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Petitioner: Syed Munir Syed VS Respondent: Sardar Muhammad Kamal Khan and others
Court Name: Islamabad High Court Judge(s): Miangul Hassan Aurangzeb Title: Syed Munir Syed vs Sardar Muhammad Kamal Khan and others Case No.: C.R.No.193/2017 Date of Judgment:2018-09-19 Reported As: 2018 IHC 117 Result: Petition Allowed
Judgment MIANGUL HASSAN AURANGZEB, J:- Through the instant civil revision petition, the petitioner, Syed Munir Syed, impugns the order dated 16.03.2017, passed by the Court of the learned Additional District Judge-V (West), Islamabad, whereby the petitioner's appeal against the order dated 09.11.2016, passed by the Court of the learned Civil Judge, Islamabad, was dismissed. Vide the said order dated 09.11.2016, the learned Civil Court, allowed respondent No.1's application under section 31 of the Arbitration Act, 1940 ("the 1940 Act") and stayed the proceedings before the Arbitrator. In the said application, respondent No.1 had prayed for the arbitration proceedings to be stayed on account of having lost confidence in the Arbitrator. 2. The facts essential for the disposal of the instant civil revision petition are that on 01.05.2015, an agreement was executed between the petitioner (Syed Munir Syed) and respondent No.1 (Sardar Muhammad Kamal-ud- Din). As per the contents of the said agreement, the petitioner was to help respondent No.1 in vacation and demarcation of his land situated in village Sarai Madhu, District Islamabad. It is not disputed that the land which was the subject matter of the said agreement spread over 255 kanals, details whereof are set out in "Schedule-A" thereto. Respondent No.1 was to pay the petitioner Rs.2 million as earnest money. This amount was to be repaid/returned to respondent No.1 out of the petitioner's share in the sale proceeds of the said land. All other costs associated with the vacation and demarcation of the said land were to be borne by the petitioner but be repaid to him by deducting 20% from the sale proceeds of the said land. The amount remaining after the deduction of said 20% from the sale proceeds was to be equally divided between the petitioner and respondent No.1 at the time of the sale mutation. The petitioner was placed under an obligation to present the purchaser of the land to respondent No.1 for the approval of the sale price. Upon agreement of the sale price with the purchaser, respondent No.1 was to be responsible for arranging the transfer by mutation. The said agreement contained an arbitration clause which is reproduced herein below:-
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"In case of any dispute arising between both parties, both parties are barred from going to the Court of Law and Sardar Mansoor Hayat T amman will be the Sole Arbitrator . And his judgment will be final." 3. A unique feature in the said agreement is that the sole Arbitrator/respondent No.2 has signed the said agreement as a witness and as an Arbitrator . 4. After disputes and differences devel oped between the petitioner and respo ndent No.1, the petitioner , on 24.06.2015, filed a suit for declaration, specific performance of agreement dated 01.05.2015 and permanent injunction, before the Court of the learned Civil Judge, Islamabad. The Arbitrator had also been arrayed as a defendant in the said suit. The petitioner had sought specific performance of the said agreement as well as a declaration to the effect that the petitioner was entitled to 60% share from the sale proceeds of the said land. Along with the said suit, the petitioner filed an application for interim injunction under Order XXXIX, Rules 1 and 2 of the Code of Civil Procedure, 1908 ("C.P .C."). 5. In respondent No.1' s written reply to the petitioner 's application for interim injunction, preliminary objection to the maintainability of the suit was taken on the ground that an arbitration clause existed in the agreement between the parties. Respondent No.1 also filed an application under Order VII, Rule 11 C.P.C. praying for the rejection of the plaint on inter-alia the ground that the said agreement was merely a "memo of understanding to gauge the intention of the parties before a deal is officially signed and concluded into a legally enforceable agreement ". 6. Vide order dated 16.09.2015, the learned Civil Court, dismissed the petitioner 's application for interim injunction. The petitioner 's appeal against the said order dated 16.09.2015 was dismissed by the learned Appellate Court, vide order dated 28.10.2015. 7. While the said suit was pending, the petitioner , on 05.12.2015, submitted his request for arbitration before the Arbitrator . As per the order sheet maintained by the Arbitrator , summons were issued to both the parties for 27.07.2016. The said order sheet also shows that respondent No.1' s attorney appeared before the Arbitrator on 27.07.2016 and submitted his Vakalatnama. On 04.08.2016, respondent No.1' s counsel was asked by the Arbitrator to present his case on the next date of hearing. 