2021 CLC 423 | TALLAHASEE RESOURCES INCORPORATED Versus DIRECTOR GENERAL PETROLEUM CONCESSIONS, MINISTRY OF ENERGY (PETROLEUM DIVISION)

Go back

2021 C L C 423

2021 C L C 423

[Islamabad]

Before Miangul Hassan Aurangzeb, J

TALLAHASEE RESOURCES INCORPORATED through Mrs. Maleeha Waheed Malik----Appellant

Versus

DIRECTOR GENERAL PETROLEUM CONCESSIONS, MINISTRY OF ENERGY (PETROLEUM DIVISION) and another---Respondents

F.A.O. No.124 of 2020, decided on 14th January, 2021.

Arbitration Act (X of 1940)----

----S.34---Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act (XVII of 2011), S.4---Civil Procedure Code (V of 1908), S.151---Stay of proceedings in a suit in presence of an arbitration agreement between parties---Adjudication of an application under S.34 of the Arbitration Act, 1940---Exercise of discretion by the court---Arbitration agreements for international arbitration as per ICSID or ICC Rules---Inherent powers of civil court---Scope---Discretion under S.34 of Arbitration Act, 1940 must be exercised judicially and court must take into consideration entire facts and circumstances of a case as well as conduct of the parties up to date of hearing of such application for stay of proceedings---Contradictory positions taken by a party could disentitle such party from such discretionary relief under S.34 of Arbitration Act, 1940 ---Arbitration agreement, if same provided for disputes to be referred for international arbitration, did not prevent a party from seeking stay of legal proceedings and mere fact that a civil court stayed proceedings under S.34 of Arbitration Act, 1940; did not imply that arbitration proceedings between parties should only be in accordance with provisions of Arbitration Act, 1940 and not per ICISD or ICC Rules---Court, in such a case, also had ample jurisdiction to treat an application for stay under S.34 of Arbitration Act, 1934, as having been made under S.4 of Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 under which section, power to stay proceedings was not discretionary---Where it was not certain that ensuing arbitration proceedings under an arbitration agreement would be foreign or domestic arbitration, and legal proceedings had been brought by a party to such an agreement, then court could treat an application for seeking stay of such proceedings as an application under S.151, C.P.C.

Muhammad Farooq v. Nazir Ahmad and others PLD 2006 SC 196; Infospan (Private) Limited v. Messrs Telecom Foundation 2017 CLC 131 and Muhammad Ilyas Khokhar v. Ihsanllahi Mughal 2000 CLC 206 ref.

Mst. Safia Bibi v. Mst. Aisha Bibi 1982 SCMR 494; Mst. Baigan v. Abdul Hakeem 1982 SCMR 673; Rauf B. Kadri v. State Bank of Pakistan PLD 2002 SC 1111; P.Q. Chemicals v. A.W. Brothers 2005 CLC 169; Muhammad Saleem Butt v. Trading Corporation of Pakistan 1986 CLC 254; Walia Steel Industries PLC v. SAGA Shipping and Trading Corporation Ltd. PLD 2019 Sindh 22; Nargis Naureen v. Judge Family Court, Multan PLD 2018 Lah. 735 and Osman Khan v. Aisha Naz 2010 CLC 475 rel.

Mirza Mehmood Ahmad, Saad Ullah Tahir and Aziz-ur-Rehman Farooqi for Appellant.

Hafiz Naeem for Respondent No.1.

Muhammad Nadeem Khan Khakwani, Assistant Attorney-General, Ms. Mehrunisa Jehangir, L.A., D.G.P.C. for Respondents.

Dates of hearing: 23rd, 24th and 28th December, 2020.

JUDGMENT

MIANGUL HASSAN AURANGZEB, J.----Through the instant appeal under Section 39 of the Arbitration Act, 1940 ("the 1940 Act"), the appellant, Tallahassee Resources Inc, impugns the order dated 17.11.2020 passed by the Court of the learned Civil Judge, Islamabad, allowing the application under Section 34 of the 1940 Act filed by respondent No.1, Director General Petroleum Concessions, seeking the proceedings in the suit for declaration and permanent injunction filed by the appellant to be stayed.

FACTUAL BACKGROUND:-

2. The facts essential for the disposal of this appeal are that on 25.08.2014, the President of the Islamic Republic of Pakistan ("the President") granted the appellant Petroleum Exploration License No.457/PAK/2014 ("the License") pursuant to the provisions of the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013 ("the 2013 Rules"), to perform activities in connection with exploration and exploitation of petroleum in Block No.3370-15 (Karak North). On the same day, a Petroleum Concession Agreement ("PCA") was executed between the appellant and the President, acting through the Ministry of Energy (Petroleum Division). The License was valid for an initial term of five years, divided into two phases of three years and two years each Furthermore, the appellant was entitled to two renewals of one year each of the License as provided in the 2013 Rules.

3. The terms of the License obligated the appellant to undertake the following Minimum Work during the initial term:-

		Minimum Work
Initial Term	Phase I	Contract Years 1, 2 and 3, 100 Work Units plus 51.4926 Work Units per Grid Area in the original Area, for each of Contract Years [comprising a total of 307 Work Units] and
	Phase II	Contract Year 4 and 5, at least one exploration well to be agreed by the Government before entering into Phase-II along with corresponding work units.

