P L D 2011 Karachi 571 (PLP)

C.M.A. No.9463 of 2005: MUNIB AKHTAR, J.

The present application has been filed under section 34 of the Arbitration Act, 1940 by the defendant No.1, seeking a stay of the suit on the ground that there is an arbitration agreement between the parties and that the dispute should accordingly be referred to arbitration in terms thereof.

2. The facts as presently relevant are as follows. The plaintiff was at the relevant time engaged in the business of providing medical care services on contract basis to the employees of different companies under the name and style of Messrs H.M. Associates. The plaintiff entered into two contracts, both dated 17-11-2003, with the defendant No.1, which is the local subsidiary of a well- known multinational engineering company. By those contracts, the plaintiff agreed to supply medicines on a daily basis to the employees of the defendant No.1 and also to provide comprehensive medical consultation and related paramedical staff services. Both the contracts contained a clause for the resolution of disputes (being clause 5.1 in both agreements) which was in the following terms:-- "5.1. In case of dispute or difference between the parties arising during the period of the job contract in connection with any of the terms and conditions of this job contract, the same shall be referred to the MD of Siemens Pakistan whose decision shall be final and binding' on both the parties." It is common ground between the parties that the foregoing clause is an arbitration agreement, which has been entered into between the parties along with the main agreements noted above. According to the plaintiff, on or about 23-6-2004, a series of events, which are narrated in detail in paras.7 to 10 of the plaint took place, and which resulted in termination of the two contracts by the defendant No.1 by means of its letter dated 23-6-2004. It is to be noted that both the contracts provided, in their respective termination clauses, that the contracts could be terminated at any time by either party giving one month prior notice in writing, and the notice as aforesaid was purportedly issued by the defendant No.1 pursuant to this provision. The grievance of the plaintiff is that the aforesaid termination was unlawful, which has resulted in loss, damage and injury to the plaintiff in terms as quantified in para. 16 of the plaint, and as a result thereof, the present suit has been filed.

3. Learned counsel for defendant No.1, relying on the arbitration agreement in clause 5.1 as noted above, submitted that the suit was liable to be stayed 'in terms of section 34 of the Arbitration Act. Learned counsel submitted that the cause of action as alleged in the plaint arose directly out of contracts in question and was fully covered by the arbitration agreement and therefore the suit was liable to be stayed.

4. Learned counsel for the plaintiff opposed the stay of the suit under section

34. He drew attention to the language of clause 5.1 and emphasized that as provided therein, the dispute that could be referred to arbitration had to arise "during the period of the job contract in connection with any of the terms and conditions of this job contract" and contended that the scope of the arbitration agreement was limited in nature to a dispute during the period of the contract itself. He submitted that the grievance of the plaintiff on the other hand was in relation to the unlawful termination of the contracts by the defendant No.1 and the consequences that flowed from such unlawful termination. Thus, according to him the dispute disclosed in the plaint was not covered by the arbitration agreement and was outside its ambit. He submitted that an arbitration clause had to be strictly construed and the present clause, on its proper interpretation, did not cover the dispute between the parties. Learned counsel for the plaintiff also submitted that the application under section 34 did not specify the exact dispute between the parties that was to be referred to arbitration and he submitted that this was a fatal defect, and the application was liable to be dismissed on this ground alone. Learned counsel further submitted in the alternative that it was well recognized that there were certain exceptions to the suit being stayed under section 34 and even if the dispute came within the arbitration agreement but fell within those exceptions, the suit was not liable to be stayed. He contended that the present dispute in any case came within the exceptions as aforesaid and that therefore the suit was not liable to be stayed. His particular grievance in this context was that the arbitration agreement referred the matter to the managing director of the defendant No.1 and since the dispute was between the plaintiff on the one hand and the defendant No.1 on the other the result of any arbitration proceedings was a foregone conclusion.

