1992MLD926 (PLP)

This suit has been filed by the plaintiffs for recovery of Rs.14,15,20,984.83. The plaintiffs case is that they proposed to establish a new biscuit manufacturing plant at the Hub Chowk, District Lasbella capable of manufacturing three thousand tonnes of biscuit per annum operating for three hundred days on the basis of double shift operation per day and thus, through PICIC, two orders were placed with the defendants who guaranteed its equipments for a period of 12 months from the starting date of the plant or 18 months from the date of main shipment whichever first occurs in accordance with the terms agreed. The order of the plaintiffs was confirmed by the defendants and irrevocable letters of credit in favour of the defendants were opened. It is the case of the plaintiffs that the defendants had neglected and failed to comply with the terms and conditions of the contract entered into between the parties and the erection and start‑up of the plant was not completed as required and the defendants had committed breach of contract, thus the plaintiffs asked the PICIC to encash the performance bond but the PICIC requested the German Bank to extend the validity of the performance bond and in case the defendants hesitate to extend the validity of performance bond the bank was specifically instructed to invoke the same within its existing validity period but the bank did not comply with the instructions and extended the validity only upto 31‑10‑19$

7. It is also the case of the plaintiffs that the plant had the basic design defects and, therefore, had to be moved, altered and re‑engineered and as the plaintiffs were suffering tremendous amount of losses and damages, it was decided that the plant should be started with a partial capacity from 1‑1‑1988 and the plant continued to work under capacity from 1‑1‑1988 and 18‑7‑1988. The engineers and technicians of the defendants carried out the necessary corrections and modifications and they tried to remove basic designs, defects and errors which took considerable time with a result that the commercial production and operation of the full capacity of the plant was delayed for a period of two orders. The plaintiffs thereafter called upon the defendants to pay to the plaintiffs the said amount of damages and losses sustained by them but the defendants neglected and failed to pay the same and, therefore, the suit was filed. The defendants were served and have moved an application under section 34 of the Arbitration Act praying for stay of the proceedings in the suit and a direction to the parties to refer their dispute to arbitration. The plaintiffs have contested this application and have filed their counter‑affidavit. I have heard the learned counsel for the parties. The case of the defendants is that the contract is governed under the "general business conditions" which have been annexed to the "order confirmation" dated 22‑4‑1986 sent by the defendants to the plaintiffs. Learned counsel for the plaintiffs has submitted that this order confirmation very specifically states "we thank you for your order which will supply in accordance with our enclosed general business conditions and confirmed it as follows". He has submitted a photostat copy of the "standard conditions of business" during the course of arguments which in clause N(2) provides: "All disputes arising from this agreement will be settled in accordance with the rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the Rules. The arbitration shall take place in Paris. If arbitration is not yet pending, we are entitled to appeal to the ordinary Court competent for our place of business or for the customer's instead of going to arbitration." According to this provision all the disputes arising between parties are to be referred to arbitration under the rules of International Chamber of Commerce whereas the arbitration is to take place in Paris. The learned counsel has? submitted that in view of this provisions it can be said that there is an agreement between the parties to refer their dispute to arbitration as the plaintiffs have not refused to accept the said conditions as mentioned in the aforesaid "order confirmation". The learned counsel has thus, submitted that in these circumstances this is an agreement binding on the plaintiffs and they have to submit to the foreign. arbitration which is to take place at Paris. In support of his contention the learned counsel for the defendants has relied on the case of Haji Soomar Haji Hajjan v. Muhammad Amin Muhammad Bashir Ltd. 1981 SCMR

