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Petitioner: NAN FUNG TEXTILES LTD. VS Respondent: NICHIMEN & CO. (PAKISTAN) LTD.
Court Name: Sindh High Court Judge(s): Rasheed A. Rizvi Title: NAN FUNG TEXTILES LTD. vs NICHIMEN & CO. (PAKISTAN) LTD. Case No.: Judicial Miscellaneous No,84 of 1976 Date of Judgment:1998-12-24 Reported As: 1999 YLR 2226 Result: Order accordingly
JUDGMENT
JUDGMENT ' This is a petition under section 5 of the Arbitration (Protocol and Convention) Act, 1937 (hereinafter referred to as the "Act 1937") for enforcement of a foreign award, dated 1st May, 1974. In the first place, I would like to observe that this proceeding should have been registered as a suit in view of subsection (2) of the Act, 1937 as Rule 294 of the Sindh Chief Court Rules (O.S.) is not in conformity with section(s) 5 and 6 of the Act, 1937. (For further reference see order, dated 31-8-1998, passed in A. Meridith Jones Ltd. v. Usman Textiles Ltd. J.M. No,22 of 1998). 2. The undisputed facts of this case are that as a result of some five contracts executed between the parties, during the period of 30th October, 1972 to 8th November, 1972, the respondents sold to the petitioner some 6000 (six thousand) bales of cotton. All these contracts contained a clause for arbitration between the parties in case of any dispute which was to be conducted in accordance with the rules and regulations of the Liverpool Cotton Association Ltd. Liverpool, United Kingdom. It is alleged in the petition that as a result of certain differences between the parties, the matter was referred by the petitioner to the Liverpool Cotton Association (for brevity sake hereinafter referred to as L.C.A.). On 1st May, 1974, an award was pronounced whereby the respondent was directed to pay, to the petitioner, a sum of U.S. Dollars 517,270.00 with interest at the rate of 10% per annum from the date of award till realization. The respondent was further directed to pay a sum of U.K. 500 towards the fees and expenses of the arbitration proceedings. It is claimed in the petition that the respondent filed an appeal against the Award before the Technical Committee of L.C.A., which was dismissed and the award was upheld by a judgment, dated 2nd May, 1975, whereby the respondent was required to pay, to the petitioner, a sum of U.S. $ 642,943.36 with interest at the rate
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of 9% per annum on the amount of award from 16th May, 1975 until the date of payment. The respondent was further required to pay a further sum of U.K. 750.00 being the total cost of the Award. It is averred in the petition that since the respondent failed to comply with the direction of the award, as contained therein, petitioner has filed this petition seeking enforcement of the abovementioned foreign award with the following relief: (a) Order that, the said award be filed in this Honourable Court; (h) To pronounce judgment in terms of the said award; (c) Award the cost of this application to the petitioner; and (d) Order any other/further relief as this Honourable Court may deem fit to grant. 3. Before proceeding further, I would like to deal with one of the interesting features of this case. On 13th February, 1978, the respondent filed an application under Order XXVI, Rules 4 and 5 of the Code of Civil Procedure, 1908, (hereinafter referred to as "C.P.C.") which was numbered as C.M.A. No,614 of 1978 with the prayer that one Mr. C.P. Bramble who was arbitrator from the respondent side during the original arbitration proceedings and one more person namely the Secretary of L.C.A., be examined on commission or on interrogatories. This application came up for hearing on the 20th August, 1978, before this Court which was granted by Naeemuddin, J. (as his lordship then was) in the following manner:-- "Some of the objections taken to the award are: ' That Mr. C.P. Bramble, was never appointed as arbitrator by the respondent. That no notice of arbitration proceedings was ever given to the respondent who had no opportunity to present their case before the arbitrator. ' Mr. C.P. Bramble was one of the arbitrators who gave the impugned award. In view of the above, I am of the view that examination of Mr. C.P. Bramble is necessary. It is not denied that he is residing in England. Therefore, both the conditions laid down in the Rule 5 of Order XXVI, C.P.C. Are fulfilled in this case. ' The examination of witness No,2, is sought on the ground that he possesses the record of the arbitration proceedings which can prove whether any notice was served or not on the respondent. Therefore, the examination of this witness on commission is also necessary. ' I, accordingly grant the application. The respondent to submit interrogatories within one month. The petitioner shall also file cross-interrogatories, if any, within one month from the respondent. Commission to issue thereafter returnable within three months. Costs of the commission and Commissioner's fee will be borne by the respondent initially...." 