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Petitioner: SHIN SATELLITE PUBLIC COMPANY LIMITED through Attorney---Plaintiff VS Respondent: Messrs KASB TECHNOLOGY SERVICES LIMITED---Defendant
Court Name: Sindh High Court Judge(s): Syed Saeeduddin Nasir Title:SHIN SATELLITE PUBLIC COMPANY LIMITED through Attorney---Plaintiff vs
Messrs KASB TECHNOLOGY SERVICES LIMITED---Defendant Case No.: Suit No, 185 of 2004 Date of Judgment:2016-01-04 Reported As: 2016 YLR 2322 Result: Application dismissed Judgment ORDER SYED SAEEDUDDIN NASIR, J.---Through this application under section 34 of the Arbitration Act, 1940 the defendant seeks dismissal of the present suit or suspension/stay of all proceedings in the present suit on the ground that the instant suit is barred by section 34 of the Arbitration Act, 1940. 2. Brief facts of the case as narrated in the plaint are that the plaintiff having offices in Thailand provided services inter alia of information technology relating to internet and satellite services and equipment to the defendant, who are internet service providers, at various times through Thaicom satellite. Invoices in respect of the same were raised from time to time and sent to the defendant. The payments, however, were not made by the defendant to the plaintiff except for an amount US dollar 600, which was paid in the month of May 24, 2001 and an amount of US dollar 14,000, which was paid on May 25, 2001, whereas an amount of US dollar 265,425.19 is still outstanding against the defendant, which the defendant refused to pay to the plaintiff and therefore, the plaintiff filed the instant suit for recovery of the same. It is also stated in para 2 of the plaint that the plaintiff and the defendant had entered into agreements dated 5th February, 2001 and 5th August, 2000, which are annexed to the plaint as annexures "B" and "B/1" respectively. 3. The learned counsel Ms. Zahra Saher Vayani appearing for the defendant has inter alia contended that the suit is based upon purported agreements filed with the plaint as annexures "B" and "B-1" to the. paint of the suit appearing at pages 73 and 87 of the file; that according to Arbitration. Clauses 14 of such agreements it is clearly provided. that any dispute arising from the interpretation or from any matter relating to the performance of the said agreements or relating to any right or obligation contained therein, which cannot be resolved by the parties thereto, shall be
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resolved by the parties by referring the same to arbitration, which shall be held in Singapore; that since the present suit is based upon the aforesaid agreements, therefore, the plaintiff did not have any other option available to him except for filing a reference to the arbitration in accordance with the aforesaid arbitration clauses, therefore, the present suit is barred by section 34 of the Arbitration Act, 1940. 4. The learned counsel for the defendant further submits that the summonses of the suit were served upon the defendant on 20.10.2004 and application for stay of the suit was filed on 23.10.2004, whereas the defendant filed an application under Section 148 of the Code of Civil Procedure, 1908 on 22.11.2005 for extension of time for filing of written statement, which was C.M.A. No.9389/2005 inasmuch as the copy of the plaint and its annexures were not supplied to the defendant along with summons of the suit. 5. In order to substantiate her arguments, the counsel for the defendant has placed reliance on the following case law: (1) Pakistan International Airlines Corporation v. Messrs Pak Saf Dry Cleaner PLD 1981 SC 553 (2) Pakistan Mobile Communication Ltd. v. Naimatullah Achakzai 2012 CLC 12 (3) Hyderabad Municipal Corporation v. Messrs Columbia Enterprises 1990 CLC 47 (4) Nuruddin Abdul Hussein v. Abu Ahmed Abdul Jalli AIR (37) 1950 Bombay 127 (C. N. 35) (5) Bhowani Das Ramgobind v. Pannachand Lacham Pat 1925 Calcutta 801 and (6) Austin and Inhiteley Limited v. S. Bowley and Son King's Bench Division Vol. 108-021. 6. In the case of Pakistan International Airlines Corporation v. Messrs Pak Saf Dry Cleaner reported in PLD 1981 SC 553, it is held: "Where the party to an arbitration agreement made an application seeking adjournment for filing written statement, merely making such application would display unequivocal intention to proceed with the suit and to give up right to have matter disposed of by arbitration and prima facie construed as a step in proceedings within the meaning of section 34 of the Arbitration Act, 1940. However, due to the fact that the arbitration agreement .was not supplied along with the plaint, which is mandatory requirement of law as contemplated by Order VII, Rule 14 of the Code of Civil Procedure, 1908, the appellant was unable to notice arbitration clause in the agreement and, therefore, applied for extension of time for filing written statement. None of the acts of the appellant's counsel or applications for filing written statement can be considered indication of appellant's acquiescence to method adopted by the respondent of having dispute decided by Court." 