2026 PLP 792 (CLD)

MIRZA VIQAS RAUF, J.

The factual background of this constitutional petition is that a deed of partnership was executed between the petitioner and respondents Nos.1 to 3 on 22nd July, 2017 for carrying on business in the name and style of Rawal Cash and Carry . The business firm was registered with the Registrar of Firms, Rawalpindi in pursuance whereof, Form-C was also issued. After closure of his previous business in the name and style of Al-Nafey Cash and Carry , the petitioner started business with respondents Nos.1 to 3 in the name and style of Rawal Cash and Carry on 27th August, 2017. As per claim of the petitioner during the course of business, he handed over three cheques to respondent No.1 as surety/security but he succeeded to get the same dishonoured from the concerned bank and then lodged criminal case against him and his brother namely Muhammad Amir, who was later on declared as innocent. It is asserted in the plaint that respondents Nos.4 and 5 though have no concern whatsoever with the partnership business but they started sitting in the superstore and claiming themselves as partners in the business of the firm on the behest of respondent No.1 without any reason and justification. It is also asserted that during the course of business, misappropriation in the stock and income of the firm business as well as mismanagement was observed on the part of respondents Nos.1 to 5 (hereinafter referred to as respondents ) and when the petitioner raised his voice against such misappropriation and mismanagement, he was halted from entering into the store by the respondents by joining hands with each others. It is also alleged by the petitioner that he was abducted by respondent No.1 along with others on 20th September, 2018 regarding which FIR No.652 dated 29th September, 2018 was got registered with Police Station Civil Lines, Rawalpindi, however, on 5th October, 2018, he succeeded to escape from the custody of the abductors from Torkham Border when he was being shifted to Afghanistan. In this backdrop, the petitioner instituted the suit and sought dissolution of the firm. The respondents moved an application under Section 34 of the Arbitration Act, 1940 (hereinafter referred to as Act, 1940 ) before learned Civil Judge, Rawalpindi with the prayer to stay the proceedings and refer the matter to the arbitrator. The application was though resisted by the petitioner but it was acceded to vide order dated 28th November, 2018. Feeling aggrieved, the petitioner preferred an appeal before learned Additional District Judge, Rawalpindi, which was dismissed by way of judgment dated 25th February, 2019, hence, this petition under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973.

2. This petition was admitted for regular hearing by way of order dated 31st May, 2019 and in terms thereof, notice was issued to the respondents, who though initially arranged their representation but then opted not to appear and as a result thereof, they were proceeded against ex-parte by way of order dated 14th April, 2025 and office was directed to set-down this petition for final hearing. On 25th June, 2025, keeping in view the importance of the question raised in this constitutional petition, Agha Muhammad Ali Khan, Advocate was appointed as amicus curiae.

3. Mr. Muhammad Zafar-ul-Hassan Joya, representing the petitioner submitted that since respondents Nos.4 and 5 were not party to the agreement, so they were precluded to move any application under Section 34 of the Act, 1940. Learned counsel contended that even otherwise matter in issue relates to intricacy of facts and it cannot be transmitted to arbitrator for the purpose of arbitration, as the Civil Court is the court of ultimate jurisdiction. In support of his contentions, learned counsel placed reliance on Qatar Lubricants Company W.L.L. ( QALCO ) and another v. Atif Naeem Rana and others (2025 CLD 78), Farid Virani and another v. Feroz Virani (PLD 2013 Sindh 386), Nelofar Saqib v. Saiban Builders and Developers and others (2011 CLC 157), National Development Leasing Corporation Ltd. v. Chairman, Banking Tribunal/Court-II, Faisalabad and 5 others (2000 YLR 1769) and Haji Muhammad Zaffar v. Muhammad Sikandar and 2 others (2000 YLR 2503).

