HASSAN ALI & CO. (PVT) LTD vs POLY COTTON S.A. and others
This Inter-Court Appeal arises from an order of a Single Judge rejecting a plaint under Order VII Rule 11 of the Code of Civil Procedure 1908 in a suit filed for declaration and permanent injunction against a foreign arbitral award. The core legal questions involve whether a civil suit is maintainable to challenge a foreign arbitration agreement and award, and whether Pakistani courts possess territorial jurisdiction over an award rendered in Liverpool pursuant to an arbitration clause agreed upon by the parties. The Sindh High Court dismissed the appeal, holding that the suit was barred by law, specifically under the Arbitration Act 1940 and the Arbitration (Protocol and Convention) Act 1937, and that an arbitration agreement or award must be contested through an application rather than a regular suit. The key principle laid down is that challenges to arbitration agreements or awards cannot be brought via a civil suit where barred by statute, and foreign awards are enforceable in Pakistan in accordance with the applicable arbitration statutes.
- Whether a civil suit is maintainable to challenge the existence, effect, or validity of an arbitration agreement or award?
- Does a Pakistani court have territorial jurisdiction to entertain a suit arising from a foreign arbitration award rendered abroad?
- Can an arbitration award be contested by way of a suit instead of an application under the Arbitration Act?
- Order VII Rule 11, Code of Civil Procedure 1908
- Arbitration Act 1940
- Arbitration (Protocol and Convention) Act 1937
1. ' AGHA RAFIQ AHMED KHAN, J.---This is an Inter-Court Appeal from the order of the Single Judge sitting on original side, rejecting the plaint under Order 7, Rule 11, C.P.C. In Suit No,888/95 filed by the appellant for declaration and permanent injunction. The appeal has been dismissed in limine by a short order on 23-5-1996. These are the reasons for that order.
2. ' The facts in brief are that appellant/plaintiff and respondent/defendant No,1 entered into a contract on 20-11-1993 whereby the appellants agreed to sell ten thousand bales of raw cotton 3750 Lbs. At the price of US Cent 50 per Lb. FOB Karachi. This contract included the Arbitration Clause as under:-- "This contract is subject to the Rules and Regulations of the Liverpool Cotton Association Ltd. Place of Arbitration: Liverpool."
3. ' The appellants committed a breach of contract by failure to supply the Cotton Bales as agreed.
4. According to the appellants the Contract became incapable of performance due to "Force majeure" as the cotton was in short supply in the country and the Federal Government of Pakistan imposed a ban on exports. The respondent No,1 without any loss of time referred the dispute to respondent No,2, Liverpool Cotton Association Ltd., who nominated the respondents Nos.3 and 4 as Arbitrators for making an Award at Liverpool as agreed. The appellants associated themselves with the Arbitration Proceedings. The Award was made on 16-11-1995.
5. ' According to the terms of the Award the buyers were required to invoice back to the sellers ten thousand bales of cotton at the unit price of 89 US Cent per Lb. The sellers were required to pay the buyers a sum of US $ 1837500 being the difference between the contract value and the market value on the date of breach namely 14-6-1995. The sellers were also required to pay to the buyers US $ 68,276.97 as interest together with further interest at 2% from 7th December, 1995 until the date of payment and also the costs of the Award.
6. The appellants in order to forestall the enforcement of this Award filed the above suit on the plea that the Foreign Award is not applicable in Pakistan under the Arbitration Act, 1940. The suit of the plaintiffs/appellants is, however, clearly not maintainable for want of jurisdiction and on account of legal bar even though the award was made at Liverpool, U.K.
7. ' The appellants had themselves agreed to the Award been made by the Liverpool Cotton Association Ltd., nominees at Liverpool and no suit or application arising from the said Award could be moved in any Court in Pakistan for want of territorial jurisdiction.
8. ' In any case no suit shall lie on any ground, whatsoever, for a decision upon the existence, effect or validity of an Arbitration Agreement or Award, nor shall any Arbitration agreement or Award be set aside, amended, modified or in any way effected otherwise than as provided under the Law of Arbitration. This was agreed to being the Resolution of Civil Justice Committee 1924-25.
9. ' Under the Arbitration (Protocol and Convention) Act, 1937 (section 4(1): which reads as under:-- "4.--(1) A foreign award shall, subject to the provisions of this Act, be enforceable in (Pakistan) as if it were an award made on a matter referred to arbitration in (Pakistan).
10. "(2). ................................
11. ' Sections 32 and 33 of the Arbitration Act provide that an Arbitration agreement or Award shall be contested only by an application and not by a suit.
12. ' The suit is, therefore, premature and the plaint has been rightly rejected by the learned Single Judge under Order 7, Rule 11, C.P.C., as being barred under the law of Arbitration.
Cited by 4 cases
- Rana KHADIM HUSSAIN vs SHAHNAZ BANOO and another 2010 PLD Lahore 437
- TRADING CORPORATION OF PAKISTAN (PVT.) LIMITED vs Messrs NIDERA 2007 CLC 462
- STAHEL HONG KONG LTD. vs GENERAL IMPEX CORPORATION 2005 MLD 1677
- Trading Corporation Of Pakiistan (Pvt.) Limited vs M/S. Nidera Handels K.L.R. 2007 Civil Cases 362