Find a Lawyer

Suit No. 768 of 1986, decided on 11th May, 1987.

(a) Civil Procedure Code (V of 1908)--

---S. 11--Res judicata, principles of--Applicability of S. 11, C.P.C. is not restricted to suits but the principles of res judicata can be invoked in respect of proceedings to which it does not strictly apply.

Applicability of section 11, C . P . C . is not restricted only to suits but its principles apply to the proceedings which may not be provided in the former suit or proceeding the same parties were heard and the same dispute between them was agitated and decided by Court of competent jurisdiction. Once these conditions have been complied with, a subsequent suit on the same facts in respect of the same dispute between the same parties will he barred by the principle of res judicata. It is not necessary that the former proceedings should be only a suit. Section 11 is not exhaustive and the principles of res judicata can be invoked in respect of proceedings to which it does not strictly apply.

PLD 1966 Kar. 197; PLD 1966 Kar. 776; Hook v. Administrator General AIR 1921 P C 11; Mirza Muhammad Yaqoob v. Chief Settlement Commissioner and another PLD 1965 S.C. 254; PLD 1971 S C 779; 1974 S C M R 230; Ghulam Jilani v. Province of Punjab PLD 1979 Lah. 564; Kalipada v. Darija Pads, AIR 1930 PC 22; Ram Kirpal v. Rup Kuari ILR 6 All. 269; Lahori Singh v Official Receiver 163 I.C. 520; Ghulam Khawaja and another v. Khan Muhammad Allah Dad Khan PLD 1962 Lah. 106 and Langat Singh v. Janki Kneri (1911) ILR 39 Cal. 265 ref.

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

---S. 11--Specific Relief Act (I of 1877) S12--Arbitration Act (X of 1940), Ss. 20 & 33--Res judicata, principles of--Question of existence of arbitration agreement was an issue between the parties before Court of competent jurisdiction which was dealing with applications under Ss. 20 & 33 of Arbitration Act, 1940--Court after hearing both parties and considering documents holding that there was no agreement between the parties--Plaintiff again, in the instant suit, pleading that there existed such agreement between the parties and as the defendants had committed breach thereof, he was entitled to relief of specific performance of the said agreement and damages--Question of existence of said Agreement being in issue between the parties before the Court of competent jurisdiction in earlier litigation, proceedings in suit, held, were barred by the principle of res judicata--Plaintiff joining defendant as pro forma defendant against whom no relief had been sought--Presence of such defendant would not exclude the applicability of the principles of res judicata.

A. Rauf and Nazir Ahsn for Appellant.

Naimur Rehman and Qadir H. Sayed for Respondent.

Date of hearing: 20th April, 1987.

The plaintiff has filed this suit for recovery of Rs.74 lacs on the allegation that the defendant No.l is indenter, representative and sole agent in Pakistan for its Chinese principal, the defendant No.2 who is exporter and manufacturer of Textile Spinning plant and equipments. The plaintiff was granted provisional permission dated 30-8-1981 by Textile Commissioner for setting up 12480 spindles cotton spinning mill to be imported from defendant No.2, through defendant No.l. On 5-7-1983 the defendant No.l offered and executed a contract on behalf of defendant No.2 for supply of a complete spinning plant. This contract was subject to confirmation of the Government of Peoples Republic of China. The plaintiff was assured that the contract was final and confirmation was merely a formality. The plaintiff was Kranted final permission on 2fi-10-1983 for the import of spindles complete spinning plant with other equipments and spare parts. The plaintiff made arrangement for opening letter of credit for plant and machinery. However, the defendant No.2 informed the plaintiff by letter dated 20-8-1983 that the defendant No.2 has rejected the contract dated 5-7-1983 on the ground that the price should be converted into US. Dollars instead of RMBY Chinese currency while other terms and conditions remained the same. The plaintiff requested that the contract may be amended, but this was not accepted. The plaintiff, therefore, addressed a letter to the defendants No.l and 2 to nominate their arbitrator in terms of clause 15 of the contract dated 5-7-1983, but of no avail. The plaintiff then filed an application under section 20 of the Arbitration Act for filing arbitration agreement. In those proceedings, the defendants No.l and 2 filed application under section 33 of the Arbitration Act challenging the validity and existence of the arbitration agreement. The application under section 20 was opposed on the plea that no valid agreement exists between the parties. After hearing both the parties the learned Single Judge passed an order holding that no arbitration agreement existed between the parties. The learned Single Judge took note of the covering letter of defendant No.l dated 5-7-1983 under which the contract was founded. This letter filed with the application of defendant No.2 under section 33 of the Arbitration Act has not been disputed and has been quoted in the order. It reads as follows:-

Messrs:---

Nasim Enterprises, 74 Alhamra Society, Shaheed-e-Millat Road, Karachi.

