2013 PLP 885 (CLD)

SHAHID WAHEED, J.

Challenge in this appeal is to order dated 15-3-2012 whereby the appellant's application under section 34 of the Arbitration Act, 1940 was dismissed.

2. Briefly the facts giving rise to this appeal are that on 14-6-2007 a lease deed/agreement to lease land for setting up and operation of CNG-cum-LPG-cum-Petrol Station was executed between the appellant and respondent. Thereafter, some differences arose between the parties and resultantly on 27-9-2010 the respondent instituted a suit for recovery of rent and damages amounting to Rs.11,075,000 against the appellant. In response to summons, the appellant entered appearance before the learned trial Court. On 30-7-2011 the appellant filed an application under Order VII, Rule 11, C.P.C. for rejection of the plaint. The respondents resisted this application by filing a reply. Subsequently, the appellant filed an application under section 34 of the Arbitration Act, 1940 for staying proceedings of the suit. The respondents also contested this application by filing a reply. The learned trial Court after affording opportunity of hearing to the parties to the suit, dismissed the above said two applications vide consolidated order dated 15-3-2012. Hence, this appeal.

3. Learned counsel for the appellant submits that in view of the agreement which contains an arbitration clause, proceedings before the learned trial Court were liable to be stayed; that filing of application under Order VII, Rule 11, C.P.C. does not amount to taking further steps in proceedings; and, that the learned trial Court without appreciating the record erroneously dismissed the application. In support of his contentions the learned counsel for the appellant made reference to the cases of Director Housing, A.G's. Branch, Rawalpindi v. Messrs Makhdum Consultants Engineers and Architects (1997 SCMR 988), ACB (Pvt.) Ltd. v. Ups Worldwide Forwarding Inc. (2007 MLD 1520), Pakistan Telecommunication Corporation Ltd. v. Dr. Waqar Hussain Chaudhary (PLD 2007 Lahore 678), Aftab Khalil and 5 others v. Shaukat Hussain (2008 CLC 1592) and Mrs. Rubby Hameedullah and 3 others v. Dr. Arif and 4 others (2010 YLR 3331). Conversely, the learned counsel for the respondents vehemently opposes this appeal and submits that the learned trial Court rightly rejected the application under section 34 of the Arbitration Act, 1940. Learned counsel for the respondent further submits that by filing the application under Order VII, Rule 11, C.P.C., the appellant took steps in the proceedings and, therefore, application under section 34 of the Arbitration Act could not be filed.

4. I have heard learned counsel for the parties and perused the record.

5. It is settled principle of law that when a person applies under section 34 of the Arbitration Act, 1940 the following condition must be fulfilled: (i) The proceedings must have commenced by a party to an arbitration agreement against any other party to the agreement; (ii) The legal proceedings, which is sought to be stayed must be in respect of a matter agreed to be referred; (iii) The applicant for stay must be a party to the legal proceeding; (iv) The applicant must have taken no steps in the proceeding after appearance. (v) The applicant must satisfy that only the applicant was at the time when the proceedings were commenced, ready and willing to do everything necessary for the proper conduct of the arbitration; and (vi) The Court must also be satisfied that there was no sufficient reasons why the matter should not be referred to arbitration. Unless the Court is satisfied on all the above said conditions, it cannot grant stay order, In this regard reference may be made to the cases of Industrija Masina-i-Traktora v. Bank of Omen Ltd. 1992 MLD 2245, M/s. Cepcon (Pvt.) Ltd. v. Messrs Rizwan Builders Ltd. (1990 MLD 2027, Hyderabad Municipal Corporation v. Messrs Columbia Enterprises (1990 CLC 47), Middle East Trading Co. v. The New National Mills Ltd. (AIR 1960 Bombay 292) and Vaisyaraju Subramanyam Raju v. Vaisyaraju Chandramauly Raju and others (AIR 1987 Ori. 23). In the instant case admittedly an agreement dated 14-6-2007 containing an arbitration clause was executed between the parties. The respondents in the plaint have alleged that the appellant breached the terms and conditions of the above said agreement and this violation gave rise to a cause of action for instituting a suit for recovery of rent and damages amounting to Rs.11,075,

000. The respondents appeared before the learned trial Court and firstly filed an application under Order VII, Rule 11, C.P.C. for rejection of plaint and thereafter filed an application under section 34 of the Arbitration Act, 1940 for staying the proceedings of the suit. Now, a question arises as to whether after filing an application under Order VII, Rule 11, C.P.C., the appellant could file an application under section 34 of the Arbitration Act, 1940 for staying the proceedings in the suit. The criterion to decide whether an act constitute step in the proceedings is (a) whether an application was made to the court on summons or orally; and, (b) whether the act was such as would indicate that the party was acquiescing in the method adopted by the other side of having the dispute decided by the court. This view finds support from The Province of the Punjab v. Messrs Irfan & Co. (PLD 1956 Lahore 442), New Bengal Shipping Company v. Eric Lancaster Stump (PLD 1952 Dacca 22) and Subal Chandra Bhur v. Md. Ibrahim and another (AIR 1943 Calcutta 484). In other words the intention of the statute is that the defendant who wants to take advantage of an arbitration clause must without any ado and before submitting to the jurisdiction of the Court inform the Court in unequivocal terms that he is going to insist upon the implementation of the arbitration clause. A defendant disentitles himself to the protection of section 34 of the Arbitration Act, 1940 if he does not take this stand before filing a written statement. The situation is also not different if he takes any other steps in the proceedings before taking the objection. In this regard I find fortification from Uzin Export Import Enterprises v. M. Iftikhar & Company Ltd. (PLD 1986 Karachi 1), G.M. Pfaff A.G. v. Sartaj Engineering Co. Ltd., Lahore and 3 others (PLD 1970 Lahore 184), N.-W.F.P. through Collector, Mardan and 2 others v. Faiz Muhammad (PLD 1984 Peshawar 180) and Pakistan International Airlines Corporation v. Messrs Pak Saaf Dry Cleaners (PLD 1981 SC 553). The facts of the instant case show that the appellant had taken the steps in proceedings. No reason has been assigned as to what were the circumstances which prevented the appellant from moving the application under section 34 of the Arbitration Act, 1940 at the earliest stage of the proceedings. It is not the case of the appellant that he had not received the copy of the plaint and he was unaware of the subject-matter of the suit. In fact, the application moved by the appellant under Order VII, Rule 11, C.P.C. wherein the appellant had submitted that the plaint of the respondent be rejected is "a step further" in the proceedings. The learned trial Court, therefore, rightly dismissed the application of the appellant filed under section 34 of the Arbitration Act, 1940.

6. In view of above this appeal lacks merit and is dismissed with no order as to cost. KMZ/S-121/L Appeal dismissed.