Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: CUMMINS SALES AND SERVICE (PAKISTAN) LIMITED through Authorized Signatory VS Respondent: CUMMINS MIDDLE EAST FZE through Chief Executive and 3 otherss
Court Name: Sindh High Court Judge(s): Muhammad Tasnim Title:CUMMINS SALES AND SERVICE (PAKISTAN) LIMITED through Authorized
Signatory vs CUMMINS MIDDLE EAST FZE through Chief Executive and 3 otherss Case No.: Suit No,1804 of 2009 Date of Judgment:2012-09-07 Reported As: 2013 CLD 291 Result: Order accordingly Judgment ORDER ' MUHAMMAD TASNIM, J.---Through this order, I shall dispose of two applications, one being C.M.A. No,1028 of 2010 filed by defendants Nos,1, 2 and 4 under sections 3 and 4 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Ordinance, 2009, read with section 151, C.P.C., praying therein for stay of proceedings in above suit so that dispute, if any, may be referred by the plaintiff either to an English Court or to the London arbitration in accordance with the dispute Resolving Mechanism. Notice of this application was served upon the plaintiff, who filed its counter-affidavit on 24-2-2010 and another application being C.M.A. No,3248 of 2010 filed by plaintiff, seeking summarily rejection of defendants' application for stay of suit being C.M.A. No,1028 of 2010 filed under sections 3 and 4 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Ordinance, 2009, read with section 151, C.P.C. 2. Facts, as set-out in the plaint, are that plaintiff is engaged in business of import, distribution, supply, sale, installation and after sale service of various kinds of engines, power generating equipment as well as other various industrial and commercial installation ever since 1993 and power generation equipment sale and installation since 1997. It is the case of parties that they entered into three agreements as follows:-- Ser. Agreement Parties Status 01 Distribution AgreementCummins Power Generation Limited (Defendant No.2)Valid till December 31, 2009
---
## Page 2
effective January 1, 2007and Cummins Sales and Service (Pakistan Limited (Plaintiff) 02 Distribution Agreement effective February 21, 2005Cummins Engine Company Limited (Defendant No.3) and Cummins Sales and Service (Pakistan) Limited (Plaintiff)Valid till December 31, 2006 03 Dealership Agreement effective February 21, 2005Cummins Middle East FZE (Defendant No.1) and Cummins Sales and Service (Pakistan) Limited (Plaintiff) Valid till December 31, 2006 Renewed till December 31, 2006 3. It is further stated in paragraph-26 of the plaint that Power Generation agreement dated 29-10- 2006, effective from 1-1-2007 till 31-12-2009 regulates the whole commercial relationship between the plaintiff and the defendants as power Generators includes engine and all other related equipment for the reason that the Generators cannot function without engine. It is the case of the plaintiff that defendants have defaulted for performance of their agreement and finally it appears that termination letter dated 15-5-2009 was served by defendant No,1 upon the plaintiff, which has forced the plaintiff to file present suit with the following prayers:-- (a) pass a decree permanently restraining the defendants from discontinuing the supply of Cummins Products to the plaintiff in Pakistan as and when requested by the plaintiff through placing orders for supply in a manner and the mode which is continuously being followed by the plaintiff and defendants since year 1993 onwards; (b) pass a decree permanently restraining the defendants from terminating the existing contractual arrangements between the plaintiff and defendants, particularly the Power Generation Agreement dated October 29, 2006, effective from January 1, 2007 till December 2009 as well as from discontinuing performance of their continued contractual arrangements which are in field and in place between the plaintiff and the defendants since year 1993 for supply of Cummins Engines (diesel, gas), Cummins power generation sets, Cummins power electronic equipment, Cummins automatic transfer switches, Cummins switchgears, Cummins paralleling control system and Cummins