4. Clause 4(b) of the License provided that if the appellant fails to complete the work programme within the specified time limits, it shall pay liquidated damages to the Federal Government in accordance with Rule 28 of the 2013 Rules.

5. In Article 3 of the PCA, it has been acknowledged that simultaneous with the execution of the PCA, the President had granted a license to the appellant. Article 3.2(a) of the PCA provided that the License shall be for an initial term of five years divided into two phases; the first having a duration of three years (Phase-I) and the second of two years (Phase-II).

6. Article 1.72 of the PCA defines "Working Interest" in the following terms:-

""Working Interest" means all or any undivided interest in the entirety of the Petroleum Concessions, rights and obligations and liabilities imposed by the Rules, this Agreement, the License and any Lease(s) granted pursuant to the Rules and this Agreement, including the enjoyment of the exclusive right to explore and prospect for, develop, produce, sell and otherwise dispose of Petroleum from the Area, proportionate to which all working interest owners are obligated to bear and pay its share of all costs and Expenditures (including royalties on production and rentals), in exploring and prospecting for, drilling, developing, producing, selling and otherwise disposing of Petroleum from the Area."

7. The appellant is a foreign working interest owner, and presently holds 95% working interest in the Karak Block and has been designated as the Operator. In Article 3.2(a) of the PCA, it was provided that the License shall expire at the end of Phase-I if the Working Interest Owners ("WIOs") do not fulfil the minimum work commitment of Phase-I and do not commit at least one firm exploration well for entering into Phase-II. The minimum work programme and the minimum expenditure which had to be carried out by the appellant to discharge its obligations during the initial term were agreed in Article 3.3 of the PCA to be the same as provided in the Licence, and referred to in paragraph 3 herein above.

8. Article 3.4 of the PCA embodies the agreement of the WIOs to pay respondent No.1, as compensation for non-performance, an amount equal to the value of total unaccomplished work units (the value of one work unit being US$ 10,000/- or as specified at the time of invitation to bid) during the relevant phase of the initial term. Furthermore, it was provided that if the WIOs do not carry out the minimum work during any phase of the initial term and do not pay the agreed compensation, the PCA shall automatically terminate but it shall continue to be valid for any commercial discoveries.

9. Pursuant to Article 3.8 of the PCA, the appellant had issued a bank guarantee in favour of respondent No.1. This guarantee was replaced with bank guarantee No.PG/1002/0047/2018 dated 18.10.2018 for an amount of US$ 767,500/- issued by respondent No.2, Bank Islami Pakistan Limited. The expiry date of the said guarantee was 23.11.2019. It was irrevocable and unconditional in nature, guaranteeing the appellant's "faithful performance of its financial obligations as provided for" in the PCA. It was to reduce annually by an amount proportionate to 25% of the discharge of the minimum work commitment for that year as provided for in the PCA, as evidenced by a signed certificate from respondent No.1. The guaranteed amount or any part thereof was expressly agreed to be paid to respondent No.1 without recourse to any person on receipt of its first written demand that the amount claimed is duly payable under the PCA. Furthermore, respondent No.2 inter alia waived all of its rights as a guarantor of first requiring respondent No.1 to proceed against or enforce its contractual or legal rights against the appellant's obligations.

10. It is an admitted position that Phase-I (i.e., the first three years of the initial term of the Licence) expired in the year 2017, and upon the appellant's request for an extension in the term of the License was granted by respondent No.1 for a period of two years, i.e., up to 24.08.2019. In July 2019, the appellant requested respondent No.1 for a further extension in the duration of the License.

CIVIL SUIT FILED BY THE APPELLANT AGAINST RESPONDENT NO.1 BEFORE THE LEARNED CIVIL COURT:-

11. Before responding to the appellant's said request, respondent No.1, on 30.01.2020, made a call for the encashment of the bank guarantee. This prompted the appellant to file a suit for declaration and permanent injunction against respondents Nos.1 and 2 before the Court of the learned Civil Judge, Islamabad, praying for inter alia a declaration to the effect that the said letter dated 30.01.2020 was illegal, mala fide and without legal effect. Furthermore, the appellant sought a declaration that it was entitled to conduct exploration and production work on Karak Block in accordance with the terms of the PCA and the License. Along with the said suit, the appellant filed an application under Order XXXIX, Rules 1 and 2 of the Civil Procedure Code, 1908 ("C.P.C.") praying for an interim injunction to restrain the respondents from encashing the bank guarantee. The said suit along with the application for injunction was taken-up for hearing on 03.02.2020 whereon the learned Civil Court issued notices to the respondents and adjourned the matter to 07.02.2020.

12. Vide order dated 07.02.2020, the learned Civil Court suspended the operation of the said letter dated 30.01.2020. Furthermore, respondent No.1 was directed to file a written statement on 19.02.2020. The said order was passed in the presence of respondent No.1's Law Officer, whose signature appears on the margin of the order sheet of 07.02.2020.

