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Petitioner: M. A. CHOWDHURY MD. AYUB SIDDIQUE VS Respondent: MESSRS MITSUI O. S. K. LINES LTD. JUDGMENT
Court Name: Supreme Court of Pakistan Judge(s): Abdus Sattar Title:M. A. CHOWDHURY MD. AYUB SIDDIQUE vs MESSRS MITSUI O. S. K. LINES LTD.
JUDGMENT
Reported As: PLD 1970 Supreme Court 373 Result: Appeal allowed Judgment JUDGMENT HAMOODUR RAHMAN, C. J.-These three appeals, which raise a common question of law relating to the validity of the exclusive jurisdiction clause in bills of ladings, have been heard together and will be disposed of by this judgment. The owners of the vessel and their local agents filed an application under Order VII, rule 10 of the Code of Civil Procedure, alleging that since the bill of lading provided that "any dispute arising under this bill of lading shall be governed by Japanese law except as may be otherwise provided herein and any such dispute shall be decided by Tokyo District Courts in Japan", the Courts at Chittagong had no jurisdiction to try the suit. On this application the learned Subordinate Judge, on the 25th of March 1967, ordered that the suit is not maintainable against the defendants Nos. 1 and 2, namely, the owner of the vessel and their local agents, but may proceed against the remaining defendants after the names of the above- mentioned defendants have been struck off within 90 days from the date. Failing that the plaint was directed to be returned to the filing Advocate for presentation to the proper Court. The appellant moved the High Court against this order under section 115 of the Code of Civil Procedure but a Division Bench summarily dismissed the application on the 12th of June 1967, on the ground that the point agitated in the said applica--petition was "covered by decisions" of that Court. Leave was thereafter granted by this Court on the 13th of November 1967,' to consider
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whether such a jurisdiction clause in a bill of lading could lawfully oust the jurisdiction of the Courts in Pakistan, since there was a divergence of opinion on this point between the High Courts of East and West Pakistan. The appellant in Civil Appeal No. 86-D of 1968 imported a consignment of 163 Rolls of M. S. Black wire from Antwerp. The goods were shipped per s. s. HAINAN belonging to M/s. Scandinavian Joint Service represented by their partner, Swedish East Asia Co. Ltd., under a bill of lading No. 13, dated 25-5-65, to the Chittagong port. The vessel reached Chittagong on or about the 17th of June 1965, and discharged her cargo under the supervision of the local agents of the ship owners, M/s. United Liner Agencies of Pakistan Ltd. Out of the consignment of the appellant, 78 Rolls were short delivered according to the short landing certificate issued by the Chittagong Port Authority. The appellant claimed a sum of Rs. 13,369.20 as the C. M. F. Value of the goods from the shippers and the insurers of the goods, but having failed to recover this amount filed a suit on the 20th of July 1966, in the Court of the Third Subordinate Judge, Chittagong, for the recovery of the sum of Rs. 20,871.73 being the C. M. F. Value of the Rolls short delivered, the customs duty and sale tax paid on them. "All actions under this contract of carriage shall be brought before the Court at Rotterdam and no Court shall have jurisdiction with regard to any such action unless the carrier appeals to another jurisdiction or voluntarily submits himself thereto." The decisions of the High Courts of East Pakistan in such cases have consistently from 1953 been that section 28 of the Contract Act does not invalidate such an exclusive jurisdiction clause in a contract between a national of this country and a party resident and domiciled in another foreign country. The first case in which this question was considered was the case of Abdur Razak v. East Asiatic Co. Ltd. (5 D L R 394). There a learned Single Judge of the East Pakistan High Court took the view that the Principle of Law was well-settled that section 28 of the Contract Act "makes void only that agreement which absolutely restricts a party to a contract from enforcing his right under the contract in ordinary tribunals but has no application when a party agrees not to restrict his rights in the ordinary tribunal but only agrees to the selection of a particular tribunal in which the suit is to be tried. In other words, this section prevents parties to a contract from divesting Courts of their inherent jurisdiction but does not, in any way, nullify and vitiate an agreement between them, by which one of the contracting parties, who has the choice of the forum, agrees to a limitation of that choice". A Division Bench of the same High Court in the case of Tar Muhammad & Co. v. Federation of Pakistan and others (9 D L R 197) where the jurisdiction clause in the bill of lading gave exclusive jurisdiction to the Courts in Karachi, again had occasion to consider this point. Here