10/18/23, 9:29 AM 2000 C L C 206

2000 C L C 206

[Lahore]

Before Muhammad Akhtar Shabbir, J

MUHAMMAD ILYAS KHOKHAR‑‑‑Petitioner

versus

IHSAN ILAHI MUGHAL‑‑‑Respondent

Civil Revision No.466 of 1993, heard on 7th July, 1999.

(a) Partnership Act (IX of 1932)‑‑‑

‑‑‑‑Ss. 39, 40 & 44‑‑‑Arbitration Act (X of 1940), S.34‑‑‑Suit for dissolution

of partnership‑‑‑Stay of proceedings on ground of existence of an arbitration
agreement between the parties‑‑‑On filing suit by plaintiff for dissolution of
partnership, defendant's counsel appeared, filed his memo. of appearance
and requested for adjournment of case for filing his power of attorney and
written statement‑‑‑Counsel for defendant after filing Rower of attorney,
requested for adjournment of case for filing written statement and case was
adjourned subject to payment of costs‑‑‑Defendant on adjourned date of
hearing filed application under S.34, Arbitration Act, 1940 for stay of legal
proceedings contending that in view of arbitration clause in the agreement of
partnership disputes/ controversies between the parties were to be referred to
arbitration ‑‑‑Validity‑‑ Any party to proceedings could apply to Court for
referring matter to arbitration at any time before filing a written statement or
"taking any other steps in the proceedings" as provided under S.34,
Arbitration Act, 1940‑‑‑Defendant's counsel who filed his memo. of
appearance in Court and requested for adjournment of case for filing his
power of attorney and written statement and thereafter, filed his power of
attorney and got case adjourned for filing written statement, his such acts
would amount to "taking any other steps in proceedings" and defendant
would be deemed to have waived his right for stay of proceedings and
sending matter to arbitration.

Island Textile Mills Ltd., Karachi v. V/O Technoexpert and another 1979
CLC 307; Sadhan Kumar Bhattacherjee v. Sunil Kumar Bhattachedee and
others AIR 1948 Cal. 59; New Bengal Shipping Company v. Eric Lancaster
Stump PLD 1952 Dacca 22; Muhammad Idris and others v. Tobarak Hossain
PLD 1965 Dacca 260; Mubarik Cotton Factory v. Messrs General Agencies,
Multan PLD 1980 BJ 1; Akbar Cotton Mills Ltd. v. Messrs VES/Ojuanojo
Obtedinenije Tech/Amesh Export and another 1984 CLC 1605; Messrs
ASLO Marines Ltd. v. M.T: Magda and another PLD 1985 Kar. 745;

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 1/9
10/18/23, 9:29 AM 2000 C L C 206

Eckhardt & Company Marine GMBH, West Germany and another v.

Muhammad Hanif PLD 1986 Kar. 138; Uzin Export Import Enterprises v.
Iftikhar & Company Ltd. PLD 1986 Kar. 1 and Messrs Alazizia Industries,
Uch' Sharif Road, Ahmadpur East v. Messrs Alfalah Insurance Company
Ltd. and 4 others PLD 1993 Lah. 306 ref.

(b) Civil Procedure Code (V of 1908)‑‑‑

‑‑‑‑S. 115‑‑‑Revisional jurisdiction, exercise of‑‑‑Appellate Court below

after taking into consideration legal and factual aspects of the case reversed
findings of Trial Court‑‑‑Petitioner (defendant) having failed to point out
any illegality or jurisdictional defect in judgment of Appellate Court below,
said judgment could not be interfered with by High Court in exercise of
revisional jurisdiction.

Mian Israr‑ul‑Haq for Petitioner. Muhammad Zaheer for Respondent.

Date of hearing: 24th June, 1999.

JUDGMENT

This revision petition under section 115, C.P:C. has been filed by
Muhammad Ilyas Khan petitioner to call in question the judgment and
decree, dated 21‑12‑1992 passed by Additional District Judge, Sialkot,
whereby, the order, dated 30‑4‑1988 passed by the Civil Judge, Sialkot,
rejecting the suit for dissolution of partnership, instituted by Ihsan Elahi
Mughal, was set aside.