4. On the other hand Agha Muhammad Ali Khan, Advocate, learned amicus curiae, submitted that there are certain preconditions for invoking Section 34 of the Act, 1940. He added that in terms of Section 34 of the Act, 1940 not only a party to the arbitration agreement but any person claiming under him may apply to the judicial authority before which the proceedings are pending to stay the proceedings. While making reference to certain paragraphs of the plaint, it is contended by learned amicus curiae that respondents Nos.4 and 5 could not be debarred to move such application. Learned amicus curiae, however, submitted that in his estimation, the dispute brought before the court through the suit is not covered under the arbitration clause embodied in the agreement. It is argued that the stay of proceedings is even otherwise discretionary with the court. In support of his contentions, learned amicus curiae relied upon Director Housing, A.G S Branch, Rawalpindi v. M/s. Makhdum Consultants Engineers and Architects (1997 SCMR 988), Messrs Eckhardt & Co., Marine GmbH versus Muhammad Hanif (PLD 1993 Supreme Court 42), Muratab Ali and another v. Liaquat Ali and another (2004 SCMR 1124), Amanullah Piracha and another v. Mrs. Tasneem Baig and another (1988 MLD 1552), Satyendra Nath Mitra v. Union of India (AIR 1962 Calcutta 177), Nelofar Saqib v. Saiban Builders and Developers and others (2011 CLC 157), Government of N.W-F.P. through Secretary Forests, Peshawar and 2 others v. The Devli Kund Forest and Multipurposes Cooperative Society Limited through Managing Director (1994 SCMR 1829) and Shell Pakistan Ltd. through Attorney v. Aero Asia International (Pvt.) Ltd. through Chief Executive and another (2008 CLD 996).

5. Heard. Record perused.

6. The matter in issue, which requires determination hinges upon Section 34 of the Act, 1940, which for the purpose of ease and reference is reproduced below:-

34. Power to stay legal proceedings where there is an arbitration agreement. Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings. From the bare perusal of the above referred provision of law, it clearly manifests that when there is an arbitration agreement between the parties to legal proceedings and one of such party or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings. In short, following are the prerequisites to be fulfilled for obtaining an order staying the legal proceedings under Section 34 of the Act, 1940. i. There must be an arbitration agreement containing the arbitration clause between the parties. ii. Legal proceeding has been commenced by the party or any person claiming under him against any other party or person claiming under him to an arbitration agreement. iii. Such legal proceedings should be in respect of any matter agreed to be referred to arbitrator. iv. The application of stay must be moved by the party to the legal proceedings or person claiming under him before any concrete step is taken in the proceedings. v. The court should be satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time, when the proceedings were commenced and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration.

7. The purpose and object of the legislature while incorporating Section 34 in the Act, 1940 is quite evident, so as to make an arbitration agreement effective and to prevent a party from going to court contrary to his own willingness expressed through the arbitration agreement that in case of dispute, it shall be adjudicated by an arbitrator. Simultaneously Section 34 of the Act, 1940 enables a party to an arbitration agreement to apply to the judicial authority for stay of suit before filing of written statement or taking any step in the proceedings, so that the dispute between the parties may be resolved through arbitration instead of court.

8. Now adverting to the proposition involved herein especially with reference to contentions of learned counsel for the petitioner that respondents No.4 and 5 being not party to the arbitration agreement were precluded to move an application under Section 34 of the Act, 1940; it is observed that application was moved by the respondents jointly and when it is an admitted position that respondents Nos.1 to 3 were privy to the agreement, the application was competent on their behalf. At the same time, it is noticed that respondents Nos.4 and 5 are not the signatory of the agreement but while examining the plaint, it evinces that as per own claim of the petitioner, they are though having no concern with the partnership business but they started sitting in the superstore and claiming themselves as partners in the business of the firm on behest of respondent No.1. By filing a joint application, respondents Nos.1 to 3 have also acknowledged the status of respondents Nos.4 and 5 as their assignees in the business.