the provisions of section 20 of the Code of Civil Procedure, section 28 of the Contract Act and section 64 of the Sea Customs Act were all taken into account and the case of Abdur Razak was referred to, but it was held that since this was a case in which both the competing Courts at Karachi and Chittagong had jurisdiction and they were ordinary tribunals within the meaning of section 28 of the Contract Act, the parties were entitled to choose their forum and section 28 of the Contract Act did not invalidate this contract. Section 64 of the Sea Customs Act was, however, held to be inapplicable, as it did not lay down anything about the jurisdiction of any Court. PLD 1966 Dacca 481) another Division Bench of the Dacca High Court took the view that the principle applic--able to the subject had by then become well-settled by a series of decisions of that Court. The decisions referred to were the three cited earlier. This Bench also found support for this view from the fact that a foreign national resident in a foreign country could not be sued in a Court in Pakistan. After this the view in Dacca had hardened and subsequent Benches merely contented themselves by following the earlier decisions. Thus in the case of British India Steam Navigation Co. Ltd. v. A. R.
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Chowdhury and others (PLD 1968 Dacca 860) Hasan and A. S. Chowdhury, JJ. Merely followed the case of Osaka Shosen Kaisha O. S. K Line Japan v. The Province of East Pakistan. A petition for leave was filed in this Court from the above decision being Civil Petition for Special Leave to Appeal No. 81-D of 1966 (A. R. Chowdhury v. British India Steam Navigation Co. Ltd.) but it was dismissed. It does not appear from the order of the Court that this precise question was raised before this Court, for, all that was argued there was that the clause giving exclusive jurisdiction to the Courts in England, was not a part of the contract between the parties. The Court took the view that no material had been placed before it for thinking that the contract between the parties did not envisage the retention of the said jurisdiction clause. Be that as it may, the Dacca High Court has interpreted this order as one by which its decisions had been approved by this Court and thereafter no question of taking any other view could possibly arise-Vide Swedish East Asia Co. Ltd. v. Md. Masud Raza & Co. (21 D L R 343). There are also a number of unreported decisions of the Dacca High Court to the same effect but, it is unnecessary to refer to them as they merely follow the earlier decisions and do not give any special reasons of their own. It may here be pointed out that in another case, namely from the decision of the Dacca High Court in the case of Narayanganj Iron Works Ltd. v. Pakistan and others an appeal was actually brought to this Court but again in that appeal this specific question was not considered on the ground that it did not arise in that case. The result, therefore, is that there is no considered decision of this Court on this question. Learned counsel appearing for the appellants in these cases have, of course, argued that the Dacca High Court has fallen into error in taking the view that section 28 of the Contract Act is not applicable. Learned counsel have argued with some force that the error begins from the very first decision of Guha, J. In the case of Abdur Razak v. East Asiatic Co. Ltd. Because, he has failed to notice that all the Indian decisions which he had cited in support of his interpretation of section 28 of the Contract Act, were decisions where the competition was between two Courts in British India having jurisdiction in a matter. It is argued by learned counsel that the principle that a plaintiff who is dominus litis can always choose his forum, is necessarily limited to a competent forum situated within a country, both having jurisdiction in the case or matter. Otherwise the result would be that notwithstanding the specific provision in the statute (Contract Act) it would still be possible for parties to a litigation to oust the jurisdiction of competent Court by consent. This cannot, it is argued be permissible. Section 28 of the Contract Act reads as follows:- "28. Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent. Exception 1-This section shall not render illegal a contr--act by which two or more persons agree that any dispute which may arise between them in respect of any subjects or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred. When such a contract has been made, a suit may be brought for its specific performance, and if a suit, other than for such specific performance, or for the recovery of the amount so awarded, is brought by one party to such contract against any other such party in respect of any subject which they have so agreed to refer, the existence of such contract shall be a bar to the suit. Exception 2.-Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to reference to arbitration."
