Messrs SUNRISE TEXTILES LIMITED vs Messrs TOMEN CORPORATION And 4

1. This petition under Section 115, Civil P.C. by the plaintiff in the civil suit for recovery of a large sum of money from a Foreign Corporation was against an order of the trial Court dated 31-5-1994 by which it clarified that on reference of dispute to arbitration, status quo order granted by it during the currency of the civil suit shall stand vacated in view of its order dated 19-5-1994.

2. Short resume of facts bearing on the decision of the revision petition were these: Plaintiff instituted a civil suit for recovery of Rs.23,67,67,646 against respondent No.l in the Civil Court at Lahore. Upon being served, respondent No.l applied for stay of proceedings in the civil suit under section 34 of Arbitration Act, 1940 and for a consequent reference of the dispute for decision by arbitration. Plaintiff resisted arbitration. On 19-5-1994, the trial Court sustained the objection and stayed further proceedings in the suit. It observed that "the plaintiff should initiate arbitration proceedings according to the rules and Article 24 of the abovesaid contracts". Earlier to it, the trial Court had issued a status quo order. It was of an interim nature and was not finally confirmed when stay of proceedings in the suit was ordered by the trial Court. Later, respondent. No.l filed a miscellaneous petition under section 151 of Civil P.C. for clarification of the order of the trial Court dated 19-5-1994, more particularly, as to the fate of status quo order issued by it. Without notice to the plaintiff in the suit and hearing of them, it passed the impugned order that it stood vacated.

3. Thereupon, plaintiff filed a petition for its revision in this Court. In view of the nature of the impugned order, a notice for pre-admission hearing was given to respondent No.l. They entered appearance through Mr. Hamid Khan, Advocate. Respondent No.l was the sole contestant-defendant in the suit.

4. Other three defendants were financial institutions and were not directly involved or interested in the civil suit instituted by the petitioner for recovery of money against defendant-respondent No.l.

5. Therefore, they were not issued any formal notice for hearing in the civil revision. It was agreed between the parties that the aforesaid three respondents i.e. the banks were not required to be heard in the civil revision directed against impugned order of the trial Court.

6. Short legal point for decision in the civil revision was as to the powers of the Civil Court to make ancillary orders in the suit upon staying further proceedings in it in terms of section 34 of the Arbitration Act, 1940. Mr. Hamid Khan, Advocate contended that upon staying of proceedings in the suit and reference to arbitration, the Court was functus officio to pass any order in the nature of temporary injunction and the order already issued by the Court lost -its vitality. He referred to the cases in Firm Sita Ram Nathmal v. Sushil Chandra Das & Co. AIR 1921 Allahabad 219 and Strauss & Company v. Raghubar Dayal Durya Prasad AIR 1921 Allahabad 275 to contend that upon staying of further proceedings in the suit, the Court lost Seisin of the suit and did not retain control on it for making of orders for temporary injunction etc. Therefore, the trial Court rightly clarified that its order for status quo had come to an end. As against it, Iftikhar Ali Sheikh, Advocate, learned counsel for the plaintiff-petitioner relied upon cases in Arbab Abdul Oadir v. Mst. Bibi Fatima and another 1984 CLC 546 (Quetta), Fareed Yaqub Ali v. Haji Muhammad Tahir PLD 1989 Quetta 16 to argue that despite stay of proceedings in the suit, the court retained jurisdiction to pass interlocutory orders for preserving and protecting property and also \appointment of Receiver etc. as indicated in section 41 (b) read with Second Schedule of the Arbitration Act, 1940. Reference was also made to the case of Messrs Commodities Trading International Corporation v. Trading Corporation of Pakistan Ltd. and another 1987 CLC 2063 (Karachi) for preservation of powers in the Civil Court for making of ancillary orders in the nature of temporary injunction etc. under section 41 read with Second Schedule of the Arbitration Act, 1940. It was further argued that Arbitrators had no powers to grant interim orders for protection of subject-matter of the dispute and, therefore, the court alone had powers to pass interim orders mentioned in clause (b) of section 41 of the Arbitration Act in respect of any of the matters set out in Second Schedule for purposes of and in relation to arbitration proceedings. Rule laid down in two cases decided in Quetta jurisdiction correctly enunciates the law to the effect that despite stay of proceedings in the suit on reference of the dispute for decision in arbitration, the Court retained control on the subject-matter of the lis for making of ancillary orders envisaged by section 41 of the Arbitration Act read with its Second Schedule. It included jurisdiction to issue interim injunction. Therefore, unless the application for temporary injunction filed by the plaintiff in the suit was formally adjudicated upon by the trial Court either allowing it or dismissing it by a reasoned order, it could not be said that merely upon stay of further proceedings in the. suit and reference to arbitration, status quo order already granted by it had come to an end or vacated or discharged. Powers of the Court and existence of jurisdiction in it to grant temporary injunction was amply preserved in section 41 (b) of Arbitration Act read with its Second Schedule. Existence of these powers and jurisdiction were noticed in the cases of Daulat Ram Phoolchand v. Shriram and others AIR 1964 Madhya Pradesh 219; Debendra Nath Singha and others v. Dwijendra Nath Singha and others AIR 1970 Calcutta 255; M/s. Mohinder Singh & Co. v. Executive Engineer Jammu and Central Construction Division, C.P.W.D. and others AIR 1971 Jammu and Kashmir 130; M/s. Air Foam Industries Pvt. Ltd. v. Union of India AIR 1973 Delhi 253; Union of India v. Raman Iron Foundry AIR 1974 SC 1265; M/s. Sharma Ice Factory v. M/s. Jewel Ice Factory and others AIR 1975 J&K 25, Maheswari & Co. Pvt. Ltd and another v. The Corporation of Calcutta AIR 1975 Calcutta 165, Gem Plastics Industries, Kanpur v. Union of India and others AIR 1977 Delhi 30, Union of India v. M/s. International Chemical Corporation (India) Amritsar AIR 1977 Delhi 99, M/s. Eastern Commercial Corporation v. State of Himachal Pradesh AIR 1977 Himachal Prade'sh 74.

7. Furthermore, the impugned order suffered from a grave vice of absence of a notice to the plaintiff and a chance of hearing to them in support of the status quo order vacated by the trial Court. In the garb of clarification, the trial Court vacated the status quo order earlier granted by it. It tantamounted to dismissal of application for temporary injunction. It could not have happened in the mode and manner done by the trial Court. In my opinion, it was an injudicious exercise of judicial powers by a Court of law. Least that the Court was required was to notice the plaintiff and 8 hear him in support of the order sought to be vacated by the trial Court. In this view, the impugned order could not be sustained. Consequently, it is set aside. The result of it would be that the application for temporary injunction submitted by the plaintiff in the suit shall revive for consideration and decision afresh on merits by the trial Court. Since it has already expressed a view, the application for temporary injunction is remanded to the file of learned Senior Civil Judge, Lahore for its decision on merits in accordance with law. Suit file shall be transferred to his cause list. Parties shall appear before him on 26-6-1994. Arguments on the application for temporary injunction shall be addressed to and heard by him on 28-6-1994 and a final judgment shall be pronounced within a month from the date of hearing of the arguments on application for temporary injunction. No order for costs in this Court.