4. The above-noted order gives rise to the question, what is the scope of the present proceedings which has been filed under section 5 of the Act 1937, seeking pronouncement of judgment in terms of the Award and thereafter framing of decree in 'accordance with the award. Both the parties were directed to make their respective submissions on this aspect of the case. It was argued by Mr. Hamza I. Ali that the order for examination of witnesses on commission was passed some 20 years ago in the instant proceedings which was acted upon and which had also attained finality as none of the parties filed any appeal; therefore, as suggested by him, it is a past and closed transaction and it cannot be re-opened. Secondly, there is no bar or prohibition in the Act, 1937, where-by a Court is prohibited from examining any party in a proceeding arising out of the Act 1937. He has also referred to the cases Messrs Alhaj Muhammad Keramat Ali & Co. Ltd. v. Messrs Amin Jute Mills Ltd. Chittagong (PLD 1961 Dacca 452), Haji Tayab and 2 others v. Eastern Textile Mills Ltd., Chittagong and 12 others (PLD 1970 Karachi 357), Messrs European Grain & Shipping Ltd. v. Messrs Sargroh Oil Industries Ltd. (PLD 1982 SC 407) and the case Messrs European Grain & Shipping Ltd. v. Messrs Sargroh Oil Industries Ltd. (1984 SCMR 553). He has also placed reliance on subsection (3) of section 7 of the Act, 1937, and argued that where the parties resisting enforcement of foreign award on the grounds other than mentioned in subsections (1) and (2) of section 7, the Court is
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competent to invite further evidence of the parties: He has emphasised importance of such practice as far as instant case is concerned on the ground that there was an allegation of misconduct against their arbitrator and the proceedings being conducted at Liverpool, U.K., no record was within the possession of either of the parties of prove such alleged misconduct of the Arbitrator. In order to understand his arguments it would be pertinent if subsection (3) of section 7 of the Act, 1937 is reproduced:-- "S.7. (1) ...................................... (2) (3) If a party seeking to resist the enforcement of a foreign award proves that there is any ground other than the non-existence of the conditions specified in clause (a), (b) and (c) of subsection (1), or the existence of the conditions specified in clauses (b) and (c) of subsection (2), entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse to enforce the award or adjourn the hearing until after the expiration of such period as appears to the Court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by competent tribunal." 5. The cases Muhammad Keramat Ali and Haji Tayab (supra) pertain to the interpretation of sections 16, 30 and 33 of the Arbitration Act, 1940. In the case Alhaj Muhammad Keramat Ali & Co. (supra), it was held by a Division Bench of the then Dacca High Court, that "the question as to how many bales were actually opened, is of a question relating to what happened before the arbitrators and if there was any dispute with regard to it, the arbitrator could be called as witness to ascertain the same". Reference was made to the case Leiserach v. Schalit (1934) 2 KB 353). The judgment in case Haji Tayab (-supra) was delivered by a Division Bench of this Court. In that case one of the grounds for attacking the award was that it was invalid as the arbitrator neither issued any notice nor heard the appellants at any stage of the arbitration proceedings. It was observed by the Division Bench of this Court that "in this connection we would state that the least that could have been done in view of this being the main issue before the learned Single Judge was to summon the arbitrator as a Court witness". The cases Leiserach and Muhammad Keramat Ali & Co. (supra) were referred to Reference was also made to an earlier decision of another Division Bench of this Court in S.M. Fazail & Company v. Overseas Cotton Company (PLD 1959 Karachi 320) where it was observed that in a case where allegations are made by parties against an arbitrator or an umpire, it is always better to examine such umpire or arbitrator as Court witness to meet the allegations made against him in respect of partiality. However, all these cases arise out of the proceedings from Arbitration Act, 1940. 