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Petitioner: MESSRS ASLO MARINES LTD.s VS Respondent: M. T. MAGDA AND ANOTHER
Court Name: Sindh High Court Judge(s): Naimuddin Ahmed Title: MESSRS ASLO MARINES LTD.s vs M. T. MAGDA AND ANOTHER Case No.: Admiralty Suit No, 92 of 1977 Date of Judgment:1981-12-07 Reported As: PLD 1985 Karachi 745 Result: Application dismissed
JUDGMENT
JUDGMENT ' Messrs Aslo Marines Limited have filed this suit under Admiralty Jurisdiction against 'M. T. Magda', an ocean-going oil tanker, defendant No, I (hereinafter individually called the Vessel') and her owner Atalanta Shipping Company Limited, a company incorporated and registered in Cyprus, defendant No, 2 (here-in-after individually called 'the Vessel Owners'), claiming a sum of Rs, 13,02,728.70 as damages on account of short-landing of the oil cargo at Karachi. 2. It is the case of the plaintiffs in the plaint that under 4 charter-parties, 'the Vessel Owners' the Vessel' to the plaintiffs for carrying crude oil from Rastanura and Jebel Dhanna (Saudi Arabian Ports) for carriage by sea to Karachi. 3. Accordingly 'the Vessel' carried the oil but short-landed certain quantity mentioned in the plaint. Therefore, the plaintiffs have brought the present suit for damages as already stated in Admiralty. Jurisdiction of this Court. 4. Alongwith the suit the plaintiffs filed an application under rule 731 of the Sind Chief Courts Rules (0. S.) read with section 151, C. P. C. (being C. M. A. No, 213 of 1977) for arrest of 'the Vessel', On 14-2- 1977, the then learned Chief Justice, Mr. Justice Abdul Kadir Shaikh passed the following order :- "Notice for 16th February, 1977. A warrant for arrest of Oil Tanker "M. T. Magda" shall issue, and a direction shall be sent to the Collector of Customs, Karachi not to issue port clearance to the vessel M. T. Magda unless sum of Rs, 13,36,071.95 is deposited with the Nazir of this Court, or security in the said sum to his satisfaction is furnished." 5. It further appears that on 16-2-1977, the Master of 'the Vessel' namely, Anastasios Lefakis filed a counter-affidavit, paragraphs 2 and 5 whereof, which are material, read as follows :-
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"2. 1 have read the plaint and the plaintiff's application under rule 731 of the Sind Chief Court Rules and its accompanying affidavit and submit that the claims made by the plaintiffs are completely false, concocted and flimsy. The defendants crave leave to properly reply all the allegations made in the plaint at the time of filing the written statement. It is, however, submitted that the plaintiffs at the material time were the charterers of the vessel. 5. That the defendants reserve their right to file proper application for stay of the suit and referring the dispute to arbitration in terms of the charter party. This affidavit or any proceeding taken to secure the release of the vessel to avoid loss to the defendants may not be treated as step in the proceedings. Due to delay and detention the defendants will suffer a loss of U. S. $ 7,000 per day." 6. Thereafter, on 17-2-1977, the defendants applied under section 34 of the Arbitration Act, 1940 for stay of the suit relying on clause 38, which is common in all the Charter parties and provide as follows : "38. (a) This charter shall be construed and the relations between the parties determined in accordance with the laws of England. (b) Any dispute arising under this charter shall be decided by the English Courts to whose jurisdiction the parties hereby agree : ' Provided-that either party may elect to have the dispute referred to the arbitration_ of a single arbitrator in London in accordance with the provisions of the Arbitration Act, 1950, or any statutory modification or re-enactment thereof for the time being in force. Sun election shall be made by written notice by one party to the other not later than 21 days after receipt of a notice given by one party to the other of a dispute having arisen under this charter." ' On the same day, it appears from the record that the defendants furnished guarantee of Grindlay's Bank Limited for the amount claimed in the suit and the then learned Chief Justice passed the following order :- "In view of the Bank Guarantee having been furnished in terms of the order dated 14-2-1977, the warrant of arrest of the Oil Tanker M. T. Magda is recalled and the Collector of Customs, Karachi be informed that the directions issued to him prohibiting him from granting port clearance to the oil tanker stands vacated. The case will now come up before the Additional Registrar, by consent, for filing the written statement and any other steps that may be taken by the parties." 7. I have now, therefore, before ale for consideration the application for stay of the proceedings with the following prayer :- "It is, therefore, prayed that this Hon'ble Court will be pleased to stay the above suit and refer the matter to arbitration in terms of the charter parties." 