7. In the next case of Pakistan Mobile Communication Ltd. v. Naimatullah Achakzai reported in 2012 CLC 12 it is held that: "All the parties agreed to decide their dispute in a particular manner, then unless and until any strong and sufficient reason was shown, parties must surrender themselves to the forum voluntarily chosen by them with their free-will and consent. The application under section 34 of Arbitration Act 1940 was allowed." 8. The next case relied upon by the learned counsel for the Defendant is Hyderabad Municipal Corporation v. Messrs Columbia Enterprises (1990 CLC 47) wherein it was held: "Mere non-mentioning of details of dispute on the part of the applicant for stay of proceedings was not a ground for refusal of application under section 34 of Arbitration Act, 1940." 9. In the next case of Nuruddin Abdul Hussein v. Abu Ahmed Abdul Jalli AIR (37) 1950 Bombay 127 (C.N.35.), it is held that: "Mere entrance of appearance by the defendant by filing a formal document whereby he required the statement of claim was not an act which could be termed as a step in proceedings." 10. In the case of Bhowani Das Ramgobind v. Pannachand Lacham Pat 1925 Calcutta 801 it is held: "Mere communication between the counsel of the parties wherein the defendant's attorney wrote to the counsel of the plaintiff to supply copy of the plaint and affidavit of service, would not
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amount to taking steps in the proceedings, a step in the proceedings meant something in the nature of an application to the Court." 11. In the case of Austin and Inhiteley Limited v. S. Bowley and Son King's Bench Division Vol. 108- 7021, it is held: "Giving notice of an intention to offend by filing up the slip attached to the default summons was merely the equivalent of entering appearance to the High Court, and that the defendant had not taken any steps in the proceedings after appearance which disentitled them to apply for a stay." 12. Controverting the arguments of the learned counsel for the defendant, the learned counsel for the plaintiff, at the very outset of his arguments, submitted that the defendant actively took steps in the proceedings 'of the instant suit by taking adjournments on several dates for filing written statement and thereafter, filed an application under section 148, C.P.C. for extension of time for filing written statement on 23.10.2004; that the service of summons of the present suit was held good on the defendant on 25-05-2004 and not on 20.10.2004, as wrongly claimed by the counsel for the defendant; that the defendant also filed an application under 0. VII, Rule 11 of the Code of Civil Procedure, 1908 in the instant suit on 23.10.2004. 13. The learned counsel for the plaintiff further submits that since the defendant actively took steps in the proceedings as aforesaid, the Additional Registrar (0. S.) of this court put-up the application of the defendant under section 34 of the Arbitration Act, 1940 with an objection that the application was not maintainable at such a belated stage when the defendant had already filed an application under section 148, C.P.C. for extension of time for filing written statement. 14. Thereafter, the learned counsel for the plaintiff submitted that the defendant also filed before this Court a counter suit No.859/2004 as a counterblast to the present suit and in that suit the defendant has voluntarily chosen Karachi, Pakistan as the legal forum suppressing the Internet Services agreements dated 5th February, 2001 and 5th August, 2000, which are annexed to the plaint. in the instant suit as annexures "B" and B/1 respectively, much before filing the application for stay of suit, therefore, the defendant cannot deny the fact that it has taken material steps in the proceedings of suit in terms of Section 34 of the Arbitration Act, 1940, and as such the application filed by the defendant for the dismissal of the suit is liable to be dismissed inasmuch as the same does not fulfill the requirements of section 34 of the Arbitration Act, 1940. 15. At the end of his arguments, the learned counsel for the plaintiff states that since the defendant has not come to this court with clean hands and the defendant has taken material steps in the present suit and since the application of the defendant for stay of suit does not disclose the exact nature of the dispute between the parties, therefore, its application under section 34 of the Arbitration Act, 1940 is liable to be dismissed. 