6. The case of European Grain & Shipping Ltd. As reported in PLD 1982 SC 407, is a leave granting order while the same case is reported in 1984 SCMR 553 which is the order of appeal. One of the issues framed in that case was whether the arbitrators have misconducted for which the trial Court granted permission to the respondent/ appellant for examining two witnesses on commission who were residents outside Pakistan. This question 'reached Supreme Court and the leave to appeal was granted to consider, inter alia, whether in such a case, the only evidence that can be recorded against the enforcement of the foreign award are that which relate to proving all or any of the grounds mentioned in section 7 (1) and (2) of the Act, 1937, and whether evidence relating to misconduct in such proceedings can only be. Confined to that kind of misconduct which is also regarded as breach of rules of natural justice and not "misconduct" of general nature? However, it was not felt necessary by the Hon'ble Supreme Court to decide these questions as neither the trial Court nor the. Lahore High Court had by that time decided the question of law and the jurisdiction, involved in that case. Thus, the matter was remanded for decision on the legal and _jurisdictional issues at an early date. These authorities do not lend any support to Mr. Hamza Ali, Advocate. Both
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the learned counsel have candidly admitted that there is no law on this question in so far as Act 1937, is concerned. 7. Section 7( ) of the Act, 1937 deals with the question of enforceability of a foreign award. Subsection (2) deals with the cases where a foreign award cannot be enforced. Subsection t3) deals with a different situation not covered by subsections (1) and (2). Section 7(3) of the Act 1937 enables a party to resist the enforcement of a foreign award on grounds other than the mentioned In clauses (a), (b) and (c) of subsections (1) and clauses (b) and (c) of subsection (2). The only condition laid down in subsection (3) is that such party should prove that there is no other ground, other than the grounds mentioned earlier in subsections (1) and (2). The burden is upon the party resisting the enforcement of foreign award to prove that there exist other grounds to resist the enforcement of a foreign award. In my considered view, the ground of misconduct committed by an arbitrator may be termed as "any ground" to resist the enforcement of a foreign award. No law, either in Pakistan or in England, permits an arbitrator to commit misconduct; therefore, it may be termed to be a good ground to resist the enforcement of a foreign award under subsection (3) of section 7 of the Act 1937. I am fully conscious of an earlier decision of this Court reported as Messrs European Grain & Shipping Ltd. v. Messrs Polychem Company Ltd. (PLD 1990 Karachi 254) where it was held that the scope of section 7 of the Act 1937 is restricted only to the grounds referred to therein and thus it cannot be liberally construed. A plain reading of section 7(3) will show that the Court is competent to refuse enforcement of an award on "any ground" other than mentioned in the clauses of subsections (1) and (2). Nowhere this term "any ground" as used in section 7(3) is defined in the entire Act of 1937. In my humble view, it will include such grounds which are contrary/violative of the Islamic Injunctions, the Objectives Resolution, Fundamental Rights and other established laws of this country. (See: Ghulam Ali and 2 others v. Mst. Ghulam Sarwar Naqvi (PLD 1990 SC 1 at pages 22/23). 8. How can a party prove misconduct of an arbitrator, when the arbitrator's proceedings were conducted outside Pakistan? In the instant case, the entire record of the two proceedings, one held before the arbitrators and, the second held before Technical Committee in appeal, are in the possession of the Liverpool Cotton Association (L.C.A.). For this limited purpose, and in order to enable the respondent to prove misconduct on the part of their arbitrator, this Court was competent to order examination of such arbitrator on commission. This does not mean that in all cases where allegations of misconduct are raised the Court should invariably order the examination of arbitrator. This exercise should be ordered in very rare and exceptional cases as of the instant case, or where the party raising such allegations, prima facie, establishes before the Court a case of misconduct of his arbitrator. None of the advocates have argued on the point as to what is the scope of misconduct in the matter of foreign award. Thus, I would not like to dilate upon this question any further but would like to observe that in the instant case, it is alleged by the respondents that they never authorised the arbitrator to act on their behalf. And that after giving a consent award, he appeared as their counsel at the appellate stage and challenged his own award. Again, it is claimed by the respondents that they did not authorise the arbitrator to act on their behalf before the Appeal Committee. If it is correct, then