13. On 19.02.2020, a memorandum of appearance was filed on behalf of respondent No.1. The learned Civil Court adjourned the matter to 12.03.2020 and ordered respondent No.1 to file a power of attorney along with a written statement. On 12.03.2020, the matter was again adjourned to 31.03.2020 with a direction to respondent No.1 to file a power of attorney along with a written statement. Due to the COVID-19 pandemic, the Civil Courts were closed pursuant to an administrative order. Therefore, no proceedings could take place on the subsequent dates (i.e., 31.03.2020, 21.04.2020, 08.05.2020, 10.06.2020, and 13.07.2020). These dates had been fixed by the Reader of the learned Civil Court.

14. On 23.07.2020, respondent No.1 filed an application praying for an early hearing of the suit. In paragraph 6 of the said application, it was pleaded that one of the reasons for seeking an early hearing was to file an application under Section 34 of the 1940 Act so that the proceedings in the suit could be stayed.

15. On 04.08.2020, respondent No.1 filed an application under Section 34 of the 1940 Act praying for the proceedings in the suit to be stayed so that the disputes between the appellant and respondent No.1 could be resolved in accordance with the dispute resolution mechanism enshrined in Article 28 of the PCA. The said application was filed before a Duty Judge since the learned Presiding Officer of the Court where the appellant's civil suit was pending had proceeded on summer vacations. The order sheet pertaining to the appellant's civil suit shows that on 22.09.2020, a copy of the application under Section 34 of the 1940 Act was handed over to the learned counsel for the appellant. The appellant contested the said application by filing a written reply.

16. Vide order dated 17.11.2020, the learned Civil Court allowed respondent No.1's application under Section 34 of the 1940 Act and stayed the proceedings in the suit. The said order dated 17.11.2020 has been assailed by the appellant in the instant appeal. Along with this appeal, the appellant also filed an application (C.M.No.1046/2020) praying for a direction to respondent No.1 to deposit in this Court the amount received by encashing the bank guarantee and to invest it in a profit bearing scheme until the disputes between the parties are resolved. This appeal was taken-up for hearing by the learned Bench-I of this Court on 04.12.2020 whereon notices were directed to be issued to the respondents. Furthermore, as an interim measure status quo was directed to be maintained until 11.12.2020. Vide order dated 11.12.2020, this Court, after hearing the learned counsel for respondent No.1, vacated the status quo order dated 04.12.2020. Thereafter, vide order dated 17.12.2020, it was directed that this appeal be listed for hearing before this Bench. Vide order dated 18.12.2020, this Court declined to issue an ad-interim injunctive order sought by the appellant.

17. It may be mentioned that by virtue of the amendment in Section 141 of the C.P.C. through the Code of Civil Procedure (Amendment) Act, 2020, the appellant's application for interim injunction was transferred to another Civil Court designated to hear and decide applications for interlocutory relief. The appellant's application for interim injunction (seeking to restrain the respondents from encashing the bank guarantee) was taken-up for hearing on 19.11.2020. Vide order dated 19.11.2020, the learned Civil Court dismissed the said application solely on the ground that the proceedings in the appellant's suit had been stayed. The said order dated 19.11.2020 was assailed by the appellant in an appeal before the Court of the learned Additional District Judge, Islamabad. Vide order dated 01.12.2020, the learned Appellate Court dismissed the said appeal. The concurrent orders passed by the learned Civil Court and the learned Appellate Court are said to have been assailed by the appellant before this Court in a civil revision petition which has, till date, not been taken-up for hearing.

DEVELOPMENTS DURING THE PENDENCY OF THE CIVIL SUIT:-

18. As mentioned above, prior to the filing of the civil suit, the appellant had requested respondent No.1 to extend the duration of the License. Vide letter dated 06.02.2020, respondent No.1 turned down the said request and called upon the appellant to (i) relinquish the license area within a period of ninety days, and (ii) to deposit liquidated damages amounting to US$ 3.07 Million for the unfulfilled minimum work commitment etc.; social welfare commitment of US$ 80,940/-; training commitment of US$ 29,453/-; and rental of Rs.9,00,000/-. Respondent No.1's assertion was that the appellant had failed to discharge the minimum work commitment of 307 work units within Phase-I of the License, and that the said breach on the appellant's part had not been remedied despite an extension in the License up to 24.08.2019.

19. At this stage, it is pertinent to mention that Article 28 of the PCA sets out the mechanism for the resolution of disputes between the parties thereto. The said Article, titled "Arbitration" is reproduced herein below:-

"ARTICLE-28

ARBITRATION

28.1 Any question or dispute arising out of or in connection with the terms of this Agreement or the License or any Lease (regardless of the nature of the question or dispute) shall, as far as possible, be settled amicably through mutual negotiations between the parties in good faith within thirty (30) days after the date the disputing Parties delivers return notice of the dispute to the other Parties. Failing an amicable settlement within a reasonable period, such dispute shall be submitted to the International Centre for Settlement of Investment Dispute (ICSID) established by the "Convention on the Settlement of Investment Disputes Between States and Nationals of Other States" of 1965 and THE PRESIDENT and the Working Interest Owners, to the extent required by the said Convention, hereby consent to arbitration thereunder.