5. Learned counsel for the defendant No.1, exercising his right of reply, submitted that the arbitration agreement between the parties was clear and even if (which he denied) the plaintiff may have had some grievances against the then holder of the office of managing director, that did not preclude the present incumbent of the office from proceeding with the arbitration. He further submitted that in any case it was a settled proposition that if a party had agreed to arbitration before an officer or director of the other party, that in and of itself did not nullify the arbitration agreement. Both learned counsel also placed reliance on certain case-law, which is considered below.

6. I have heard learned counsel for the parties and have examined the record with their assistance and have considered 'the case law relied upon by them. I first take up the preliminary objection taken by learned counsel for the plaintiff that since the defendant No.1 has not specifically identified the dispute to be referred to arbitration in the application, the said applicati6n is liable to be dismissed as such. In support of this contention, learned counsel for plaintiff placed reliance on two decisions of this Court, being Cosmopolitan Development Co. v. So Di-Me Spa and another 1987 MLD 2832 and Syed Arshad Ali v. Sarwat Ali Abbasi 1988 CLC 1350; NLR 1989 UC 524, and also a decision of the Lahore High Court reported as Novelty Cinema v. Firdaus Films and another PLD 1958' Lahore

208. Both the decisions of this Court relied upon are single Bench decisions, as is the decision of the Lahore High Court (which in fact has been relied on in the two decisions of this Court). The decision of the Lahore High Court is not binding on me, nor indeed are the single Bench decisions of this Court binding as such. It is of course a well-recognized convention that single Bench decisions, especially if of some years' standing, are of high persuasive value and ought not to be lightly departed from by subsequent single Benches of that court. However, this convention has not (at least yet) hardened into a rule of law, and in appropriate circumstances, a subsequent single Bench made well depart from the view that was taken earlier. It appears to me, with the utmost respect, that another view is possible, different from that which earlier found favour. While it would be desirable for a defendant moving an application under section 34 to specify with some exactitude the dispute that ought to be referred to arbitration, a failure to do so should not be regarded as fatal. The reason for this, in my respectful view, is twofold. Firstly, it is well settled that if parties have chosen to refer their disputes to a domestic forum of their own choice, that choice should be honored to the maximum extent possible, and the parties should be directed to have the dispute resolved by that forum (i.e., by arbitration). To simply dismiss an application for stay of suit on a rather technical ground may result in the court being forced to proceed with 'a dispute that ought to have been arbitrated. Secondly, even if the court is put to some inconveniency as a result of the defendant's failure to specify the dispute that ought to have been referred to arbitration, that inconvenience does not create an insurmountable burden. The reason is that the plaint must, after all, disclose a cause of action, and the defendant's objection that the matter be referred to arbitration can only be in respect of the cause of action disclosed in the plaint, either in whole or in part. It is normally not difficult to extract the cause of action from the contents of the plaint and thus, in effect, to identify the dispute that ought to be referred to arbitration. It is also to be noted that section 34 does not, as such, require that the defendant must specify the dispute in his application. It follows therefore that in my respectful view, the failure to exactly identify the dispute in the application under section 34 ought not to be regarded as fatal. Finally, and in passing, I may note that the two single Bench decisions of this Court relied upon by learned counsel for plaintiff, though of some years' standing, fell from the pen of the same learned Judge (as his lordship then was), and appear to have been handed down within a week of each other. These decisions can therefore be regarded as, in effect, but a single view, and not a sustained view taken over a considerable period by this Court. I would respectfully adopt the alternative view that is possible in the matter. Resultantly, the preliminary objection raised by learned counsel for the plaintiff cannot be accepted.