9. The expression claiming under a party used in Section 34 of the Act, 1940 connotes the wider meaning. To this effect, case of Satyendra Nath Mitra v. Union of India (AIR 1962 Calcutta 177) is quite relevant. The relevant extract from the same is reproduced below:- (3) I will first take up the case as against the defendant Uma Sankar. It is contended by Mr. D. K. Sen learned counsel appearing in support of the application that the claim against Uma Sankar is a claim for damages for breach of contract. In any view of the matter it is a claim arising out of the contract and therefore covered by the arbitration clause which is in so wide terms as to cover all dispute relating to the contract. Mr. A.M. Pal, learned counsel for the respondent contended that even though the claim arises out of a contract, it is a claim in tort and, as such, is outside the arbitration clause. The disputes intended to be covered by the arbitration clause are contractual disputes, that is, disputes having reference to its performance or breach. The arbitration clause was never intended to cover a claim in tort which is independent of the contract though arising out of it. In my judgment, it is not necessary for me to decide whether the claim made is "ex contractu" or "ex delicto" or whether the claim if it is "ex delicto" is covered by the arbitration clause. In order that the suit may be stayed under Sec. 34 of the Arbitration Act, the first point to be considered is whether Uma Sankar is a party to the contract or a person claiming under a party to the contract. Admittedly, Uma Sankar is not a party to the contract. He has not even signed the contract on behalf of the President. He is a mere employee of the Union of India and in my judgment, he cannot be said to be a person claiming under the Union of India. The expression "claiming under a party" in Section 34 means the heirs or legal representatives or assigns. It may perhaps include an agent entering into the contract who can be sued on the contract under Section 230 of the Indian Contract Act. In my judgment, a mere employee of a contracting party to an arbitration agreement cannot be said to be a person "claiming under the party to the arbitration agreement. In that view of the matter it must be held that this Court has no jurisdiction to stay the suit as against Uma Sankar. It is contended by Mr. D.K. Sen that the claim against Uma Sankar is a frivolous claim which cannot be sustained in law in an application for stay under Section 34 the Court cannot and should not decide or express any opinion on the merits of the claim made in the plaint as has been laid down by the Supreme Court in the case of A.M. Mair and Co. v. Gordhandas Sagarmull, AIR 1951 SC

9. If the defendant Uma Sankar feels that there is no case against him in the plaint, the proper thing for him is to make an application to take the paint off the file. In that proceeding the question whether the plaintiff has made any case in the plaint can be gone into. In my judgment the question cannot be gone into in an application under Section 34 of the Indian Arbitration Act. It is further contended by Mr. Sen that this claim against Uma Sankar has been made in the instant suit to prevent a stay under Section

34. I do not however think that the plaintiff has made the alternative case with the object imputed by Mr. Sen. The plaintiff had reason to think that his claim against the Union for damages may not be sustained in law having regard to Clause 3 of the Conditions of Contract. He is therefore seeking to make a claim against the General Manager. Further it is clear that there is a joinder of defendants and causes of action and in fact the suit instituted is really two suits rolled into one. One suit may very well be stayed while the other may proceed. It cannot therefore be said that the object of impleading Uma Sankar and pleading a frivolous cause of action against him is to prevent the stay order against the defendant Union of India. Reliance is placed on the decision of S. R. Das J. in the case of Khusiram v. Hanutmal, 53 Cal WN

505. I do not think, however, that Khusiram's case has any bearing on the point in controversy when once it is held that the person against whom a stay is prayed is neither a party to the arbitration agreement nor claiming under any of the party to such agreement. For reasons given above the suit as against Uma Sankar cannot be stayed. I am asked by Mr. Pal to note this fact that Uma Sankar does not ask the suit to be stayed as against him. The applicant for stay is Union of India only and not Uma Sankar.