16. In order to substantiate his arguments the learned counsel for plaintiff placed reliance on the following case law:- 1. Messrs Eakhardte Co. Marine GmbH v. Mohammad Hanif (PLD 1990 SC 42); 2. Novelty Cinema, Lyallpur v. Firdous Films and others (PLD 1958 (W. P.) Lahore 208); 3. Syed Arshad Ali v. Sarwat Ali Abbasi 1988 CLC 1350 (Karachi); 4. BOC Pakistan Limited v. National Gases (Pvt.) Limited (2013 CLD 898 Sindh); 5. Rachappa Guruadappa Bijapur v. Gurusiddated Appa Nuraniappa (1990 M LD 1383 Supreme Court of India); 6. State of Uttar Pradesh and another v. Messrs Janki Saran Kailash Chandra and another (1973) 2 SC Cases 96 (From Allahabad High Court); 7. Mohammad Farooq v. Nazir Ahmed and others PLD 2006 SC 196; 8. Messrs Shell Pakistan Ltd. v. Bhoja Air (Pvt.) Ltd. 2007 M LD 1424 Karachi. 17. In the case of Messrs Eakhardte Co. Marine Gmbh v. Mohammad Hanif (PLD 1993 SC 42) it is held that:
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"We are of the view that nonperformance of the contract for reason of congestion and strike at Karachi Port was beyond contemplation of the parties at the time of contract. In such circumstances, whole evidence on this point has to come from Karachi composed of documents and oral evidence and taking of such evidence to London would be inconvenient to the parties and also would be expensive. For facts and reasons so stated above, we find no merit in this appeal, which is hereby dismissed with no order as to cost." 18. In the case of Novelty Cinema, Lyallpur v. Firdous Films and others [PLD 1958 (W.P.) Lahore 2081 it is held that: "If a suit is filed on the basis of an agreement which contains an arbitration clause, the mere fact that the defendant is not prepared to pay the amount to which he is liable under the agreement, does not mean that there is a dispute between the parties........... The application under section 34 of the Arbitration Act must mention in specific terms the dispute existing between the parties, merely saying in such an application that there is an arbitration clause in the agreement, therefore, the suit should be stayed, the application is liable to be dismissed." 19. In the case of Syed Arshad All v. Sarwat All Abbasi 1988 CLC 1350 Karachi) it is held: "In the application under section 34 and affidavit the defendant has not stated the dispute between the parties and mere reference to cause dismissal of the application. Reference can be made to PLD 1958 Lahore 208. The application is dismissed." 20. In case of BOC Pakistan Limited v. National Gases (Pvt.) Limited (2013 CLD 898 Sindh) it is held: "Dispute must be specified in an application under section 34 of the Arbitration Act, 1940. Party making application had to satisfy the Court firstly; that there was an agreement to refer, secondly; that the suit related to any matter agreed to be referred to arbitration and thirdly; that there was a "dispute" between the parties which was covered by the agreement; and unless this was shown, the suit could not be stayed. In a dispute that arises on the basis of an agreement which contained an arbitration clause, mere fact that the defendant was not prepared to pay the amount for which he was liable under the agreement, did not mean that there was a "dispute" between the parties. When an application is moved under section 34 of the Arbitration Act, 1940 for stay of proceedings and the defendant fails to state the "dispute" between the parties, but makes only a reference to the arbitration clause, said shortcoming was sufficient to cause dismissal of the application." 21. In the case of Rachappa Guruadappa Bijapur v. Gurusiddated Appa Nuraniappa (1990 M LD 1383 Supreme Court of India) it is held: "Thus, section 34 requires that the application for stay of legal, proceedings must be filed before the filing of written statement or taking any other step in the proceedings. In order to be entitled to stay under section 34 of the Act, it is imperative to find out whether "any other steps in the proceedings" have been taken before making an application for stay apart from written statement. Where the counsel appearing for the party to the suit had sought adjournment" specifically for filing written statement" and . obtained time for more than one occasions for such purpose, subsequent application for stay of suit would not be maintainable. It was not only the time taken to consider whether written statement should be filed as a defence to the plaint to enter into an arena of controversy, but it was time taken to have the matter decided by the suit. The party evinced an intention to have the matter adjudicated by the Court." 22. In the case of State of Uttar Pradesh and another v. Messrs Janki Saran Kailash Chandra and another (1973) 2 Supreme Court Cases 96 (from Allahbad High Court) it is held: "It is, however, to be clearly understood that the mere existence of an arbitration clause in an agreement does not by itself operate as a bar to a suit in the court. It does not by itself impose
