P L D 2017 Balochistan 29
Before Jamal Khan Mandokhail, J
ROSSMERE INTERNATIONAL LTD. through Authorized Representative ---Plaintiff
Versus
SEA LION INTERNATIONAL SHIPPING INC and 6 others ---Defendants
Civil Suit No.2 of 2016, decided on 22nd December, 2016.
(a) Arbitration --
----Scope, purpose, and object ---Arbitration is a concessional process, in which parties
voluntarily agree for determination of their dispute through their chosen persons ---When award
is completed, it is permissible only against a p arty to arbitration ---Award is not enforceable
against persons not party to arbitration agreement.
(b) Recognition and Enforcement (Arbitration Agreements and Arbitral Awards) Act
(XVII of 2011) --
----S. 6---Civil Procedure Code (V of 1908), O.VII, R.11 ---Enforcement of foreign arbitral
award ---Rejection of plaint ---Territorial jurisdiction ---Plaintiff sought enforcement of award
announced by London Maritime Arbitrators Association ---Defendant sought rejection of plaint
on the plea of lack of territorial j urisdiction ---Plea raised by plaintiff was that after passing of
award, defendants were not permitted to sell the vessel, therefore, he wanted realization of award
through sale proceeds of the vessel ---Validity ---For the enforcement of award, the subject m atter
of which was money, the suit had to be filed in the Court, within whose jurisdiction, Bank
account of defaulting party was located ---Bank account of defaulting party i.e. the defendant was
not located within the jurisdiction of High Court ---High Cour t did not agree with the plea raised
by plaintiff, as vessel in question was not subject matter of award ---Court could enforce money
award, either through Bank account or to order realization of amount through assets or sale
proceeds of assets of defaultin g party ---Vessel was sold by one defendant to the other before
enforcement of award, therefore, the vessel did not remain as their asset ---No movable or
immovable asset of defendant existed within the jurisdiction of High Court, nor defendant was
party to award, therefore, no effective order could be passed ---Earlier, plaintiff had approached
the Court at England, which not only recognized the award but also decreed the amount; it was
for the Court in England to give effect to its own order ---Application ha d already been filed in a
competent Court of law, which had passed order thereon, therefore, unless and until it was
proved that the award before said Court was unenforceable, second application was not
competent --- Plaint was rejected in circumstances.
Sayed Iqbal Shah and Muhammad Mansoor Mir for Plaintiff.
Mujeeb Ahmed Hashmi and Usman Hadi for Defendants.
Date of hearing: 18th November, 2011.
JUDGMENT
JAMAL KHAN MANDOKHAIL, J. --The plaintiff contended that the defendants Nos.1
to 5 are part of "Fal Group" owned and run by the defendant No.6. The plaintiff purchased a
vessel m.t. "GAMMA" from the defendant No.1, for the price of US$7,899,547.24 through a
Memorandum of Agreement (the MoA) dated 17th December, 2014. The plaintiff deposited an
amount of US$1,379,909.44 as advance in the bank account of Fal group, maintained in the
name of Fal Energy FZCO (the defendant No.5). A dispute arose between the plaintiff and the
defendant No.1, as such, in terms of clause 10 of the agreement, the matter was refe rred to panel
of the Arbitrators at England with the intervention of the London Maritime Arbitrators
Association (LMAA). Before the Arbitrators, the claim of the plaintiff was for the
recovery/return of the deposited amount of US$ 1,379,909.44 with damage and interest. The
Arbitral Tribunal announced its Award on 14th July 2015 in the following terms:
"...the following sums to be paid to the Plaintiff by the Defendant No.1, being part of the
Defendant Fal Group:
a) US$ 1,379,909.44 with interest at the cont ractual rate (i.e.5% per annum) from
21-01-2015 until payment.
b) 56,301 towards recoverable cost.
c) Interest on the sum of 56,301 at the rate of 5% per annum and pro rata,
compounded at three monthly rest from the date of award until payment.
2. The pla intiff approached the High Court of Justice Queens Bench Division Commercial
Court for enforcement of the award, which was ordered on 14th July 2016. According to the
plaintiff, the defendants Nos.1 to 5 in order to avoid the arbitral award, agreed to sell one of its
another vessel named m.t. "ZETA", to the defendant No.7, who despite knowledge of the claim
of the plaintiff, agreed to purchase the same, with mala fide intention, and renamed the vessel as
m.t. "MALIN" without proper documentation and legal a uthority. The plaintiff alleged that the
vessel is beached within the territorial jurisdiction of the Province of Balochistan, therefore, this
Court has the jurisdiction to entertain the suit. The plaintiff stated that after the Arbitral Award,
the defenda nts Nos.1 to 6 were not permitted to sell their asset including the vessel in question,
but they did do, therefore, through the suit, the plaintiff has prayed as under:
"It is, therefore, prayed that this Hon'ble Court may be pleased to: -
A. Order that th e Foreign Award dated 14 -7-2015 may be recognized and enforced in
the same manner as a judgment or order of a court in Pakistan for the following sums: -
i) US$ 1,379,909.44 with interest at the contractual rate (i.e.5% per annum) from 21 -01-
2015 until pay ment.
ii) 56,301 towards recoverable cost.
iii) Interest on the sum of 56,301 at the rate of 5% per annum and pro rata, compounded
at three monthly rest from the date of award until payment.