10. The expression claiming under party corresponds to the heirs or legal representatives or assignees. The word assign in its literal meaning is to convey in full; to transfer (rights or property) as defined in Black s Law Dictionary Tenth Edition whereas the term assignee is defined in Black s Law Dictionary Tenth Edition as under:- assignee

1. One to whom property rights or powers are transferred by another. ● Use of the term is so widespread that it is difficult to ascribe positive meaning to it with any specificity. Courts recognize the protean nature of the term and are therefore often forced to look to the intent of the assignor and assignee in making the assignment - rather than to the formality of the use of the term assignee - in defining rights and responsibilities. - Also termed assign. From the perusal of the agreement, it is evident that in terms thereof each partner includes his successor(s), inheritor(s) and assignee(s). The respondents Nos.4 and 5 thus clearly hold the character of assignees. In order to understand the scope in better terms reference can be made to the case from Indian jurisdiction, whereby the High Court of Calcutta, while deciding A.P.O.T. No.338 of 2024 titled as M/s Exchange and others v. Pradip Kumar Ganeriwala and another held as under :-

40. The ratio laid down in Ajay Madhusudan Patel (supra), relying on Cox & Kings Limited v. SAP India Private Limited and another, reported at (2024) 4 SCC 1, has to be red in the above backdrop. In the said judgment, the Supreme Court, in unequivocal terms, observed that the courts and tribunals should not adopt a conservative approach to exclude all person or entities who intended to be bound by the underlying contract containing the arbitration clause through their conduct and relationship with the signatory parties. The mutual intent of the parties, relationship of the non-signatory to a signatory, the commonality of the subject-matter, composite nature of the transactions and performance of the contract, it was held, are all factors that signify the intention of the non-signatory to be bound by the arbitration agreement. In the case of Cheran Properties Limited v. Kasturi and Sons Limited and others (Civil Appeals Nos. 10025-10026 of 2017) the Supreme Court of India also interpreted the expression persons claiming under them used in Section 35 of the Arbitration and Conciliation Act, 1996 in the following words :- 20 Section 35 of the Arbitration and Conciliation Act 1996 postulates that an arbitral award "shall be final and binding on the parties and persons claiming under them respectively". The expression 'claiming under', in its ordinary meaning, directs attention to the source of the right. The expression includes cases of devolution and assignment of interest (Advanced Law Lexicon by P Ramanatha Aiyar). The expression "persons claiming under them" in Section 35 widens the net of those whom the arbitral award binds. It does so by reaching out not only to the parties but to those who claim under them, as well. The expression "persons claiming under them" is a legislative recognition of the doctrine that besides the parties, an arbitral award binds every person whose capacity or position is derived from and is the same as a party to the proceedings . Guidance in this respect can also be sought from Muratab Ali and another v. Liaquat Ali and another (2004 SCMR 1124) wherein the Supreme Court of Pakistan held as under:- Learned counsel for the petitioners contended that the learned Single Judge vide impugned judgment did not take into consideration the provisions of section 34 of the Arbitration Act. According to him, respondent No.2 Messrs Rathore and Company was not a party to the partnership agreement, dated 31-10-1982 containing clause for making reference to the arbitration in respect of the dispute relating to the business etc. between them, therefore, the suit could not have been stayed. We are afraid the contention raised by the learned counsel is not acceptable because respondent No.1 Liaquat Ali, being a party to the partnership agreement, before submitting to the jurisdiction of the Civil Court had filed an application with the request to stay the proceedings in view of the arbitration clause is the agreement. The learned High Court after having taken into consideration the implication of section 34 of the Arbitration Act and the object for which respondent No.2 was impleaded as party observed as under:-- "

