2007 PLP 1424 (MLD)

MUSHIR ALAM, J.

Through instant suit under Summary Chapter (Order XXXVII, C.P.C.) Plaintiff seeks judgment and Decree in the sum of Rs.16,275,437.05 with markup at the State Bank rate with quarterly rest and further decree in the sum of US$ 286,918.11.

2. Defendant has filed application C.M.A. No. 3288 of 2001 under section 34 of the Arbitration Act, 1940 and C.M.A. No. 3289 of 2001 under Order XXXVII Rule, 3 C.P.C.

3. Case in brief' appears to be that the plaintiff entered into an agreement with the defendant for the supply of fuel both within and outside Pakistan for its Jet Airliners. The supply was to be made on 7 days credit secured through guarantees. It is the case of the plaintiff that, fuel was supplied to the defendant against various delivery invoices. The defendant in settlement of the amount used to make payment through cheques. It is the case of the plaintiff that, supplies were made in Pakistan on credit valued at Rs.15,473,988 against the very supplies defendant issued various cheques as tabulated in Annexure "Y/1" to the plaint available at page 133 of the file. Ali the cheques appear to have been stopped for payment by the drawer. Cheques have also been produced and are available at pages 133 to 849 of the Court file. It seems that the plaintiff claims that, the fuel was supplied to the defendant's carrier abroad as well through associate companies as per agreement. The amount, of the fuel supplied abroad in the sum of U.S$ 271461, which were also paid through cheques in foreign currency in the name of their associated company, which cheques were also dishonoured or stopped for payment. Tabulation of such dishonoured cheques is placed on record as Annexure Z-1 available at page 851 of the file.

4. Plaintiff has claimed recovery of the amount of dishonoured cheque through instant suit under the summary chapter.

5. Defendant has filed C.M.A. No. 3288 of 2001 under section 34 of the Arbitration Act on 25-4-2001 seeking stay of the suit and for reference to the arbitration in terms of arbitration clause 25 contained in the agreement.

6. On 26-4-2001 another application being C.M.A. No. 3289 of 2001 under Order XXXVII Rules 2 and 3 C.P.C. seeking unconditional leave to defend has been filed.

7. At the very outset, learned counsel for the defendant Mr. Yawar Farooqui was required to satisfy the Court as to which of the application in the order of the priority is to be taken up first.

8. Mr. Yawar, learned counsel for the defendant contended that, the plaintiff has not denied the arbitration clause. They have only surmised that the defendant is not in a position to pay the arbitration fees and instant application has been filed as delaying tactics, which defendant would also employ in arbitration proceeding as well. It was contended that, it is none of the plaintiff's business to make such surmise. According to him, the defendant is very much willing and ready to proceed with arbitration. Relying on the case of Messrs Cepcon (Pvt.) v. Messrs Rizwan Builders Ltd. 1990 MLD 2027, he submits that, where the suit is founded on contract containing arbitration clause, then application under section 34 shall have precedence over the application under Order XXXVII, C.P.C. At this juncture, Ms. Sana Minhas punctuated that, the said judgment was set aside by a Division Bench decision rendered at a later date reported as Cotton Export Corporation v. Asif Cotton Ginners 1995 CLC 1024.

9. Ms. Sana Minhas, rebutting the argument of Mr. Yawar Farooqui contends that the suit is not based on the agreement between the parties but on cheques issued by the defendant, which have been dishonoured. According to the learned counsel, neither locally dishonoured cheques detailed at pages 133 to 151 of the file nor the foreign dishonoured cheques tabulated at pages 851 to 855 of the file have been denied by the defendant.

10. It is asserted that, for the fuel supplied in Pakistan payment in Pak Rupee was to be made and payment in U.S. Dollar for the delivery of fuel made out of Pakistan. She has drawn my attention to para. 2 of the counter affidavit available at page 115 of the Part II of the file to assert that, fuel supplied by associated companies of the plaintiff has not been denied. No affidavit-in-rejoinder in rebuttal has been filed, therefore assertion contained in the counter affidavit is deemed to be correct. She has also drawn my attention to the agreement starting from page 33 (relevant page 71) clause 27 thereof, "Seller". It is defined as "any other Shell Associate as hereinafter defined". "Shell Associate" is defined as

(a) N.V. Koninklijke Nederlandache Maatachappi; (b) The "Shell" Transport and Trading Company Plc; (c) Any company (whether registered) which for the time being is directly or indirectly affiliated with either or both of the companies mentioned in sub-paragraph (a) or (b) of this definition.