networking and ancillary equipment etc.; (c) pass a decree permanently restraining the defendants from giving effect to the Termination Letter dated May 15, 2009 served by the defendant No,4 (having no dealing with the commercial dealing with plaintiff) upon the plaintiff (d) pass a decree permanently restraining the defendants from interfering into plaintiff's business of Cummins Products in Pakistan (either directly or indirectly or through any other licensee/ dealer/ distributor) which is being conducted by the plaintiff since year 1993 onward; (e) pass a decree permanently restraining the defendants from appointing any other person or company as an exclusive or non exclusive Distributor/Franchisee/ Licensee for import, marketing, supply, sale and maintenance of Cummins Products in Pakistan either by replacing the plaintiff or otherwise; (/) pass a money decree for payment of Rs,6,049,105,127 to the plaintiff as compensation for the loss suffered by the plaintiff on account of breaches and violations committed by the defendants
---
## Page 3
of their contractual arrangements etc., along with profit @ 15% per annum; (g) cost of the suit may be provided; and (h) grant any other relief as deemed appropriate by this honourable Court. 4. Along with suit, an application being C.M.A. No,11513 of 2009 under Order XXXIX, Rules 1 and 2, C.P.C., was filed. It appears that on 22-12-2009 notice of such application was issued to the defendants and parties were directed to maintain status quo till next date of hearing. However, 'such order was modified to the extent that defendants may continue with their commercial operation of business. However, such concession was given to the defendants subject to result of this suit. 5. After service of the notice of the above suit the defendants Nos,1, 2 and .4 filed applications being C.M.A. No,1028 of 2010 under sections 3 and 4 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Ordinance, 2009, read with section 151, C.P.0 , for stay of suit. Defendants have stated in their application that plaintiff and defendants had entered into two agreements viz. Cummins Power Generation Distributor Agreement dated 29-10-2006 between Cummins Power Generation Limited (defendant No,2) (as Annexure "F-1" to the plaint) and the plaintiff ("Distributor Agreement") and Cummins Dealer Agreement dated February 21-2-2005 between Cummins Middle East FZE (defendant No,1) (being Annexure 'F-3' to the plaint) and the plaintiff, as extended by a letter Agreement signed by the defendant No,1 on December 2, 2008 and signed by the plaintiff on December 12, 2008 (being part of the Annexure 'F-3' to the Plaint above) ("Dealer Agreement"). It is also stated that Distributor Agreement in Clause-11 pertaining to "LAW AND DISPUTES" stipulates as under:-- "11. LAW AND DISPUTES 11.1 Law: This Agreement is governed in 'all respects by English law and is subject to the exclusive jurisdiction of the English Courts. 11.2 Disputes among Cummins Distributors: In the event .Of any dispute between Distributor and any other distributor or dealer of Cummins Power Generation or its affiliates, all facts touching on such dispute shall be submitted promptly to Cummins Power Generation in writing, and the decision of Cummins Power Generation transmitted in writing to the parties involved shall be final and binding on said parties. 11.3 Mediation: The parties will attempt to resolve any dispute between, them which results from this agreement in a spirit of co-operation. Accordingly, the parties agree to engage in good faith negotiation to reach a rapid and equitable solution. If the parties are unable to resolve a dispute through direct negotiation they will use the services of a mediator appeal the Centre for Dispute Resolution ("CEDR") in Loncu; The rules of CEDR will apply to that mediation. If the mediation fails to reach an equitable solution to the dispute within 45 days after the request by either party to submit the dispute to mediation, then the dispute will be settled exclusively by final and binding arbitration initiated by either party. 