M/s Black Bricks Builders & Developers Pvt. Ltd. Vs M/s Abasin Builders & Developers etc.

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Judgment Sheet

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FAO No. 11 7-P12024.

M/s Rlack IIRICK Iluilders & Developers pvt.

L,td..

VerslIS...

M/S Abasin lSuilders & I)evelopers etc.

Date of hearing ...15.4.2025.

Appellant (s) by:- Mr. Umair Iqbal, Advocate.

Respondent(s) by: Mr. Iehanzaib Khan Muhammadzai, Advocate.

JUDGMENT

IYIOAR AHMAD, l:- Instant appeal under section 39 of the Arbitration Act,1940 ( herein after referred to as Act) is directed against judgment dated 22.5.2024 passed by learned Additional District Judge-XI, Peshawar whereby application filed by

respondent/defendants under section 34 of the Act was allowed and the suit was stayed

2.Appellant herein instituted a suit before the Commercial Court Peshawar established under section 37 of the Khyber Pakhtunkhwa Resolution of Commercial Disputes Act, 2022 (to be referred herein after as "RCD Act") praying for declaration to the effect that they had been title holders of the property in dispute, which they had acquired as aresult of successfully rendering consultancy service underthe contract they had earlier executed with respondent No.1. 'l'hey have also sought FAO No. I l7-P!2024.

injunctive relief for restraining respondents from meddling in said v property. A prayer for damages and specific performance of contract had also been made in the plaint.

3.Facts of the case as narrated in the plaint are such that the parties through their authorized officers entered into a contract regarding construction of Abasin Builder's Project, known as "Cantt Icon" situated at 28th the Mall Peshawar Cantt. That in pursuant to Clause-I of the agreement (i.e. SCOPE of AGREEMENT), plaintiff had to retain the supervisory rights of the project in question. Under the provision of said contract, plaintiff has statedly invested a total amount of Rs. 13.5 million at the initial stage of project for the architectural design, architectural visualization,Market analysis etc which amount was to be recovered by plaintiff through marketing of the project, however defendant's firm has not invested a single penny over the project till date, which he was bound to pay under clause-4 of the Contract. Since the initiation of construction activities, defendant have paid consultancy services for the month of Octobe\2021, Novembet,20?l and December, 202L @ Rs. 800,000/- for overhead expenses ofplaintiff as per agreement/contract. In January, 2022 respondents asked tbr changing some terms and conditions of the contract, alongwith revocation of labiality of clause(XVl) of contract, but plaintiffs refused to do so, however both parties agreed upon changing nature of payments schedule, as such total contract amount was fixed as Rs. 100 million for the consultancy services of 40 months' period only and the FAO No. I 17-P12024.

schedule was circulated via whatsApp on 26.2.2022. Thereafter the v plaintiff received payments of l0 months from January, 2022 to october, 2022 with total amount of Rs. l0 million at the rate of one million per month. Subsequently defendant's firms stopped payment of consultancy services. Plaintiffs approached Toyota Frontier Motors, who was holding a 50o/o share in the Cantt; Icon project for mediation and resolution of the matter as per liability clause-7 (xvD of agreement. Plaintiffs proposed two names of elders for arbitration, however, respondents refused to engage in any arbitration proceedings and rejected the resumption of the consultancy contract. It was further averred that despite, sending of several notices to respondents for initiating mediation process by the mediators (proposed for the purpose), the respondents had not being paying the outstanding amount, rather on 5.1.2023 issued a legal notice for termination of the contract, on the ground of violation of contract by the petitioners/plaintiff and that also without any supporting documentary evidence, as required by the Terrhination Claus-XVI of the contract. As such the petitioner filed civil suit before the Commercial Court, Peshawar followed by an application for grant of temporary injunction.

