2012 C L C 12
[Balochistan]
Before Jamal Khan Mandokhail and Abdul Qadir Mengal, JJ
PAKISTAN MOBILE COMMUNICATION LTD., (MOBI LINK) ISLAMABAD
through Authorized Representative ----Appellant
Versus
NAIMATULLAH ACHAKZAI and 3 others ----Respondents
Civil Miscellaneous Appeal No.1 of 2011, decided on 22nd August, 2011.
Arbitration Act (X of 1940) ---
----S. 34 ---Specific Relief Act (I of 1877), S.42 ---Arbitration agreement ---Stay of
proceedings ---Suit for declaration and recovery of damages ---Defendant filed application
for stay of proceedings on the ground that parties had arbitration clause in their
agreement ---Application fil ed by defendant was dismissed by Trial Court ----Plea raised
by defendant was that dispute had arisen out of the agreement, therefore, despite
termination of agreement between the parties, matter should be referred to arbitrator ---
Validity ---Plaintiff did n ot dispute execution of agreement and its arbitration clause ---
Once, the parties agreed to decide their dispute in a particular manner, then unless and
until any strong and sufficient reason was shown, parties must surrender themselves to the
forum volunta rily chosen by them with their free will and consent ---Defendant, being co -
signatory with plaintiff to arbitration agreement, had the option to compel plaintiff to
abide by arbitration clause before commencement of legal proceedings ---Application
under s ection 34 of Arbitration Act, 1940, filed by defendant without taking any step of
participating into legal proceedings showed his intention to exercise his option to enforce
arbitration agreement ---Plaintiff failed to show any sufficient reason as to why t he matter
should not be referred to arbitrator ---Termination of agreement was a result of
dissatisfaction of defendant and alleged violation of terms and conditions of the
agreement, therefore, dispute was outcome of the agreement, which ought to have been
decided by invoking arbitration clause ---Intention of parties to include arbitration clause,
was to specify the forum to resolve future differences or dispute arising out of the
agreement, including its termination ---Arbitration clause was an independent agreement
between the parties which could be invoked, if a dispute or difference had arisen between
the parties, therefore, termination of agreement would not supersede it ---Irrespective of
non-existence of agreement, the arbitration clause survived and ar bitrator had the power
to resolve the dispute ---High Court in exercise of appellate jurisdiction, set aside the
order passed by Trial Court and application under section 34 of Arbitration Act, 1940,
filed by defendant was accepted resultantly proceed ings before Trial Court were
stayed ---Appeal was allowed in circumstances.
Ali Raza and Noorullah Kakar for Appellant.
Qahir Shah and Saleem Lashari for Respondents.
Date of hearing: 15th June, 2011.
JUDGMENT
JAMAL KHAN MANDOKHAIL, J. --- Facts in brief are that, the appellant
appointed the respondent No.1 to provide mobile service to PMCL's customers, pursuant
to an agreement dated 27th July, 2003, on agreed terms and conditions. The appellant
terminated the franchise agreement by issuing the notice dated 18th June, 2007 to the
respondent No.1, which is reproduced hereinbelow: ---
"As you are well aware, PMCL is deeply disappointed by your conduct which not
only amounts to a grave violation of the terms and conditions of the Franchise
Agree ment and is certain to have an extremely adverse effect upon the business,
operation and reputation of PMCL; but has also resulted in complete erosion of
our confidence in your ability to be part of the PMCL network of franchises.
Accordingly, and without prejudice to PMCL's other rights (e.g. to pursue
appropriate civil and criminal proceedings in respect of our conduct), we do
hereby terminate the Franchise Agreement with immediate effect.
Without prejudice to the aforesaid, to the extent the above term ination may in any
manner be deemed without justification, this letter shall be treated as termination
by 15 days notice, as provided for in the Franchise Agreement."
2. Feeling aggrieved, the respondent No.1 filed a suit for declaration, injunction,
recov ery of commission, retention money, value of the unsold 5000 Jazz connections, as
well as, damages to the tune of Rs.5,00,00,000/ - (Rupees Five Crore), against the
appellant and the respondents Nos.2 to 4.
3. The appellant preferred to file an application under section 34 of the Arbitration
Act with a request to stay the suit. It is alleged that, the agreement contains an arbitration
clause and it was agreed by the parties that all the disputes arising out of the agreement
have to be referred to the arbitra tor, therefore, the suit is required to be stayed. The
application was contested by the respondent No.1 through his rejoinder. The trial Court,
after hearing the parties, dismissed the application by means of the order dated 18 -2-
2010, hence this appeal.
4. The learned counsel for the appellant argued that, the franchise agreement has
been terminated by invoking clause 15 of the agreement, and if the respondent/plaintiff
has any grievance, he may approach the arbitrator in view of clause 17 of the Agreement .