8. It is opposed by the plaintiffs on the grounds :- (0 that the arbitration clause has not been invoked ; (ii) that the defendants have already taken steps in the proceedings; and (iii) That discretion should not be exercised in favour of the defendants for the reasons :- (a) that the evidence and witnesses relating to short-landing are mostly in Pakistan ; (b) that it would be difficult for the plaintiffs to take their witnesses to foreign country in view of the difficulty in obtaining foreign exchange; and (c) that the plaintiffs will lose the benefit of security furnished by the defendants if stay is granted. 9. I have heard Mr. Mansoor Ahmed Khan the learned counsel for the plaintiffs in opposition to the application and Mr. Muhammad Naeem, the learned counsel for the defendants in support of the application. 10. The conditions for grant of stay under section 34 of the Arbitration Act, 1940 are as follows :- "(1) the proceeding must have been commenced by a party to an arbitration agreement against any other party to the agreement ;
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(2) the legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred ; (3) the applicant for stay must be party to the legal proceeding and he must have taken no step in the proceeding after appearance. It is also necessary that he should satisfy the Court not only that he is but also was at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration ; and (4) the Court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration in accordance with the arbitration agreement." ' See Anderson Wright Ltd. v. Moran & Co. AIR 1955 SC 53. 11. It is not disputed that under section 34 of the Arbitration Act, Court has discretion to grant or not to grant stay of the proceeding, though no doubt such discretion has to be exercised with due regard to the facts and circumstances of each case and on judicial considerations and not arbitrarily' or capriciously. 12. It is also not disputed that the application fulfills conditions Nos. 1 and 2. What is in dispute is that conditions Nos. 3 and 4 are not fulfilled. 13. So far as first point raised by Mr. Mansoor Ahmad Khan is concerned, in clause 38 of the Charter parties the parties have primarily agreed that Courts in England will have jurisdiction. However, it is further provided therein that either party will have option to invoke arbitration by taking necessary steps provided therein. It is contended by Mr. Mansoor Ahmed Khan that no steps to invoke arbitration were taken by the defendants. According to the provisions of clause 38 of the charter parties the party who elects to refer the dispute to arbitration has to give written notice to the other party not later than 21 days after receipt of the notice given by one party to the other of the dispute having arisen under the charter party. It is argued that since no notice has been given by the defendants invoking arbitration, therefore, the reference clause _cannot be said to have been invoked. On the other hand, it is submitted by Mr. Muhammad Naeem that the defendants were required to give notice within 21 days of the receipt of the notice from the plaintiff of the dispute and since no notice was admittedly served on the defendants they could not, therefore, invoke the arbitration agreement and if the filing of suit is taken as notice then by the application under section 34 of the Arbitration Act, the defendants should be deemed to have invoked the arbitration agreement. 14. I would not consider the merits or demerits of these arguments, for in sub-clause (b) of clause 38 of the charter parties it is provided that any dispute arising therein under the same shall be decided by the English Court, whose jurisdiction the party thereby agreed. Such a clause has been construed in this country by the highest Court. That is, the Supreme Court of Pakistan in M. A. Chowdhury v. Messrs Mitsui 0. S. K. Lines Ltd. And 3 others (1), as reference clause. 15. I may here refer to the relevant observations of Hamood-urRahman, C. J., who delivered the opinion of the Court and the same read as follows :- "Having said this, however, I am of the opinion that in order to preserve the sanctity of contracts 1 ought also to hold, as was done in the earlier cases in Great Britain that such foreign jurisdiction clauses, even when they purport to give jurisdiction to a Court in a foreign country, are really in tne nature of arbitration clauses which come within the exceptions to section 28 of the Contract Act and, therefore, should be dealt with in the same manner as other arbitration clauses." 16. Therefore, in view of the above observations, I need not dwell on this point any more as the sub- clause (b) of the charter parties is still attracted and the application under section 34 of the Arbitration Act can be considered with reference to sub-clause (b) ibid. 17. Now, I would, therefore, take up the next ground urged by the learned counsel for the plaintiffs that the defendants by filing affidavit had not only taken step in the proceedings but have manifestly expressed their intention to proceed with the case by filing the written statement. In fact
