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Official Citation: 2024 PLD 387
Court / Jurisdiction: Sindh High Court
Year of Decision: 2021
Decision Date: 2021-05-17
Parties: TCB Aviation (Pvt.) Limited vs Sri Lankan Airlines Limited through Country Manager
Ruling Summary: This decision was rendered by the Sindh High Court on 2021-05-17, officially reported as 2024 PLD 387. In this matter between TCB Aviation (Pvt.) Limited and Sri Lankan Airlines Limited through Country Manager, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as PLD 2024 Sindh 387
Court Name: Sindh High Court Judge(s): Muhammad Faisal Kamal Alam Title:TCB Aviation (Pvt.) Limited vs Sri Lankan Airlines Limited through Country
Manager Case No.: Suit No. 1657 of 2020 Date of Judgment:2021-05-17 Reported As: 2024 CLD 1145, PLD 2024 Sindh 387 Result: Order accordingly Judgment
DECISION MUHAMMAD FAISAL KAMAL ALAM, J. The present proceeding is filed by Plaintiff under Section 20 of the Arbitration Act, 1940 [the Act, 1940], seeking multiple relief, including, that dispute between Plaintiff and Defendant (Sri Lankan Airlines) be referred to arbitration under the above provision. 2. Relevant facts, as averred in the plaint are that Plaintiff has been acting as General Sales Agent for passengers and cargo of Defendant Airlines by virtue of two separate Agreements dated 20-5- 2015 and lastly on 17-10-2018 [Annexures P/1 to P/30 of the plaint] the GSA Agreements, which have been extended from time to time and finally vide two separate Agreements dated 24-8-2020 [pages-289 and 293], for passenger and cargo, the GSA Agreements were extended up to 31.10.2020. By their correspondence(s) of 26.10.2020 [in respect of both GSA Agreements for passenger and cargo] Defendant informed the Plaintiff that after expiry of the time, relationship between Plaintiff and Defendant will come to an end and thereafter accounts be settled between the Parties. 3. Plaintiff has challenged the above last correspondence of Defendant. It is argued by legal team of Plaintiff that since Defendant did not terminate the two subject agreements as envisaged under Article 3.2 and other ancillary provisions, therefore, the above correspondence is of no value; Plaintiff has made substantial investment, as per the special instructions of Defendant, for running the business in accordance with the prescribed standard of Defendant and expanded the customer base of Defendant in Pakistan, thus the Plaintiff is not an ordinary general sales agent of Defendant Airline in Pakistan, but the agency is coupled with interest, in terms of Section 202 of the
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Contract Act, 1877. Contended, that till date no Counter-Affidavit is filed by Defendant, therefore, contents of plaint is deemed to be admitted and consequently Article 27 of the subject GSA Agreements relating to the Arbitration, has become meaningless and Plaintiff is not bound to participate in any arbitration proceeding in Colombo and the matter can be adjudicated upon here in Pakistan under the Arbitration Act, 1940; that even under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011, the Act, 2011, it is not necessary that present dispute between Plaintiff and Defendant should be sent to Arbitration at Colombo, as mentioned in the Subject GSA Agreement(s), because in terms of Section 4 of the above Act 2011, and because of present pandemic, the Arbitration Agreement is incapable of being performed. Mr. S. Haider Imam Rizvi, Advocate, has cited the following case law to augment his arguments. i. 2021 CLC page-423 [Islamabad] [Tallahasee Resources Incorporated through Mrs. Maleeha Waheed Malik v. Director General Petroleum Concessions, Ministry of Energy (Petroleum Division) and another]- Tallahasee case. ii. PLD 2000 Supreme Court page-841 [The Hub Power Company Limited (HUBCO) through Chief Executive and another v. Pakistan WAPDA through Chairman and others]-Hubco case. iii. 1993 SCMR page-866 [Messrs Uzin Export and Import Enterprises for Foreign Trade v. Messrs M. Iftikhar & Company Limited]-Uzin case. iv. 2015 CLC page-1 [Sindh] [Pak Turk Enterprises (Pvt.) Ltd v. Turk Hava Yollari (Turkish Airlines Inc.]