11.4 Arbitration: Any question or dispute arising out of or in connection with this Agreement shall be referred to a panel of three arbitrators in London. Each party shall nominate one arbitrator and the third arbitrator will be appointed by agreement between the two nominated arbitratoRs, Failing agreement, the third arbitrator will be appointed by the President for the time being of the London Chamber of Commerce. The UNCTTRAL rules will govern the arbitration. The decision of a majority of the arbitrators shall be final and binding upon the parties." 6. It is further stated that the Dealer Agreement also contains similar clause in paragraph-11 thereof. It is submitted in the application that in view of plaintiff having instituted the suit in clear violation of the Dispute Resolving Mechanism, the defendants in accordance with their rights under the English Law which is governing law and for protecting their interests, passed on legal advice received from their lawyers in England, instituted proceedings for an 'anti-suit injunction' in
---
## Page 4
pursuance of the Senior Courts Aet, 1981 in the High Court of Justice, Queen's Bench Division, Commercial Court seeking, inter alio, a declaration that the suit instituted by the plaintiff in Pakistan is in breach of the Dispute Resolving Mechanism, to which both the parties are contractually bound. It is further stated that pursuant to a hearing held before the English Court on 28-1-2010, the English Court was pleased to grant requisite injunction, which is applicable only to the plaintiff, in terms of which plaintiff has been directed, inter alia, until the next date of hearing not to pursue, or take any further steps in, or procure or assisi the pursuit of, the Pakistan proceedings by itself, its directors, employees, officers or agents. In this background, it was prayed in the application under disposal that proceedings in the suit be stated and the dispute, if any, may be referred by the plaintiff either to an English Court or to the London arbitration in accordance with the Dispute Resolving Mechanism. 7. Plaintiff filed counter-affidavit to the application (C.M.A. No,1028 of 2010) filed by the defendants, wherein execution of aforesaid three agreements was admitted. It was also admitted by the defendants that the agreements "annexures F-1 to F-3" contained the clause-11 quoted hereinabove. It was stated in the counter-affidavit that disputes as mentioned in the suit are outside the purview and scope of the Arbitration Clause as contained in the agreements. It was further stated that the evidence of the dispute is available in Pakistan where the properties connected with the disputes are also located. The contractual relationships, business and commercial understandings as well as mutual promises and assurance have been performed by both sides ever since 1993 in Pakistan therefore, proceedings in the suit cannot be stayed. 8. Mr. Sajid Zahid, learned counsel for the defendants Nos,1, 2 and 4 has submitted that dealership- agreement dated 21-2-2005, effective from 21-2-2005, expiry on 31-12-2009 contained arbitration clause being Clause-11.4, hence present proceedings is not maintainable before this Court and matter is referable to the Arbitration in terms of arbitration mechanism agreed between the parties. He also submitted that agreement annexure "F-3" has already expired on 31-12-2009. He further submitted that clause 4 of the agreement provides that agreement shall not be effective until it has been signed by the Dealer and Cummins but if and when so signed, it shall effective on the effective date and continue in force for the term. He further submitted that no act or failure to act by either party to this agreement shall be construed an extension or renewal of this agreement except renewals or extensions in writing duly signed by both the parties. He further submitted that no further agreement extending the period of annexure "F-3" was ever executed by the parties to the proceedings. He further submitted that clause-11.4 provides that any question or dispute arising out or in connection with this agreement shall be referred to a panel of three