JUGOTEKSTIL IMPEX Versus SHAMS TEXTILE MILLS LTD.

ORDER

1. This petition under section 5 of the Arbitration (Protocol and Convention) Act, 1937 (hereinafter referred to as the said Act) is filed by the petitioner who is a company duly incorporated in Ljubljana, Yugoslavia (Titova 1‑3, P.O. Box No. 237‑A) for the enforcement of a foreign award. In the above petition the petitioner has prayed for the following reliefs: ‑

2. "(a) order that the said Award be filed in Court.

(b) pronounce judgment in terms of the said Award.

(c) award the costs of the application to the petitioner

(d) order any other/further relief as this Honourable Court may deem fit to grant."

3. The facts leading to the filing of the above petition are that by a contract No. 172, dated 22nd' November, 1973, the respondent sold to the petitioner 2,00,000 yards of gray cloth un‑calandered 21 x 21/60 x 60‑38" pieces length 80$ and above with 15$ quantities in 40/79 yards at a price of U.S. Cents per yard C & F Rijeka, on certain terms and conditions specified therein. By a further contract No. 213, dated 5th April, 1974, the respondent sold to the petitioner 1,50,000 yards cotton bleeched cloth 21 x 21/60 x 60‑55" pieces length 80$ 60 yards and up with 20$ 40/59 yards at U.S. Cents 52 per yard C & F Jeka on terms and conditions specified therein. It has been averred that both the contracts contained clause for arbitration between the parties. It is advantageous to reproduce herein below the arbitration clause which reads as under:‑

4. "Any dispute or difference will be referred to the Federation of Pakistan Chamber of Commerce and Industry, Karachi (Pakistan) or Manchester Chamber of Commerce, Manchester."

5. It has been further averred that the cloth exported by the respondent did not correspond to the stipulated quality and certain difference arose between the petitioner and the respondent in respect of the above two contracts due to the respondents breaches of the contracts. Consequently the petitioner referred the dispute in respect of the said contracts to arbitration to the aforesaid Manchester Chamber of Commerce, Manchester. It has been averred that the said Manchester Chamber of Commerce dismissed the claim of the petitioner in respect of first contract as time‑barred and allowed damages to the petitioner in respect of the second contract to the extent of U.S.$ 23,590 plus 52 towards the expenses of the arbitration to be shared equally by the petitioner and the respondent. It has been averred that the respondent has failed to fulfil its obligations and make the payment under the said award despite repeated requests. It has also been averred that the award was made by an agreed tribunal in pursuance of an agreement for arbitration and is clearly a 'Foreign Award' in terms of section 2 of the Said Act. On the basis of the above assertion the petitioner has prayed for the reliefs already quoted hereinabove.

6. The respondent has filed written objections.

7. Mr. Abdul Rauf the learned counsel for the respondent has raised the following contentions:‑

(1) The award is not stamped and, therefore, it cannot be enforced.

(2) The contract was substituted by another contract, dated 11‑12‑1974.

(3) Arbitration clause is absolutely vague and cannot be acted upon. Reverting to the first contention of the learned counsel for the respondent that as the award is not stamped it cannot be enforced and reliance has been placed on cases reported in P L D 1971 Lah. 522 and A I R 1962 Punjab 167. Article 12 of the Stamp Act provides for stamp duty chargeable on Award and as the Award in this petition has not been stamped, according to the respondent this is not admissible under section 35 of the Stamp Act and is, therefore, not enforceable.

8. It is advantageous to reproduce section 3 of the Stamp Act which reads as under:‑

9. "3. Instruments chargeable with duty:‑

10. Subject to the provisions of this Act and the exemptions contained in schedule 1, the following instruments shall be chargeable with duty of the amount indicated in that schedule as the proper duty, therefore, respectively, that is to say:‑

(a) every instrument mentioned in that schedule which, not having been previously executed by any person, is executed in Pakistan on or after the first day of July, 1899;

(b) every bill of exchange payable otherwise than on demand or promissory note drawn or made out of Pakistan on or after that day and accepted or paid, or presented for acceptance or payment or endorsed, transferred or otherwise negotiated in Pakistan; and

(c) every instrument other than a bill of exchange or promissory ‑‑‑note mentioned in that Schedule, which, not having been previously executed by any person, is executed out of Pakistan on or after that day, relates to any property situate, or to any matter or thing done or to be done, in Pakistan and is received in Pakistan."