8. Respondent No.1 filed an application before the Arbitrator, wherein it was pleaded inter-alia that respondent No.1 had lost confidence in the arbitration proceedings; and that by filing a civil suit, the petitioner had expressed his intention not to arbitrate. Before the Arbitrator could pass any order on the said application, respondent No.1, on 04.10.2016, filed an application before the learned Civil Court under section 31 of the 1940 Act, praying inter- alia for the proceedings before the Arbitrator to be stayed. Vide order dated 09.11.2016, the learned Civil Court, allowed the said application and stayed the arbitration proceedings. The operative part of the said order dated 09.11.2016, is reproduced herein below:- "...It is an admitted position that the respondent approached the arbitrator after instituting the civil suit. If the respondent intends to invoke the arbitration clause of the alleged agreement then he should not have file the civil suit. The respondent cannot simultaneously approach two forums for the redressal of his grievances. Before instituting the suit it was an open choice for the respondent to either approach the civil court or to invoke the arbitration clause of the alleged agreement but once he has filed the civil suit by weaving the arbitration clause of the agreement then he cannot approach the arbitrator. Moreover, the allegations of biasness and partiality leveled against the arbitrator by the petitioner have force in it as the arbitrator is party to the lis. Hence, in my view the arbitrator cannot carry out the proceedings on the basis of agreement dated 1.05.2015. The proceedings being carried out by the arbitrator on the basis of agreement dated 01.05.2015 are hereby stayed." 9. It may be mentioned that when the said order dated 09.11.2016 was passed, the petitioner 's suit had been dismissed for non-prosecution and the petitioner 's application for the restoration of the suit was pending. 10. The said order dated 09.11.2016 was assailed by the petitioner in an appeal. Vide order dated 16.03.2017, the learned Appellate Court, dismissed the petitioner's said appeal. The said concurrent orders dated 09.11.2016, passed by the learned Civil Court and 16.03.2017, passed by the learned Appellate Court, have been assailed by the petitioner in the instant civil revision petition. 11. The petitioner's suit had been dismissed for non-prosecution on 23.12.2015. Although an application for the restoration of the said suit was filed within the limitation period provided by law, the petitioner, on
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31.05.2017, filed an application for the withdrawal of the application for the restoration of the suit. Vide order dated 31.05.2017, the learned Civil Court, after recording the petitioner's counsel's statement, dismissed the said application as withdrawn. CONTENTIONS OF THE LEARNED COUNSEL FOR THE PETITIONER: - 12. Learned counsel for the petitioner, after narrating the facts leading to the filing of the instant petition, submitted that the agreement dated 01.05.2015 had been written by respondent No.1 in his own handwriting; that the petitioner and respondent No.1 had agreed to appoint respondent No.2 as the sole Arbitrator; that the mere fact that respondent No.2 had signed the said agreement as a witness and Arbitrator did not disqualify him from entering upon reference with respect to the disputes between the petitioner and respondent No.1; that the mere fact that the petitioner had instituted a civil suit against respondent No.1 did not disentitle him from initiating arbitration proceedings; that at no material stage, had any adjudication on merits taken place in the proceedings before the learned Civil Court; that respondent No.1 had sought the dismissal of the suit on the ground that there existed an arbitration agreement between the petitioner and respondent No.1; and that the stance taken by respondent No.1 is with the intention to deprive the petitioner from seeking adjudication of his claim against respondent No.1 before any forum. 13. Learned counsel for the petitioner further submitted that respondent No.1 had not specified any instance which would indicate bias on respondent No.2's part; that in the proceedings before respondent No.2, respondent No.1 did not raise any allegation of bias; that the mere fact that respondent No.2 had signed the agreement or was impleaded as a defendant in the suit did not disqualify him from sitting as an Arbitrator on the dispute between the petitioner and respondent No.1; and that respondent No.1 is a prudent person of business and had consciously agreed to respondent No.2's appointment as an Arbitrator. Learned counsel for the petitioner prayed for the revision petition to be allowed and for the concurrent orders passed by the learned Courts below to be set-aside. CONTENTIONS OF THE LEARNED COUNSEL FOR RESPONDENT NO.1:- 14. On the other hand, learned counsel for respondent No.1 submitted that the impugned orders passed by the learned Courts below were