4.Respondents were summoned to appear. On appearance they submitted an application under section 34 of the Arbitration Act,1934 for staying proceedings in the case due to existence of an Arbitration clause in the agreement that had admittedly been executed between the parties. It is also necessary to be mentioned here that petitioner had FAO No. I 17-P12024

also filed an application under section 21 of the Arbitration Act praying v for making of an order for referring the subject matter of the lis to Arbitration. Reply to said application has also been filed by respondent/defendant. After hearing parties, court below through the impugned order has stayed the proceedings in the suit while it could not pass any order in respect of the application filed by petitioner under section 2l of the Act. Feeling aggrieved appellant have filed instant appeal against the impugned order.

5.Leamed counsel for appellant mainly contended that a suit can only be stayed under section 34 of the Act when a party moving an application for the purpose is ready and willing to do all things necessary for proper conduct of the arbitration. Learned counsel referred to a notice statedly sent by his client to respondent on L1.1.2023 requesting for settlement of the dispute through external arbitration (Annexure-F). He also relied on another letter dated 13.6.2023 with the same request (annexure-Fl) and contended that said requests of petitioners had not been responded by respondents with a positive gesture which indicated the fact that respondents had not been ready and willing to perform all acts necessary for parties for conducting arbitration and therefore proceedings in the suit should not have been stayed under section 34 of the Act. In support of his plea learned counsel placed reliance on judgments rendered in case of Messrs Macdonald Lyyton & Company Ltd. Vs. Messrs Airports Development Agency Ltd. Reported as PLD 1979 Karachi 444 and FAO No. I l7-P12024.

judgments rendered by Hon'ble Sindh High Court in case of Messers \z/

Sheel Pakistan Ltd..vs. Messrs Bhoja Air ( pvt) Ltd. Reported as 2007 MLD 1424 and judgment rendered by same court in case of Messrs Tradesmen International (pvt) Ltd. Through Chief Executive.vs..

Federation of Pakistan through Secretary Ministry of Food Agriculture and Livestock and other reported as 2005 MLD 541 as well as judgment of Lahore High Court rendered in case of Dr. Muhammad Shafi. Vs.

Maj.(Retd) M. Iqbal Hussain and others reported as PLD 1996 Latrore 667 and judgment of same court rendered in case of Pakistan Tele Communication Company Limited through Chief Executive/General Manager .vs. Union Communication (P\rt) Limited reported as 2021 CLC 695. Learned counsel also contended that respondent had in fact been intending to block all doors available to appellant for having access to justice and with said malafide intention they have moved application under section 34 of the Act otherwise they had never been ready and willing for initiating and participating in arbitration proceedings. He also criticized the impugned order for not deciding the application of appellant under section 21 of the Act.

6.Learned counsel for respondents submitted in rebuttal that respondents have always been ready and willing in participating in a duly constituted arbitration proceedings. He denied receipt of the two notices relied upon by learned counsel for appellant in his arguments.

Learned counsel also produced a judgment ofHon'ble Madhya Pradesh High Court rendered in case of Sansarchand Deshraj vs. State of M.P FAO No. I l7-P12024.

and ors. reported as AIR 1961 Mp 322 andcontended that moving of \-r

an application under section 34 of the Act during existence of a valid arbitration clause was interpreted in said judgment to be itself denoting that the party moving such an application was prepared to have the dispute decided by arbitration. Leamed counsel also contended that appellant had in fact been intending to have referred the matter to private Jirga and not arbitration. FIe relied on judgment rendered in case of Maj. (Retd) Mian Badshah .vs. Major (Retd) Bahadur Shah reported as 1994 SCMR 384, so as to forti& his submission that proceedings of private Jirga could not be equated with proceedings of arbitration.

Learned counsel insisted that the only remedy available to appellant was to have moved an application under section 20 of the Act and the court could not have proceeded with the suit when the appellant had filed an application for referring the matter to arbitration at the first available opportunity. Learned counsel also placed reliance on judgment of Flon'ble Supreme Court of Pakistan reported as 2004

SCMR 1124.

7.Respondent No.2 appeared in person and requested that he has settled the matter with the appellant, therefore, he did not want contest the appeal by engaging counsel. Arguments of counsel for appellant as well as counsel representing respondent No.l were heard and record perused.