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they have in the counter-affidavit, as quoted hereinabove, submitted that the claim made by the plaintiffs was completely false, concocted and flimsy. These are matters germane to defence of the suit. Further, in paragraph 2 of the counter-affidavit, they have sought leave to properly reply to all the allegations made in the plaint at the time of filing the written statement. However, it is submitted by the learned counsel for the defendants that the defendants have reserved their right to file proper application for stay of the suit and refer the dispute in the suit to arbitration in terms of the charter parties. But firstly, it vas not done without prejudice to the earlier stand ; secondly, it appears from the provision of section 34 of the Arbitration Act that the condition provided therein that the defendants should make application for stay before taking any step in the proceedings is on the basis of principle of acquiescence in the proceedings, and if I judge in the light of D this principle, the defendants in paragraph 2 of the counter-affidavit have first in unequivocal terms acquiesced in the proceedings and then have taken (1) PLD 1970 SC 373 stand of reserving their rights to file proper application for stay of the proceedings and refer the dispute to arbitration in terms of the charter E parties. -This, at best, amounts to approbation and reprobation at one and the same time, which is not permissible. 18. The counter-affidavit - was filed in reply to the application for arrest of the vessel. I am of the view that filing of the counter-affidavit containing matters pertaining to defence of the case and also a statement that the defendants will deal with the allegations made in the plaint in the written I statement, and furnishing security without simultaneously applying for stay are all steps in the proceedings. I am fortified in my conclusion by the observations of Russell in 'Russell on Arbitration', 19th Edition page 182 which read as follows :- "The filing of an affidavit, on a summons for judgment under Order XIV, disputing the claim and asserting a right. To submit the dispute to arbitration, is probably a "step in the action," so that if this is done a summons to stay ought to be taken out at the same time." ' In this connection reliance is placed on unreported judgment in Carbide Trading Co. Ltd. v. Charles Bingham & Co. Reference is also made to the judgment of Lord Goddard itlPitChers Ltd. v. Plaza (Queensbury) Ltd. (1), wherein the learned Lord disapproved the contrary dicta in an unreported decision in Allied Artist's Corporation v. Jacobson (1922). 1 may here quote the observations of Lord. Goddard, L. J., which are as follows :- "The only other thing which I want to say is that the Annual Practice; 1940, p. 2502, states as follows :- "In Allied Artists Corpn. v. Jacobson it was held that where, on a summons for judgment under R. S. C., Order XIV, the defendant had filed an affidavit disputing the claim and claiming the right to submit the dispute to arbitration, he had not taken a step in the action, but as the defendant had alleged fraud in his affidavit, a stay was refused. ' For myself, I should say that that is a somewhat dangerous passage to follow. In the first place, as the stay was refused on the ground that the defendant had alleged fraud, any view which the Judge may have expressed as to whether or not the affidavit was insufficient to justify a stay is in the nature of an obiter dictum. The position was that, as the defendant alleged fraud, a stay had been refused. For myself, I am not at all satisfied that, if the defendant tiled an affidavit in answer to an application for judgment under R. S. C. Order XIV, although he may raise the arbitration clause, it may not be said that he has taken a step in the action unless at the same time he has taken out a summons to stay the action. Of course, if he has taken out a summons to stay the action which comes on (as, in the ordinary course, it would) at the same time as the summons for judgment, and the master refuses the application to stay, and says, "On the plaintiff's summons, I give judgment," I should say that there could be no doubt that, in -appealing against both the refusal of