28.2 If, for any reason, the request for arbitration proceedings is not registered by ICSID, or if the ICSID fails or refuses to take jurisdiction over such dispute, such difference or dispute shall be finally settled by arbitrators under the Rules of Arbitration of the International Chamber of Commerce (the "Chamber Rules") and by three (3) arbitrators appointed in accordance with the Chamber Rules. The arbitrators shall not be nationals of Pakistan or of the country of the other party to the dispute nor shall any of such arbitrators be employees or agents or former employees or agents of any of the parties to the proceedings.

28.3 The venue of the arbitration shall be in Pakistan or elsewhere as mutually agreed between THE PRESIDENT and the foreign Working Interest Owners. If such mutual agreement cannot be reached, the venue shall be deiced by the ICSID or ICC (as appropriate). The award rendered shall be final and conclusive. The judgment on the award rendered may be entered in court having jurisdiction or application may be made in such court for a judicial acceptance of the award and an order of enforcement as the case may be. The official language of arbitration will be English.

28.4 This Article is only applicable in case of a dispute between foreign Working Interest Owners inter se, or between foreign Working Interest Owners and THE PRESIDENT, or between foreign Working Interest Owners and Local Working Interest Owners, provided that in the event of a dispute between the Local Working Interest Owner(s) inter se, or between the Local Working Interest Owners and THE PRESIDNET, the arbitration shall be conducted in accordance with the Arbitration Act, 1940."

20. It was not until 14.09.2020 that the appellant issued a notice under Article 28.1 of the PCA to the Secretary, Ministry of Energy (Petroleum Division) for an amicable settlement of the dispute through negotiations. A copy of this letter was sent to respondent No.1. Through the said notice, the appellant made a request for the nomination of respondent No.1's representative to participate in the negotiations aimed at an amicable settlement of the dispute relating to the extension of the License. In the said notice, it was explicitly mentioned that the appellant's claims were not exhaustively stated in the said notice and that its claims "may be subsequently modified or supplemented during the course of negotiations or eventual arbitration, if any."

21. Vide letter dated 23.10.2020, respondent No.1 refuted in toto the appellant's contentions in its letter dated 14.09.2020 but expressed its willingness to settle the dispute through negotiations in accordance with Article 28.1 of the PCA, provided the appellant withdraws its suit and extends the validity of the bank guarantee. Respondent No.1 also expressed its intention to discuss its claim of liquidated damages against the appellant.

CONTENTIONS OF THE LEARNED COUNSEL FOR THE APPELLANT:-

22. Learned counsel for the appellant, after narrating the facts leading to the filing of the instant appeal, submitted that by not filing an application under Section 34 of the 1940 Act at the earliest opportunity, respondent No.1 had impliedly waived its right to seek the proceedings in the suit to be stayed and the matter in dispute to be referred to arbitration; that the appellant had taken 'steps in the proceedings' by not filing the said application despite the directions passed to the said effect by the learned Civil Court on three occasions; that respondent No.1 filed the application under Section 34 of the 1940 Act six months after the institution of the suit; that respondent No.1's Law Officer tendered appearance before the learned Civil Court on the first date of hearing and addressed arguments on the appellant's application for interim injunction but did not apply for the proceedings in the suit to be stayed; that respondent No.1 had filed two applications for early hearing prior to filing the application under Section 34 of the 1940 Act; that since the COVID-19 pandemic did not prevent respondent No.1 from filing applications for early hearing, there was no plausible justification for the inordinate delay in filing the application under Section 34 of the 1940 Act; that in the said application, no reason was given for the delay in its filing; and that the learned Civil Court erred by not appreciating that respondent No.1's conduct was such which did not entitle it to seek the proceedings in the suit to be stayed. In making these submissions, learned counsel for the appellant placed reliance on the judgments in the cases of Muhammad Farooq v. Nazir Ahmad and others (PLD 2006 SC 196), Infospan (Private) Limited v. Messrs Telecom Foundation (2017 CLC 131) and Muhammad Ilyas Khokhar v. IhsanIlahi Mughal (2000 CLC 206).

23. Furthermore, it was submitted that the appellant was a foreign WIO in the Karak Block; that Article 28.4 of the PCA provided inter alia that arbitration shall be conducted in accordance with the provisions of the 1940 Act where a dispute is between local WIOs inter se or between local WIOs and the President; that the applicability of the 1940 Act to disputes between parties specifically mentioned in Article 28.4 of the PCA will, by implication, exclude the applicability of the said Act where the disputes are not between the parties to whom the provisions of the said Act have been made applicable; that Article 28 of the PCA does not make the provisions of the 1940 Act applicable to a dispute between a foreign WIO and the President; that despite the appellant having agitated this ground before the learned Civil Court, there is no finding in the impugned order on whether the provisions of the 1940 (including Section 34 thereof) applied to the disputes between the appellant and respondent No.1; and that the dispute agitated by the appellant in the civil suit has no nexus with the dispute which was the subject matter of the appellant's notice / letter dated 14.09.2020 for amicable settlement issued under Article 28.1 of the PCA.