FAO No. I 17-P12024.

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8.Perusal of record reveal that the contract was admitted between the parties. It was carrying an arbitration clause which is also reproduced herein for ready reference;

*XVI. If any party intentionally and purposely breached the terms and condition of this contract; the other party shall have the right to terminate this contract with a notice of one month, if the other party disagree with the allegation, the issue shall be resolved by mutual understanding or external arbitration.

The termination of this contract shall not exploit or lost the contractual rights of both parties under this contract, I the client wants to terminate this contract, all dues of supervision consultant shall be cleared before the official termination of the contract, and the termination without clearingl00o/o dues of superuision consultant under this contract shall not be done. In case the superuision consultant wants to terminate this contract he shall also give a 30 days advance notice of terminate, within the notice time all concerned documentation of CNTT: ICON shall be handed over to the client and all contact network shall be informed officially by the supervision consultant about the termination of the supervision consultancy contact, the termination shall not be accepted unless all required information and documentations are handed over to the client, along with the final audit of the project upto the date of termination.

Any party interested in termination shall prove with supporting documents and evidences that the other party has breachcd the terms and conditions of this contract, without this condition no party has the right to terminate this contract."

9.There was no dispute regarding existence of the arbitration agreement. Parties have been blaming each other for not initiating arbitration proceedings but in other words both parties had been claiming to have been ready and willing for initiating arbitration proceedings. This court specifically asked learned counsel for respondent No.l whether respondent had all along been ready and F'AO No. I l7-P12024.

willing to refer the matter to arbitration and participate therein, he replied as "of course". Even while submitting reply to the application submitted by respondent under section 2l of the Act, respondent No.l did not oppose referring the matter to arbitration. In this respect part of reply submitted by respondent (annexcure-I,l) is reproduced;

'(2. In reply to para no.2 and 3 it is respectfully suhmitted that the answering defendants also desires to resolve the instant controversy through arbitration. However, the defendants reserve the rights to submit their detailed reply and in the event of its acceptance and after framing of TORs the defendant shall submit the name of the arbitrator. Consequently, the court may then refer the matter to arbitration and appoint the nominated arbitrators.

Pravers.

The answering defendant have no objection on acceptance of this application subject to the reply given in the para No. 2 & 3."

10.When learned counsel for respondent No.l was asked whether the court should not have considered the application under section 21 of the Act, when both the parties were before the court and both were ready and willing to refer the matter to arbitration, the learned counsel replied that when law provided a thing to be done in a particular manner same should be done in same manner in all eventualities. There is no doubt about the legal proposition relied by learned counsel for respondent but when section 2t of the Act was providing a course, it was open to the court but same was not considered by the court at all.

Through the impugned order the suit has been stayed and arbitration proceedings could not be initiated. It would have been much appropriate that the court while staying the proceedings under section FAO No. I l7-P12024.

v 34 of the Act could have referred the matter to Arbitration so as to facilitate the parties in exercising their right of access to justice. In adversarial jurisdictions sometimes an opposing party may desire to get all the doors shut for an opposite party but courts of law can never help such parties in achieving their endeavors. Instead of knocking out parties in technicalities or giving them technical knockouts court of law should opt for such of the options, available under the law, where the parties are put on such a course which results in early commencement, speedy conduct and conclusion of such legal proceedings which effectively result in resolution of their disputes. In such circumstances when attendance of all parties had been procured, they had engaged counsel, incurred expenses in arranging for their legal representations, the application under section 2l of the Act was there, the court was having lawful authority to refer the matter to arbitration , both the parties have been ready and willing to participate in the arbitration proceedings and the arbitration clause was admittedly existing in the contract then the court should have opted for such a course which would have resulted in early commencement of the arbitration proceedings.

The proceedings if earlier commenced on a proper course in accordance with law, would naturally result in early resolution of the dispute.

Courts of law should always give preference to expeditious resolution of disputes in accordance with law enabling the parties to easily exercise their rights of access to justice. Access to justice is a fundamental right as held by Hon'ble Supreme Court of Pakistan, in the case of "Sh. Riaz-Ul-Haq and another v. Federation of Pakistan FAO No. I l7-P12024.

