livelawpk.com - The Exclusive Jurisdiction Clauses in the Agreements are bin

The Exclusive Jurisdiction Clauses in the Agreements are binding upon the parties to suit --- Lahore High Court, Lahore

2 months, 2 weeks
71

The Exclusive Jurisdiction Clauses in the Agreements are binding upon the parties to suit --- Lahore High Court, Lahore

Islamabad 05-10-2024: The Lahore High Court, Rawalpindi Bench, has dismissed a civil suit filed by Sadiq Poultry Farms (Private) Limited against First Habib Modaraba, citing lack of territorial jurisdiction. The case, Civil Original Suit No. 06 of 2023, was presided over by Mr. Justice Jawad Hassan, who ruled that the plaint must be returned and filed in a Court of competent jurisdiction in Karachi as stipulated by the exclusive jurisdiction clauses in the contractual agreements between the parties.

Sadiq Poultry Farms and its co-plaintiffs initiated the suit under Section 9 of the Financial Institution (Recovery of Finances) Ordinance, 2001, seeking recovery of Rs. 285 million along with up-to-date profit from the defendant due to non-fulfillment of financial obligations and breach of sanctioned finance facilities. In response, the defendant, First Habib Modaraba, contested the maintainability of the suit by filing a PLA under Section 10 of the Ordinance, arguing that the case should be heard in Karachi Courts as per Clause 12 of the Musharakah Agreement dated 27th May 2022.

During the proceedings, the defendant’s counsel, Ms. Samia Faiz Durrani, ASC, emphasized that the agreements between the parties included exclusive jurisdiction clauses, conferring jurisdiction solely upon the Karachi Courts. She pointed out that multiple agreements, including the Diminishing Musharakah Agreement, Monthly Payment Agreement, and other related finance agreements, were executed in Karachi and contained provisions that disputes arising out of these agreements would be adjudicated in Karachi.

The plaintiffs’ counsel argued that the agreements were signed at Rawalpindi and that the cause of action arose within the jurisdiction of the Lahore High Court, Rawalpindi Bench. However, after detailed arguments and examination of the agreements, the Court concluded that the jurisdiction clauses were clear and unambiguous, leaving no room for interpretation.

Mr. Justice Jawad Hassan referred to several landmark decisions of the Supreme Court of Pakistan to support the enforceability of exclusive jurisdiction clauses in contractual agreements:

1. Government of Sindh Through Secretary Education and Literacy Department vs. Nizakat Ali (2011 SCMR 592) Held that a Court must ascertain its jurisdiction before proceeding to adjudicate any matter.

2. Fauji Foundation vs. Shamimur Rehman (PLD 1983 SC 457) Reinforced the principle that jurisdiction cannot be vested in a Court merely by the consent of the parties.

3. Eden Builders (Pvt.) Limited vs. Muhammad Aslam (2022 SCMR 2044) Upheld the validity of jurisdiction clauses as long as they do not contravene statutory provisions or public policy.

In its final ruling, the Court found that the exclusive jurisdiction clauses in the agreements were binding upon the parties. Citing the case law State Life Insurance Corporation vs. Rana Muhammad Saleem (1987 SCMR 393) and Messrs Kadir Motors vs. Messrs National Motors (1992 SCMR 1174), the Court reiterated that the agreed forum must be honored, and the matter should be adjudicated in the Court of competent jurisdiction.

As a result, the Court returned the plaint under Order VII Rule 10 of the Code of Civil Procedure, 1908, for presentation before a Court of competent jurisdiction in Karachi, thereby dismissing the suit from its docket.

This ruling underscores the sanctity of jurisdiction clauses in commercial and financial contracts, reaffirming that Courts must respect the mutually agreed terms of the parties, provided they do not infringe statutory rights or public policy. The judgment serves as a reminder to litigants to carefully consider jurisdictional provisions before initiating legal proceedings, as deviation from these clauses can lead to dismissal on technical grounds.

The case is expected to be refiled by the plaintiffs in the appropriate Court in Karachi, where the merits of the financial claims will be adjudicated.