2. The facts giving rise to the present revision petition are that Ihsan Elahi
Mughal, plaintiff (respondent herein) entered into a partnership deed, dated
1‑6‑1985 to carry on business of import and sale of surgical instruments, at
Chicago U.S.A. or at such place or places the partner might agreed upon,
and in pursuance of this agreement the plaintiff Ihsan Elahi Mughal supplied
goods from Sialkot to the petitioner/defendant in U.S.A. who received the
same but did not make payment of the bills on due dates. The
plaintiff/respondent not only processed all the goods to him but also
incurred expenditures thereon. The petitioner/defendant misappropriated the
goods and failed to render the account of the same on repeated requests of
the plaintiff. As such the plaintiff claimed that the partnership business had
totally failed, destroyed and could not be carried on. The plaintiff prayed for
the dissolution of the partnership deed and a decree in the following terms:‑‑

(a) for a declaration that the partnership stands dissolved. In the alternative
for dissolution of the partnership. For taking of accounts of partnership.

(b) for appointment of a receiver; and

(c) any other relief which the Court deems proper.

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 2/9
10/18/23, 9:29 AM 2000 C L C 206

On 29‑2‑1988 the petitioner/defendant filed an application under section 34

of the Arbitration Act read with section 151, C.P.C., wherein, it had been
contended that the agreement contained a clause No. 12. According to
which, all disputes, controversies etc. between the parties shall be referred to
the Arbitration. In the light of this arbitration clause of the agreement it was
asserted that the matter be referred to Arbitrator at the Polesh Chamber of
Foreign Trade in Warsaw, and so the suit shall not be maintainable. After
getting reply from the plaintiff the Court rejected the suit under Order VII,
Rule 11, C.P.C. vide order, dated 30‑4‑1988.

3. Feeling aggrieved the respondent preferred an appeal and the learned

Additional District Judge, Sialkot, vide judgment and decree, dated
21‑12‑1992 accepted the same, set aside the order of the trial Court and
remanded the case to the trial Court for decision afresh.

4. Learned counsel for the petitioner contended that the appellant Court
acted in the exercise of its jurisdiction illegally and with material
irregularity, while reversing the findings of the learned trial Court, and that
application under section 34 of the Arbitration Act was filed by the present
petitioner, without taking any step of proceedings of the Court. He further
contended that initially the case was adjourned for submission of
Wakalatnama on behalf of the petitioner/defendant. He argued that the
Appellate Court committed illegality by holding that the petitioner took all
steps in the proceedings and no clear cut undertaking was shown by him. He
further submitted that the defendant/ petitioner entered appearance and
applied for a copy of the application, so it could not be said to have taken
steps in the proceedings and also the adjournment given by the lower Court
for submission of power of attorney by the counsel of the
petitioner/defendant would not have been treated to participation in the
proceedings by the petitioner/defendant. He added that the Appellate Court
also committed illegality while holding that reference of the matter be made
to Foreign Tribunal for arbitration as per clause of the partnership deed,
would have created hardship for the respondent/plaintiff. As he would not he
able to pursue his case properly and that this finding was clearly given in
violation of the law laid down by superior Court in Island Textile Mills. Ltd.
Karachi v. Techno expert and another 1979 CLC 307.

5. On the other hand learned counsel for the respondent/plaintiff forcefully

controverted the arguments of the learned counsel for the petitioner, and
supported the judgment of the First. Appellate Court contending that the
petitioner/defendant had waived his right for the stay of proceedings and
sending the matter to Arbitration. He further contended that the
petitioner/defendant did not apply to the Court for the reference of the
matter to arbitration at the earliest opportunity, when he appeared before the
Court.

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 3/9
10/18/23, 9:29 AM 2000 C L C 206

6. I have heard the arguments of the learned counsel for the parties
anxiously and studied the record minutely.

7. To begin with, relevant statutory provisions may be referred to section 34

of the Arbitration Act, 1940 provides that:‑‑

"Where any party to an arbitration ‑ agreement or any other person claiming

under him commences any legal proceedings against any other party to the
agreement or any person. claiming under him in respect of any matter
agreed to be referred, any party to such legal proceedings may, at any time
before filing a written statement or taking any other steps in the proceedings,
apply to the Judicial Authority before which the proceedings are pending to
stay the proceedings; if satisfied that there is no sufficient reason why the
matter, should not be referred in accordance with the arbitration agreement
and that the application was, at the time when the proceedings were
commenced, and still remains, ready and willing to do all things necessary
to the proper conduct of the arbitration, such authority may make an order
staying the proceedings.."