Dear Sir,

Enclose herewith two original copies of contract No.83 MP dated 1st July, 1983 for your signature. Please return one copy duly signed and stamped by you.

Please note that we are still awaiting to receive confirmation as regards price, terms and delivery from our Principals and are issuing this contract on your request for submission to authorities in time. Therefore, this contract as a whole is subject to final approval and confirmation of our Principals.

Kindly acknowledge receipt. Thanking you,

Yours faithfully,

ASSOCIATE TRADING COMPANY LIMITED."

After referring to this letter it was observed as follows:-

"A reading of the above letter will show that the contract was also made subject to approval of defendant No.2. The defendants have also filed letter Annexure 'B' dated 8-8-1983, addressed by defendant No.2 to the defendant No.l relating the contract to defendant No.l. This was followed by another letter dated 20th August 1983, addressed to the plaintiff by defendant No.l in which he intimated the plaintiff that the contract had been returned by their principal defendant 2 who have insisted that the price should be made payable in U.S. Dollar. The plaintiff by letter dated 23rd December, 1983, accordingly requested for amendment of contract, but it appears that on account of some other changes which the plaintiff demanded in the specification of some components of plant, the defendant did not confirm the contract as is evidenced from the letter dated 28th December, 1983. Apart from it the defendant have also placed on record a certificate issued by the Officer of Commercial Counsellor of E.R. in Pakistan confirming that the contract dated 5th July, 1983 was not approved confirmed by Government of People Republic of China. In these circumstances it is quite clear that there is no valid arbitration agreement."

The plaintiff filed High Court Appeal against this order which was dismissed by the following order:-

"The learned Single Judge also referred to a certificate of the Office of the Commercial Counsellor of Pakistan Embassy in China stating therein that the contract was not approved confirmed by the Government of People Republic of China.

The judgment seems to be in consonance with law. Since the factum whether there was a concluded contract or not, was itself under dispute, it was not a fit case for reference to arbitration. "

Both the Courts have held that there was no valid arbitration agreement between the parties.

The plaintiff then filed the present suit for specific performance of agreement dated 5-7-1983 and recovery of damages of Rs.74,00,000. The defendants have filed application under section 11 C.P.C. read with Order VII rule 11 C.P.C. The main contention of Mr. Naimur Rahman is that the issues regarding existence of contract dated 5-7-1973 which is the basis of the plaintiffs claim has been directly and substantially in issue between the same parties in suit No.110/84 which has been finally decided by the order dated 5-9-1984 and confirmed in appeal, therefore, the plaintiff cannot raise the same issue in a subsequent suit. The defendants have thus pleaded that suit is barred under section 11, C.P.C. Mr. A. Rauf the learned counsel for the plaintiff has contended that the orders referred by the defendants were passed in proceedings under section 20 of the Arbitration Act which cannot be construed as a suit, and therefore, the said order cannot operate as res judicata against the plaintiff. It is an admitted position that the order referred was passed in a proceeding filed under section 20 of the Arbitration Act. These proceedings were filed by the plaintiff for filing the arbitration agreement in respect of the claim of the plaintiff relating to contract dated 5-7-1983 which is subject-matter and basis of the claim in this suit also. In those proceedings, the defendants had filed application under section 33 of the Arbitration Act challenging the existence of the arbitrations agreement, and in this regard both the parties had filed affidavits in support of their contentions. Under section 20 of the Arbitration Act the Court after ascertaining that there exists a dispute between the parties and also that there is an agreement between the parties to refer such dispute to the arbitrator if no sufficient cause is shown the Court shall order the agreement to be filed and shall call upon the arbitrator to decide the dispute. The learned counsel for the plaintiff has referred to PLD 1966 Kar. 197 and PLD 1966 Kar. 776 to show that the proceedings under section 20 is not a suit and is of a limited jurisdiction. It is correct that nature of proceedings under section 20 Arbitration Act is not a suit though it is called a suit, nor in this proceeding all the procedures of suit are followed. The scope and nature of the controversy resolved under this provision is also limited to the consideration of existence of dispute between the parties and agreement to refer the same to arbitration. While determining these questions the Court is required to see whether there is an agreement between the parties or not. This is one of the main questions in such proceedings, and the Court has to determine the existence of the agreement. While under section 33 of the Arbitration Act the Court decides the existence and validity of the arbitration agreement.