arbitrators in London. Each party shall nominated one arbitrator and the third arbitrator will be appointed by agreement between the two nominated arbitratoRs, Failing agreement, the third arbitrator will be appointed by the President for the time being of the London Chamber of Commerce. The UNCITRAL rules will govern the arbitration. The decision of a majority of the arbitrators shall be final and binding upon the parties. Learned counsel for the defendants has also invited attention of the Court to clause- 12.6 of the agreement and submitted that agreement annexure "F-3" constitutes the full understanding of the parties and supersedes all prior agreements whether oral or written. It further provides that any prior agreements are cancelled as at the start of this agreement and neither party is relying upon any representation, warranty or other provision except as expressly provided. He further submitted that clause-12.6 further provides that this agreement cannot be altered, except by a 'written amendment signed by the dealer and an authorized officer of Cummins and specified to be an amendment to this agreement. Learned counsel further submitted that Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Award's) Act, 2011 (hereinafter called as "the Act, 2011") is applicable to the case in hand. He further submitted that Act, 2011 came into force on 19-7-2011. He submitted that sections 1 and 3 of Act, 2011 apply to
---
## Page 5
arbitration agreements made before, on or after the date of commencement of Act, 2011. He further invited the attention of the Court to section 2(c) which provides definition of "Convention" and submitted that convention means the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on 10 June 1958, set forth in the schedule of the Act, 2011. Learned counsel further submitted that Pakistan is signatory to the United Nation Convention on the Recognition and Enforcement of Foreign Arbitral Award, 1958 as appears in the preamble of the Act, 2011. Learned counsel further submitted that in terms of subsection (2) to section 3 of the Act, 2011, an application to stay legal proceedings pursuant to the provisions of Article II of the Convention can be filed in Court, in which legal proceedings are pending. He further submitted that subsection (1) to section 4 of the. Act, 2011, provides that a party to an arbitration agreement against whom legal proceedings have been brought in respect of a matter which is covered by arbitration agreement may, upon notice to the other party to the proceedings, apply to the Court in which the proceedings have been brought to stay the proceedings in so far as they concern that matter. He further submitted that subsection (2) of section 4 of the Act, 2011 provides that on an application under subsection (1), the Court 'shall' refer the parties to arbitration,' unless it finds that arbitration agreement is null and void, in operative or incapable of being performed. He further invited the attention of the Court to schedule to the Act, 2011 and more particularly to sub- Article 3 to Article II which provides that the Court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that said agreement is null and void, inoperative or incapable of being performed. Learned counsel further submitted that after expiry of the agreement between the parties there was no contractual basis for continuing to deal with the plaintiff, it can never be the intention of the Court to place any party in more advantageous position than it was during the operation of relevant agreement. In the end learned counsel for the defendants Nos,l, 2 and 4 submitted that C.M.A. No,1028 of 2010 be allowed and the suit filed by the plaintiff be stayed and the matter may be referred to arbitration in accordance with the arbitration agreement entered into between the parties. In support of his contentions, learned counsel for the defendants Nos,1, 2 and 4 placed reliance on the following case-law:-- (1) MESSRS TRAVEL AUTOMATION (PVT.) LTD. THROUGH MANAGING DIRECTOR v. ABACUS INTERNATIONAL (PVT.) LTD. THROUGH PRESIDENT AND CHIEF EXECUTIVE AND OTHERS (2006 CLD 