2001 PLP 3150 (YLR)

With the plaint, the plaintiff filed two applications under Order 39, rules 1 and 2, C.P.C. and Order 38, rule 5, C.P.C. The defendants filed their counter-affidavits to above applications and also filed an application under section 34 of the Arbitration Act with the prayer referred to above. The plaintiffs have opposed the said application through counter-affidavit, wherein two-fold pleas were taken (i) that defendant No.-l has taken steps in the proceedings by filing counter-affidavit to C.M.As., as such the application under section 34 of the Arbitration Act is not tenable in law, (ii) that International Arbitration Association Rules and Procedure would be too expensive. I have heard Ms. Sana Minhas, learned counsel for the defendant in support of the application and Mr. Mahfoozyar Khan, learned counsel for the plaintiff. The agreement containing arbitration clause is not disputed. Clause 20.10 of the Agreement is reproduced as under:-- "20.10. If a negotiated settlement to any dispute between the parties cannot be reached such disagreement will be irrevocably settled in accordance with the International Arbitration Association Rules and procedures in a hearing before the Stockholm or London International Arbitrage, to be scheduled at the earliest time available after the request of either party. The application is resisted on the ground that the defendant have taken steps in the proceedings by filing counter-affidavit. Learned counsel for the defendant has contended that filing the counter-affidavit in opposition of the injunction application and attachment before judgment applications would not amount to taking any step in the proceedings. She referred the following cases to support such contention:

(i) Ladak & Sons ltd. v. Advebe B. A. 1999 YLR 1505 and (ii) Island Textile Mills Ltd. v. V/O Technoexpert and another 1973 CLC

307. In the former case by placing reliance on the latter case I had taken the view that the steps taken by the defendant opposing the injunction application against them will not be deemed to be any step in the proceedings disentitling them from invoking the provisions of section 34 of the Arbitration Act. Thus, the plea taken by the learned counsel for the plaintiff that by filing the counter-affidavit in opposition to injunction and attachment before judgment applications by the defendant No.1 amounts to taking any steps and disentitled them to invoke the provisions of section 34 of the Act is not tenable. Learned counsel for the plaintiff while urging the second ground has canvassed that the arbitration proceedings before the International Arbitration forum would be too expensive and the Courts do not encourage expensive proceedings at arbitral forum. To support his contention, reference has been made to the case of The Hub Power Company Ltd. v. Pakistan WAPDA (PLD 2000 SC 841). This case is distinguishable with the facts of the present case. The dispute in the said case between the parties was not commercial dispute arising from an undisputed legally valid contract, or relatable to such a contract, for on account of such criminal acts disputed documents did not bring into existence any legally binding contract between the parties, therefore, dispute primarily related to the very existence of valid contract and not a dispute under such a contract. Conversely, learned counsel for the defendant contended that the plaintiff is a foreign company and has filed the suit in Pakistan. The proceedings either in Pakistan or in England would have no consequence to the plaintiff so far as the expenses are concerned. Her further submission was that the ground that the proceedings at the Arbitral Tribunal would be too expensive has no bearing. She referred the following cases:- (i) Echardt & Co. v. Muhammad Hanif PLD 1993 SC 42 and (ii) Messrs Manzoor Textile Mills Ltd. v. Nichimen Corporation 2000 MLD

641. In the above cases inconvenience of the party pleaded for rejection of the prayer for stay of the suit was declined. The view taken was that the approach of the Court in this regard should be dynamic and Court should not lightly release the parties from the bargain on the ground of inconvenience or hardship. Separate note recorded by Mr. Justice Ajmal Mian (as he then was) in Echardt & Co. (supra) may be referred:-- "It may observe that while dealing with an application under section 34 of the Arbitration Act in relation to a foreign arbitration clause like the case in issue, the Court's approach should be dynamic and it should bear in mind that unless there are some compelling reasons, such an arbitration clause should be honoured as generally the other party to such an arbitration clause is a foreign party. With the development and growth of International Trade and Commerce and due to modernization of Communication/ transport system the world, the contracts containing such an arbitration clause are very common now-a-days. The rule that the Court should not lightly release the parties from their bargain, that follows from the sanctity which the Court attaches to contracts, must be applied with more vigour to a contract containing a foreign arbitration clause. We should not overlook the fact that any breach of a term of such a contract to which a foreign company or person is a party, will tarnish the image of Pakistan in the comity of nation. A ground which could be in contemplation of a party at the time of entering into the contract as a prudent man of business, cannot furnish basis for refusal to stay the suit under section 34 of the Act. So, the ground like, that it would be difficult to carry the voluminous evidence or numerous witnesses to a foreign country for arbitration proceedings or that it would be too expensive or that the subject-matter of the contract is in Pakistan or that the breach of the contract has taken place in Pakistan, in my view, cannot be a sound ground for refusal to stay a suit filed in Pakistan in breach of a foreign arbitration clause contained in contract of the nature referred to hereinabove. In order to deprive a foreign party to have arbitration in a foreign country in the manner provided for in the contract, the Court should come to the conclusion that the enforcement of such an arbitration clause would be unconscionable or would amount to forcing the plaintiff to honour a different contract, which was not in contemplation of the parties and which could not have been in their contemplation as a prudent man of business." The above view was followed by me in Manzoor Textile Mills Ltd. (supra) para. 22 of the report is reproduced as under:-- "I cannot be unmindful of 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. In the present case 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 abqve clause with the aid of this Court. In order to acquire a respectable place in the -comity of nations, not only the Government, but even the individuals are expected to honour their commitments. In my view, the party having entered into an agreement with full knowledge of its consequences, cannot be allowed to defeat the arbitration clause. In view of the above discussion, the application is allowed. These are the reasons of my short order, dated 22-3-2001. H.B.T./S-154/K Application allowed.