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the master to stay and the order giving leave to sign judgment, the defendant is not taking a step in the action." 19. There is yet another aspect of the matter which also goes against the defendants. By the order dated 17-2-1977, the case was directed to go before the Additional Registrar for filing written statement and any other (1) (1940) 1 All R 151 steps that may be taken by the parties in the suit. This was done by consent of the parties. Thus it is clear that on 17-2-1977 the defendants had shown their willingness to file their written statement and this case thus falls within F the purview of the following observations made by Constantine, J. In a Division Bench judgment in Messrs M. M. Yaseen v. Messrs Irving R. Boody & Co. (1). "Later there was a House of Lords case Ford's Hotel v. Bartlett, and Tendolkar, J., has quoted the observation of Lord Shand, "This appears to me to have in effect been an abandonment of the proposal to have the subject of the cause disposed of by arbitration." This was echoed by Ridley, J., in Austin v. S. Bowley. The learned Judge stated "In my opinion what is intended by a step in the proceedings is some step which indicates an intention on the part of a party to the proceedings that he desires that the action should proceed and has no desire that the matter should be referred to arbitration." The requirement, therefore, of Lindley L. J., that there should be something in the nature of an application should also take out a summons or something of that kind which is in the technical sense a step in the proceedings, has been extended to anything which shows an intention of a party that he desires that the action should:proceed. The two cases which have been mentioned at the beginning of this judgment were not referred to by Tendolkar, J. ' They are in our opinion to be considered from the point of view that where an order is passed against the other side and you stand by and allow that order to be passed you should be treated as having applied for that order." 20. I may also refer to Fleming Shaw & Co. v. Haji Yusif Ellias (2), wherein time was taken for filing written statement on the ground that the documents relating to suit had to be discovered and the time allowed had been too short to permit of this being done. On referring to the documents, defendants noticed an arbitration clause in the indent and thereupon filed an application for stay of the proceedings. The Court held "whether the applicant wished to have further time to file a written statement or wished to have further time to raise as a bar to the suit the agreement to refer to arbitration, in either event the application was an application to invite the Court to do something which would enable the applicant to establish his defence". It was further observed by Pratt, J. C. That : "The later English cases go even further and establish that mere acquiescence in a proceeding initiated by the other party and in an order made on his separate application does amount to a step in the proceedings : County Theatres and Hotels, Limited v. Knowles 1902 K B 480 Lord Halsbury's Laws of England, Volume I, paragraph 956, summarises the law on the subject as follows : "A party who makes any application whatsoever to the Court, even though it be merely an application for time, takes a step in the proceedings." ' This seems to me to be also the law here and this application must, therefore, fail." ' Learned counsel for the defendants referred to Badshah Meah Sowdagar v. (1) PLD 1957 Kar. 758 (2) AIR 1917 Sind 12 Nurul Hag (1) and Md. Esack v. Raja Miah and another (2). In the first-named case the defendant prayed for time for filing objections to the application for appointment of receivership, but until then he was not served with the copy of the plaint. It was, therefore, held that the prayer made by the defendant was not a step in the proceedings, as the act did not amount to acquiescence in the
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proceedings, particularly in view of the fact that the defendant was not even aware of the contents of the plaint. ' In this case it was observed that the primary duty of a Court is to look into the facts of the case fairly and then to decide whether the conduct of the applicant is such as would amount to participation in the suit itself or any indication of acquiescence in the proceedings so as to dig entitle him to file an application under section 34 of the Arbitration Act. ' In the second case the plaintiff had filed an interlocutory application for injunction and the defendant was called upon to show cause against the prayer for injunction but neither be was served with a copy of the application for temporary injunction nor with a copy of the plaint in the suit. The defendant in response to the injunction application filed an application under section 34 of the Arbitration Act and also filed another application for time to file objections to the prayer for grant of temporary injunction. On these facts it was held that the defendant was not even aware of the contents of the plaint and therefore, he could not have-acquiesced in