-Pak Turk case. v. 2001 YLR page-3150 [Karachi] [Messrs Serulean (Pvt.) Ltd Karachi v. Messrs Bhoja Airlines (Pvt.) Ltd. through Chairman and another]-Bhoja Airlines case. vi. 1997 CLC page-1250 [Karachi] [Gul son Air Cargo Services (Pvt.) Ltd. v. Compagnie Internationale Air France]-Air France case. vii. 1986 CLC page-2408 [Lahore] [re: Messrs Allied Commercial Finance Limited] viii. 1986 CLC page-1408 [Karachi] [Muhammad Farooq M. Memon v. Government of Sindh through its Chief Secretary, Karachi]. ix. PLD 1977 Karachi page-351 [Muhammad Jamil v. lqbal Ahmed]-Jamil case. 4. It is necessary to mention here that on 26.04.2021 a proposal was made on behalf of Defendant for which Plaintiff's counsel sought time. The complete order of 26.04.2021 is reproduced herein under " 26.04.2021 Messrs S. Haider Imam Rizvi, Jamal Bukhari and Asadullah Shar, Advocate for Plaintiff. Messrs Jahanzeb Awan and Rashid Mahar, Advocates for the Defendant. *** Today learned counsel for the Plaintiff has concluded his arguments after citing couple of case law. Learned counsel for Plaintiff will file Written Synopsis not more than two pages, also containing case law on which he is relying upon. However, it is necessary to make observation with regard to the present proceeding that a specific question was put to learned Advocate for Defendant considering the present pandemic situation. It is stated that arbitration proceeding as envisaged in the Arbitration Agreement (General Sales Agency Agreement) should commence but as far as possible the proceeding will be conducted through Video Link. It is stated that for travelling to Sri Lanka, all the expenditure will be borne by Defendant including stay of representatives of Plaintiff in a 5 Star Hotel in
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Colombo and the arbitration venue will be in the same Hotel in which representatives will be staying. The team of Plaintiff should only comprises of concerned persons. Learned counsel for Defendant has also proposed that ad-interim order operating in this suit may continue for next 15 days and in the intervening period arbitration should commence, but Plaintiff may prefer an Application, inter alia, under Section 13 of the Sri Lanka Arbitration Act, 11 of 1995, for any interim relief. However, this proposal is modified to the extent that ad-interim order passed in this suit will continue for next 15 days from the date of disposal of this lis and in the intervening period arbitration will commence in Colombo as envisaged in Clause 27 of the Arbitration Agreement and an application can be preferred by Plaintiff's side before the Arbitral Tribunal at Colombo in terms of the above Arbitration Act of Sri Lanka and the same can be decided by the Tribunal. Once the application is filed within 15 days (as above), the ad-interim restraining order passed in this lis will continue upto 30 days, unless the Application is decided earlier (that is, before 30 days). The restraining order in this suit will lapse on the 30th day, from the date of filing of an application before the Tribunal at Colombo. On the above, learned counsel for Plaintiff seeks one day time to take instruction from the client. It is further clarified that if Plaintiff's client does not agree to the above terms then this matter will be reserved for passing of the decision. To be listed tomorrow, viz. 27.04.2021 at 10:00 am." 5. On 26th of March 2021, a query was raised about availability of an arbitration centre of the SAARC Countries in Pakistan and the office of Learned Additional Attorney General was called upon to appraise the Court regarding this. On following dates learned Advocates for Plaintiff and Defendant so also DAG have placed on record the Rules of Arbitration of SAARC Centre at Islamabad. Learned DAG has also cited the reported decision handed down in Global Quality Foods Pvt. Limited v. Hardee's Food Systems, Inc. PLD 2016 Sindh 169. 6. On 27.04.2021, learned counsel for Plaintiff upon instructions, has stated, that matter may be referred to Arbitration as per the subject GSA Agreements, but after confirmation of ad-interim injunction to which Defendant's counsel did not agree, hence in view of the above order of 26.04.2021, the matter has been reserved for Decision. 7. At the conclusion of hearing, learned counsel for the Plaintiff has submitted 'Skeleton Arguments on behalf of Plaintiff' containing 50 (fifty) decisions (case law), including some of the case law cited by learned counsel in earlier hearings, which are mentioned herein below. 1 1979 CLC 307 2 1997 CLC 1230 3 PLD 1972 AJK 80 4 1994 CLC 2000 (AA 1940) 5 PLD 1974 Lahore 231 6 1979 CLC 565 7 1983 CLC 1695 8 2013 MLD 1083 9 1995 CLC 1877 101987 CLC 2063 112010 YLR 3331 12 PLD 2014 Karachi 427 132011 CLC 323 141984 CLC 546