11. Section 3 is the charging sections which imposes an obligation to stamp the instruments specified therein. It provides that subject to the provisions of the Act and the exemptions contained in schedule 1, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty, thereof. The relevant clause is C. Clause 3(c) provides that instruments mentioned in the Schedule executed outside Pakistan and relating to any property situated or to any matter or thing done or to be done in Pakistan and received in Pakistan. A bare reading of section 3 makes it clear that documents executed outside Pakistan, are excluded unless covered by clauses (a), (b) and (c) of section 3. Clause (c) provides that instruments executed outside Pakistan and not relating to any property or to any matter or thing done, or to be done in Pakistan are not chargeable with duty under the Act.

12. It is undisputed that the Award in the instant petition was made out of Pakistan. It does not relate to any property in Pakistan. The Award merely decides the disputes between the petitioner and the respondent under which the respondent has to pay the specified amount to the petitioner. It has to be filed in a Court situate in Pakistan and has to be made a rule of the Court. After that the respondent would become liable to pay the amount awarded by the arbitrator and recovery thereof would also be made here. The award only declares the liability of the respondent.

13. I now turn to one judgment of the Lahore High Court reported in Pakistan Cement Industries Ltd., Rawalpindi v. Teekayef Trading Company P L D 1971 Lahore 522 and other judgment of East Punjab High Court at Delhi in the case of Messrs Gjrals Co., v .Messrs M.A. Morris reported in A I R 1962 Punjab 167.

14. In the first judgment the facts of the case were that the arbitrator, who was a retired Judge of the Supreme Court, entered on the reference, although the arbitration agreement was unstamped and as he failed to give his award within the statutory period of four, months, the respondent applied for extension of time under, section 28 of the Arbitration Act. But despite the applicant's objection that in the arbitration agreement was unstamped, the respondent made no attempt to pay the duty for which it was liable under the said Act together with the penalty prescribed under section 35. The trial Court rejected the applicant's objection on the ground of acquiesce and extended time any to the arbitrator for pronouncing his award. The applicant challenged this order in a revision in the Lahore High Court which Pakistan. with the observation that the arbitration agreement was inv it was unstamped.

15. Now I turn to the second judgment of Punjab accordance with the Delhi. The facts of the case were that there was some, the respondent and the petitioner with regard to the supply of certain goods by the petitioner to the respondent. Therefore, the matter was referred to arbitration in England and the award was given on 25‑2‑1953 according to which the respondent company was entitled to get 325 and 7 shillings from the petitioner. Further 42 were assessed as costs and fees of the awards which amount was also be paid by the petitioner. Since no payment was made to the respondent, they filed the application in the Court of the Subordinate Judge under section 6 of the Arbitration (Protocol and Convention) Act for the enforcement of the foreign award. The petitioner raised a preliminary objection that the award was inadmissible in evidence having not been duly stamped. The trial Court came to the conclusion that the award did not require any stamp and was admissible in evidence. Against this order the petition was filed in the Punjab High Court at Delhi. Mr. P.C. Pandit, J., held as follows:‑

16. "In my opinion, it does, because in the first instance, it has to be filed in a Court situate in India and has to be made a rule of the Court. After that, the petitioner Company, which is situate in India, would become liable to pay the amount awarded by the Arbitrators and recovery thereof would also be made here. This would show that this award relates to a matter, or to a thing to be done in India."