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It is urged that the words "usual legal proceedings in the ordinary tribunals" in this section must necessarily be restricted to legal proceedings under the Code of Civil Procedure and similarly ordinary tribunals to tribunals within the country. They cannot possibly refer to tribunals outside the country. Indeed even an arbitration proceeding would have been hit by the provisions thereof if it had not been specifically excepted from the operation thereof by the exceptions thereto. On the other hand, it is contended on behalf of the respondents that this Court should not lightly interfere with the consistent view that has prevailed in the East Pakistan High Court since 1953, and unsettle the law which has been regarded in East Pakistan, at any rate, to have become settled. The word "tribunal", it is said in its generic sense means "a body appointed to adjudicate on some matter". In this sense it will include even an internationally recognised arbitrator under the Arbitration and Protocal Convention Act, 1937 and even a "foreign Court" since the judgments of foreign Courts are also under our own Civil Procedure Code, enforceable in this country. The provisions of section 28 of the Contract Act, it is contended, are attracted only where the exclusion is absolute; i.e., no recourse to any tribunal is allowed and not to a case where the parties have merely agreed in advance to choose one of two competent forums. If it is at all possible to give effect to these exclusive jurisdiction clauses in bills of lading then, it is said, the Courts should lean towards it since such clauses have come to be regarded as a usual provision of such contract according to trade and mercantile usage generally followed in the case of such contracts of affreightment. The arguments advanced on either side are weighty but the mere fact that some Courts of the country have for a few years, adopted a particular interpretation of a legal provision, is, by no means, a sufficient reason for maintaining that interpretation if it is clearly opposed to some general principles. The principle of stare decisis is not applicable to a case where only some of the Courts in a country have taken a particular view and that too for a comparatively short period. The leave granting order itself indicates that in West Pakistan the High Court has, in the case of Malik A.I Akbar v. Metropole India Limited (PLD 1952 Lah. 249), not found it possible to adopt the view of the East Pakistan High Court, even though the East Pakistan High Court has claimed that a Full Bench decision of the Lahore High Court in the case of Musa Ji Lukman Ji v. Durga Dass (AIR 1946 Lah. 57) supports its view. Since the decisions of the Dacca High Court appear to be based mainly upon the reasonings given in the case of Abdur Razak it is necessary to examine these reasons. A large number of decisions, both of the British Indian High Courts as well as of English Courts have been referred to therein for basing the conclusion that the "principle was well-settled". An examination of the decisions of the British Indian High Courts cited in this case, however, reveals that they were all cases of competition between two Courts in British India, which were, even under the strict interpretation of section 28 of the Contract Act, "ordinary tribunals of the country," as pointed out by Abdur Rahman, J., even in the Lahore Full Bench case. Out of the English decisions cited in this case only three are really to the point, namely, the cases of Kopin v. Adamson ((1875) 1 Ex. D 17), Law v. Garrett ((1878) Ch. D 26) and Austrian Lloyd Steamship Co. v. Gresham Life Assurance Society Limited ((1903) 1 K B 249). The case of Kopin v. Adamson arose out of a suit filed in England on the basis of a foreign judgment delivered by a French Court. The defendant in that suit resisted the suit on the ground that he was neither a native of France nor at any time before judgment resident or domiciled within the jurisdic--petition of the French Court nor was he ever served with any process or summons in that suit. Replication was put in by the plaintiff saying that he being a share-holder in a French Company had agreed to be bound by the articles of association of that company which provided, inter alia, that all disputes arising during the liquidation of the company between the share-- holders of the company, the administrators or the commissioners would be submitted to the
