be paid a sum of Rs.18,00,000 (rupees eighteen lac) and should be allowed to continue the consultancy work. After the termination of the agreement by respondent No.1, rightly or wrongly, the question of petitioner-Company's continuing the work of consultancy and receiving its payment does not arise.

9. In view of the above there is no substance in the revision which is dismissed. H.B.T./T-26/L Revision dismissed.