17. Mr. S. Hamid Ali Rizvi the learned counsel for the petitioner has submitted that foreign Award "is not chargeable with stamp duty and he placed reliance on the case of Nan Fung Textiles Ltd. v. Sadiq Traders Ltd. P L D 1982 Kar. 619. The facts of the case are that certain dispute arose between the petitioner and the respondent with regard to the supply of certain goods, that is, cotton by the respondent to the petitioner. Therefore, the matter was referred to arbitration in accordance with the Rules if Liverpool Cotton Association Ltd. and the awards were given, according to which the petitioner was entitled to the amount. The petitioner filed three petitions under section 5 of the Arbitration (Protocol and Convention) Act 1937 in this Court. The respondent filed written objections inter alia that the awards are not stamped and, therefore, they cannot be enforced. My brother Mr. Saleem Akhtar, J., while rejecting the contention of the learned counsel for the respondent observed as follows:‑

18. "These two instruments though of the same genesis are completely different from each other having their special characteristics, particularly a 'foreign award' to which a specific meaning has been given in terms of international convention. Article 12 of Stamp Act which provides for stamp duty speaks of 'award' and not "Foreign Award". It, therefore, can, safely be presumed that it is applicable to 'Awards' which are not 'Foreign Awards'. It is a well‑settled principle of interpretation of fiscal statutes that if there are two possible interpretations, one which is favourable to the subject should be accepted. In my opinion Article 12 does not cover a foreign award. For the aforesaid reasons with respect I regret that I am unable to agree with the views expressed in A I R 1962 Punjab 167. In my view 'Foreign Awards' as in the present petition, are not chargeable with stamp duty."

19. I have advantage of reading the above decision of my learned brother Saleem Akhtar J., an eminent Judge of this Court and with respect I regret to say that I have not been able to persuade myself to agree with it that the awards do not require to be stamped in accordance with the provisions of the Stamp Act before it is filed and made a rule of the Court. With great respect I am not inclined to follow this view. The relevant words of clause (c) are "relates to any property situate, or to any matter or thing or to be done, in Pakistan" and the instrument does relate to a matter or thing to be done in Pakistan, that is, this award is brought in Pakistan and an effort is made to make it a rule of the Court so that the amount specified therein is realized from the respondent, who is in Pakistan, will it not be an instrument about which it could be said that it relates to a matter or a thing to be done. The relevant clause says that it is sufficient if the instrument relates to anything done or to be done in Pakistan.

20. It is advantageous at this stage to reproduce section 4(4) of the English Stamp Act, 1891, which reads as under, Halabury's Statutes of England, 2nd Edition, Volume 9, page 610:‑

21. "(4) Save as aforesaid, an instrument executed in any part of the United Kingdom, or relating, wheresoever executed, to any property situate, or to any matter or thing done or to be done, in any part of the United Kingdom, shall not, except in criminal proceedings, be given in evidence, or be available for any purpose whatever, unless it is duly stamped in accordance with the law in force at the time when it was first executed."

22. I may point out that the provisions of the English Stamp Act are in all essential respects the same. In Irland Revenue Commissioner v. Maple and Co. (Paris) Ltd. 1908 A C 22 Lord Machaghten held as under:‑

23. "The Act speaks of the 'instrument'. The provision is not confined to the operative part of the instrument. It speaks of the instruments as "relating to" certain subjects. There is no expression more general or far‑reaching than that. This instrument relates to the capital of the new company, out of which it was agreed that a specified number of shares should be appropriated and allotted to the old company. The share capital of the new company, if it was situated anywhere, was situate is England. In my opinion this instrument does relate to property situate in England. Be that as it may, it certainly relates to something to be done in England".

24. In Oscar Faber v. Commission of Inland Revenue 1936 A E R 617 Mr. Lawrance, J. held that the deed of covenant related to a matter or thing done or to be done in the United Kingdom within the Stamp Act, 1891, section 14(4). In my opinion, the petitioner has filed this petition in this Court and has to be made a rule of the Court. After that the respondent would become liable to pay the amount awarded by the arbitrator any recovery thereof would also be made here. This would show that this award relates to a matter or to a thing to be done in Pakistan.