497), (2) FAR EASTERN IMPEX (PVT.) LTD. v. QUEST INTERNATIONAL NEDERLAND BV AND OTHERS (2009 CLD 153), (3) GAS AUTHORITY OF INDIA LTD. v. SPIE CAPAG, S.A. AND OTHERS (AIR 1994 DELHI 75), (4) SVENSKA HANDELSBANKEN AND OTHERS v. MESSRS INDIAN CHARGE CHROME LTD. AND OTHERS ((1994) 2 SUPREME COURT CASES 155), (5) A. MERDITH JANES CO. LTD. v. CRESCENT BOARD LTD. (1999 CLC 437), (6) R.M. INVESTMENT & TRADING CO. PVT. LIMITED v. BOEING CO. AND OTHERS (AIR 1994 SC 1136), (7) MESSRS SRIVENKATESWARA CONSTRUCTIONS AND OTHERS v. THE UNION OF INDIA (AIR 1974 ANDHRA PRADESH 278), (81 SQN. LDR. (R.) KHURRAM ZAMAN v. MRS, AFIA ZAFAR AND OTHERS (2008 CLD 662), (9) LAIIORE DEVELOPMENT AUTHORITY THROUGH DIRECTOR GENERAL, L.D.A., LAHORE v. MOHANDISIN-E- MASUD THROUGH MANAGING PARTNER AND ANOTHER (2010 YLR 66), (10) AFTAB KHALIL AND OTHERS v. SHAUKAT HUSSAIN (2008 CLC 1592), (11) MESSRS ECKHRDT & CO. MARINE GMBH v. MUHAMMAD HANIF (PLD 1993 SC 42), (12) BOLAN BEVERAGES (PVT.) LIMITED v. PEPSICO. INC. AND OTHERS (2004 CLD 1530), (13) MESSRS SHAKIL WAQAS & CO. AND OTHERS v. GENERAL MANAGER/ MARKETING, PAKISTAN RAILWAYS AND OTHERS (PLD 2011 KAR. 185),
---
## Page 6
(14) CONCENTRATE MANUFACTURING COMPANY OF IRELAND AND OTHERS v. SEVEN-UP BOTTLING COMPANY (PRIVATE) LIMITED AND OTHERS (2002 CLD 77), (15) TAHIR ZAMAN v. JIN WEI (M) SDN BHD AND OTHERS (2004 CLD 603), (16) MARGHUB SIDDIQI v. HAMID AHMAD KHAN AND OTHERS (1974 SCMR 519), (17) LAHORE STOCK EXCHANGE LTD. THROUGH MANAGING DIRECTOR AND ANOTHER v. MESSRS HASSAN ASSOCIATES THROUGH MANAGING PARTNER (2010 MLD 800), (18) MESSRS GULF PACIFIC FERTILIZER, CALIFORNIA, U.S.A. THROUGH ATTORNEY v. MESSRS ALI AKBAR ENTERPRISES AND OTHERS (2000 MLD 1537), (19) ZULQARNAIN AND OTHERS v. SURBULAND KHAN AND ANOTHER (2004 SCMR 1084), (20) NOOR AHMAD v. MUHAMMAD SHAFI (PLD 1969 BAGHDAD-UL-JADID 17), (21) MRS, MUSSARAT SHAUKAT ALI v. MRS, SAFIA KHATOON AND OTHERS (1994 SCMR 2189), (22) METROPOLITAN STEEL CORPORATION LTD. v. MACSTEEL INTERNATIONAL U.K. LTD. (2006 CLD 1491), (23) M.A. CHOWDHURY v. MESSRS MITSUI O.S.K. LINES LTD. AND OTHERS (PLD 1970 SC 373), (24) MESSRS UZIN EXPORT AND IMPORT ENTERPRISES FOR FOREIGN TRADE v. MESSRS M. IFTIKHAR AND COMPANY LIMITED (1993 SCMR 866), (25) MESSRS DANISH BROTHERS LIMITED AND OTHERS v. COTTON EXPORT CORPORATION OF PAKISTAN (PVT.) LIMITED (1994 MLD 2227), (26) ASSOCIATED AGENCIES LTD. AND ANOTHER v. INDUSTRIJA MASINA/ TRACTORA AND ANOTHER (PLD 1993 KAR. 459), (27) MESSRS SERULEAN (PVT.) LTD. KARACHI v. MESSRS BHOJA AIRLINES (PVT.) LTD. THROUGH CHAIRMAN AND ANOTHER (2001 YLR 3150), (28) ISLAND TEXTILE MILLS LTD. KARACHI v. V/ O TECHNOEXPERT AND ANOTHER (1979 'CLC 307), (29) PORT QASIM AUTHORITY, KARACHI v. AL-GHURAIR GROUP OF COMPANIES AND OTHERS (PLD 1997 KAR. 636), (30) LAHORE STOCK EXCHANGE LIMITED v. FREDRICK J. WHYTE GROUP (PAKISTAN) LTD. AND OTHERS (PLD 1990 SC 48), (31) DAR OKAZ PRINTING AND PUBLISHING LIMITED LIABILITY COMPANY v. PRINTING CORPORATION OF PAKISTAN PRIVATE LIMITED (PLD 2003 SC 808), (32) HAJI SOOMAR HAJI HAJJAN v. MUHAMMAD AMIN MUHAMMAD BASHER LTD. (1981 SCMR 129), (33) S. GHOUS MOHIUDDIN v. MESSRS NATIONAL REFINERY LTD. (PLD 1968 KAR. 652). 9. On the other hand, Mr. Moeen Qamar, learned counsel for the plaintiff has submitted that this application is liable to be dismissed as the same was filed under Ordinance XXXIII of 2009 dated 26-11-2009. Learned counsel further submitted that since the aforesaid Ordinance was not laid before the National Assembly and that Ordinance expired after a period of Four months. He further submitted that the Act, 2011 was promulgated on 19-7-2011, where under no application has been filed by the defendanis. He further submitted that by filing C.M.A. No,12255 of 2011 the defendants have submitted to the jurisdiction of this Court hence they cannot press present C.M.A. i,e, 1028 of 2010. Learned counsel for the plaintiff has invited attention of the Court to paragraph-2.1 of the plaint to contend that the plaintiff apart from its registered corporate office in Karachi, has a Regional Offices in Lahore and Rawalpindi. Additionally, the plaintiff has its display, sales, supply