Government of Punjab etc Vs Muhammad Arshad & Co

Stereo. H C J D A-38.

JUDGMENT SHEET

IN THE LAHORE HIGH COURT, LAHORE

JUDICIAL DEPARTMENT

FAO No.2885 of 2020

Government of the Punjab & others Versus M/s Muhammad Asad & Co.

JUDGMENT

Date of hearing: 08.06.2021.

Appellants by: Barrister Ameer Abbas Ali Khan, A.A.G. Respondent by: M/s Ch. Imran Raza Chadhar and Qasim Raza Chadhar, Advocates.

Mr. Umar Sharif, Advocate / Legal Advisor for

SNGPL.

MUHAMMAD SAJID MEHMOOD SETHI, J.: This consolidated judgment shall dispose of instant appeal along with connected revision petition i.e. C.R. No.60512 of 2020, as common questions of law and facts are involved in these cases.

2.Through instant appeal, appellants have assailed order dated 10.12.2019, passed by learned Civil Judge, Lahore, whereby appellants’ application under Section 34 of the Arbitration Act, 1940 (“the Act of 1940”) for staying the proceedings of respondent’s suit and referring the matter/dispute to the Arbitrator for decision as per arbitration agreement, was dismissed.

3.Brief facts of the case are that respondent instituted suit for recovery of Rs.17,03,68,742/- regarding the construction work i.e. construction of Pandori Dam Package “A”, along with markup, against the appellants. Meanwhile, appellants moved application under Section 34 of the Act of 1940 for staying the proceedings and referring the matter / dispute to the Arbitrator. Learned Trial Court, after hearing arguments of learned counsel for the parties, proceeded to dismiss the application vide order dated 10.12.2019. Hence, this appeal.

FAO No.2885 of 2020

4.In connected revision petition, appellants have assailed order dated 19.08.2020, passed by learned Civil Judge, Lahore, whereby appellants’ right to file written statement was closed / struck off.

5.Learned Law Officer appearing on behalf of appellants submits that learned Court below while dismissing the application has failed to correctly appreciate the law and misconstrued the record. He adds that no step was taken by the appellants before filing application under Section 34 of the Act of 1940 seeking reference of matter for arbitration in terms of arbitration clause available in the agreement. He further submits that since operation of impugned order dated 10.12.2019 was suspended by this Court, therefore, learned Trial Court was precluded from passing any order for closing right of the appellants to file written statement.

6.Conversely, learned counsel for counsel for respondents defends the impugned order by contending that the appellants could have moved application under Section 34 of the Act of 1940 prior to taking any other steps in such proceedings, and such fact could be verified from their conduct as in this case, appellants not only appeared before the Trial Court but in order to contest the suit, availed opportunities to file written statement. In support, he has referred to Messrs Gas Drive CNG Service v. Special Judge (Rent), Lahore and others (2020 CLC 871). As regards impugned order dated 19.08.2020, whereby appellants’ right to file written statement was closed, learned counsel for respondents has expressed no objection if appellants are given only one opportunity to file written statement in the suit.

7.Arguments heard. Available record perused.

8.According to Section 34 of the Act of 1940, application for stay of the proceedings should have been made (i) before filing a written statement or (ii) taking any other steps in proceedings. The superior Courts have interpreted the term ‘before taking any steps’ as ‘at the earliest’, ‘at the first opportunity’, ‘before seeking adjournment(s) for filling of written statement’ etc. In this case,

FAO No.2885 of 2020

appellants have neither filed the application at the earliest nor at the first opportunity, rather sought time/adjournments to file the written statement, therefore, apparently they have ceased their right to get the suit stayed under Section 34 of the Act of 1940.