strictly in accordance with the law; that the petitioner could not be allowed to approbate and reprobate by instituting a civil suit against respondent No.1 and thereafter abandoning the said suit by instituting arbitration proceedings on the same dispute; that the petitioner instead of pursuing his application for the restoration of the suit decided to withdraw the said application; that by instituting a civil suit, the petitioner had waived his right to institute arbitration proceedings against respondent No.1; that prior to the institution of the suit, no affirmative action was taken by the petitioner to initiate arbitration proceedings; that just like a defendant in a suit waives his right to arbitration by not filing an application under section 34 of the 1940 Act, the petitioner waived his right to arbitration by instituting a civil suit; that the institution of the civil suit manifestly displayed the petitioner's unequivocal intention to give-up his right to have his disputes with respondent No.1 resolved through arbitration; and that the learned Civil Court had the jurisdiction to decide questions regarding the validity, effect or existence of the arbitration agreement entered into between the petitioner and respondent No.1. Learned counsel for respondent No.1 prayed for the civil revision petition to be dismissed. In making his submissions, learned counsel for respondent No.1 placed reliance on the judgments reported as 2002 SCMR 1964 and 2006 YLR 807. 15. I have heard the contentions of the learned counsel for the contesting parties and have perused the record with their able assistance. 16. The facts leading to the filing of the instant civil revision petition have been set out in sufficient detail in paragraphs 2 to 1 1 above and need not be recapitulated. 17. The vital questions that need to be determined in these proceedings are (1) whether the petitioner, by instituting a suit for declaration etc. against respondent No.1, had waived his right to initiate arbitration proceedings against respondent No.1; and (2) whether the sole Arbitrator appointed by the petitioner and respondent No.1 in the agreement dated 01.05.2015 can be said to be biased on account of him having signed the said agreement as a witness and Arbitrator.
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18. The admitted position is that disputes and differences arising from and related to the terms of the agreement dated 01.05.2015 had developed between the petitioner and respondent No.1. The petitioner claims to have performed his obligations under the agreement and was seeking to recover his alleged dues. The petitioner said claim had been repudiated by respondent No.1. 19. Despite there being an arbitration agreement between the petitioner and respondent No.1, the petitioner instituted a civil suit against respondent No.1. Respondent No.1 had sought the rejection of the plaint in the said suit. The first ground agitated by respondent No.1, in his application under Order VII, Rule 11 C.P.C., was that the suit was barred due to the arbitration agreement between the parties. An objection to the said effect was also taken in respondent No.1's reply to the petitioner's application for ad-interim injunction under Order XXXIX, Rules 1 and 2 C.P.C. The said objection to the maintainability of the suit cannot be lost sight of while determining whether the learned Courts below were correct in holding, in effect, that the petitioner could not have had his disputes with respondent No.1 resolved through arbitration. 20. Given the fact that the petitioner's suit was dismissed for non-prosecution and that he had withdrawn his application for the restoration of the suit, there is hardly a chance for the revival of the said suit. Order IX, Rule 8 C.P.C. provides inter-alia that where the defendant appeared and the plaintiff does not appear when the suit is called on for hearing, the Court shall make an order that the suit be dismissed. It is an admitted position that vide order dated 23.12.2015, the learned Civil Court had dismissed the petitioner's suit by invoking the provisions of Order IX, Rule 8 C.P.C. The petitioner did apply to the learned Civil Court for an order to set the said dismissal aside, but unconditionally withdrew the application. Order IX, Rule 9(1) provides inter-alia that where a suit is wholly or partly dismissed under Rule 8, the plaintiff shall be precluded from bringing a fresh suit in respect of the same cause of action. Therefore, the petitioner is precluded from filing a fresh suit against respondent No.1 on questions that were the subject matter of the suit which had been dismissed for non-prosecution. 