it may constitute one of such cases falling within the scope of misconduct. To clarify this position I would like to refer the case of Brooke Bond (Pakistan) Ltd. v. Conciliator and 6 others (PLD 1977 SC 237 at 2671 where the term "misconduct" in reference - to an arbitrator appointed under provisions of the Industrial Relations Ordinance, 1969, was considered in the following manner:- " The term ' misconduct' used in connection- with arbitration does not necessarily imply anything in the nature of fraud or moral turpitude. In the judicial sense the misconduct of Arbitrator means his failure to perform his essential duty, resulting in substantial miscarriage of justice between the parties. According to Atkin, J. In Williams v. Willis (*) the words misconducted the proceedings'
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means such a mishandling of arbitration as is likely to cause some substantial miscarriage of justice. In the American Juris-prudence, Vol. 3, on pages 964-5, it is observed that awards which are valid on their faces may be set aside in equity for misconduct on the part of arbitrators, and the extrinsic evidence is Admissible to prove such misconduct. Conduct in consist at with the duties imposed upon those selected as the arbitrators, either at the hearing, or in reaching their conclusions will frequently constitute misconduct as will impeach an award..." (*) Williams v. Willis (83 U KB 1296). 9. Unfortunately this matter is pending for the last 22 years. For the first time, respondents tiled their objections on 3-10-1977 raising as many as 23 objections. Now, due to lapse of time several objections raised by the respondents have been answered by the different Courts in different proceedings and therefore Mr. Hamza I. Ali has rightly confined his arguments to mainly five objections which are reproduced as follows:-- (i) This is, not a "Foreign Award" within the meaning of section 2 of Arbitration (Protocol- and Convention) Act, 1937 and is therefore not enforceable. (ii) The Award is a copy which is not certified by Consulate General of Pakistan in U.K. As required by Rule 298 of Sindh Chief Court Rules (0.S.). (iii) The power of attorney is inadmissible, firstly, as it is a photocopy and secondly it has not been re-stamped under sections 3 and 18 of Stamp Act. (iv) The application and Vakalatnama have not been duly signed under due authority. (v) The Award is not enforceable having been made in violation of law governing arbitration procedure and being contrary to public policy of Pakistan and due to misconduct of arbitrator Mr. C.P. Bramble. 10. Mr. Hamza I. Ali argued that in order to constitute foreign award three conditions are necessary, namely, it should be result of an agreement for arbitration as set-forth in the First Schedule to the Act, 1937. Secondly, it should be between persons of whom one is subject to the jurisdiction of one of such powers which the Federal Government has notified in the official Gazette and the other is subject to the jurisdiction of some of the other powers. It was argued that at the relevant time when the award was announced Hong Kong was a crown colony of the England and cannot be treated as another power. According to learned counsel, this situation is not covered by the Notification issued by the Central Government. It was further argued that the Foreign Award and Maintenance Orders, Enforcement (Amendment) Ordinance, 1962 has not declared Pakistan to be power party to the Convention and declared U.K. As one of the territories to which the Convention under Act 1937 applied; therefore, he argued the respondent is not subject to the jurisdiction of his "Britanic Magesty". To summarize his arguments, Pakistan has not so far declared itself power party to the Convention and therefore, the conditions prescribed by section 2 of the Act, 1937, are totally absent, and, hence award made by the arbitration of the Liverpool Cotton Association cannot be treated as foreign award. Learned counsel for the respondent has cited all the case-law, for and against his case which are as follows:-- ' Dalmia Cement Ltd. v. National Bank of Pakistan (1974) 3 All ER 189). ' Messrs Barlas Bros. (Karachi) &Co. v. Messrs Yangtze (London) Ltd. (PLD 1959 Karachi 423). ' Messrs Yangtze (London) Ltd. v. Messrs Barlas Brothers (Karachi) (PLD 1961 SC 573). ' Nan Fung Textiles Ltd. Hongkong v. H. Pir Muhammad Shamsuddin (PLD 1979 Karachi 762). ' Nan Fung Textiles Ltd. v. Sadiq Traders Ltd. (PLD 1982 Karachi 619). ' Ralli Brothers & Coney Ltd. v. Muhammad Amin Muhammad Bashir Ltd. (1987 CLC 83). (vii) Petrocon (Pvt.) Ltd. v. Hyderabad Development Authority, H)derabad (1990 MLD 1675). (viii) Hassanali & Co. Cotton (Private) Limited v. Poly Cotton S.A., 2-Rue, Andrien Vallin, 1201 Geneva, Switzerland and others (PLD 1996 Karachi 416).