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any obligation on the court to stay the suit or to give any opportunity to the defendant to consider the question of enforcing the arbitration agreement. To enable a defendant to obtain an order staying the suit, apart from other conditions mentioned in section 34 of the Arbitration Act, he is required to present his application praying for stay before filing his written statement or taking any other step in the suit proceedings. Discretion with regard to stay under section 34 of the Arbitration Act is to be exercised only when an application under that section is otherwise competent. Hence if the appellant's application was for adjournment for the purpose of filing written statement, then there -is no question of any exercise of discretion by the trial court." 23. In the case of Mohammad Farooq v. Nazir Ahmed and others (PLD 2006 Supreme Court 196) it is held: "From the above proceedings in the Court it would be clear that the appellant even after the receipt of notice of the plaint got three clear dates for filing written statement but the application under section 34 of the Act was moved on the fourth date. Above acts of the appellant on number of dates stated above would show that he intended to participate and defend the suit before the Court. In this process he engaged a counsel and filed adjournment application or requested for adjournment on the above dates. Frequent request for adjournment for filing written statement would fall within the purview/ambit of the phrase "taking any other steps in the proceedings" within the meaning of section 34 of the Arbitration Act." 24. In the case of Messrs Shell Pakistan Ltd. v. Bhoja Air (Pvt.) Ltd. 2007 M LD 1424 Karachi it is held: "Even otherwise, for deciding an application under section 34 of the Arbitration Act one of the important consideration that weighs 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." 25. First of all, I take up the case law relied upon by the counsel for defendant who argued first. 26. In the case of Pakistan International Airlines Corporation v. Messrs Pak Saf Dry Cleaner supra, relied upon by the learned counsel for the defendant the Hon'ble Supreme Court, while allowing the application of the Appellant under section 34 of the Arbitration Act, 1940, held that - Where the party to an arbitration agreement made an application seeking adjournment for filing written statement, merely making such application would display unequivocal intention to proceed with the suit and to give up right to have matter disposed of by arbitration and prima facie construed as a step in proceedings within the meaning of section 34 of the Arbitration Act, 1940, however, where the Arbitration agreement was not supplied to the defendant along with the plaint, due to which he could not notice that there was an arbitration clause in the agreement, and for that reason took time for filing written statement, would not amount to taking steps in the proceedings of the suit. 27. Upon perusal of the relevant portion of the aforesaid judgment, I am of the humble opinion that the same is distinguishable and not at all relevant to facts and circumstances of the present case. In the present case the defendant being one of the parties to the arbitration agreement cannot say that it was not aware of the arbitration clause in the said agreement and, therefore, took time to file the written statement instead of filing an application under section 34 of the Arbitration Act, 1940, due to non-supply of the arbitration agreement to the defendant along with the plaint. Moreover, when the service of the instant suit was held good on 20-05-2004, the defendant never stated before the Additional Registrar (0.S.), before whom the counsel for the defendant appeared on several dates, that complete set of annexures 'has not been supplied to it by the plaintiff along with the plaint. Even in the application for extension of time, no such reason is mentioned. In the said application the defendant has categorically stated that " ...four weeks' time for filing of written statement on behalf of the Defendant, the Defendant have not yet supplied the relevant documents required for preparation of Written Statement."