B. Grant an injunction in the nature of Mareva Injunction directly the vessel m.t
"ZETA" (IMO No.8706167) or called with any other name, her equipments, apparels and
tackles be attached/arrested and may not be allowed to leave the jurisdiction of this
Hon'ble High Court and further may not be allowed to be beached and or dismantled,
until the amount awarded in the Foreign Award is paid.
C. Upon failure of the Defendants to make payment of the amount awarded in the
Foreign Award, direct that the said vessel m.t "ZETA" (IMO No.8706167) or called with
any other name be sold along with her equipments, apparels and tackles and the claim of
the Plaintiff be satisfied against the sale proceeds of the said vessel.
D. Grant cost of the application.
E. Grant any further and better relief as may be deemed appropri ate by this Hon'ble
Court in the interest of justice."
3. The learned counsel for the defendant No.7 filed an application under Order VII, Rule 11,
C.P.C. along with the relevant documents, with a prayer to reject the plaint. The learned counsel
stated tha t the defendant No.7 is neither a party, nor is the vessel in question a subject matter of
the award, therefore, the suit is not maintainable under the law. He further alleged that the
plaintiff has already approached the High Court of Justice, Queens Benc h Division, Commercial
Court for enforcement of the award, wherefrom he has obtained a decree against the defendant
No.1 for the amount specified therein, therefore, enforcement of the award for the second time
through this suit cannot be done. The learned counsel added that the vessel in question was
purchased prior to the recognition and enforcement of the award and that the defendant No.7 was
unaware of the award, therefore, the suit against the vessel is not maintainable, as such, the
learned counsel re quested for rejection of the plaint.
4. The application was opposed by the respondent/plaintiff through reply. The learned
counsel for the respondent/plaintiff stated that the vessel belongs to the defendants Nos.1 to 6,
who with mala fide intention sold o ut the same to the defendant No.7, just to frustrate the award.
He added that the moment the award is passed, the owners were not allowed to sell their assets,
before realization of the amount, subject matter of the award, therefore, the transaction betwee n
the defendants Nos.1 to 6 and the defendant No.7 is illegal. The learned counsel stated that since
the award is undisputed, therefore, this Court can recognize and enforce it by arresting and
auctioning the vessel for the purpose of realization of the am ount. He in the end stated that the
suit is competent under the Recognition and Enforcement (Arbitration Agreements and Foreign
Arbitral Awards) Act 2011, as such, the application is liable to be dismissed.
5. I have heard the learned counsel for the parti es and have gone through the relevant
provision of law. Pakistan is a signatory to the United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Award, therefore, the Parliament has enacted the
Recognition and Enforcement (Arbitratio n Agreements and Foreign Arbitral Awards) Act 2011
(the Act). Pursuant to the Act, the High Court has the exclusive jurisdiction to adjudicate and
settle the matters related to or arising from this Act, therefore, an application for the recognition
and enf orcement of a Foreign Arbitral Award can be filed under section 6 of the Act, which is
reproduced herein -below:
6. Enforcement of foreign arbitral award .-(1) Unless the Court pursuant to
section 7, refuses the application seeking recognition and enforcemen t of a foreign
arbitral award, the Court shall recognize and enforce the award in the same manner as a
judgment or order of a court in Pakistan.
(2) A foreign arbitral award which is enforceable under this Act, shall be treated as
binding for all purposes on the persons as between whom it was made and may
accordingly be relied on by any of those persons by way of defence, set off or otherwise
in any legal proceedings in Pakistan."
The phrase "Foreign Arbitral Award" has been defined it sub -clause (e) of sec tion 2 of
the Act as under:
"2(e) "foreign arbitral award" means a foreign arbitral award made in a Contracting State
and such other State as may be notified by the Federal Government, in the official
Gazette."
6. The Arbitral Award means a decision by a p erson(s), who is/are chosen to settle
differences between people or group of people, arising out of legal relationships, whether
contractual or not. According to sub -section (2) of section 6 of the Act, the Foreign Arbitral
Award shall be treated as bindin g for all purposes on persons as between whom it was made.
Thus, it is evidently clear that the award shall be enforceable against those who are party to it,
therefore, an application for recognition and enforcement of a Foreign Arbitral Award shall be
filed by the parties to the agreement/award. The party applying for recognition and enforcement
of the Foreign Arbitral Award must at the time of filing application, furnish the following
documents as evidence before the Court in accordance with Article IV of the Convention:
1. To obtain the recognition and enforcement mentioned in the preceding article, the party
applying for recognition and enforcement shall, at the time of the application, supply: -
(a) The duly authenticated original award or a duly certi fied copy thereof;
b) The original agreement referred to in Article 11 or a duly certified copy thereof;
2. If the said award or agreement is not made in an official language of the country in which
the award is relied upon, the party applying for recogni tion and enforcement of the award shall
produce a translation of these documents into such language. The transaction shall be certified by
an official or sworn translator or by a diplomatic or consular agent."