7. The more substantive objection taken by learned Counsel for the plaintiff is that the dispute disclosed in the plaint does not at all come within the scope of the arbitration agreement/clause. In Port Qasim Authority v. Al-Ghurair Group of Companies and others PLD 1997 Karachi 636, a learned Division Bench of this Court cited with approval certain observations made by the Supreme Court of India in Renusagar Power Co. Ltd v. General Electric Company and another AIR 1985 SC 1156 (which appear also to have been referred to by our Supreme Court in Lahore Stock Exchange v. Federick J. Whyte Group Pakistan Ltd. PLD 1990 SC 48) where it was held that words such as "arising out of', "under", etc. were words of wide amplitude and had to be construed and applied accordingly. Normally, these words are used in direct juxtaposition to the word "contract" in the relevant arbitration agreement/clause, and have therefore been held to apply to (all matters or disputes regarding the main contract, including its termination and even its validity. In the present case however, as pointed out by the learned counsel for the plaintiff, the word "arising" is followed by the words "during the period of the job contract in connection with any of the terms and conditions of this job contract". It is of course well settled that an arbitration clause embedded in an agreement is an independent agreement in its own right, and has to be interpreted and applied accordingly. In my view, the words used in the arbitration clause presently being considered are somewhat different from those used normally, and limit the scope of the arbitration clause in a manner that is not usually the case. Having examined clause 5.1, which is the arbitration agreement between the parties, I am of the view that its scope is limited to a dispute arising during the course of the agreement and not otherwise. In the present case, the dispute raised in the plaint relates to the allegedly unlawful termination of the contract, and damages are sought on account of the loss and injury allegedly suffered by the plaintiff on account of such unlawful termination. This is clear from a perusal of the relevant paras. of the plaint, being paras.7 to 10 referred to above. In my view, therefore, the dispute as disclosed in the plaint cannot be regarded as coming within the scope of the arbitration clause. It is to be noted that some of the claims (the details of which are set forth in para.16 of the plaint) may come within the scope of the arbitration clause. These claims are however, only a small portion of the total claim put forward by the plaintiff. The staying of a suit under section 34 is discretionary and not j mandatory. If the portion of the claim that falls within the scope of the arbitration clause is small as compared to the overall claim, and essentially the same evidence (or at least overlapping evidence) would have to be led to establish both, then the suit ought not to be stayed, even with regard to the claim that may be referable to arbitration. That appears to be the position at hand.

8. Insofar as the objection taken by learned counsel for the plaintiff that since the arbitration is to be before the managing director of the defendant No.1, the result is a forgone conclusion, I am not at all satisfied that there is any substance to this objection. In fact, what the plaintiff claims is that the arbitrator (i.e., the managing director) will be biased against the plaintiff, or at least biased in favour of the defendant No.1. However, as pointed out by learned counsel for the defendant No.1, it is well settled that the mere fact that an officer or director of one party has been chosen as the arbitrator is no ground in and of itself not to refer the parties to arbitration. Secondly, the arbitrator selected in the present case is by designation and not by name, i.e., is the holder for the time being of the office of managing director. The question of bias, if any, would arise in respect of the acts or omission of an individual, and allegations of bias cannot be made against an office as such. Nothing has been brought on the record that would establish that there would be a bias against the plaintiff and/or in favour of the defendant No.1 in any manner.

9. Learned counsel for the plaintiff also alleged that the actions of the defendant No.1 were tainted by fraud and therefore for that reason as well, the matter could not be referred to arbitration. In this regard, learned counsel referred in particular to paras.7 and 8 of the plaint. However, in my view, a perusal of these paragraphs show that they do not make out a case of fraud and therefore, a case has not been made out for applying the exceptions to the rule that the parties must, in general, be held to their bargain if they have agreed to refer their dispute to arbitration.

10. In conclusion, since I have of the view that the principal dispute (if not the whole of it) as disclosed in the plaint falls outside the scope of the arbitration agreement, i.e., clause 5.1 noted above, the present application must in the end fail and is therefore hereby dismissed. The defendants may file their written statements within a period of eight weeks from the date of the announcement of this order. S.A.K./S-82/K??????????????????????????????????????????????????????????????????????????????????? Application dismissed.