11. It was therefore, contended that, cheques drawn in favour of the any other Shell. Associate were against the supplies made by them, cheques drawn in their favour are for the benefit of the plaintiff, therefore, the plaintiff is entitled to bring an action for the recovery of such dishonoured cheques. In addition to the case referred to above, she has also referred to 2002 CLD

624. In the referred case, it was held that the suit founded on the instrument defined under summary chapter could not be stayed under section 34 of the Arbitration Act. 11A. Having heard the arguments of both the learned counsel, perused the record and examined the case laws cited at bar.

12. I have examined the plaint. Indeed essentially relationship between the parties is governed under the agreement, dated 1-10-1995. Admittedly, the agreement contains arbitration clause 25 thereof. However, the suit itself is not founded on any controversy covered by the arbitration clause. Claim in suit is based on outstanding amount covered by dishonoured cheques detailed in Annexure "Y-1" and "Z-1".

13. Case of Cotton Export Corporation v. Asif Cotton Dinners 1995 CLC 1024 was founded on Promissory Note under summary chapter, application wider section 34 was filed. It was held that, for the purposes of deciding application under section 34 of the Arbitration Act, pleadings in suit are to be looked into and not the application itself. It was further helot that the suit is based on independent cause of action based on. Promissory Mote and not relates to dispute under arbitration agreement. The application wider section 34 of the Arbitration Act was dismissed. Similar rule of prudence was followed in another case reported as Pioneer Cables Ltd. v. Saadi Cement Ltd. 1999 CLC 1841, similar view also echoed in Mst. Suriya Waseem Usmani v. L&M International (Pvt.) Ltd. 2002 CLD 624.

14. In view of the stated legal position plaint in suit in hand was examined. Pleading is repeated with series of event of issuance of local currency and foreign currency cheques and dishonourment thereof. Under circumstances I am bound to follow the dicta laid down in the case reported as Cotton Export Corporation v. Asif Cotton Dinners 1995 CLC 1024 followed in Pioneer Cables Ltd. v. Sandi Cement Ltd. 1999 CLC 1841. I am of the opinion that, no dispute of the nature claimed by the defendant in his application under section 34 of the Arbitration Act has arisen. Suit is simply founded on dishonoured cheques, therefore, the application under section 34 of the Arbitration Act is dismissed. Even otherwise, for deciding an application wider section 34 of the Arbitration Act one of the important consideration that weigh with the Court is the conduct of the defendant as well. It is incumbent on the defendant to press into service the application under section 34 ibid to show that the defendant before filing of the suit was and is ready and willing to arbitrate.

15. This bring me to C.M.A. No. 3289 of 2001 under Order XXXVII Rules, 2 and 3, C.P.C. read with section 151, C.P.C. for the grant of unconditional leave to appear and defend the suit moved by the defendant.

16. Facts forming the background of the listed application are already set-down in the narrative above. Dispute appears to be that, the plaintiff claims to have supplied fuel on the order and direction of the defendant both at Karachi and abroad directly or through its associated companies. Cheques were issued in favour of the plaintiff or its associates companies against the supplies trade, which cheques it is claimed were dishonoured. Detail of the dishonoured cheques is contained in Annexure `Y' is available at pages 133 to 151 representing cheques issued for the local supply within Pakistan. As regard detail of cheques issued by the defendant or to his order to the plaintiff or its associates company for the fuel supplied aboard are detailed in annexures Z-1 to Z-20 at pages 851 to 1215 of the file.

17. Defence as taken by the defendant in his leave to defend application with regard to the cheques referred to above need to be examined to appreciate the contention of the learned counsel for the defendants. First objection raised by Mr. Yawar, is that the cheques have been issued to Shell Markets (ME) Ltd., and the plaintiffs cannot claim any amount for the dishonoured cheque issued to a separate legal entity. Similar objections are in respect of the cheques to another concern namely Messrs Salzburg Shipping. According to the learned counsel plaintiff cannot be allowed to hold brief for the other legal entities. Another defence taken in the leave to defend application appears to be that, the cheques were not dishonoured but payment was stopped as the plaintiff failed to reconcile the accounts. It was next urged that, for the cheques payable abroad no action could be brought in Pakistan. It is further the case of the defendant that, the plaintiff is seized of the security of snore than double the amount encashable on reconciliation of the account. It is the case of the plaintiff that accounts were not reconciled therefore, payments of the cheques were stopped. It is further urged that, pursuant to MoU between the parties, the cheques were to be returned' and it was not returned. It is further the case of the defendant that, the plaintiffs themselves breached the credit facility of seven days, fuel was supplied despite alleged breached and the plaintiff is responsible for the same. It is further the case of the defendant that plaintiff ought to have invoked the arbitration.