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15PLD 1976 Karachi 644 162000 MLD 785 172001 CLC 664 18 2003 CLD 209 192004 CLC 544 202008 CLD 1312 212003 YLR 461 22PLD 1983 Karachi 613 23PLD 1978 Karachi 273 241996 SCMR 690 25PLD 1993 SC 4226 262010 YLR 1560 27PLD 1989 Karachi 645 28 2005 MLD 641 29 PLD 1986 Karachi 38 30PLD 2008 Islamabad 48 31PLD 1970 SC 373 32 1989 CLC 1143 33PLD 1995 Karachi 286 341998 CLC 485 352014 CLD 337 36 PLD 1966 AJK 19 371994 SCMR 1555 382006 CLD 1491 39PLD 1978 SC 220 40PLD 1989 Karachi 404 41. PLD 2010 Karachi 274 [Digital World Pakistan (Pvt.) Ltd. through Chief Executive v. Samsung Gulf Electronics FZE through Managing Director/Chief Executive Officer and another]-Digital case. 42. 1998 SCMR 1618 [Hitachi Limited and another v. Rupali Polyester and others]-Hitachi case. 43. PLD 2018 Sindh 414 [Aroma Travel Services (Pvt.) Ltd. through Director and 4 others v. Faisal Al Abdullah Al Faisal Al-Saud Sand 20 others]- Aroma Case. 44. PLD 2020 Islamabad 52 [Ovex Technologies (Private) Limited v. PCM PK (Private) Limited and others]-Ovex case. 45. 2010 SCMR 524 [Standard Construction Company (Pvt.) Limited v. Pakistan through Secretary Ministry of Communications and others] 46. 2002 SCMR 1694 [Societe Generale De Surveillance S.A. v. Pakistan through Secretary, Ministry of Finance, Revenue Division, Islamabad]
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47. PLD 2002 SC 660 [Lahore Cantt. Cooperative Housing Society Limited v. Messrs Builders and Developers (Pvt.) Ltd and others] 48. 2012 CLC 350 [Sindh] [Abdul Salam Ansari and 6 others v. Province of Sindh through Secretary and 2 others] 49. PLD 2002 SC 310 [Messrs Jame's Construction Company (Pvt.) Ltd., through Executive Director v. Province of Punjab through Secretary to the Government of Punjab (Communication and Works) Department, Lahore and 3 others] 50. 1982 SCMR 673 [Mst. Baigan v. Abdul Hakeem and another]- Baigan case. 8. It is not necessary to discuss each and every decision in which a same principle has been reiterated, but, reported decisions, particularly of Hon'ble Supreme Court are considered, relevant for the present controversy. 9. Legal Team of Defendant has also submitted a rebuttal to the above referred Skeleton Arguments of Plaintiff, containing number of reported cases, which are mentioned herein under. i. 2018 MLD 2058 [Sindh] [Taisei Corporation v. A.M. Corporation Company (Pvt.) Ltd]. ii. 2015 CLD 1655 [Sindh] [Cummins Sales and Service (Pakistan) Limited through Authorized Signatory v. Cummins Middle East FZE through Chief Executive and 4 others]. iii. 2015 MLD 1646 [Islamabad] [Abid Associated Agencies International (Pvt.) Ltd and others v. Areva and others]. iv. 2013 CLC 291 [Sindh] [Cummins Sales and Service (Pakistan) Limited through Authorized Signatory v. Cummins Middle East FZE through Chief Executive and 3 others] v. PLD 2016 Supreme Court 358 [Sahabzadi Maharunisa and another v. Mst. Ghulam Sughran and another v. Mst. Ghulam Sughran and another] vi. 2009 CLD 153 [Karachi] [FAR Eastern Impex (Pvt.) Ltd. v. Guest Internationa Nederland by and 6 others] vii. 2006 CLD 497 [Karachi] (Messrs Travel Automation (Pvt.) Ltd. through Managing Director v. Abacus International (Pvt.) Ltd. through President and Chief Executive and 2 others]. viii. 2004 CLD 1530 [Supreme Court of Pakistan] [Bolan Beverages (Pvt.) Limited v. Pepsico. Inc. and 4 others] 10. Arguments heard and record perused. 11. It is necessary to mention that learned counsel for Defendant has earlier filed a Statement dated 12-4-2021, at page-369 of the Court File, enclosed therewith is the notice of arbitration dated 1st March 2021, sent by Defendant's attorney in Sri Lanka, inter alia, for reference of dispute to arbitration in Columbo before an Arbitral Tribunal and has also nominated an arbitrator and called upon the present Plaintiff to join the proceeding. Subsequently, this notice was replied to by the present counsel of Plaintiff vide their correspondence of 16.03.2021, which was again replied by the Sri Lankan Law Firm acting on behalf of present Defendant, inter alia, calling upon present Plaintiff to nominate its arbitrator. In the present proceeding Defendant's counsel also filed another Statement dated 26.04.2021 along with Annexures "A" to "E". Annexure "A" is the copy of plaint in Suit No. nil of 2021 filed by present Plaintiff against the present Defendant in the Court of Senior Civil Judge, Lahore, with the Prayer Clause that impugned notices dated 26.10.2020 (which is also