21. What Order IX, Rule 9 C.P.C. bars the institution of a fresh "suit" on the same cause of action which was the subject matter of the earlier suit dismissed for non-prosecution. The invocation of the arbitration clause in the agreement dated 01.05.2015 by the petitioner cannot be termed as institution of a fresh "suit". Arbitration with or without the intervention of the Court is not a "suit". In the cases of Messrs James Construction Company (Pvt.) Limited through Executive Director Vs. Province of Punjab through Secretary to the Government of Punjab (PLD 2002 SC 310), Mohamed Abdul Latif Faruqi Vs. Nisar Ahmad (PLD 1959 Karachi 465), Bismal Kumar Ghosh and another Vs. Saikat Sarkar (AIR 1987 Calcutta 208), Inderpal Singh Hassan Walia Vs. Messrs Bir Tibetan Wollen Mills and others (AIR 1974 Delhi 95) and S.P Consolidated Engineering Company (Pvt.) Limited Vs. Union of India and another (AIR 1966 Calcutta 259), it has been held inter-alia that an application under section 20 of the 1940 Act is not a suit stricto senso but only to be registered and numbered as a suit. 22. Section 69 of the Partnership Act, 1932 bars a partner in an unregistered partnership from instituting a "suit" to enforce a right arising from a contract. In the case of "Messrs United Cotton Factory , Hyderabad Vs. Ahmad Khan" (PLD 1960 Karachi 774), it was held that an application under section 20 of the 1940 Act does not fall within the ambit of section 69 ibid. Furthermore, it was held that although the word "suit" had not been defined in any statute, it had a well understood forensic connotation, including its main indicia of the presentation of a plaint. 23. I am of the view that if the legislature had intended to bar the institution of all sorts of proceedings, including arbitration proceedings, subsequent to the dismissal of the suit for non-prosecution, it would have included the words "and other proceedings" after the words "fresh suit" in Order IX, Rule 9 C.P.C. Since Order IX, Rule 9 C.P.C. is a penal provision imposing a disability on a party to institute a fresh suit after his earlier suit on the same cause of action had been dismissed for non-prosecution, it has to be construed strictly. 24. The suit instituted by the petitioner did not culminate in a judgment or a decree. In other words, an adjudication of the disputes between the petitioner and respondent No.1 had not taken place before the learned Civil Court. Since the said suit had not been decided on merits, the principle of res judicata will not apply as regards the institution of the arbitration proceedings by the petitioner. The legal effect of the impugned orders is that the petitioner has been deprived of seeking adjudication of his claim before any forum.
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25. True, when a defendant in a suit takes a step in the proceedings or files a written statement, he disentitles himself from seeking a stay of the suit on the basis of an arbitration agreement executed with the plaintiff. The case in hand, however, is on a different footing. Here the petitioner instituted a suit against respondent No.1 on a matter which both the parties had agreed to resolve through arbitration. It is my view that since respondent No.1 had objected to the maintainability of the suit on the basis of the arbitration agreement executed between the petitioner and respondent No.1, the institution of the said suit or its dismissal for non-prosecution could not operate to place a legal disability on the petitioner from instituting arbitration proceedings against respondent No.1. There is no express provision in the 1940 Act or the C.P.C. which debarred the petitioner from instituting arbitration proceedings in such circumstances. 26. In staying the arbitration proceedings, the learned Courts below placed reliance on paragraphs 47 and 48 of the judgment in the case of "Societe Generale De Surveillance S.A. v. Pakistan' (2002 SCMR 1694 ). I have gone through the said paragraphs and find that they record the contentions of the learned counsel for the respondent in the said case and his reliance on "Domke on Commercial Arbitration (The Law of Practice of Commercial Arbitration)". The contents of the said Treaties have been reproduced in paragraph 47, whereas in paragraph 48, the opinion and observations of the author of the said Treaties have been set out. 27. Perusal of the judgment in the case of Societe Generale De Surveillance S.A. v. Pakistan' (supra) shows that the facts in the said case were different from the ones in the case at hand. In the said case, the termination of a contract caused the appellant to institute an action for recovery before a Court in Switzerland. The said action was dismissed on the ground that there existed an arbitration clause in the contrac t between the appellant and the respondent providing for the settlement of the disputes between the said parties through arbitration in accordance with the provisions of the 1940 Act. After the said action was dismissed, the respondent filed an application under section 20 of the 1940 Act before a Court in Pakistan. Along with the reply to the said application, the appellant filed a counter claim against the respondent. Soon after filing the said reply, the appellant filed a request for the initiation of arbitration before the International Centre for Settlement of Investment Disputes ("ICSID"). The respondent's