Section 11, C . P. C . applies to cases where an issue in a suit was directly an issue in a former suit between the same parties and has been decided. However, the applicability of the principle of res judicata has not been exclusively restricted to proceedings in suit. It is well settled that section 11 is not exhaustive to cover all the circumstances to which principle of res judicata may apply. In many cases it has been held that principle of res judicata as enunicated in section 11 can be enforced in proceedings other than suit and the general principle that there should be finality to the litigation, and further that a person cannot be waxed twice in respect of issue which has already been adjudicated by the Court can be applied to such proceedings. In Hook v. Administrator General AIR 1921 P.C. 11 where in an Administration suit the rights of the ,parties were determined a subsequent suit for reconstruction of gift was held to be barred by the principles of res judicata. It was observed:----

" It is not, and indeed it cannot be, disputed that, if that be the case, the matter has been finally settled between the parties, for the mere fact that the decision was given in an administration suit does not affect its finality (see Peareth v. Marriott (1882) 22 Ch. D.182-48 L. T. 170. The Court of Appeal, however, took a different view, and regarding the question as still open decided it against the appellant, but the error in their judgment is due to the fact that they regarded the question as completely governed by section 11 of the Code of Civil Procedure. That section prevents the re-trial of issues that have been directly and substantially in issue in a former suit between the same parties, and this question obviously arises in the same and not in a former suit, but it does not appear that the learned Judge's attention was called to the decision of this Board in (Ram Kirpal Shukkul v. Mt. Rup Kuari (2) which clearly shows that the plea of res judicata still remains apart from the limited provisions of the Code. and it is that plea which the respondents have to meet in the present case. In the words of Sir Barnes Peacock (at p.41)---

"The binding force of such a judgment in such a case as the present depends not upon S.13, Act X of 1877" (now replaced by S.11 of the Code of Civil Procedure), "but upon general principles of law. If it were not binding there would be no end to litigation".

In Mirza Muhammad Yaqoob v. Chief Settlement Commissioner and another PLD 1965 S.C. 254 it was observed that;---

"a petitioner is not entitled to take different pleas at different times so as to file more than one writ petition on the same facts. For a further plea, the proper course would be to file petition for review of such a petition is maintainable. The general principle of res judicata is applicable to writ petitions also".

The same view was taken in Fazal Din 8 others PLD 1971 S.C. 779, 1974 S.C.M.R. 230 and Ghulam Jilani v. Province of Punjab PLD 1979 Lah. 564. In Kalipada v. Darija Pada AIR 1930 PC 22, it was held that if in a probate proceedings Question of relationship of parties has been decided a subsequent suit between the same parties in respect of the same subject-matter is barred by the rules of res judicata although section 11 may not be strictly applicable. The principles of section 11 have also been applied to the orders and decision made in execution proceedings. In this regard reference can be made to Ram Kirpal v. Rup Kuari ILR 6 All. 269. Principle of section 11 has been applied in insolvency proceedings also in Lahori Singh v. Official Receiver 163 I.C. 520 of winding up at appeal or the application of a person who claims to be an Auditor with respect (sic).

In Ghulam. Khawaja and another v. Khan Muhammad Allah Dad Khan PLD 1962 Lah. 106 it. was observed that if question of title is once decided even against a stranger by the Insolvency Court, jurisdiction of the Civil Court is barred by section 11. It was also observed that section 11 C.P.C. is not exhaustive and binding force of the subsequent judgment is not section 11 but the general principle of law which apply to Insolvency proceedings. In Langat Singh v. Janki Koer (1911) ILR 39 Calcutta 265 it was observed that where an application for amendment of a decree has been heard and finally decided it will debar a subsequent application for the same purpose upon general principle of law analogous to those of res judicata.

From these authorities quoted above it seems clear that applicability of section 11 is not restricted only to suits but its principles apply to the proceedings which may not be provided in the former suit or proceeding the same parties were heard and the same dispute between them was agitated and decided by court of competent jurisdiction. Once these conditions have been complied with, A a subsequent suit on the same facts in respect of the same dispute between the same parties will be barred by the principle of res judicata. It is not necessary that the former proceedings should be only a suit. Section 11 is not exhaustive and the principles of res judicata can be invoked in respect of proceedings to which it does not strictly apply.