24. It was further submitted that since the appellant's application for injunction to restrain the respondents from encashing the bank guarantee was dismissed on the sole ground that the proceedings in the suit had been stayed, if this Court sets aside the impugned order dated 17.11.2020 it would also have the jurisdiction to pass an interim order to restrain respondent No.1 from encashing the bank guarantee; and that the concurrent dismissal of the appellant's application for interim injunction by the learned Courts below and the pendency of a revision petition before this Court against such concurrent orders would not prevent this Court from granting an injunction either to restrain from the encashment of the bank guarantee or to direct respondent No.1 to deposit the encashed amount in the Court. Learned counsel for the appellant prayed for the appeal to be allowed and for the impugned order dated 17.11.2020 to be set-aside.

CONTENTIONS OF THE LEARNED COUNSEL FOR RESPONDENT NO.1:-

25. On the other hand, learned counsel for respondent No.1 submitted that Article 26.1 of the PCA provides inter alia that the PCA shall remain in effect so long as the WIOs continue to own interest in the License; that the appellant, being a WIO in the Karak Block, breached its obligations under the License by not undertaking the minimum work provided in clause 4 of the License; that in Phase-I of the initial five-year term of the License, the appellant had to achieve 307 work units but till date the appellant has not achieved a single work unit; that clause 4(b) of the License provides that if the licensee should fail to complete the work programme within the time limits specified in the License, it shall pay liquidated damages to the Federal Government in accordance with Rule 28 of the 2013 Rules; that Rule 28 of the 2013 Rules requires a licensee to pay liquidated damages to the Federal Government at a rate which corresponds to the minimum expenditure of the undischarged work obligations set out in the License within a period of thirty days of its expiry; that under Article 3.4 of the PCA, the working interest owners are under an obligation to pay to respondent No.1, as compensation for non-performance, an amount equal to the value of the total unaccomplished work units (the value of one work unit being US$ 10,000/-); that Phase-I of the License expired in the year 2017; that on the appellant's request an extension in the duration of the License was granted up to 24.08.2019; that subsequently, the appellant's application for a further extension in the duration of the License was rejected by respondent No.1 vide letter dated 06.02.2020; that the appellant is liable to pay US$ 3.07 Million as liquidated damages in accordance with clause 4(b) of the License and Article 3.4 of the PCA; that additionally the appellant was liable to pay US$ 80,940/- as its social welfare obligation, and US$ 29,453/- in connection with the training fund account of respondent No.1; that the appellant was also liable to pay Rs.9,00,000/- as rental charges; and that the non-payment of the said amount caused respondent No.1 to make a call for the encashment of the bank guarantee.

26. Furthermore, it was submitted that since respondent No.1 had neither filed a written statement nor had it taken any step in the proceedings, the impugned order dated 17.11.2020 whereby the learned Civil Court stayed the proceedings in the appellant's suit did not suffer from any legal infirmity; that since the learned Civil Court where the suit was pending was closed due to the COVID-19 pandemic, no proceedings could take place on 31.03.2020, 21.04.2020, 08.05.2020, 10.06.2020 and 13.07.2020; that on 23.07.2020, respondent No.1 filed an application for early hearing wherein it expressed its intention of filing an application under Section 34 of the 1940 Act; that respondent No.1 filed the application under Section 34 of the 1940 Act on 12.08.2020 before the learned Duty Judge; that respondent No.1 did not express its intention to waive its right to seek the proceedings in the suit to be stayed at any stage; that respondent No.1 had never sought an adjournment to file a written statement; and that indeed on 07.02.2020, 19.02.2020 and 12.03.2020, the matter was adjourned with the direction to file a written statement but since the Courts were closed on five subsequent dates fixed by the Reader of the Court, and since on 23.07.2020, respondent No.1 expressed its intention to file an application under Section 34 of the 1940 Act, the learned Civil Court was correct in allowing respondent No.1's application under Section 34 of the 1940 Act.

27. It was further submitted that after filing of the suit, the appellant had issued a notice for an amicable settlement under Article 28.1 of the PCA; that the dispute which the appellant sought to resolve through the said notice was the same as the one agitated by it in the civil suit; that the appellant had taken contradictory positions by filing a civil suit as well as initiating a process under Article 28 of the PCA; and that while deciding this appeal, this Court cannot issue an interim injunction in the appellant's favour since its application for interim injunction has been concurrently dismissed by the learned Courts below, and the appellant has already filed a revision petition before this Court which has not been fixed for hearing as yet. Learned counsel for respondent No.1 prayed for the appeal to be dismissed.

28. I have heard the contentions of the learned counsel for the contesting parties and have perused the record with their able assistance. The facts leading to the filing of the instant appeal are set out in sufficient detail in paragraphs 2 to 21 above and need not be recapitulated.

