HILTON INTERNATIONAL COMPANY vs AVARI HOTEL Ltd.

ORDER

1. SHAFIUR RAHMAN, J.-- The defendant in a pending civil suit has, by this petition for leave to appeal, challenged the decision of the Appeal Bench of the Sind High Court dated 10th January, 1985, whereby the ad interim order passed under Order XXXIX, rule 1, C.P.C. By the learned Judge of the High Court seized of the suit was modified on an appeal filed by the respondent and the petitioner's own appeal against it was dismissed.

2. The plaintiff-respondent has full proprietary interest in the venture while the petitioner's interest was that of a lessee since 1968 and that of management and control since 1976. The petitioner's management and control was to last under the arrangement twenty years, followed, by, at its options, three renewals of ten years each. This arrangement had the approval of the Government of Pakistan. The plaintiff-respondent took objections to the management and accounts in December 1983, unilaterally rescinded the agreement in March, 1984 claimed to have assumed its management and control and filed Suit No. 314 of 1984 on the original side of the Sind High Court. A permanent injunction restraining the petitioner from interfering with its control and management, rendition of full accounts, refund of unauthorised realizations and payment of guaranteed return on investment with interest for sums due was asked for. Alongwith the suit, an application under Order XXXIX, rule 1 was filed claiming ad interim relief consequential to the main reliefs sought.

3. The petitioner not only resisted this application but at the first opportunity filed an application under section 34 of the Arbitration Acts praying that the proceedings in the suit be stayed and the matter be referred to arbitration in terms of the arbitration clause in the agreement between the parties.

4. At first an ad interim order without hearing the petitioner was passed but it was substituted by another order on 30-5-1984 after hearing the parties. The learned Single Judge directed maintenance of status quo as existing on 14-5-1984 and the petitioner was restrained from making remittances of income or funds outside Pakistan and its application for stay of proceedings and reference to arbitration was allowed. This order was, however, kept subject to such other order as may finally be passed in the arbitration proceedings in this regard The detailed reasons for the short order were furnished on 17-6-1984, The petitioner filed an intra-Court appeal against the to conditions imposed and the respondent also filed an appeal against the reference to arbitration-and the terms in which the interim order was granted. By the impugned order the appeal Bench of the High Court reversed the decision of the learned Single Judge on the application for stay of proceedings and reference of the dispute to arbitration and that part of the decision is the subject-matter of Civil Appeal No-3 of 1985 filed under Article 185(2), clause (e) of the Constitution. More need not be said about it at this stage. As regards the ad interim order the appeal Bench modified and substituted it by the following order -- "We hereby order that the Hiltons should consult Avaris in the matter of running of the hotel in general terms. We should not be misunderstood to mean that, for, he day to day running of the hotel, the consent of Avaris will be necessary, but in the matter of fixing or rates, appointment of executives, nomination of bankers, appointment of accountants, Avaris must be consulted by Hiltons, and, if a consensus is not obtained, the matter could be referred to Court. We further order that the Hiltons shall not at any one the keep with themselves cash amount in excess of Rs.25,000 for sundry expenses, and all the amounts must be credited in the bank. We also order that all cheques, withdrawing money from the bank, if in excess of Rs.5,000 shall require the signature of Avaris, or, their nominee. We also order that the account books shall always be kept available for inspection by Avaris, or, their nominee. This order, in our view, will safeguard the interest of Avaris. If, in the matter of actual implementation, the parties feel any difficulty, a reference could be made to the learned Single Judge, hearing the suit.

5. Having dealt with H . C . A . No. 43 /1984, we now proceed to consider the appeal filed by Hiltons against Avaris, namely, H . C . A . No. 39/1984. The main grievance of Hiltons is that they have been prohibited from remitting any amount outside Pakistan. In view of the accounting process and the allegations in the matter of accounting made by Avaris, we are of the view that this order was eminently justified. This is a suit for accounts where, ultimately, the accounts shall have to be taken, if Avaris succeed. Until then, if the amounts are retained in Pakistan, no prejudice will be caused to Hiltons. On the other hand, if at any stage of the suit an application is made by Hiltons for remitting any amount outside Pakistan, the same may be considered by the learned Single Judge on its merits."

6. The learned counsel for the petitioner contended before us that the arrangement ordered by the appellate Bench of the High Court is unworkable and has given rise to difficulties which if not removed, may lead to an impasse or statement thereby throttling the venture itself. According to the learned counsel, the management rules require payments by cheques but then the amounts to be paid even by single cheques exceed lacs of rupees e.g. Bills of electricity, telephone, excise duty, insurance etc. The slightest delay in payments thereof may expose to risk the enterprise itself, the occupants of the premises and all those concerned with it. It was urged that the petitioner's appeal has received little attention in the impugned order.

7. The learned counsel for the caveator has, on the other hand, contended that the investments and proprietary interest was solely of the respondent and there were substantial allegations of fraud, misfeasance, malfeasance, mal administration, defalcations etc. And in the background of alleged agreement being void and the relationship being fiduciary, the plaintiff's interest should have been adequately protected. The appeal Bench has only attempted that though not to the complete satisfaction of even the respondent for which it may, if advised, file a separate appeal.

8. After hearing the learned counsel for the petitioner and the caveator for the whole day and noticing that there is already an appeal as of right relating to a separate matter but arising out of the same order and it is primarily the disposal of that controversy which will give an indication as to what sort of control over management should be ordered ad interim, leave to appeal is hereby granted. Security Rs.2,500. This appeal shall be heard alongwith. Civil Appeal No.3 of 1985 on the present record with liberty to the parties to file such additional documents as they may consider necessary and both be made ready for early hearing.

9. As regards the ad interim relief, we take note of the fact that the parties entered into the contract first in 1968 and then in 1976 and they had been operating under the latter for the last six years or so. For this reason, we would allow the petitioner to manage the affairs of the Hotel which has been held to be in its possession by both the Courts. The petitioner shall run it in accordance with the terms of the agreement subject to following conditions and interim:-- (1)There shall be no remittance of the earnings outside the country as was ordered by the learned Single Judge of the High Court and affirmed in appeal.

10. 2)The counter-signature of the respondent or its nominee would be required only on cheques for payments of or exceeding of Rs. 2 lacs.

11. 3)The cash to be retained at any one point of the by the petitioner for sundry expenses shall not exceed 50,000 rupees at any one the.

12. 4)The status quo with regard to the employees and the affairs as existing on 14-5-1984 shall generally be maintained.

13. 5)The accounts and records shall be kept open and available for inspection and for obtaining extract therefrom by the respondent as provided under the agreement.

14. 6)The proceedings in the suit shall remain stayed pending decision of the to appeals.