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11. Mr. Hamza Ali, laid much emphasis on the interpretation of section 2 of the Act 1937. He stressed that this provision envisages two separate powers which must have been declared as parties to the Convention. On this premise, he argued that there is only one power mentioned in the notification which is "His Britannic Magesty" while in the instant case, according to learned counsel, there are parties belonging to two powers. He pointed out that the plaintiff is registered in Hong Kong, which is a Crown Colony and the defendant Nichiman is subject of another power i,e, Pakistan. He has placed much reliance on the case of Dalmia Cement Ltd. (supra) where the Queen's Bench Division, declined to enforce the award requiring Bank of India to make payments to the Dalmia Cement Ltd. In that case, the question involved was the definition of a foreign award as provided in section 35 of the English Arbitration Act, 1950. 'That case was considered strictly from the point of view English Law vis-a-vis Indian Arbitration Act, 1940 and the case of Pakistan was held to be different than the case before the Queen's Bench. Reference was made to the Foreign Awards and Maintenance Orders Enforcement (Amendment), (1962) (PLD 1962 Central Statutes 607) through which subsection (2) was introduced in the Act 1937 which reads as follows:-- (2) For the removal of doubt it is hereby declared that any notification issued under this section by the late Government of India before the fifteenth day of August, 1947, and in force on that day for the purpose of enforcement of foreign awards in British India, declaring any Power to be a party to the said Convention or any territory to be the territory to which the Convention applies, shall be deemed to be a notification issued by the Central Government for the purpose of enforcement of foreign awards in Pakistan...." 12. Mr. Bashir Shaikh has referred to the cases Nan Fung Textiles, Ralli Brothers, Petrocon, and Hassan Ali (supra). The question of reciprocal arrangement was considered by this Court in the both cases of Nan Fung (supra). In the case of PLD 1979 Karachi 762 at 777 (Nan Fung Textiles), more or less same plea as of Mr. Hamza Ali was taken by Mr. A. Rauf, Advocate who was opposing the enforcement of a foreign award made, as per rules and regulations of the Liverpool Cotton Association Ltd. In that case also, the plaintiff was a firm of Hong Kong and the defendant was of Pakistan origin. Reference was made to the judgment of Justice Kerr of Queen's Bench Division in the case Dalmia Cement Ltd. (supra) whereafter it was held by Ajmal Mian,. J. (now Chief Justice of Pakistan) that "It is the privilege or prerogative of the Government of Pakistan _to decide as to whether the award given in a particular foreign country should be enforceable in Pakistan or not, notwithstanding that the country in which the award has been given has not made any reciprocal arrangement for the enforcement of Pakistan awards as contemplated in section 2 of the Act. The Government of Pakistan has expressed its intention not through a notification but it has been manifested through an enactment and, therefore. I cannot decline to enforce the instant award on the ground that in England no reciprocal provisions have been provided for the enforcement of Pakistani awards " This view was followed by another Judge of this Court Saleem Akhtar, J. (as his lordship then was) in the case of Sadiq Traders (PLD 1982 Karachi 619). The arguments of learned counsel for the respondent did not compel me enough to take a view contrary to the two decisions of Nan Fung cases. The decision of Dalmia Cement Ltd. (supra) is of no help to the respondent as the learned Judges of the Queen's Bench, have held that in Pakistan it is a different situation, in view of the introduction of subsection (2) to section 2 of Act 1937. Following is the relevant observation from the case of Dalmia Cement Ltd. (1974) 3 All ER 189 at 198):-- ' It is also right to mention that the difficulty which faces me has been recognised in the municipal law of Pakistan. This is shown by the decision of Supreme Court of Pakistan in Yangtze (London) Ltd. v. Barlas Bros. (Karachi) (PLD 1961 SC 573) to which I was referred by counsel for the Bank. The Supreme Court there held, in effect, that despite the continued operation in Pakistan of the India Arbitration (Protocol and Convention) Act, 1937 by reason of section .18 of the Indian Independence Act, 1947, the Republic of Pakistan was not a party to the Convention. This was remedied by the
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Pakistan Foreign Awards and Maintenance Orders Enforcement (Amendment) Ordinance, 1962 which was enacted (for the avoidance of doubt) retrospectively to 15th August, 1947, the date on which the Dominion of Pakistan came into existence. While this illustrates the same difficulty in relation to the municipal law of Pakistan, I mention it only for the sake of completeness. It has no direct bearing, since I have to decide the issue on the basis of the law of this country. Unfortunately, if my conclusion in relation to the law of this country is correct, then the position is that although the legislation of both India and Pakistan since 1962 clearly appears to provide For satis factory reciprocal arrangements in these countries for the purposes of section 35(1)(b) of the 1950 Act, the position in the United Kingdom is that further formal Orders-in-Council are needed to fulfil the requirements of this section as a matter of English Law " (Emphasis added). 13. Recently in the case of Hitachi Ltd. And another v. Rupali Polyester and others (1998 SCMR 1618 at 1650) the Hon'ble Supreme Court, after reference to the cases as mentioned in para. 10 and other…
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