application before the trial Court in Pakistan to restrain the appellant from pursuing the remedy through arbitration before ICSID was dismissed. The Hon'ble Supreme Court, in the said judgment, held inter-alia that the appellant's conduct of instituting an action before the Court in Switzerland and filing a reply to the respondent's application under section 20 of the 1940 Act, was sufficient to constitute waiver of his right to seek arbitration before ICSID. The distinguishing feature in the case of Societe Generale De Surveillance S.A. v. Pakistan' (supra) was that even though the appellant had instituted an action against the respondent before the Court in Switzerland, the appellant was able to agitate its claim in the form of a counter-claim against the respondent before the Courts in Pakistan. Given this peculiar and distinguishable feature in the instant case, I am of the view that the petitioner could not have been denied his right to institute arbitration proceedings against respondent No.1 on the ground that the petitioner had earlier instituted a civil suit against respondent No.1. It is worthwhile to mention once again that respondent No.1 had raised an objection to the maintainability of the said suit on the ground that there existed an arbitration agreement between the petitioner and respondent No.1. 28. The judgment in the case of Societe Generale De Surveillance S.A. v. Pakistan' (supra) aids the petitioner more than the respondent inasmuch as the institution of the action by the appellant in the said case before the Court in Switzerland did not disentitle it from raising a counter-claim against the respondent in the arbitration proceedings under the provisions of the 1940 Act. What the appellant in the said case was not permitted to do was the institution of yet another arbitration proceeding against the respondent, i.e., arbitration under the ICSID Rules. Another distinguishing feature of the case at hand is that as a result of the impugned orders, the petitioner has been deprived of his right to seek the adjudication of his claim against respondent No.1 before any forum, be it through arbitration or through a civil suit before a Court of plenary jurisdiction. 29. Now the learned counsel for respondent No.1 had submitted that no agreement had formally been entered into between the petitioner and respondent No.1; and that the document execute d on 01.05.2015 was "not an agreement according to the law" and was merely "a memo of understanding to gauge the intention of the parties
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before the deal is officially signed and concluded into a legally enforceable agreement." By taking this plea, respondent No.1 adopted two positions which are mutually exclusive. On the one hand, he took the plea mentioned above, and on the other hand, he objected to the maintainability of the petitioner 's suit on the ground that there existed an arbitration agreement between the said parties. A party cannot be permitted to take such contradictory pleas. 30. Having gone through the agreement dated 01.05.2015, I am of the view that the same contains a valid arbitration agreement between the parties thereto. Section 2(a) of the 1940 Act defines an arbitration agreement as a written agreement to submit present or future differences to arbitration, whether an Arbitrator is named therein or not. An arbitration agreement is not required to be in any particular form. To constitute an arbitration agreement in writing, it is not necessary that it should be signed by the parties, and it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established. All that is necessary is that the parties should accept the terms of the arbitration agreement. The acceptance may be in writing or by conduct. The arbitration agreement need not be incorporated in a formal deed or be under seal. It may well be entered into through correspondence or by a less formal document. What is required to be ascertained is whether the parties had agreed that if disputes arose between them in respect of the subject matter of the contract, such disputes would be referred to arbitration, then such an agreement would spell out an arbitration agreement. All these requirements appear to have been satisfied in the case at hand. Had the parties to the agreement dated 01.05.2015 not had consensus ad idem regarding the execution of an arbitration agreement, respondent No.1 would not have objected to the maintainability of the petitioner's suit on the basis of the arbitration agreement between the said parties. 31. Now respondent No.1 in his application under section 31 of the 1940 Act has alleged bias against the Arbitrator named in the agreement dated 01.05.2 015. The allegations of bias hurled by respondent No.1 against the Arbitrator in the said application are reproduced herein below:- "Besides many other things which reflects bias against the respondent; the respondent is not getting a fair opportunity and as such has…
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