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challenged in the present proceeding) be declared illegal and void ab initio, Permanent Injunction and a request that the matter in dispute between the parties may be referred to Arbitration as per Article 27.1 of the Agreement dated 17.10.2018 [GSA Agreements]. Annexure "B" is the Advertisement by Defendant, inviting applications for appointment of General Sales Agent in respect of cargo and passenger in the territory of Pakistan. Annexures "C" and "D" are the Applications of present Plaintiff in the prescribed format submitted to Defendant in response to the said Advertisement. Both Annex ures contained Stamp of Plaintiff's Company. 12. Basic facts are not disputed that under the two subject Agreements, Plaintiff is acting as General Sales Agent for passengers and cargo of Defendant Airline. There is no adverse plea concerning both the subject Agreements, that they are the result of any fraud or its terms are unconscionable and thus unenforceable in the interest of public policy. This fact cannot be ignored also, that recently Plaintiff has again responded by filing application in response to the advertisement referred above, Annexures "C" and "D" with the Statement, for appointment of Genera! Sales Agent for the territory of Pakistan. 13. Prcis of the case law relied upon by Plaintiff is_ i. that the Court is obliged to give due preference to the desire of the parties to abide by the terms of the contract and while maintaining the sanctity of arbitration agreement between the parties to which there was no controversy and without violating the terms and conditions of the IATA [International Air Transport Association] Rules, the matter was referred to arbitration; ii. non-filing of Counter-Affidavit means that facts of the case as stated by a petitioner in the petition is admitted; Opposing the injunction application by defendant by filing of Counter- Affidavit, will not be deemed to be any step in the proceedings, disentitling Defendant from invoking the provision of Section 34 of the Arbitration Act, 1940. Court can refuse stay of proceedings under Section 34 of the Act, 1940, if it is satisfied that arbitration proceeding would result in substantial miscarriage of justice or inconvenience; Provision for arbitration of International Chamber of Commerce in Paris would not oust the jurisdiction of Courts in Pakistan and this clause is to be treated at par with provision for arbitration within the Country, hence, arbitration proceeding was disallowed to be taken to Paris, which would be inconvenient to the parties and also would prove to be expensive; instead parties were directed to take steps for having their dispute decided through arbitration proceedings with venue at Karachi in terms of the Act, 1940, (Messrs Uzin case, supra); mere fact that Civil Court stayed the proceedings under Section 34 (of the Arbitration Act, 1940), does not imply that the arbitration proceedings between the appellant and respondent No.1 would be in accordance with the provisions of the above Act and not under the ICSID (International Centre for Settlement of Investment Disputes) and ICC (International Chamber of Commerce) Rules. The other case of Pak Turk Enterprises primarily relates to board resolution as required under Order 29 of Civil Procedure Code. This judgment has reconciled the earlier case law on this law point; iii. Messrs Uzin case (ibid) is distinguishable, inter alia, as appellant had already instituted a suit for injunction and after filing of written statement also containing counter claim, matter was compromised and subsequently, application under Section 34 of the Arbitration Act, 1940, was filed which was dismissed by the learned Single Bench of this Court and maintained in Appeal, which eventually decided by the above reported case. But it is also necessary to observe that honourable Supreme Court although disallowed the arbitration in Paris but directed the parties to have their dispute decided in an arbitration proceeding with venue at Karachi, which means that sanctity of an arbitration clause mentioned in the agreement was kept intact by the Apex Court; iv. in this reported case of Bhoja Airlines (supra) plaintiff's request for not referring the matter to arbitration was declined and dispute was referred to arbitration while allowing the application of defendant No.1 under Section 34 of the above Arbitration Act, 1940 (for stay of proceedings); this