According to him, section 34 of the Arbitration Act gives power to the Court to stay the
suit, because the parties have surrendered themselves to the jurisdiction of Arbitration
Tribunal, therefore, the respondent/plaintiff is not entitled to file the su it.
5. On the other hand, the learned counsel for the respondent No.1 opposed the
contention and stated that, the appellant -company itself terminated the franchise
agreement, therefore, after its termination, the arbitration clause also deemed to be
termin ated. He argued that, since the agreement is not in existence, therefore, section 34
of the Arbitration Act cannot be invoked. He further argued that, the subject -matter of the
suit is not a dispute arising out of the agreement, therefore, the arbitration clause cannot
be invoked.
6. We have heard the learned counsel for the parties and have perused the record.
Admittedly, the cause of action accrued to the respondent No.1/plaintiff on the basis of
the notice for termination of the agreement, which contains the allegation that the
respondent No.1 has violated the terms and conditions of the agreement. The appellant
was dissatisfied from the performance of the respondent No.1 and alleged the violation of
the terms and conditions of the agreement. Thus, it is evident that, the dispute alleged by
the appellant is in respect of the matters pertaining to the terms and conditions of the
agreement, which resulted into its termination. Clause 17 of the agreement pertains to the
resolution of dispute, which is reprodu ced hereinbelow: ---
"If any question or difference or dispute regarding the terms of this agreement
shall arise between the parties which cannot be settled amicably, then, and in all
such cases, the same shall be referred to arbitration by one Arbitrator to be
appointed by the mutual consent of the parties and failing such mutual consent, to
be appointed by the court. The provision of the Arbitration Act, 1940 shall apply
to such arbitration, which shall be held in Lahore. The award under such
Arbitration shall be final and binding on the parties."
The respondent No.1 does not dispute the execution of the agreement and its
arbitration clause. Once, the parties agreed to decide their dispute in a particular manner,
then, unless and until any strong and suff icient reason is shown, they must surrender
themselves to the forum voluntary chosen by them with their freewill and consent. The
appellant, being co -signatory with the respondent No.1 to the arbitration agreement, has
the option to compel the respondent to abide by the arbitration clause before the
commencement of the legal proceedings. The application under section 34 of the
Arbitration Act filed by the appellant without taking any step of participating into the
legal proceedings shows his intention to e xercise his option to enforce the, arbitration
agreement. The respondent No.1 has failed to show any sufficient reason as to why the
matter should not be referred to the arbitrator. Admittedly, the termination of the
agreement is a result of dissatisfactio n of the appellant and he alleged violation of the
terms and conditions of the agreement, therefore, the dispute is the outcome of the
agreement, which ought to have been decided by invoking the arbitration clause.
8. Now considering the contention of the learned counsel for the respondent No.1
that, after the termination, the arbitration clause automatically comes to an end. Suffice it
to observe here that, the termination of the agreement was on the basis of the alleged
violation of the terms and conditio ns of the agreement. It is obvious that at the time of the
execution of the agreement, there was no dispute between -the parties, so the intention of
the parties to include the arbitration clause, was to specify the forum to resolve the future
differences o r dispute arising out of the agreement, including its termination. The
arbitration clause is an independent agreement between the parties, which can be invoked,
if a dispute or difference arises between the parties, therefore, the termination of the
agreem ent would not supersede it. Irrespective of the non -existence of the agreement the
arbitration clause still survives and the arbitrator still has the power to resolve the dispute.
9. The trial Court has come to a wrong conclusion, therefore, the order impu gned is
not sustainable. The appellant has already approached the competent Court of law by
filing an application under section 20 of the Arbitration Act for the reference of the
differences between the parties to the arbitrator in terms of clause 17 of th e agreement,
therefore, any claim alleged by the respondent No.1 in his plaint, could be agitated before
the arbitrator. Under section 34 of the Arbitration Act, the trial Court has the jurisdiction
to stay the proceedings till the resolution of the disput e between the parties through the
arbitrator, but it has declined to do so, which act amounts to non -exercise of the
jurisdiction, which is an illegality and irregularity.
10. Thus, in view of what has been stated and discussed hereinabove, we are inclined
to accept the appeal, set aside the impugned order dated 18 -2-2011, passed by the Civil
Judge -II, Quetta. The application filed by the appellant/defendant under section 34 of the
Arbitration Act is accepted and the proceedings pending before the Court of Civil Judge -
II, Quetta, are stayed. The parties are directed to invoke the arbitration clause contained
in the franchise agreement between them. On reference of the dispute, the arbitrator
should try to dispose of the matter as early as possible.
M.H./100/ Q Appeal allowed.This judgment is reproduced from a publicly available source for informational purposes and does not constitute legal advice. If you believe this listing contains an error,
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