WHETHER RESPONDENT NO.1 HAD TAKEN 'STEPS IN THE PROCEEDINGS':-

29. I propose to first determine whether respondent No.1 was disentitled from seeking the proceedings in the suit to be stayed on the ground that it had filed the application under Section 34 of the 1940 Act more than six months after the institution of the suit, during which period directions were given on three occasions by the learned Civil Court to respondent No.1 to file a written statement. True, in the case of Infospan (Private) Limited v. Messrs Telecom Foundation (supra), I had the occasion to hold that six adjournments, stretched over a period of six months for the filing of a written statement until the right of the defendant to file a written statement was struck off by the learned Civil Court, manifestly displayed an unequivocal intention of the defendant to proceed with the suit and to give up the right to have the matter disposed of by arbitration. However, the distinguishing feature in the case at hand is that the learned Civil Court where the appellant's suit was pending was closed for a few months due to the COVID-19 pandemic, and the matter had been adjourned in routine by the Reader of the Court on five occasions. The order sheet of the case before the learned Civil Court reveals that the proceedings in the suit were adjourned on 31.03.2020, 21.04.2020, 08.05.2020, 10.06.2020 and 13.07.2020 as the Court was closed due to the COVID-19 pandemic. On 23.07.2020, respondent No.1 filed an application for an early hearing of the suit. In paragraph 6 of the said application, respondent No.1 expressed its intention to file an application under Section 34 of the 1940 Act. On 12.08.2020, (i.e., during the summer vacations), respondent No.1 filed an application under Section 34 of the 1940 Act before the Duty Judge. Bearing in mind these peculiar circumstances, it is my view that the learned Civil Court did not commit any illegality by holding that respondent No.1 had not taken any steps in the proceedings so as to disentitle it from seeking the proceedings in the suit to be stayed.

30. Admittedly, respondent No.1 had not sought an adjournment for the purpose of filing a written statement. The order sheet also shows that when respondent No.1 was directed to file a written statement, the other respondents in the suit were being issued summons / notices in the ordinary and through substituted modes. Since respondent No.1, in its application dated 23.07.2020 for early hearing, expressed its intention to file an application under Section 34 of the 1940 Act, which was in the midst of the COVID-19 pandemic, and at an early enough stage of the suit, it cannot be held that respondent No.1 had displayed an unequivocal intention to proceed with the suit and give up its right to have the disputes with the appellant resolved through the dispute resolution mechanism set out in Article 28 of the PCA. The closure of the Court / absence of the Presiding Officer due to the COVID-19 pandemic was ample justification for the delay in filing the application under Section 34 of the 1940 Act. The filing of the said application was a manifestation of respondent No.1's readiness and willingness to do all things necessary to the proper conduct of arbitration in terms of Article 28 of the PCA. After having the proceedings in the suit stayed, in the event respondent No.1 avoids to do all things necessary to the proper conduct of arbitration, the appellant will be well within its rights to apply for revival of the proceedings in the suit on that ground.

WHETHER RESPONDENT NO.1'S APPLICATION UNDER SECTION 34 OF THE 1940 ACT SEEKING THE PROCEEDINGS IN THE SUIT TO BE STAYED WAS NOT MAINTAINABLE ON THE GROUND THAT ARTICLE 28 OF THE PCA PROVIDED FOR ARBITRATION BETWEEN THE PRESIDENT AND A FOREIGN WIO TO BE IN ACCORDANCE WITH THE ICSID OR ICC RULES:-

31. I now proceed to decide the ground taken by the appellant that the disputes between the appellant (which is a foreign WIO) and respondent No.1 could not be resolved in accordance with the provisions of the 1940 Act, and therefore the application under Section 34 of the said Act was not maintainable.

32. After respondent No.1 made a call for the encashment of the bank guarantee, and after the appellant instituted the suit, the latter set in motion the dispute resolution procedure provided in Article 28.1 of the PCA by issuing a notice dated 14.09.2020 to the Secretary, Ministry of Energy (Petroleum Division) (with a copy to respondent No.1). In the said notice, the appellant named its representatives to conduct negotiations with the representatives of respondent No.1. The appellant had also requested respondent No.1 to nominate its representative to participate in such negotiations. Respondent No.1, vide letter dated 23.10.2020, expressed its willingness to settle the disputes in accordance with the procedure provided in Article 28.1 of the PCA but required the appellant to withdraw the suit and extend the validity of the bank guarantee before any negotiation could take place.

33. The conjoint reading of the appellant's civil suit and its notice dated 14.09.2020 shows that the disputes raised therein stem from respondent No.1's decision not to extend the duration of the License beyond 24.08.2019 and to make a claim against the appellant for the payment of liquidated damages etc. In the suit instituted by the appellant, it has not been pleaded that the suit has been filed in aid of arbitration or for the purpose of only seeking an interim or conservatory measure. As mentioned above, the appellant, in its suit, has also sought a declaration to the effect that it is entitled to conduct exploration and production work at the Karak Block. In the suit instituted by the appellant, it has not been pleaded that the suit has been filed in aid of arbitration or for the purpose of only seeking an interim or conservatory measure. As mentioned above, the appellant, in its suit, has also sought a declaration to the effect that it is entitled to conduct exploration and production work at the Karak Block. Therefore, it is my view that the disputes raised in the said suit as well as in the said notice are inextricably intertwined and cannot be segregated. This being so, the appellant has indeed taken contradictory positions by insisting for its civil suit to proceed while also issuing a notice for amicable settlement as a prelude to arbitration in accordance with Article 28 of the PCA.