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Court distinguished the reported judgment passed in Hubco Power Company PLD 2000 Supreme Court 841; v. in Hubco case (ibid), factors which weighed with the Apex Court for not sending the dispute to arbitration under International Chamber of Commerce [ICC Rules], were, that one of the schedules appended with the main Agreement between HUBCO Power Company Ltd. and Pakistan WAPDA, was prima facie fraudulently amended to the utmost disadvantage of respondent WAPDA to the extent that those terms seem to be unconscionable and without consideration; allegations of corruption were raised against officials for executing such an Agreement between the two parties requiring a finding about alleged criminality against officials; few of the employees of respondent WAPDA joined Hubco company at very high salaries, which lent support to the allegations of corruption. Thus, considering all this it was held that disputes between the said parties were not commercial dispute arising from an "undisputed legally valid contract............. therefore, the dispute primarily relates to very existence of a valid contract and not a dispute under such a contract" and hence the dispute was not arbitrable but be decided by a Court of law as a matter of public policy; vi. in Tallahassee case, matter was referred to arbitration. It is held that disputes between the appellant (which is a foreign entity) and respondent No.1 arising from and related to petroleum concession agreement is to be resolved not accordance with the provisions of the above Act, 1940, but in accordance with the ICSID [International Centre for Settlement of Investment Dispute] or ICC (International Chamber of Commerce) Rules, as the case may be, as provided in the PCA [Petroleum Concession Agreement] itself. However, such arbitration clause in the agreement does not prevent a party from seeking the proceedings before the Court instituted by the other party to the said arbitration agreement, to be stayed, so that the parties are left to resolve the dispute in accordance with the Arbitration Agreement; A Civil Court is well within its power to treat the application filed by the respondent No.1 under Section 34 of the Arbitration Act, 1940, as an application under Section 4 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011. Prayer for interim injunction moved by appellant, restraining encashment of bank guarantee was not considered as it was dismissed concurrently by the learned Trial and Appellate Courts. Hence, sanctity of a foreign Arbitration Clause was kept intact and suit proceeding was stayed. This reported Decision of Tallahassee is contrary to the argument of Plaintiff. 14. Now adverting to the case law cited by Plaintiff in his 'Skeleton arguments'_ i. PLD 1977 Karachi page-351 [Muhammad Jamil v. Iqbal Ahmed]-Jamil case. The decision was given in a partnership dispute while explaining the import of subsection (1) of Section 20 of the Arbitration Act and plea of respondent that Arbitration Clause is vague, was not accepted, by holding that when number of Arbitrators are not mentioned in the Arbitration Agreement then Section 20 of the Arbitration Act, 1940, is to be invoked. Receiver was appointed as partnership business was dissolved. On the facts alone, this case law is not applicable to the controversy of present case. ii. 1982 SCMR 673 [Mst. Baigan v. Abdul Hakeem and another] This Judgment is cited in respect of arguments that this Court has ample power to mould the relief and convert the present proceeding into a regular suit. This is a settled rule and its applicability to the present case will be discussed in the following paragraphs. in 2012 CLC 350 [Sindh] [Abdul Salam Ansari and 6 others v. Province of Sindh through Secretary and 2 others]-Ansari case.