The aforesaid documents if prima facie prove that the Foreign Arbitral Award is genuine,
then the applicant is not required to produce any further evidence.
7. A suit for Recognition and Enforcement of a Foreign Arbitral Award is to be filed in a
Court of any contracting country, in whose territorial jurisdiction, the asset/person against
which/whom, the enforcement of the Foreign Arbitral Award is sought, is/are located. If the
subject matter of the award is money, the application shall be filed in the Court within whose
jurisdiction, the Bank Accoun t of the defaulting party is located. If the applicant does not find
assets or money in the account maintained by the defaulting party, within the Court's jurisdiction,
he may file another application for enforcement of the award in the Court, within whose
jurisdiction another Bank Account of the defaulting party is maintained. Thus, selection of the
Court by a party, seeking to enforce a Foreign Arbitral Award internationally, depends upon
location of the assets/bank account of the losing party.
8. The Act emphasizes on two expressions, i.e. recognition and enforcement, which are
distinct and connote separate meanings. Recognition means the act of accepting that something is
true, important or does exist for the purpose of legal proceedings. Whereas the exp ression
enforcement means to give force to any law, rule, award, decision, etc. Thus, the party applying
for the enforcement of the Foreign Arbitral Award, must produce enough material before the
Court for its satisfaction to recognize the award as genuine . The Court shall thereafter start legal
proceedings for enforcement of the foreign arbitral award, either to obtain title of the assets of
the defaulting party or to realize the decretal amount of the award from the Bank account or
through the sale procee ds of such properties.
9. The Act assigns power to the High Court to exercise exclusive jurisdiction to adjudicate
and settle matters related to or arising from a foreign arbitral award. Similarly, the Court can
refuse recognition and enforcement of Foreig n Arbitral Award on the grounds mentioned in
Article V of the Convention, which is reproduced herein -below:
1. Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent authority
where the recognition and enforcement is sought, proof that: -
(a) The parties to the agreement referred to in Article II were, under the law applicable to
them, under some incapacity, or the said agreement is not valid under the law to which
the parties have subjected it or, failing any indication thereon, under the law of the
country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to
present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms
of the submission to arbitration, or it contains decisions on matters beyond the scope of
the submission to arbitration, provided that, if the decisions on matters submitted to
arbitration, can be separated from those not so submitted, that part of the award which
contains decisions on matters submitted to arbitration may be recognized and enforce d; or
(d) The composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was not in
accordance with the law of the country where the arbitration took place; or
(e) Th e award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority if the country in which, or under the law of which,
that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that.: -
(a) The subject matter of the difference is not capable of settlement by arbitration under
the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of
that country".
10. In the case in hand, the execution of the award is undisputed, however, the defendant
No.7 has raised an objection of its enforceability against him. In such view of the matter and
considering the evidence produced by the plaintiff, the award in question is proved to be
genuine, therefore, it is accordingly recognized. This is a fact that the defendant No.7 was not a
party to the Arbitral Award, therefore, a question arises whether such an award can be enforced
against third person? Arbitration is a concessional process, in which the parties voluntarily agree
for the determination of their dispute through their chosen person(s). The moment an award is
completed, it is permissible only ag ainst a party to the arbitration. It is, therefore, not true and
enforceable against a person(s) not a party to the arbitration agreement. Besides, the subject
matter of the award is money. As has been discussed above that for the enforcement of the
award, the subject matter of which is money, the suit has to be filed in the Court, within whose
jurisdiction, the Bank Account of the defaulting party is located. Admittedly, the bank account of
the defaulting party, i.e. defendant No.1 is not located within th e jurisdiction of this Court. The
plaintiff emphasis that after passing of the award, the defendants Nos.1 to 6 were not permitted
to sell the vessel, hence the plaintiff wants realization of the award through the sale proceeds of
the vessel. I am not in a greement with the learned counsel for the simple reason that the vessel in
question is not the subject matter of the award. The Court can enforce the money award, either
through the bank account or to order realization of the amount through the assets or s ale proceeds
of the assets of the defaulting party. Since the vessel has been sold by the defendants Nos. 1 to 6
before the enforcement of the award, therefore, she did not remain as their assets. Thus, there is
no movable or immovable asset of the defenda nts Nos.1 to 6, within the jurisdiction of this
Court, nor the defendant is party to the award, therefore, no effective order could be passed.
11. Moreover, this is an admitted fact that earlier, the plaintiff approached the Court at
England, which not onl y recognized the award, but also decreed the amount. It is now for that
Court to give effect to its own order. In view of the fact that already an application for
recognition and enforcement of the award in question has been filed in a competent Court of l aw,
which has passed an order thereon, therefore, unless and until it is proved that the award before
that Court is unenforceable, this second application is not competent.
Thus, in view of above, it is proved that in the given circumstances, the award ca nnot be
enforced through this Court, therefore, the application is allowed, consequently the plaint stands
rejected. The office to prepare a decree sheet.
MH/2/Bal Plaint rejecte dThis 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,
let us know.