34. The power conferred on the Court to grant a stay under Section 34 of the 1940 Act is discretionary and must be exercised judicially. The expression "such authority may make an order staying the proceedings" appearing in Section 34 of the 1940 Act clearly indicates that the Court has the discretion to stay the suit or not. In exercising discretion, the Court has to take into consideration the entire facts and circumstances of the case and the conduct of the parties upto the date of the hearing of the application. Discretion has to be exercised having regard to the peculiar facts in each case. The appellant's contradictory positions in the case at hand disentitled it from discretionary relief. Therefore, it cannot be held that the learned Civil Court, by allowing respondent No.1's application under Section 34 of the 1940 Act, exercised its discretion arbitrarily or unlawfully.

35. Article 28.1 of the PCA provides inter alia for the disputes between inter alia a foreign WIO and the President to be resolved through reference to the International Centre for Settlement of Investment Disputes ("ICSID") established by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965. Article 28.2 of the PCA provides inter alia that in case ICSID fails or refuses to take jurisdiction over such disputes, they shall be settled by Arbitrators under the Rules of Arbitration of the International Chamber of Commerce ("ICC"). Article 28.3 of the PCA provides inter alia that the venue of the arbitration shall be in Pakistan or elsewhere as mutually agreed between the foreign WIO and the President, and if such mutual agreement cannot be reached, the venue shall be decided by ICSID or ICC.

36. The terms of the PCA show that the appellant is a company existing under the laws of Canada having its registered office in Calgary, Alberta. It is an admitted position that the appellant's status is that of a foreign WIO. Indeed Article 28.4 of the PCA provides that "in the event of a dispute between the local working interest owner(s) inter se or between the Local Working Interest Owners and the PRESIDENT, the arbitration shall be conducted in accordance with the Arbitration Act, 1940." It also provides that Article 28 of the PCA. "is only applicable in a case of a dispute between foreign working interest owner(s) inter se or between foreign Working Interest Owners and the PRESIDENT or between foreign Working Interest Owners and Local Working Interest Owners." The dispute raised by the appellant in its suit as well as the notice dated14.09.2020 is a dispute between a foreign WIO and the President acting through respondent No.1. The vital question that needs to be answered is whether arbitration by ICSID or under the ICC Rules would ipso facto preclude respondent No.1 from filing an application to stay the proceedings in the appellant's suit.

37. What respondent No.1 essentially sought by filing an application under Section 34 of the 1940 Act is for the proceedings in the suit instituted by the appellant to be stayed due to the existence of the arbitration clause in the PCA. The disputes between the appellant (which is a foreign WIO) and respondent No.1 arising from and related to the PCA and/or the License are to be resolved not in accordance with the provisions of the 1940 Act but in accordance with the ICSID or the ICC Rules, as the case may be. The arbitration agreement providing for such disputes to be referred to the ICSID or the ICC does not prevent a party to the arbitration agreement from seeking the proceedings before a Court instituted by the other party to the arbitration agreement to be stayed so that the parties are left to resolve the disputes in accordance with the arbitration agreement. The mere fact that the learned Civil Court stayed the proceedings on respondent No.1's application under Section 34 of the 1940 Act does not imply that the arbitration proceedings between the appellant and respondent No.1 would be in accordance with the provisions of the 1940 Act and not the ICSID or the ICC Rules.

38. The present position of the dispute resolution process initiated by the appellant through its notice dated 14.09.2020 for amicable settlement under Article 28.1 of the PCA is that respondent No.1 has through its letter dated 23.10.2020, expressed its willingness to negotiate with the appellant provided the appellant withdraws its civil suit and extends the validity of the bank guarantee. It is an admitted position that the validity of the bank guarantee expired on 23.11.2019 and the same has not been extended as yet. There appears to be little chance of the settlement process to bear any fruit given the fact that the appellant has not satisfied the conditions on which respondent No.1 agreed to negotiate with the appellant. In these circumstances, it remains to be seen whether the appellant takes the next step in the dispute resolution process contemplated by Article 28.1 of the PCA by submitting its disputes with respondent No.1 to ICSID for arbitration. However, presently, the appellant is persisting in its stance that the proceedings in its suit could not have been stayed by the learned Civil Court.

39. If one is to accept the contention of the learned counsel for the appellant that the applicability of the provisions of the 1940 Act to a dispute between the President and a local WIO would, by implication, oust the applicability of the said Act to a dispute between the President and a foreign WIO, this would not denude the learned Civil Court of its power to stay the proceedings in the appellant's suit. It is the substance of the application that has to be seen, and not just its form. The learned Civil Court had ample jurisdiction to treat respondent No.1's application seeking a stay of the proceedings in the appellant's suit as an application under Section 4 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 ("the 2011 Act"), which reads thus:-

"4. Enforcement of arbitration agreements.--(1) A party to an arbitration agreement against whom legal proceedings have been brought in respect of a matter which is covered by the arbitration agreement may, upon notice to the other party to the proceedings, apply to the court in which the proceedings have been brought to stay the proceedings insofar as they concern that matter.