129. In this case their Lordships have been pleased to hold that in cases which are covered by arbitration clause Courts are generally inclined to stay the suit on application by a party against whom fraud is alleged and to allow the dispute to be settled through arbitration. It is further held in this case that where the parties to an agreement expressly choose through an arbitration clause, a forum other than a Court of law for settlement of their dispute then neither of them should normally be allowed to avoid that forum. The learned counsel for the defendants has also placed reliance on the case reported in PLD 1970 SC 373 wherein also their Lordships were pleased to hold that where a clause in a contract provided for determination of all disputes arising between the parties to contract by foreign tribunal, it mutt be construed as a submission clause for arbitration. The next case relied upon by the learned counsel for the defendants is that of Messrs Aslo Marines Ltd. v. M.T. Magda and another PLD 1985 Karachi 745 wherein a learned Single Judge of this Court had observed that burden of proof to satisfy the Court as to justification for staying the proceedings where clause in agreement provides for foreign jurisdiction, would he on the person wishing to alter the jurisdiction of Court and wishing to overcome the said clause. It was also held m this case that such clause in agreement and the convenience of parties and witnesses were also to be taken into consideration while exercising discretion under section 34 of the Arbitration Act. The last case referred to by the learned counsel for the defendants is that of Island Textile Mills Ltd., Karachi v. V/O Techno‑Expert and another 1979 CLC 307 wherein the learned Single Judge of this Court has held that such a clause requiting recourse to arbitration would exclude the jurisdiction of Court and that any other view would render arbitration clause nugatory and redundant. In the same case it was further held that where such contract was entered into and it was within the knowledge of the plaintiffs that the reference to arbitration would involve expenses and inconvenience, then these grounds would not be available to defeat the arbitration clause. I have given anxious consideration to the above submissions of the learned counsel for the defendants. There can be no cavil about propositions of law as laid down in the above‑cited cases but the basic question which requires consideration is as to what is the agreement of arbitration. Where such clause is provided in contract it means that the party then submits to the arbitration and of course there can be no two opinions about it but the point for consideration would be whether the party has submitted to such condition? In section 2(a) of the Arbitration Act the 'arbitration agreement" has been defined as under:‑‑‑ . "2(a) "arbitration agreement' means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not." In view of this definition it is incumbent upon the present defendants to show that such an agreement existed between the parties. It is only if such agreement existed between the parties then the jurisdiction under section 34 of the Arbitration could be exercised and the proceedings in the suit could not be stayed in absence of such agreement. The provisions of Arbitration Act cannot be imposed upon an unwilling party. The contention of the learned counsel for the defendants is that this agreement is impliedly entered into between the parties because the "order confirmation" dated 22‑4‑1986 sent by the defendants to the plaintiffs mentions that the supply will be in accordance with the general business conditions but there is nothing on the record to show that the plaintiffs expressly agreed to such conditions as amongst others provided for reference to arbitration under the rules of International Chambers of Commerce to be held at Paris. As pointed out above the definition of arbitration agreement requires that such agreement had to be a specific agreement in writing. In the instant case nothing has been brought on record to show that the plaintiffs had even expressed their intention to abide by or agreed to such clause. The learned counsel for the plaintiffs has referred to the case of Messrs Cosmopolitan Development Company v. Messrs SO DI ME. S.PA. and another 1987 MLD 2832. In this case a learned Single Judge of this Court was pleased to observe as under:‑‑‑ "It is well‑established principle of law that where arbitration clause from any other agreement is required to be lifted and incorporated in any other agreement, then it should specifically and clearly be so stated. Merely by reference to the terms of the previous agreement arbitration clause does not automatically stand incorporated in the fresh agreement." In the same case it was further observed by his Lordship as under:‑‑‑ "Secondly, assuming for the sake of arguments that there is an agreement between the parties, then it provides for a foreign arbitration at London. The consignment was to be shipped from Karachi to Naples. The port of shipment and. the port of discharge is not in London. The goods have not been shipped at all. Therefore, the entire, evidence regarding contract shall be available in Pakistan. In' these circumstances, in view of the principle laid down in PLD 1985 Kar. 613 and PLD 1986 Kar. 138 the dispute cannot be referred to arbitration, and the suit cannot be stayed. The application is dismissed." In the present case also, Paris, where the arbitration is required to be held is neither the port‑of shipment nor the port of landing. In these circumstances, I am of the view that the case of Messrs Cosmopolitan Development Company v. Messrs SO DI. ME: S.PA. and another is applicable to the present case with full force. The learned counsel for the plaintiffs has then referred to the case of Avari Hotels Limited v. Hilton International Company PLD 1985 Kar. 425 wherein a Division Bench of this Court has been pleased to hold that: "It would now appear that the parties on their own volition had chosen a different forum for arbitration in relation to their disputes, such forum was situated outside Pakistan, the body that was designated for the purpose of arbitration was also from a foreign country, such body has its own rules, concerning arbitrations before it, and even such rules in several matters make striking departures from the Arbitration, Act and the body of rules framed there under. For the above reasons, it would seem that section 47 of the Arbitration Act would exclude such an arbitration because the arbitration contemplated by the parties was not an arbitration under the Arbitration Act of 1940. Since the Arbitration Act itself did not apply section 34 of the Arbitration Act would also not apply." The learned counsel for the plaintiffs has then submitted that Industrial Policy Statement issued by the Government of Pakistan in June 1984 in conditions Nos. 10 and 11 at page 26 of the said policy under the heading of "Guide Lines for Agreement for Transfer of Technology". "(10)Agreement should be under the Pakistan law. (11) Arbitration should be held in Pakistan under the Pakistan law." He has also` placed reliance on a judgment given by Division Bench of ,this Court in High Court Appeal No.162 of 1989 announced on 16‑9‑1991. In view .of the above discussion I find no force in the present application under section 34 of the Arbitration Act which is accordingly dismissed. The above are the reasons for the short order announced on 19‑1‑1992. AA./D‑99/K??????????????????????????????????????????????????????????????????????????? Application dismissed.