19. Ms. Sara Minhas learned counsel for the plaintiff contended that, the cheques have not been disputed no discrepancy so far has been pointed out by the defendant. According to her, the amounts were paid through cheques for the supplies made by the associated company of plaintiff. Defendants have not disputed such fact in their rejoinder. It is urged that any concession extended by the plaintiff to accommodate the defendants to make the payment beyond the agreed time cannot be construed as wavier or acquiesce, defendant cannot take benefit of continued supply of the fuel without clearance of earlier liability. Ms. Sana vehemently urged that, the defendant ever carne forward to reconcile the account, it was urged that there was no discrepancies pointed out in any of the account filed along with the plaint. She has drawn my attention to a letter, dated 4-10-2000 (annexure `T' available at page 123 of the part 1 of the tile) whereby the defendant committed that all the payments due and payable to your goodselves will be cleared by 1200 hrs of 05/10" .

20. It was further contended by Ms. Sana that the defendants have nowhere denied that the cheques issued to the companies that supplied fuel abroad, were not the associated companies of the plaintiff.

21. I have heard the arguments and perused the record. Contract for the supply of fuel and manner of payment in local and foreign currency is not disputed.

22. As regard contention of Mr. Yawar that, the plaintiff cannot claim amount of cheques issued to Shell Markets (ME)-Ltd., and Messrs Salzburg Shipping. Admittedly the amount for the fuel supplied aboard were to be made in foreign currency for the benefit of the plaintiff, most of the cheques were issued in favour of the plaintiff. Defendants have even otherwise not disputed or denied that the cheques issued in favour of the companies are not the associated companies of the plaintiff as defined in the contract. Once the parties agreed for particular mode and manner of payment, then there is hardly any, justification to object to such mode and manner of payment. Objections of the defendant on such count are therefore not tenable:

23. Adverting to other defence that, the cheques were not dishonoured but payment was stopped as the plaintiff failed to reconcile the accounts. Mr. Yawar was not able to point out any discrepancy in the account and or detail of the cheques issued by or on the order of the defendants as detailed in tabulated statement referred to above. Just a bald and sweeping statement that accounts need reconciliation alone would not be sufficient to earn unconditional leave to defend on such count. Defendant has neither disputed any invoice nor any dishonoured cheque, nor showed that any amount of dishonoured cheque was paid subsequently.

24. As regard supply of fuel in breach of the credit facility of seven days is not worth consideration, once the defendant has not disputed the supply of the fuel though beyond credit facility would hardly provide any justification to deny payment for the fuel supplied.

25. I have thoroughly examined the record, what has persuaded me to grant leave is that the following cheques were :found to be at multiple pages. Detail of Cheque No. 531855 at pages:-- 159, 183, 231, 319, 367, 391, 415, 461, 485, 1065, 1093 & 1135. Detail of Cheque No. 017946 at pages:-- 511, 527, 539, 567, 577, 613, 623 & 1163. Detail of Cheque No. 531858 at pages:-- 165, 189, 265, 289, 323, 347, 373;; 397, 421, 467, 491, 1071, 1099 & 1141. Detail of Cheque No. 017944 at pages:-- 169, 193, 24.1, 293, 327, 351, 377, 401, 425, 471, 495, 1075, 1103 & 1145: Detail of Cheque No. 017945 at pages:-- 173, 197, 273, 297, 331, 355, 381, 405, 429, 475, 499, 1079, 1107 & 1149. There seems to be no explanation for such multiplicity except that same cheque might have been presented more than once for encashment, but each tune dishonoured. Though the defendant had not raised such ground, however in all fairness, in order to determine as to what is the actual amount of cheques that could be lawfully claimed by the plaintiff needs to be thrashed out. For the foregoing reasons defendant is granted leave to defend the suit, however subject to furnishing solvent surety to the extent of 25% of the amount claimed in suit. Let the surety be C furnished within 30 days from the date of this order. After the surety is furnished, written statement be filed within 15 days thereafter. M.H./5-42/K Leave granted.