9.The Legislature has, of course, clearly implied in the language used in Section 34 that the arbitration clause should be respected, but has also made it abundantly clear that the party seeking to avail of the provision of stay under this section must clarify its position at the earliest possible opportunity, so as to leave no manner of doubt that it wishes to have resort to arbitration proceedings. If it hesitates in this regard, or allows the suit to proceed in any manner, that conduct would indicate that such party has abdicated its claim to have the dispute decided under the arbitration clause, and to have thereby forfeited its right to claim stay of the proceedings in the Court. Even if the matter has been adjourned by the Court in routine for filing of a written statement, the defendants, if they want to opt for the dispute resolution mechanism contained in the contract, can take corrective steps and inform the Court, without any delay, about their intention to seek stay of the suit. Since the appellants have not taken up the issue of sending the matter to the arbitrator at the earliest, thus, relinquished/waived their right for such request. Reliance is placed upon Pakistan International Airlines Corporation v. Messrs Pak Saaf Dry Cleaners (PLD 1981 Supreme Court 553), Muhammad Farooq v. Nazir Ahmad (PLD 2006 Supreme Court 196), Muhammad Ilyas Khokhar v. Ihsan Ilahi Mughal (2000 CLC 206), Rana Muhammad Ikram v. Province Of Punjab (2005 CLC 206), Government of the N.-W.F.P. and others v. Khalid Khan and others (2006 MLD 1897), Province Of Punjab v. Muhammad Asghar (2008 YLR 300), Messrs Sprint Energy (Pvt.) Limited v. Ahsaan Ullah (2013 CLD 885), Hamad Raza v. Sajid Hussain (2014 CLC 1057), Aftab Ahmad Khan v. Wazir Ahmad (2014 CLC 1401), Shin Satellite v. Messrs Kasb Technology Services Limited

FAO No.2885 of 2020

(2016 YLR 2322), Infospan (Private) Limited v. Messrs Telecom Foundation (2017 CLC 131) and Messrs Ash Associates v. The Chief Executive Officer (2019 CLC 1303).

In the case of Messrs Pak Saaf Dry Cleaners supra, the Hon’ble Supreme Court has ruled as under:- “The Legislature has, of course, clearly implied in the language used in the section that the arbitration clause should be respected, but has also made it abundantly clear that the party seeking to avail of the provision of stay under this section rust clarify his position at the earliest possible opportunity, so - as to leave no manner of doubt that he wishes to have resort to arbitration proceedings. If he hesitates in this regard, or allows the suit to proceed in any manner, that conduct would indicate that he has abdicated his claim to have the dispute decided under the arbitration clause, and to have thereby forfeited his right to claim stay of the proceedings in the Court.”

[emphasis supplied]

Similarly, the Hon’ble Islamabad High Court, in the case of Infospan (Private) Limited supra, has observed as under:- “Once in the contract, take corrective steps and inform the Court, without any delay, about his intention to seek the defendant has gone through the suit, he must, at the earliest make up his mind whether or not to submit to the jurisdiction of the Court. He must not dilly-dally but take a position at the first available opportunity. Even if the matter has been adjourned by the Court in routine for the filing of a written statement, the defendant, if he wants to opt for the dispute resolution mechanism contained in the contract, take corrective steps and inform the Court, without any delay, about his intention to seek stay of the suit.”

[emphasis supplied]

10.The findings of learned Trial Court have been analyzed on the basis of available record and same are found to be in conformity with the law laid down in the afore-referred case law. No exception can be taken to the impugned order. Appellants have failed to point out any illegality or legal infirmity in the impugned order.

FAO No.2885 of 2020

11.Resultantly, instant appeal, being devoid of any merit, is dismissed with no order as to costs. As regards connected C.R. No.60512 of 2020, keeping in view the clemency shown by learned counsel for respondents, same is allowed to the extent that appellants are granted only one opportunity to file written statement. Parties are directed to appear before learned Trial Court on 22.06.2021, whereafter 20-days’ time shall be granted to appellants for submission of written statement.

(Muhammad Sajid Mehmood Sethi) Judge

APPROVED FOR REPORTING.

Judge

*A.H.S.*