and after sale service facilities in the cities of Karachi. Lahore. Rawalpindi and Gujranwala. He further invited the attention of Court to paragraph-2.2 of the plaint and submitted that all the business operations of the plaintiff are being conducted and run with 170 employees which include business executives, support staff and technical staff etc. He further submitted that from the year 1993 onwards the plaintiff on sole basis of its visionary management, marketing skills as well as after service, has been able to achieve tremendous growth in its business which can be gauged from the fact that in the year 1993 the value of the business conducted by the plaintiff in Pakistan was Rs,6,500,000 which valued for the year 2008 has been US S 20 million. He further submitted that
---
## Page 7
defendants had assured the plaintiff that a long term business relationship for an indefinite period. He further submitted that plaintiff was assured that the defendants would ensure supply of all the Cummins Products which are ordered by the plaintiff and that on account of plaintiffs success in Pakistan, preferential treatment would also be extended to the plaintiff as compared to other distributoRs, He further submitted that no doubt agreements mentioned in the plaint had expired but parties continued to follow the same till the filing of the suit and there is no dispute between all parties, which is referable to the arbitration. He further submitted that Engine Assembly Plant was installed in Pakistan without any written agreement. Learned counsel further submitted that section 1(3) and section 10 of the Act, 2011 do not save any pending proceedings under Ordinance XXXIII of 2009 till the passing of the Act, 2011. Learned counsel for the plaintiff further submitted that agreement executed between the plaintiff and defendants shall continue to operate even after expiry period mentioned in the agreement itself. He further submitted that in spite of expiry of agreement period parties entered into supra contractual relationship to the extent of supply of engine e.t.c. And the business relationship was existing between the parties till the filing of the suit. Learned counsel for the plaintiff further submitted that termination order dated 15-5-2009 was issued which forced the plaintiff to file the present suit and interim order was also passed by this Court. Leaned counsel further submitted that findings -recorded by the learned Judge in the case of MESSRS TRAVEL AUTOMATION (PVT.) LTD. THROUGH MANAGING DIRECTOR (supra) with regard to discretion of the Court while dealing with an application under sections 3 and 4 of the Ordinance XX of 2005 is not a good law and Judgment is per incuriam. He further submitted that dispute has not been mentioned in the application under disposal hence on this ground as well the application is liable to be dismissed. ' In support of his contentions learned counsel for the plaintiff has placed reliance on the following case-law:-- (1) IZHAR ALAM FAROOQI, ADVOCATE v. SHEIKH ABDUL, SATTAR LASI AND OTHERS (2008 SCMR 240), (2) WAK ORIENT POWER AND LIGHT LIMITED v. WESTINGHOUSE ELECTRIC CORPORATION AND OTHERS (2002 SCMR 1954), (3) MESSRS MUSLIM COMMERCIAL BANK LIMITED v. TAHIR EDIBLE OIL (PVT.) LTD. AND OTHERS (2003 CLC 416), (4) NORTH-WEST FRONTIER PROVINCE GOVERNMENT, PESHAWAR THROUGH COLLECTOR, ABBOTTABAD AND ANOTHER (PLD 1993 SUPREME COURT 418), (5) INTERNATIONAL MULTI LEASING COMPANY v. CAPITAL ASSETS LEASING CORPORATION LIMITED AND ANOTHER (2004 CLD 1), (6) MESSRS ECKHARDT & CO., MARINE GMBH v. MUHAMMAD HANIF (PLD 1993 SC 42), (7) MESSRS UZIN EXPORT AND IMPORT ENTERPRISES FOR FOREIGN TRADE v. MESSRS M. IFTIKHAR & COMPANY LIMITED (1993 SCMR 866) (8) MESSRS TRAVEL AUTOMATION (PVT.) LTD. THROUGH MANAGING DIRECTOR v. ABACUS INTERNATIONAL (PVT.) LTD. THROUGH PRESIDENT AND CHIEF EXECUTIVE AND OTHERS (2006 CLD 497), (9) METROPOLITAN STEEL CORPORATION LTD. v. MACSTEEL INTERNATIONAL U.K. LTD. (2006 CLD 1491), (10) FAR EASTERN IMPEX (PVT.) LIMITED, KARACHI v. QUEST INTERNATIONAL NEDERLAND BV AND OTHERS (2009…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.