8. From the language of the statute' it is quite clear that any party to the
proceedings, may at any time before filing a written statement or taking any
step in the proceedings can apply to the Court for referring the matter to the
Arbitration and the defendant is under legal obligation to apply to the Court
for referring the matter to the Arbitration must without any ado and before
submitting to the jurisdiction of the Court inform the Court in an
unequivocal terms that he is going to insist upon the implementation of the
Arbitration Clause, but where the party/defendant appears in the Court,
obtains adjournments for filing written statement such party deemed to have
waived his right and proceedings could not be stayed. Reliance can be
placed in this respect on‑‑

(i) Sadhan Kumar Bhattacherjee v. Sunil Kumar Bhattacherjee and others

AIR 1948 Cal. 59,

(ii) New Bengal Shipping Company v. Eric Lancaster Stump PLD 1952
Dacca 22,

(iii) Muhammad Idris and others v. Tobarak Hossain PLD 1965 Dacca 260,

(iv) Mubarik Cotton Factory v. Messrs .General Agencies, Multan PLD

1980 BJ 1,

(v) Akbar Cotton Mills Ltd. v. Messrs VES/Ojuanojo Obtedinenije

Tech/Amesh Export and another 1984 CLC 1605,

(vi) Messrs ASLO Marines Ltd. v. M.T. Magda and another PLD 1985 Kar.
745,

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 4/9
10/18/23, 9:29 AM 2000 C L C 206

(vii) Eckhardt & Company Marine GMBH, West Germany and another v.
Muhammad Hanif PLD 1986 Kar. 138,

(viii) Uzin Export Import Enterprises v. Iftikhar & Company Ltd. PLD 1986
Kar. 1,

(ix) Messrs Alazizia Industries Uch Sharif Road, Ahmadpur East v. Messrs
Alfalah Insurance Company Ltd. and 4 others PLD 1993 Lah. 306.

9. In case of New Bengal Shipping Company v. Eric Lancaster Stump PLD

1952 Dacca 22 (supra) the defendant asked for adjournment‑of the case to
file written statement and after that the defendant applied to the Court for
the stay of the proceedings and his application was rejected on the ground
that it was not filed at the earliest possible opportunity and the Honourable
Judges of the Dacca High Court observed as under:‑‑

"On adjourned date defendant filed two applications one for further time for
filing written statement and the other under section 34 of the Arbitration Act
for staying the suit. Objection petition was not confined to question of
jurisdiction. It contained grounds on merits of case and was without
reservation and all this amounts to step in proceedings and the suit was not
stayed.

10. In Muhammad Idris and others' case PLD 1965 Dacca 260 (supra), a
Division Bench of Dacca High Court relying on New Bengal Shipping
Company v. Eric Lancaster Stump of Singapore held that:

"An application for time to file written statement to certain circumstances

might be regarded as amounting to steps in the proceeding within the
meaning of section 34 of the Arbitration Act and in this Muhammad ldris's
case the petitioners did not ask for stay before taking any step in the
proceedings and it was held that the filing of written statement is surely a
kind of step taken in the proceedings and a prayer for time to put in written
statement for the purpose of contest is surely another kind of step within the
meaning of section 34 of the Arbitration Act."

11. In case of Mubarik Cotton Factory PLD 1980 BJ 1 (supra) it was held
that: ‑‑.

"an early application for extension of time to file written statement amounts
to taking step in the proceedings and in this case ex parte proceedings were
ordered and the defendant applied to set aside the ex parte proceedings
through an application which was set aside on 15‑9‑1968 and thereafter, the
application for stay was filed and during the pendency of the stay
application adjournments were obtained thrice on 15‑1‑1968, 31‑1‑1968 and
16‑2‑1968 for a compromise. His Lordship Mr Justice Abdul
Shakoor‑ul‑Islam Who became the Chief Justice of the Lahore High Court
afterwards; observed that while getting the adjournments on stay application

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 5/9
10/18/23, 9:29 AM 2000 C L C 206

for a compromise the party had submitted, to the 'jurisdiction of the Court'
and 'did not' insist upon the implementation of the Arbitration Clause and
thereafter, the party was not entitled to ask for stay of proceedings."

12. In case of Akbar Cotton Mills Ltd. 1984 CLC 1605 his Lordship Mr.
Justice Saeed‑uz‑Zaman Siddiqui, Judge of Sindh High Court (now
Honourable Chief Justice of Supreme Court of Pakistan) observed that:‑‑