(2) On an application under subsection (1), the court shall refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

(Emphasis added)

40. There is no denying the fact that the learned Civil Court had jurisdiction under Section 4 of the 2011 Act to stay the proceedings in the appellant's suit on the basis of the arbitration clause in the PCA. As can be seen, unlike Section 34 of the 1940 Act, the power of the Court to stay the proceedings under Section 4 of the 2011 Act is not discretionary. Where it is not certain that the ensuing arbitration would be foreign or domestic arbitration, and legal proceedings have been brought by a party to an arbitration agreement, a Court can even treat an application seeking a stay of the legal proceedings as an application under Section 151, C.P.C. Reference in this regard may be made to the following case law:-

(i) In the case of Mst. Safia Bibi v. Mst. Aisha Bibi (1982 SCMR 494), it was held that "mention of a wrong provision of law in an application would not deprive the Court of the power and jurisdiction if otherwise the same is available under the law."

(ii) In the case of Mst. Baigan v. Abdul Hakeem (1982 SCMR 673), it was held that "mentioning of a wrong provision in a pleading (which otherwise is flawless) would not, normally render it invalid."

(iii) In the case of Rauf B. Kadri v. State Bank of Pakistan (PLD 2002 SC 1111), it was held inter alia that "mere wrong citation of a provision of law in the order would not per se vitiate the judgment."

(iv) In the case of P.Q. Chemicals v. A.W. Brothers (2005 CLC 169), the Division Bench of the High Court of Sindh held that "mere reference to a wrong provision of law is inconsequential and the Court is always expected to consider the substance rather than mere form of the application."

(v) In the case of Muhammad Saleem Butt v. Trading Corporation of Pakistan (1986 CLC 254), the Hon'ble High Court of Sindh held as follows:-

"Since in the application containing objections, the prayer is to remit, refer or set aside the award, the objections are obviously, either under section 16 or 30 of the Act, although they are made under section 14 of the Act which section contains no provisions for remission or reference of the award or setting aside the same. Accordingly, I treat them as such for Court always look to the substance of the matter rather than to the form or title of the pleadings, and then applies the law."

(vi) Recently, in the case of Walia Steel Industries PLC v. SAGA Shipping and Trading Corporation Ltd. (PLD 2019 Sindh 22), it was held as follows:-

"We are not unaware that as long as the power to hear and decide a matter vests in a Court, mere reference to a wrong provision of law, for invocation of that power is not a bar to the exercise of that power. It needs no mention that all rules of procedure framed for regulating the proceedings before a Court or Tribunal are meant for advancing the course of justice. Therefore, procedural laws and rules cannot be used as a means for denying the relief to an aggrieved party on ground of technical non-observance of these rules or procedural laws. Keeping these principles in view the Courts have always liberally allowed conversion of proceedings of one kind into another and misdescription in the title of proceedings or mention of a wrong provision of law have never been considered fatal to the grant of relief if it is otherwise available under the law to an aggrieved party. It cannot be denied that mention of a wrong provision of law in an application would not deprive the Court of the power and jurisdiction if otherwise the same is available under the law."

(vii) In the case of Nargis Naureen v. Judge Family Court, Multan (PLD 2018 Lahore 735), it was held as follows:-

"[I]t is by now settled that a party could not be non-suited merely because a wrong provision of law has been cited at the Bar. Reliance is placed on The State through Advocate General, Sindh v. Zahid Ali (2007 SCMR 1017). Besides mere wrong citing or relying on wrong provision of law would not be of any consequence for the court to assume jurisdiction, provided the court otherwise had jurisdiction under the Constitution, statute or any other provision of law to pass the order. Reliance is placed on Olas Khan and others v. Chairman NAB through Chairman and others (PLD 2018 SC 40)."

(viii) In the case of Osman Khan v. Aisha Naz (2010 CLC 475), the Hon'ble Peshawar High Court held as follows:-

"When decision on merits is the most cherished goal of law and Courts administering justice are not slaves of technicalities, then mere mention of a wrong provision of law should not be a hurdle in doing justice between the parties and particularly when one is otherwise found entitled to it."

41. As regards the appellant's application for interim injunction seeking to restrain the respondents from encashing the bank guarantee or to require the respondents to deposit the encashed amount in the Court, suffice it to say that the appellant's application for interim injunction has already been concurrently dismissed by the learned Courts below. A revision petition against the orders dismissing the appellant's said application has been filed before this Court. The said petition is to be decided on its own merits. The orders passed by the learned Courts below dismissing the appellant's application for interim injunction cannot be collaterally challenged in this appeal.

42. In view of the above, I do not find any merit in this appeal, which is accordingly dismissed with no order as to costs.

KMZ/23/Isl. Appeal dismissed.