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This Judgment is cited in respect of arguments of Plaintiff, that statutory notice is mandatory. The above cited Judgment of this Court is given on Sections 54, 70 and 70-A of the Cooperative Societies Act, 1925, concerning issuance of prior notice to the 'Society before filing of proceeding. In the reported case plaintiffs were elected as office bearers of the society but were superseded by an Administrator appointed by Registrar of Cooperative Societies, which was challenged in the suit proceeding and in the written statement, the maintainability of the suit was challenged, which was finally decided in favour of Defendant and the suit was dismissed. This decision does not support the case of Plaintiff. iv. PLD 2002 SC 660 [Lahore Cantt. Cooperative Housing Society Limited v. Messrs Builders and Developers [Pvt.] Limited]. The above case law is in fact a leave granting order, once again in respect of a dispute concerning a Cooperative Societies and a developer whose access was blocked by petitioner's society after construction of a boundary wall. Both decisions are irrelevant because the notice required under Arbitration Act, 2011, and in the Cooperative Societies Act, 1925, have different aspects and import, besides, facts of both cited case are completely different. v. 1998 SCMR 1618 [Hitachi Limited and another v. Rupali Polyester and others]-Hitachi case. The issue before the Hon'ble Supreme Court was post award dispute. The Award was given by an Arbitral Tribunal at London. The main controversy agitated by appellant (of the reported case) before the Apex Court was that English Courts have exclusive jurisdiction in respect of the arbitration proceeding conducted under the Rules of Conciliation and Arbitration of the International Chamber of Commerce [ICC Rules], whereas, the case of respondent was that both English and Pakistani Courts' have concurrent jurisdiction. A significant feature of the contract in dispute was, that governing law was Pakistan law, whereas, arbitration in case of dispute was to be settled under the ICC rules; secondly, it was already conceded by the appellants counsel (of the reported case) that the erstwhile Arbitration (Protocol and Convention) Act, 1937, would not apply to the two awards in question. It is an exhaustive judgment dealing with characteristic of an arbitration clause and the governing law vis-a-vis jurisdiction of Courts. It is also observed that applicability of ICC Rules would not divest the Court in Pakistan of the Jurisdiction vested in them under the law. If the parties fail to choose the law governing the arbitration proceedings, those proceedings will almost certainly be governed by the law of the country in which the arbitration is held. Further held, that parties should honour their contractual commitment, particularly, involving multi-national parties, while, referring to the ratio of another Case Messrs Eckhardt and Co. v. Muhammad Hanif (PLD 1993 SC 42, relevant portion at page 52). "I may observe that while dealing with an application under section 34 of the Arbitration Act in relation to a foreign arbitration clause like the one in issue, the Court's approach should be dynamic and it should bear in mind that unless there are some compelling reasons, such an arbitration clause should be honoured as generally the other party to such an arbitration clause is a foreign party. With the development and growth of international Trade and Commerce and due to modernization of Communication/Transport systems in the world, the contracts containing such an arbitration clause are very common nowadays. The rule that the Court should not lightly release the parties from their bargain, that follows from the sanctity which the Court attaches to contracts,…
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