"a party applying under section 34 of the Arbitration Act does not have a
right to obtain stay of legal proceedings in Court. Such an order purely
discretionary and in appropriate cases, the Court may refuse to stay the
proceedings in spite of an arbitral clause in the agreement between the
parties which provided for reference of dispute to arbitration. No doubt the
Court has to exercise this discretion in a judicious manner but the discretion
conferred on the Court can neither be curtailed nor circumvented by means
of agreement between the parties. It is true that ordinarily when a party has
entered into an agreement of which the arbitral clause is an integral port, he
should not receive assistance from the Court, if he resiles from it, but this
does not mean that even in a case where the Court is satisfied that the very
purpose and object of the arbitration would be frustrated or it is not likely to
be achieved it will stay the legal proceedings and direct that parties to have
recourse to arbitral clause. No doubt one of the commonly understood object
of inserting an arbitral clause in commercial agreements is to avoid expenses
and the conventional delays experienced in Court of law but the paramount
and avowed object of the arbitration still remained the same namely the
resolution of dispute between the parties is a fair, just and impartial manner.
This letter stated objected cannot be sacrificed in the name of less expensive
and speedy mode to settle the dispute between the parties. Therefore, where
the Court finds that a party to the dispute is not likely to get a fair, just or
impartial treatment of his cause in arbitration proceedings it may refuse to
stay the legal proceedings in Court brought in contravention of the arbitral
clause in the agreement under section 34 of the Arbitration Act. "

12‑A. In the present case the petitioner/defendant's counsel appeared in the

Court on 5‑1‑1987 and filed his memo of appearance and requested for
adjournment of the case for filing his power of attorney and written
statement. The power of attorney of the counsel for the petitioner/defendant
was filed on 27‑2‑1988 and requested for adjournment of the case for filing
written statement. The case was adjourned for 6‑3‑1988 subject to the
payment of costs. On that date the learned Presiding Officer of the Court
was not present and the Reader adjourned the case to 9‑3‑1988. On that date
application under section 34 of the Arbitration Act for stay of legal
proceedings in the Court‑ was filed. It means that the petitioner defendant
submitted himself to the jurisdiction of the Court _and obtained
adjournments for filing of the written statement. These adjournments were a
step into the legal proceedings as held in the cases referred to above The
dictum laid down in the said cases is applicable on all four of the present
case The application under section 34 of the Arbitration Act was not filed

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 6/9
10/18/23, 9:29 AM 2000 C L C 206

before the filing of the written statement or taking any other steps in the
proceedings Following the principle settled in the cases referred to above
that applying for time to file written statement is an expression, "taking any
other step in the proceedings" in accordance with the provisions of section
34 of the Arbitration Act. 1940.

13. The petitioner/defendant had failed to apply to the Court to refer the
matter to arbitration before filing of the written statement or taking‑ any
other steps in the proceedings. The contention of the learned counsel for the
petitioner that the lower Appellate Court acted in the exercise of its
jurisdiction illegally and with mala fide and that application under section
34 of the Arbitration Act was file quite in time without any delay is
misconceived.

14. The second contention of the learned counsel for the petitioner that the
agreement was executed by the parties and Arbitration Clause was inserted
in the agreement by both the parties willingly and consciously through a
foreign Tribunal and no party could rigour out from the arrangement on the
plea of inconvenience. This argument was settled in case of Akbar Cotton
Mills Ltd. 1984 CLC 1605 (supra) where in the agreement there was an
Arbitration Clause that the dispute between the parties would be referred to
Arbitral Tribunal in Moscow, his Lordship Mr. Justice Saeed‑uz‑Zaman
Siddiqui (now Chief Justice of Supreme Court of Pakistan) observed that:

"In view of the above discussion I am of the view that in spite of the fact
that at the time the plaintiff entered into agreement, dated 7th August, 1970
Without defendant No. l they were aware that in the event of dispute or a
claim by them in respect of the agreement, the dispute is to be referred to
Arbitral Tribunal in Moscow, they were entitled to show in the application
under section 34 of the Arbitration Act filed for stay of their suit, that
commencement of the arbitration proceedings in the foreign country would
result in an ex parte decision against them as all evidence in respect of the
dispute is available at the place where legal proceedings is filed and that
either by reasons of impracticability of the restrictions imposed by the
government in matter of providing foreign exchange to individual citizen it
would be impracticable, impossible for them to produce evidence before the
Foreign Arbitral Tribunal. If the Court is convinced, after hearing the parties
in this behalf that the aforesaid reasons do exist it may refuse to stay the
legal proceedings in such circumstances under section 34 of the Arbitration
Act. "

The second contention of the learned counsel for the petitioner is also
repelled.

15. The lower Appellate Court taking into consideration the legal and factual
aspects of the case reversed the findings of the trial Court committed no
illegality, and learned counsel for the petitioner has failed to point out any

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 7/9
10/18/23, 9:29 AM 2000 C L C 206

other illegality or jurisdictional defect in the impugned judgment, which

calls for no C interference.

For the foregoing reasons, there is no force in this revision petition which is
dismissed...

H.B.T./M‑1193/L Revision petition dismissed.

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 8/9
10/18/23, 9:29 AM 2000 C L C 206

https://www.pakistanlawsite.com/Login/PrintCaseLaw?caseName=2000L229 9/9