P L D 1959 (W (PLP)

Sharifuddin for Applicant. Fazlur Rehman for Respondent. Dates of hearing : 23rd and 25th September 1959. The plaintiff has filed this application under section 20, Arbitration Act, 1940 and prayed that the agreement between the parties to refer their disputes to arbitration be ordered to be filed in Court and the disputes arising under it be referred to the arbitrators for decision in accordance with law. The facts of this case are very simple. The plaintiffs are a Steamship Company which own S. S. "Safina‑e‑Arab" besides; other ships. Mr. K. A. Dalpatadu defendant No. 2 in or about the second week of February 1957 approached the plaintiffs for its charter from‑Karachi. After some negotiations, on the 15th of February, 1957 the plaintiffs by a letter (Exh. 3/1) confirmed certain terms and conditions on which the defendants had agreed to charter the ship from Karachi to Jaffna and Colombo. These terms provided that about 3,000 tons of cargo would be loaded on the said ship, including 2,100 tons of gypsum in bags, Lay days were mentioned as ready 8th March, 1957/cancelling 31st March, 1957 and hire was fixed at Sh. 100 per ton of 20 cwts. payable within 24 hours of vessels' sailing at Colombo to the plaintiffs' agents. One of the terms namely clause (p) provided that all disputes, if any, will be settled by arbitration at Karachi. These terms were accepted by the defendant with minor modifications on the same day (Exh. 3/2) and these modifications are alleged to have been accepted by the plaintiffs in the same meeting. It is alleged that the plaintiffs thereafter approached the Controller of Shipping for licence to take out the ship outside Pakistan and also made arrangements to put the said ship in ready condition. In the second week of March they contacted defendant No. 2 at Karachi and informed him that the said ship was ready for voyage. But he did not pay any heed, which compelled the plaintiffs to contact him by telegram (Exh. 3/3), whereby they called upon him to perform their part of the contract within 24 hours of its receipt. Defendant No. 2 on the 15th of March, 1957 informed the plaintiffs by telegram (Exh. 3/4) that they had not chartered any vessel. The plaintiffs by telegram (Exh. 3/5) re‑affirmed their position and called upon the defendants to take steps to fulfil their part of the contract, but they failed to do so. On the 19th of March, 1957 the present application was filed for the reliefs mentioned above. The defendants have resisted this application on the grounds that there was no contract subsisting between the parties, that the application does not lie under section 20 of the Arbitration Act and that there was no agreement whatsoever to refer the matter in dispute to arbitration. The first question for consideration in this case is whether there was any agreement between the parties to refer the alleged disputes between them to arbitration. The plaintiffs have examined P. W. 1 Abdul Ahad Ansari (Exh. 3), Senior Commercial Assistant of their company, in support of their contentions. This witness has supported the plaintiffs in all respects. According to the statement of this witness negotiations for the charter of S. S. "Safina‑e‑Arab" were completed on the 15th of February, 1957 and the defendants agreed to charter it on the terms mentioned in Exh. 3/I and Exh. 3/2. According to this witness the modification suggested by defendant No. 2 in Exh. 3/2 was accepted by the plaintiff company and conveyed to defendant No. 2 in the same meeting. There is no rebuttal of this evidence and I have not the slightest doubt that the agreement between the parties was concluded by Exhs. 3/1 and 3/2. It was urged on behalf of the defendants that the agreement in question should have been incorporated in a formal document known as charter party agreement. But it is not supported by any evidence on the record. In law also it is not incumbent although the view of Carvena, the author of Carriage of Goods by Sea is that it is desirable that its terms should be incorporated in a formal document. In my view, like ordinary contracts, the terms of charter party agreement can also be spelt from the correspondence exchanged between the parties and the learned counsel for the defendants has failed to point out any provision of law which comes in its way and renders such contract as legally not binding. Mr. Fazlur Rehman, the learned counsel on behalf of the defendants further attacked this agreement inter alia on the grounds that the contract was of an executory nature and was to come in force after the plaintiffs had obtained the licence from the Shipping Controller, that it was illegal as the export of goods from Pakistan are prohibited and finally that the arbitration clause has disappeared from the scene after the defendants' repudiation of the contract in dispute. I will deal with the first and second points raised by the defendants together. The learned counsel for the defendants referred me to the last paragraph of Exh. 3/1, which runs as follows :‑ "This offer is subject to our getting necessary Licence and permission from the Government of Pakistan for which we do not anticipate any difficulty". and contended that unless the requisite licence was obtained the agreement between the parties was incomplete and could not be enforced. Before dealing with the legal aspects of the case, it is desirable to mention here that there is sufficient evidence to establish on the record that the plaintiffs had applied on 1‑3‑1957 to the Shipping Controller for a licence as required by law. This application, however, was withdrawn as the defendants had repudiated the contract and the plaintiffs approached the Con troller of Shipping for another licence which was granted to them on the 21st of March, 1957 for carrying other cargo from Karachi to Colombo and back of the capacity of 2,000 tons. There is no doubt in my mind that the plaintiffs have always been ready and willing to perform their part of the contract and had made arrangements to obtain the necessary licence before the date fixed for the voyage. Mr. Sharifuddin contended that the licence for taking out a ship on a voyage outside Pakistan is always issued in the nick of time and as there was no difficulty in getting the same, which in fact was obtained so far as the other charter party is concerned, this condition will not keep the contract incomplete. In my opinion the contention raised on behalf of the defendants is not of much substance. Under the Contract Act conditional contracts are also permissible, and the contract in question is one of those contracts. There is nothing on the record to suggest that the condition is of such a nature which shows that the agreement between the parties had not been finally concluded. In these days of control and licences, such terms are commonly incorporated in the agreement. The plaintiffs also made the offer subject to the getting of the licence from the Government of Pakistan, which was accepted on behalf of the defendant No. 1 by defendant No.

