ORDER SHEET

HIGH COURT OF SINDH, KARACHI

HCA NO. 212/10

HCA No.231/10

Present: Faisal Arab, J.

Aqeel Ahmed Abbasi, J.

Date Order with signature of Judge

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For katcha peshi.

For hearing of CMA 1838/10

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M/s Aziz A. Munshi and Abdullah Munshi, Advocates for appellant

in HCA No.D-212/10

Mr. Omair Nisar, Advocate for appellant in HCA No.231/10

Mr. Waheed Haider AND Ch. Atif, Advocates for Respondents

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FAISAL ARAB, J.- Respondent Company entered into an Agreement with the Appellant , whereby the Respondent agreed to supply its gas to the Appellant at agreed price. During the contract period dispute arose between the parties as it was case of the Respondent that the Appellant has failed to make payments for the supplies made to it by the Respondent. As there was an arbitration clause in the Agreement, the Respondent filed an application under Section 20 of the Arbitration Act for appointment of Arbitrator. While seeking appointment of Arbitrator, the Respondent also filed an application for interim relief i.e. return of equipment which

was installed at the appellant’s premises for delivery of gas. The learned Single Judge after hearing the parties ordered that such equipment be returned by the appellant back to the Respondent forthwith failing which the Nazir shall ensure return of the equipment. Against the said interim order the appellant filed the present appeal.

2. Learned counsel for the appellant contended that the matter with regard to return of the equipment was to be decided by the Arbitrator but before appointment of the Arbitrator interim order was passed which amounts to deciding the controversy in suit which is referable to the Arbitrator only. He further contended that in the prayer clause the interim relief sought in the application is not mentioned, therefore, such relief cannot be granted through an interlocutory application. He further contended that though Section 41 of the Arbitration Act does provide granting of interim injunction in the suit but the question of return of equipment was of a nature which could only be decided by the Arbitrator in the arbitration proceedings.

3. In the connected appeal similar arguments were advanced by Mr. Omair Nisar. He contended that under Clause 10.1 of the Agreement even after notice of termination of contract the Respondent was obliged to continue contract for the entire initial period of ten years and, therefore, the relief that was granted to the respondent for return of equipment was not justified and contrary to the term of the contract. He further contended that there was no default in payment and such fact has been specifically denied by the appellant in paragraph 4 of the counter affidavit, therefore, Clause 10.2, which provides that on commission of default in the payments contract can be terminated, was not attracted to the respondent’s case.

4. Mr. Haider Waheed, counsel for Respondent, on the other hand, referred to Clauses 3.3, 3.6, 3.8, 10.2, 10.6 and 11.2 of the Contract and stated that under the Contract the ownership of the equipment was exclusively of the Respondent and upon termination of the contract the equipment was liable to be returned back to the Respondent, therefore, the Appellant had no right to retain the same and the only dispute which was referable to the Arbitrator was with regard to the default, if any, for the price of gas supplies that were made by the Respondent to the Appellant from time to time. He contended that even if the Respondent fails in establishing its case before the Arbitrator, the fact remains that Respondent under the Contract has a right to terminate the contract and upon termination it becomes entitled to receive back the equipment, therefore, interim order was justly passed. He further contended that even if termination is held by the Arbitrator to be wrongful the Appellant at the best can claim damages for any loss that might have caused to it on account of termination but it cannot retain the equipment belonging to the Respondent, hence the respondent sought return of the equipment through an interlocutory application in the suit.

5. Upon question from the Court with regard to the ownership of the equipment, Mr. Omair Nisar, Counsel of the appellant candidly conceded that the Appellant does not claim any proprietary right in the equipment that was installed by the Respondent at the Appellant’s premises, which was utilized for the storage of gas under the Contract. The dispute, therefore, did not pertain to ownership of the equipment which upon termination of the contract had to be returned in any case by the appellant back to the respondent.

6. As regards the dispute with regard to the payment for the supplies as demanded in the Notice dated 17.11.2009 the Appellant has admitted in reply dated 26.11.2009 that delay in payment was due to force majeure and unavoidable circumstances and it is willing to make payment. From the reply to the Show Cause Notice, it is evident that certain amount was due and payable to the Respondent. In any case, the dispute whether there were any dues is to be decided in the arbitration proceedings. The fact of the matter is that Clause 10.2 was invoked when the contract was terminated vide Notice dated 17.11.2009. Upon expiry of stipulated 30 days, the contract came to an end and hence the equipment belonging to the Respondent had to be returned by the Appellant irrespective of the outcome of the arbitration proceedings with regard to the dispute which is only limited to the payment, against supplies made by the Respondent to the Appellant and nothing more. Therefore, the learned Single Judge rightly passed order for return of the equipment to the Respondent to which the Appellant has no claim of its own.

7. As regards argument that no interim relief can be granted, if such relief is not sought in the suit, we would simply say that such a plea is misconceived. Argument may be true in ordinary civil suit, but in the present case where prayer has to be confined only to the appointment of arbitrator and referral of the controversy to the Arbitrator. Nevertheless in such suits where appointment of Arbitrator is sought interim relief such as return of the equipment can be sought and such relief cannot be denied to the owner of the equipment on the ground that such relief was not part of the main case. The controversy before the Arbitrator with regard to the amount due and payable may take some time, therefore, the equipment cannot be allowed to deteriorate or misused by the Appellant until the entire arbitration proceedings finally come to an end. Therefore, we find no legal justification to interfere in the impugned order. These appeals were dismissed by short order dated 19.1.2012 and these are the reasons for the same.

JUDGE

sharif