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jurisdiction of the French Court. The Courts in England held this replication to be a good replica-- petition and gave verdict in favour of the plaintiff holding that it was an absolute agreement by the defendant that his rights shall be decided by a foreign tribunal. This, it will be observed, is not the same thing as saying that the jurisdiction of the Courts is ousted. Even as early as 1878 the Court of Appeal in England had ruled that under section 11 of the Common Law Procedure Act of 1854 the Courts would have a discretion in the matter of staying or not staying a suit filed in breach of such an agreement. Section 11 of the Common Law Procedure Act, 1884, had in the meantime been repealed by the English Arbitration Act of 1889 and section 4 of the latter Act, although somewhat differently worded, re-enacted the principles contained in section 11 of the earlier Act. The language of section 4 of the English Arbitration Act was substantially the same as section 19 of the Indian Arbitration Act of 1889, which was repealed by the Indian Arbitration Act of 1940, but the provi--sions of section 19 were re-enacted in section 34 of the latter Act. This Court has already held in the case of Seafarers Inc. v. The Province of East Pakistan (20 D L R 225 (SC)), that under section 34 of the Arbitration Act the Courts have a discretion in the matter and are not bound to stay every suit, even though it arises out of contract which contains a clause for arbitration. It is unfortunate that Guha J., who wrote the Judgment in 5 D L R, did not notice these distinctions. Indeed, the question of returning the plaint for submission to another Court could hardly arise under the English Procedure. It appears that even the view of Gentle, J. In the case of Ramhicklal Chhaganlal v. Vivekanand Mills Co. Ltd. (49 C W N 58), went unnoticed. This question was elaborately discussed there and it was pointed out by Gentle, J., that under the principles adopted by the English Courts there could be no question of ouster of jurisdiction. The jurisdiction is not, and cannot, be ousted by a contract purporting to deprive the Court of its jurisdiction nor by a term by which the parties agree that their disputes shall be decided by one of two Courts, each of which has jurisdiction. There is, of course, nothing to prevent the parties to a contract from agreeing upon a tribunal, whether a chosen Court having jurisdiction to entertain a suit between the parties or a lay arbitrator, but in such a case the Courts in England have consistently taken the view that it is not a case of ouster of jurisdiction but the Courts would treat such a clause in a contract as a reference to arbitration and then might stay the suit and allow the arbitration to proceed in accordance with the principle embodied in section 4 of the English Arbitration Act of 1889 and section 34 of our own Arbitration Act of 1940. It is true that in the case of Racecourse Betting Control Board v. Secretary of State for Air ((1944) Ch. D 114), Mackinnon, L. J., while discussing the cases of Law v. Garrett and Austrian Lloyd Steamship Co. v. Gresham Life Assurance Society Ltd., had observed that it was perhaps not quite correct to say that the power and duty of the Court to stay the action was exercised under section 4 of the Arbitration Act, 1889. He thought that it was on a wider general principle, namely, "that the Court makes people abide by their contracts and, therefore, will restrain a plaintiff from bringing an action which he is doing in breach of his agreement with the defendant that any dispute between them shall be otherwise determined," but even so he did not go to the extent of saying that under this wide principle a clause of such a nature completely ousted the jurisdiction of the Courts which were otherwise competent to try the suit. The principle referred to by Lord Denning was propounded earlier by Atkin, L. J., as he then, was in the Athenee's case ((1922) 1 I L R 6), wherein the latter had adopted the language of Lord Moulton from the judgment in the case of Bristol Corpora--petition v. John Aird & Company. This was to the following effect :-
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"I always look upon these arbitration clauses as in a business point of view a substantial portion of the contract, and I think the Courts have acted quite rightly in requiring good reason to be shown why this part of a contract, should not be strictly performed. But, my Lords, it must be remembered that these arbitration clauses must be taken to have been inserted with due regard to the existing law of the land, and the law of the land as applicable to them is, as I have said, that it does not prevent the parties coming to the Court, but only gives to the Court the power to refuse its assistance in proper cases. Therefore, to say that if we refuse to stay an action we are not carrying out the bargain between the parties does not fairly describe the position. We are carrying, out the bargain between the parties, because that bargain to substitute for the Courts of the land a domestic tribunal was a bargain into which was written, by reason of