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28. It is also important to note that the Hon'ble Supreme Court in the case of Mohammad Farooq v. Nazir Ahmed and others (PLD 2006 Supreme Court 196) supra, relied upon by the learned counsel for the plaintiff, has held that "Frequent requests for adjournment for filing written statement would fall within the purview/ambit of the phrase "taking any other steps in the proceedings within the meaning of section 34 of Arbitration Act, 1940." In the same judgment, while relying on the case of Pakistan International Airlines Corporation, the Hon'ble Supreme Court has set-out the parameters for determining whether an act is a step in the proceedings or not as under: "We may also observe that test for determining whether an act is a step in the proceedings or not, this court in the case of Pakistan International Airlines v. Pak Saaf Dry Cleaners PLD 1981 SC 553 at page 559 in the first para, has observed: "As would be seen from above, the mere existence of a clause providing for arbitration does not bar a suit or other legal proceeding in court. It only entitles a party to have the legal proceedings stayed. In order that a stay may be granted under the provisions of this section, certain conditions must be fulfilled. The party must take the objection and apply for stay of proceedings before taking any step, for example, the filing of the written statement that is before he placed his cards on the table. The provisions of the section further imply that the Court should, first of all examine whether the arbitration clause applies to the dispute, and-if it does, whether the nature of the dispute is such that the ends of justice will be better met by the decision .of the Court than by that of private forum chosen and agreed upon, and to which the parties had made themselves bound to adhere and adopt in case that type of dispute arose between them. The Legislature has, of course, clearly implied in the language used in the section that arbitration clause should be respected, but has also made it abundantly clear that the party seeking to avail of the provision of stay under this section must clarify his position at the earliest possible opportunity, so as to leave no manner of doubt that he wishes to have resort to arbitration proceedings. If he hesitates in this regard, or allows the suit to proceed in any manner, that conduct would indicate that he has abdicated his claim to have the dispute decided under the arbitration clause, and to have thereby forfeited his right to claim stay of the proceedings in the Court". 29. In para, 3 at page 564 of the above cited decision this Court has observed: "In my opinion, the true test for determining whether an act is a step in the proceedings is not so much the question as whether the party sought an adjournment for filing the written statement although of course that would be a satisfactory test in many cases but whether taking into consideration of the contents of the application as well as all the surrounding circumstances that led to the party to make the application display an unequivocal intention to proceed with the suit, and to give-up the right to have the matter disposed of by arbitration. An application of such nature, therefore, should prima facie be construed as a step in the proceedings within the meaning of section 34 and whole burden should be upon the party to establish why effect should not be given to the prima facie meaning of the application." 30. In view of the above, it is crystal clear that the reliance on this case by the defendant's counsel is misconceived inasmuch as the facts and circumstances of the present case are distinguishable from the case cited above. Here it is not the case of the defendant that a complete set of plaint along with its annexures was not supplied to the defendant along with summons of the plaint at the time of service of summons. 31. In the case of Pakistan Mobile Communication Ltd. v. Naimatullah Achakzai supra, it is held that parties must surrender themselves to the forum voluntarily chosen by them with their freewill and consent. The application under section 34 of Arbitration Act 1940 was allowed, 32. I am not in agreement with the argument extended by the learned counsel for the defendant that when the parties have chosen a particular forum for resolution of their dispute, they should surrender themselves before that forum. This judgment is not of any help to the defendant
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inasmuch as it is not a hard and fast rule that all disputes arising between the parties, who have voluntarily inserted arbitration clause in the agreement governing their business relationship, should only be referred to arbitration. This may be the general rule, whereas in the peculiar circumstances of the present case where the defendant has taken some material steps in the proceedings, like engaging a counsel, filing applications under section 148, C.P.C. and under Order VII, Rule 11 of the Code of Civil Procedure, 1908, and so also by filing a counter suit against the plaintiff, the defendant has manifested his intention to have the matter resolved by the Court. The case law cited by the learned counsel for the defendant is, therefore, not relevant. Moreover, the defendant has not disclosed the nature of dispute in the stay application existing between the parties so as to enable the Court to determine as to whether or not the matter should be referred to arbitration. 33. The next case relied upon by the learned counsel for the Defendant is Hyderabad Municipal Corporation v. Messrs Columbia Enterprises supra, wherein it was observed by the Court that mete non-mentioning of the dispute between the parties in the application for stay of suit under section 34 of the Arbitration Act, 1940, is not a ground for rejection of such an application. However, a contrary view has been taken in the case of Novelty Cinema, Layallpur supra, relied upon by the learned counsel for the plaintiff, wherein it is held that dispute must be specified in an application under section 34 of the Arbitration Act, 1940. Party making application had to satisfy the Court firstly; that…
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