25. In view of what I have said above, I would accept this objection and hold that the award requires to be stamped in accordance with the provisions of the Stamp Act before it is filed and made a rule of the Court.

26. Admittedly, the award in the present petition is not stamped and as such there is a defect in the award inasmuch as it is in contravention of Article 12 of the Stamp Act. Such award has to be brought on the record of the Court and it is bound to attract the provision of section 35 of the Stamp Act which prohibits any instrument which is chargeable with duty from being admitted in evidence for any purpose.

27. In view of section 35 of the Stamp Act, the award in question cannot be brought on the record as it is chargeable with duty in view of Article 12 of the Stamp Act. Section 33 of the Stamp Act prescribes the procedure of impounding an instrument which is chargeable with duty when it is filed before any authority including a Court and by that procedure the defect of want of stamp can be cured and rectified. The proviso (a) to section 35 of the Act casts a duty on the Court in all cases to admit a document on payment of penalty "subject to all just exceptions. "

28. In Mullas Commentary on Stamp Act, 6th (1963) Edition, at page 129, dealing with the phrase "subject to all just exceptions", the learned author states as follows:‑

29. "The words 'subject to all just exceptions' in proviso (a) do not confer a discretion on the Court to refuse to admit a relevant document when the deficit duty and penalty have been paid (i). They refer to other factors such as irrelevancy under the Evidence Act, or non‑registration under the Registration Act, etc."

30. Having regard to my conclusion that the arbitration agreement is vague and uncertain, I am not inclined to grant any time to the petitioner for stamp duty and penalty under the proviso to section 35 of the Stamp Act.

31. Reverting to the second contention of the learned counsel for the respondent that the contract was substituted by contract, dated 11‑12‑1974, it is advantageous to reproduce section 62 of the Contract Act which reads as under:‑

32. "If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."

33. Section 62 lays down that a contract need not be performed, where parties to the contract agree:

(a) to substitute a new contract for it, technically called "novation".

(b) Or to rescind it; or

(c) to alter it.

34. Novation, rescission and alteration are some of the ways in which a contract may be discharged.

35. The objection of the respondent is that the original contract No. 213, dated 5‑4‑1974 was substituted by other contract, dated 11‑12‑1974. The new contract provides that the petitioner shall reship 1,50,000 yards of cotton bleeched cloth to Pakistan. This contract was subject to approval of the State Bank of Pakistan, Chief Controller of Imports and Exports, Government of Pakistan and Pakistan Customs Authorities. The new contract contained an arbitration clause under which the parties had agreed to refer their disputes for arbitration to the Federation of Pakistan, Chamber of Commerce. As the respondent could not get the necessary permission, hence the contract could not be performed.

36. The case of the petitioner is that the contract, dated 11‑12‑1974 never came into force. The contract was concluded subject to approval of the authorities. The necessary approval was never granted and consequently the contract never came into ford;

37. I am of the opinion that the new contract never came into force as admittedly it was subject to permission from the authorities concerned. It is also admitted position that no permission was accorded. In this view of the position the new contract never came into force. This contention of the learned counsel for the respondent has no force.

38. The last contention of the learned counsel for the respondent is that the arbitration clause is vague and cannot be acted upon. Mr. Hamid Ali the learned counsel for the petitioner has submitted that the clause is not vague.

39. Mr. A. Rauf, the learned counsel for the respondent has urged that the contract to refer disputes to arbitration contained in clause 8 of the terms and conditions of the contract between the petitioner and the respondent is void for uncertainty.

40. Section 29 of the contract provides that where a contract is uncertain performance of which could never be enforced then it must be held that the contract is void for uncertainty. In the case of G. Scammell and Nephew, Limited v. H.C. and J. Dustin 1941 A C 251, the respondents agreed to purchase from appellants a new motor car van but stipulated that:

41. "This order is given on the understanding that the balance of purchase price can be had on hire‑purchase terms over a period of two years."