the filing of the suit and Both these cases are distinguishable on facts and have no application to the facts of the present case. In fact both these cases were also cited in Island Textile Mills Limited v. V. 0. Technoexpert (3) and the learned Judge while dealing with the same observed as follows "In my view the question as to whether a defendant has taken steps in the proceedings will depend on the facts of each case and it will vary from case to case. If from the conduct of the defendant it appears that he has acquiesced to the suit and intended to contest the suit on merits before the Court, he cannot thereafter file or press an application under section 34 of the Arbitration Act. However, if a defendant makes his stand clear at the earliest opportunity that he wishes that the disputes/differences be referred to arbitration as per arbitration agreement in such a case the mere fact that the defendant has contested an application for injunction or for appointment of a receiver will not constitute a step in the proceedings." I, therefore, hold that the defendant had taken steps in the proceedings and had acquiesced. 21. Now, taking up the last point urged by Mr. Mansoor Ahmed Khan that the Court should not exercise discretion in favour of the defendants, he submits that it would be highly inconvenient for the plaintiffs to take their witnesses to London as most of the evidence concerning the claim will be from Karachi for the goods were short landed at Karachi and even if the plaintiffs could take the witnesses to London, they may not be provided with foreign exchange for their expenses. He further submits that the plaintiffs had filed action in rem and in the action the defendant No, 1 was arrested and was released on furnishing security and if the action is stayed the (1) PLD 1967 Dacca 250 (2) PLD=1969 Dacca 719 (3) 1979 CLC 307 security has to be released and thus the plaintiffs would lose the benefit of the security. On the other hand, Mr. Muhammad Naeem submits that the plaintiffs had entered into charter which included adjudication of dispute in England or settlement of dispute by arbitration in London with open eyes and they should not be allowed to avoid their bargain on consecration of pleas now urged. In this connection the learned counsel relied upon a single bench decision of this Court in Island Textile Mills Ltd. Karachi v. V/O Technoexpert and another already referred to by me, wherein it was observed by the learned Single Judge at page 316 of the report as follows :- "(e) I cannot be unmindful of the well-established principle that the Court should not lightly release the parties from their bargain, that follows from the sanctity which the Court attaches to contracts. In the instant a foreign State owned enterprise is involved, which entered into the contract in question on the basis that in case any claim would be made against them, the same would be adjudicated upon as per aforesaid arbitration clause but the plaintiffs wish to defeat the above clause with the aid of this Court. If Pakistan desires to acquire a respectable place in the
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community of nations, not only the Government, but even individuals are expected to honour their commitments-to the foreign parties." 22. And also on a judgment of Supreme Court in Haji Soomar Haji Hajjan v. Muhammad Amin Muhammad Bashir Ltd. (i), wherein it was observed that "wherever the parties to an agreement expressly chose, through an arbitration clause, a forum other than a Court of law, for the settlement of their dispute, neither of them should normally be allowed to avoid that forum. The sole purpose of the Arbitration Act is to curtail litigation in Courts and to promote the settlement of the dispute amicably through persons in whom both the parties repose their trust." 23. However, the rule laid down in the above cited case is not absolute. The provisions of section 34 of the Arbitration Act themselves leave much discretion with the Court and the same is recognized even in England in relation to similar provisions in the Arbitration Act in force there. Mr. Mansoor Ahmed has pointed out that in M. A. Chowdhury v. Messrs Mitsui 0. S. K. Lines Ltd. And 3 others reference was made by the Supreme Court with approval to the "The Eleftheria" (2), which was a case of an application for stay of action brought against the ship owrers by the cargo owners wherein Brandon, J., after reviewing all the earlier decisions, summarised the principles followed by the English Courts as follows :- "(1) Where plaintiffs sue in England in breach of an agreement to refer dispute 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 unlessstrong 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 _ (1) 1981 SCM R 129 (2) (1969) 2 All R 641 (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…
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