2. Defendant No. 1 accepted these terms and the moment other modifications suggested by them were accepted by the plaintiffs, there was a complete contract. But it was contingent and could be enforced unless rendered impossible. This view is supported by the observations of their Lordships of the Privy Council in Dalsukh M. Pancholi v. The Guarantee Life and Employment Insurance Co. Ltd. (A I R 1947 P C 182=P L D 1947 P C 185). In that case their Lordships considered a similar contract as con tingent but held that it could not be enforced as it became impossible to fulfil. Mr. Fazlur Rehman, the learned counsel for the defendants, next urged that the contract entered into between the parties was void in view of the provisions of sections 24 and 56 of the Contract Act. He argued that under section 3 Act XXXIX of 1950, export of goods from Pakistan was prohibited and there fore the contract was unlawful and could not be enforced. This contention also is devoid of all force. The learned counsel failed to appreciate that this enactment is only applicable to export of goods and hiring of a vessel by an outsider does not mean export of any goods. As pointed out by Mr. Sharifuddin the relevant statute is Act XXVI of 1947 and as the parties entered into the agreement in question subject to its provisions, to the contract cannot be held for an unlawful purpose and impossible of performance. Lastly, Mr. Fazlur Rehman argued that as the defendants had repudiated the contract, the arbitration clause had gone with it and the Court cannot enforce it against any of the parties. The contention of the learned counsel might have had some force if they had denied the existence of the contract or stated that it was not signed by them or that defendant No. 2 was not authorised to enter into the contract on behalf of defendant No. 1, but no such plea has been taken in this case and the only grounds on which the agreement has been attacked are that there was no subsisting contract between the parties and that there was no agreement between the parties to refer the matter to arbitra tion in case of any dispute arising between them. We are therefore left with the question that If a party to a contract repudiates it whether an arbitration clause in such a contract can be enforced or not. Mr. Sharifuddin, the learned counsel for the plaintiffs, has drawn my attention to two very important decisions Heyman and another v. Darwins Ltd. ((1942) 1 All England Law Reports 337) and Firm Karam Narain Daulat Ram and another v. Messrs. Volkart Bros. and another (A I R 1946 Lah. 116 (F B)). These decisions fully support the contentions of the plaintiffs. The House of Lords decision in (1942) 1 A. E. L. R. 337 clearly lays down that repudiation of the contract does not bring to an end the arbitration clause contained in it and that such a clause can be enforced in. a Court of law. In A I R 1946 Lah. 116 (F. B.) also the view taken in the House of Lords case was accepted as the correct proposition of law and all the learned Judges held that the repudiation of a contract will not render an arbitration clause as nugatory and that it remains in force for the purposes of determining the rights of the party under the contract. I am in complete agreement with the observations made in the above mentioned cases. These decisions have been followed in Radhakishin C. Chawla v. General Construction Co. (A I R 1947 Sind 57), Hoosen Bros. Ltd. v. Pakistan Textile Mills Ltd. (P L D 1954 Sind 1) and Chandanmall Jhaleria and others v. Clive Mills Co. Ltd. and others (A I R 1948 Cal. 257). 1n all the cases it has been held that the arbitration clause, in spite of the repudiation of the contract by one of the parties, is available to the party who has not repudiated the contract and the arbitra tion clause can be enforced. Doubt is expressed in some cases whether the arbitration clause will be available to those who repudiated the contract or not but this is not the dispute in the present case. I am therefore clearly of the view that the agreement between the parties was concluded by Exh. 3/1 and Exh. 3/2. Exh. 3/1 contains a clear stipulation that any dispute between the parties will be referred to arbitration and that although the contract has been repudiated by the defendants in this case, the arbitration clause still remains in tact and the same can be enforced. This objection is therefore over‑ruled. Under the circumstances I will order the agreement to be filed under section 20 (4) of the Arbitration Act, 1940 and direct the parties to refer the dispute arising under the agreement to two arbitrators, one to be appointed by each party within one month of this order. If they fail to do so, the aggrieved party is permitted to take such action as may be necessary to carry out the terms of the order. For the reasons given above the petition is allowed with costs. K.B.A. Petition allowed.