\d through Ministry of [,aw and others", (p L D 2013 supreme court 501). It was observed by Hon'ble Supreme Court that;

"28. It is to be noted that the right of "access to justice to all" is a well recognized inviolable right enshrined in Article 9 of the constitution and is equally found in the doctrine of "due process of lawtt.

In the case of 'Taj wali Shah v. Bakhti zaman, (zor9 scMR g4)" it was also held;

"l2...Any right vested in a person to seek his remedy under the law should be liberally construed, as this would bolster his recognised fundamental right of access to justice" While opting to available one of two legal options court should always lean in favour of such an option which facilitate a citizen in exercising his fundamental right. While interpreting laws also courts shouldprefer such an interpretation which enable citizens of the state to better exercise their fundamental rights. In the case of "Sunni Ittehad Council v. Election Commission Of Pakistan", reported as PLD 2025 SC 67, Hon'ble Supreme Court has held;

"34...In a constitutional democracy, laws are solicitous of the individual rights and liberties of citizens and interfere with them as little as possible in the public interest. By adopting a Iiberal and expansive interpretation of such laws, individual rights and liberties cannot be curtailed more than expressly provided by the legislature in the public interest. Therefore, Iaws that curtail individual rights and liberties, particularly the fundamental rights guaranteed in the Constitution, are to be construed strictly".

11 Coming back to our discussion it has also been held by Hon'ble Madhya Pradesh High Court in case of Sansarchand Deshraj (supra) that even filing of an application under section 34 of the Act would explicitly indicate that the parties raising the plea had always been FAO No. I 17-P12024.

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v ready and willing for participation in arbitration proceedings. Relevant para of the judgment is also reproduced herein for ready reference;

"9. It was also urged on behalf of the appellant that to take advantage of the provisions of section 34 of the Act, the defendants should have shown that they were ready and willing to have the matter decided by arbitration and they have failed to do so in the instant case. The point raised is without any substance. The defendants in their reply dated 8.9.1959, have clearly drawn the attention of the court to the subsistence of the arbitration agreement and further have pointed that was the correct remedy for the plaintiff to follow. It is implicit in the objection raised that thy were prepared to have the dispute decided by arbitration." Respondent No.l in the case in hand cannot only be presumed but he has also expressly conveyed his readiness and willingness to participate in the arbitration proceedings, while submitting his reply to the application under section 21 of the Act. During the course of arguments also his counsel has been conveying his readiness in the arbitration proceedings. Plea of learned counsel for appellant that respondent No.l had not been ready and willing to participate in the arbitration proceedings (and therefore application under section 34 of the Act should have been dismissed allowing the suit to have proceeded in regular mode of civil proceedings, was therefore not holding water.

The arbitration clause was admitted, respondent No.1 has all along been ready and willing for participating in such proceedings). The suit should not have been allowed to be run in regular mode prescribed for such suits. The better course would have been that the matter could have been referred to arbitration by the court below under section 21 of the Act by allowing the application filed for the purpose. When said court FAO No. 117-P12024.

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\,.\, has not opted for such a course this court while seized with the instant appeal can also decide the matter in similar terms.

12.Resultantly the instant appeal is partly allowed to the effect that order dated 22.5.2024 is set aside. Application under section 21 of the Act filed by appellant before the court below stands accepted. The matter stands remanded to the court below for referring the subject matter ofthe dispute to the arbitrators which are to be nominated by the parties. I'he court below shall call for proposals from the parties for framing of Terms of Reference (TORs) for arbitration, beside, obtaining names for arbitration from the parties in accordance with law.

After framing of TORs the matter shall be referred to arbitration in accordance with law. Parties are directed to appear before the court below on 20.5.2025 for further proceedings.

Announced on;

I Sth of April, 2025 *Zazilud* ts

(SB)Mr. Justice Wiqar Ahmad

FAO No. 117-P12024,