B. R. HARMAN & MOHATTA LTD. vs GHEE CORPORATION OF PAKISTAN LTD., KARACHI

1. ' The plaintiff has filed this suit under section 20 of the Arbitration Act, 1940, praying for a direction to the defendants to file the Arbitration agreement between the parties in Court and thereafter, to refer the dispute between them to arbitration according to the arbitration agreement.

2. ' The only objection taken before me and argued by Dr. A. Basit on behalf of the defendant is that the condition precedent provided arbitration agreement has not been fulfilled and therefore the suit is not maintainable.

3. ' It is, therefore, necessary to refer to the arbitration agreement which is as follows :- "18 (a).-Any disagreement, dispute or claim which may arise from this agreement or in connection with it, in the first instance, may be sorted out mutually by the parties. In case, any disagreement, dispute or claim could not be resolved mutually by the parties, the dispute shall be referred to the Board of Directors of the Purchasers whose decision shall be final and binding on the party subject to arbitration as 'provided in this para. The work under agreement shall if reasonably possible, continue during the time that the dispute is before the Board of Directors. Referring of any dispute to the Board of Directors of the Purchasers shall be a condition precedent to any other action at law. Suih disagreements, disputes or claims shall be settled through an arbitration in accordance with the Arbitration Act of 1940."

4. ' It will be seen from the above-mentioned provisions of the agreement that any disagreement, dispute or claim which arises under the agreement or in connection therewith, on failure to sort out the same mutually by the parties, has first to be referred to the Board of Directors of defendants whose decision is made final and binding on the party subject to arbitration as provided. It will be further seen that referring the disagreement or dispute or claim to the Board of Directors of the defendants is made a condition precedent to take any action at Law. It is also provided that if the party does not accept the decision of the Board of Directors of the defendants then such disagreement, dispute or claim has to be referred to arbitration in accordance with the provisions of section 40 of the Arbitration Act, 1940.

5. ' In this case it is admitted by Mr. Saeeduz Zaman Siddiqui teamed counsel for the plaintiff that the dispute has not been referred to the decision of the Board of Directors of the defendants. Therefore, the condition precedent, has not been fulfilled. However, Mr. Saeeduz Zaman Siddiqui learned counsel for the plaintiff relying on the provisions of section 28 of the Contract Act argued that the condition precedent is void because it is in restraint of usual legal proceedings.

6. ' Section 28 of the Contract Act applies to agreements which wholly or partially prohibit absolutely the parties from having recourse to a Court of law. The agreement does not absolutely prohibit any party from having recourse to a Court of law. It only makes the reference of disagreement or dispute or claim to the Board of Directors a condition precedent and if the party is still dissatisfied with the decision of the Board of Directors of the defendants he can then resort to arbitration or go to a Court of law under certain circumstances which need not be stated here. Surely, even if that agreement would have made the decision of the Board of Directors of the defendants as final and binding without any further restrain that would have been perfectly legal and would not have come within the mischief of this section. Here I may refer to two decisions from foreign jurisdiction namely, Coringa Oil Co. Ltd. v. Koeglar and others (1) ; Garges Manufacturing Company Limited v.

7. Lndra Chand and another (2). In the first case the contract provided that all disputes arising between the parties should be referred to two competent London Brokers and that their decision should be final. It was held that the contract does not come within the purview of this section. In the second case the contract provided that all disputes arising between the parties "should be referred to arbitration of the Bengal Chamber of Commerce, whose decision shall be accepted as final and binding on (1) I L R 1876 Cal. 466 (2) 1 L R 33 Cal. 1169 both the parties to the contract". It was held that the contract does not come within the purview of this section.

8. ' Mr. Saeeduz Zaman Siddiqui then referred to Exception 1 to section 28 of the Contract Act in support of his contention but reference to this exception does not advance the argument in any way for this Exception applies only to a class of contracts, where the parties have agreed that no action shall be brought until some question of amount has first been decided by a reference, as for instance, the amount of damage which the assured has sustained in a marine or fire policy. Such an agreement does not exclude the jurisdiction of the Courts ; it only stays the plaintiff's hand till some particular amount of money has been first ascertained by reference as was held in Coringa Oil Co. Ltd. v. Koegler and others.

9. A perusal of the agreement clearly shows that the parties contemplated that before going to arbitration the party dissatisfied should first approach the Board of Directors of the defendants for redress of his grievance for it is possible that it may be redressed by them, thus obviating the necessity of even going to arbitration or to Court. But this course, if followed, would not close the doors of arbitration or of Court, for if the plaintiff is dissatisfied with decision he could still , go to arbitration o under certain conditions come to Court.

10. ' Since the condition precedent mentioned in the arbitration clause has not been fulfilled, I am therefore, of the view that the suit is premature and not maintainable. I, therefore, dismiss it leaving the parties to bear their own costs.

11. ' This order will however, not preclude the plaintiff from filing fresh suit after fulfilling the condition precedent.