6. Respondent No.2 has been impleaded as a defendant to the suit merely on the allegation that respondent No.1 used to file false, forged and fictitious tax returns through the active connivance and collusion of respondent No.2 but otherwise no decree has been sought, in the prayer of the plaint, against respondent No.2 and therefore, I am of the view that the Appellate Court has correctly held that respondent No.2 is not a necessary party to the suit and has correctly followed the rule of law laid down in Amanullah Piracha and another v. Mrs. Tasneem Baig and another 1988 MLD 1552 (DB) wherein it has been held that where a party who has been arrayed as a defendant in the suit and is riot a necessary party and is also not privy to arbitration agreement, then the provisions of section 34 of the Arbitration Act can be pressed upon." Because the application has been moved for staying the proceedings under section 34 of the Arbitration Act, therefore, notwithstanding the fact whether respondent No.2 was a party or not in terms of arbitration clause in the partnership agreement read with section 34 of the Arbitration Act, the suit has been rightly stayed and no exception can be taken against such order, therefore, the argument raised by the learned counsel for the petitioners has no substance. As such for the foregoing reasons, we see no force in this petition, therefore, the same is dismissed and leave is refused. Reference to the above effect can also be made to Amanullah Piracha and another v. Mrs. Tasneem Baig and another (1988 MLD 1552).

11. Adverting to the contention unanimously raised by learned counsel for the petitioner and learned amicus curiae that the claim agitated in the plaint is since not covered by the arbitration clause, so it cannot be referred to arbitrator; suffice to observe that before delving into this aspect, it would be advantageous to examine the arbitration clause embodied in the agreement, which reads as under:-

16. ARBITRATION That if any dispute arises between the partners in respect of the conduct of the business of the firm, or in respect of interpretation, operation or enforcement of any of the terms or conditions of this deed or in respect of any other matter, clause or any word whatsoever not herein otherwise provided for, the same shall be referred for adjudication to an Arbitrator or Arbitrators nominated by the partners, decision of whom shall be final and binding upon all the partners. (Underlining supplied for emphasis) Arbitration clause clearly postulates that it can be invoked if any dispute arose between the parties in respect of conduct of the business of the firm or in respect of any other matter. From the perusal of plaint itself it clearly reveals that the reason for institution of the suit was the complained misappropriation and mismanagement of the partners i.e. respondents Nos.1 to 3 in the firm business and even three cheques, which were dishonoured, issued by the petitioner in the course of business to respondent No.1, though asserted that these were issued as surety/security. The dispute canvassed in the suit is thus clearly arising out of the business and it is duly covered by the arbitration clause, so this contention for all practical purposes is misconceived.

12. In the above backdrop, it is observed that in the case of Shell Pakistan Ltd. through Attorney supra cause of action pleaded in the suit was rested solely on dishonoured cheques and it was adjudged that it is an independent cause of action not related to dispute under arbitration agreement whereas judgment in the case of Qatar Lubricants Company W.L.L. ( QALCO ) and another supra when examined it is noticed that the facts in the said case were founded on entirely different premises and as such ratio laid down therein is not applicable to the case at hand. Moreover the principles laid down in other cases referred by learned counsel as well as learned amicus curiae when examined on the touchstone of the facts and issues involved, there can be no second opinion that those are clearly distinguishable on various counts.

13. The petitioner is seeking writ of certiorari in terms of Article 199(1)(a)(ii) of the Constitution of the Islamic Republic of Pakistan, 1973. After having glimpse of the above referred provision of law, it can safely be observed that the scope of interference is very limited. The petitioner, in order to persuade the Court to exercise the extraordinary jurisdiction, has to demonstrate that the order or judgment under assailance is without lawful authority and suffers with material illegalities. The petitioner has failed to point out any perversity or material irregularity, warranting exercise of constitutional jurisdiction by this Court. Reliance in this regard can be placed on Amjad Khan v. Muhammad Irshad (deceased) through LRs (2020 SCMR 2155) and Chief Executive MEPCO and others v. Muhammad Fazil and others (2019 SCMR 919).

14. The nutshell of above discussion is that this petition is bereft of any merits, as such it is accordingly dismissed with no order as to costs. MH/R-4/L Petition dismissed.