42. Their Lordships of the House of Lords held that this clause as to hire‑purchase terms was so vague that no precise meaning could be attributed to it, and consequently there has no enforceable contract between the parties. At page 255 Viscount Maugham in his speech observed:‑

43. "In order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture. This general rule, however, applies somewhat differently in different cases. In commercial documents connected with dealings in a trade with which the parties are perfectly familiar the Court is very willing, if satisfied that the parties thought that they made a binding contract, to imply terms and in particular terms as to the method of carrying out the contract which it would be impossible to supply in other kinds of contract."

44. There is considerable force in the argument put forward by Mr. A . Rauf . It is advantageous to reproduce the relevant clause 8 contained in the contract which reads as under:‑

45. "Any dispute or difference will be referred to the Federation of Pakistan Chamber of Commerce and Industry, Karachi (Pakistan) or Manchester Chambei of Commerce, Manchester."

46. The contract contained an arbitration clause to the effect that any dispute or difference will be referred to the Federation of Pakistan Chamber of Commerce and Industry, Karachi (Pakistan) or Manchester Chamber of Commerce, Manchester. In Stoud's Judicial Dictionary (fourth edition) at page 1823 it is stated that word 'of' is sometimes the equivalent of 'after' e.g. "within 21 days of the execution."

47. In ordinary use the word 'or' is a disjunctive that marks an alternative which generally corresponds to the word 'either'. In either case these two words 'of' and 'or' are vague and uncertain.

48. This clause can be interpreted in two ways:‑

(a) The expression provides for a panel of Arbitration Tribunals and the reference is first to the Federation of Pakistan, Chamber of Commerce and Industry, Karachi (Pakistan) then a further reference to Manchester Chamber of Commerce, Manchester.

(b) The word 'or' provides for alternatives and the expression means v either the Federation of Pakistan, Chamber of Commerce and Industry or Manchester Chamber of Commerce, Manchester.

49. Mr. Hamid Ali Rizvi the learned counsel for the petitioner bases his clients entirely on the footing that second construction is correct construction and he argues that the arbitration clause provides for reference of the dispute or difference to either the Manchester Chamber of Commerce, Manchester which I will call Tribunal 'a' to the Federation of Pakistan, Chamber of Commerce and Industry, Karachi (Pakistan) to be appointed by either party which I will call Tribunal 'B'.

50. If this construction is accepted, the arbitration agreement does not say under what circumstances the reference is to be made to 'a' tribunal and under what circumstances the reference is to be made to the 'b' tribunal and it cannot be said with certainty whether 'a' tribunal or 'b' tribunal is the appointed arbitrator. Under this argument prima facie the arbitration agreement is uncertain. Mr. Rizvi contends that the uncertainty is curable by election. His contention is that the respondent agreed to the appointment of Manchester Chamber of Commerce, Manchester.

51. There is nothing to indicate in the arbitration agreement that one of the parties has the opinion of determination the Arbitration Tribunal to whom the reference is to be made.

52. Under an arbitration agreement two Arbitration Tribunals can not have jurisdiction over the identical subject‑matter at the same time. An arbitration agreement is an agreement that the disputes or differences shall be settled by an arbitrator named or designated in the agreement or by an arbitrator appointed in accordance with the arbitration agreement.

53. An agreement to refer either to Federation of Pakistan, Chamber of Commerce and Industry or Manchester Chamber of Commerce, Manches ter is not an agreement to a named arbitrator because it is not certain who is the Arbitrator is Manchester Chamber of Commerce. The agreement does not authorise the parties to appoint either Federation of Pakistan, Chamber of Commerce and Industry or Manchester Chamber of Commerce, Manchester as Arbitration by making a reference to it. The Arbitration Tribunal had no authority to make the award and the award is invalid.

54. In these circumstances, in my opinion, the arbitration clause is bad as being vague and uncertain, the arbitration agreement is invalid. I declare that the award is also invalid. In the circumstances of the case the parties will bear their own costs.

55. M . B . A . Order accordingly.