the existing legislation, the condition that it should only be enforced if the Court thought it a proper case for its being so enforced." Atkin, L. J., thought that whether it was a case of a clause giving jurisdiction to a foreign tribunal or to another domestic tribunal the question always is as to "whether there are proper reasons for not enforcing it" and amongst these reasons he considered "the balance of convenience, the substantial advantage which the plaintiffs may have by suing in the country, and other advantages in respect of proof of loss" to be relevant. Finally, in the Elefrheria's case ((1969) 2 All E R 641), which was also a case of an application for stay of action brought against the ship---owners by the cargo-owners, Brandon, J., after reviewing all earlier decisions, summarised the principles followed by English Courts as follows :- "(1) where plaintiffs sue in England in breach of an agree--ment to refer disputes to a foreign Court and the defendants apply for stay, the English Court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant stay but has a discretion whether to do so or not ; (2) the discretion should be exercised by granting a stay unless strong cause for not doing so is shown ; (3) the burden of proving such a strong cause is on the plaintiff' ; (4) in exercising its discretion the Court should take into account all the circumstances of a particular case ; (5) without prejudice to (4) above the following matters, where they arise can properly be taken into account ; (a) in what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts ; (b) whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects ; (c) with what country either party is connected, and how closely ; (d) whether the defendants genuinely desire trial in the foreign country, or are only seeking a procedural advantage ; (e) whether the plaintiffs would be prejudiced by having to sue in the foreign Court, because they would (i) be deprived of security for that claim ; (ii) be unable to enforce any judgment obtained ; (iii) be faced with a time bar not applicable in England ; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial. It would thus appear that so far as England is concerned the Courts there had never proceeded on the basis that such a clause absolutely ousted the jurisdiction of the English Courts. At most, they have treated such a clause as being in the nature of a submission to arbitration, which does not oust the jurisdiction of the Court but gives the Court a discretion to decide whether it will allow the
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suit to proceed or enforce the agreement between the parties and compel them to go to arbitration as agreed upon whether before another tribunal in the same country or in a foreign country or before a lay arbitrator. It seems difficult to appreciate how the question of ouster of jurisdiction can at all arise in a case of such a clause providing for adjudication of the dispute by a tribunal in a foreign country, if the principle is accepted, as was done in the Dacca case, that no one can by consent either vest a Court with jurisdiction which it does not otherwise possess or' take away its jurisdiction which it does possess. The principle that where two Courts are equally competent to try a cause or matter, then it is open to the plaintiff to choose his forum or for the parties to the dispute to agree to a particular forum in advance, must in my opinion, be read subject to the laws of the country in which the contract was made and in which it was intended to be performed. Such a choice or election by the parties cannot be in defiance of the law or opposed to public policy or to statutory provisions expressly prohibiting the making of such agreements or rendering the same, if made, invalid. The practice adopted by the East Pakistan Subordinate Courts and approved by the Dacca High Court is, to my mind based neither upon principle nor upon precedent. Even upon the principle adopted by the East Pakistan High Court in each case there should of necessity have been an enquiry to find out whether under the proper law of the contract the foreign Court to which exclusive jurisdiction was sought to be given, had, in fact jurisdiction to try the cause or matter according to the laws of that country. If it had no such jurisdiction, then obviously the principle that a party may choose one of two competent Courts which had jurisdiction to try a cause or matter, would not be applicable. If it so happens that the foreign Court has no jurisdiction in the matter, or is unable to grant the relief sought for, then the plaintiff would be left with no redress at all. Again the question of returning the plaint can only arise where the same plaint can be presented in a foreign…
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