DB SHAPRIYA CO LTD VS YARA T LTD MISC

Page 1 of 15 IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM MISC COMMERCIAL CASE NO 55 OF 2016 (From original Commercial Case No 37 of 2016 BETWEEN DB SHAPRIYA CO LIMITED------------------------------------ APPLICANT VERSUS YARA TANZANIA LIMITED-------------------------------- RESPONDENT RULING SONGORO, J This is a ruling which emanates from Applicant and Respondent arguments following the Ruling of this court dated 31/3/2016 which ordered stay of the Application for an order of temporary injunction for 30 days to enables the parties to do all things necessary for proper conduct of arbitration. The Court Order took into account the fact that the Plaintiff's Commercial Case No. 37 of 2016 and Misc Commercial Application No. 55 of 2016 were based on a contract which has arbitration clause. Therefore relying on Arbitration clause and Section 6 of Arbitration Act, Cap 15 the Court ordered stay of the hearing of Application for Page 2 of 15 30 days to enable the parties to initiate the processes of pursuing arbitration. Indeed the Order of this court appears at page 6 of the Ruling dated 31/3/2016, was couched on the following words; "Now going by the wordings of Section 6 of Cap 15 when the court is satisfied that there is submission to go to Arbitration it may order stay of proceedings. The word "proceedings" used in the cited section 6 of Cap 15 in my view means and includes the Application. Bearing in mind the Respondent Counsel has indicated that, in the contract there is submission clause to go to arbitration, and expressed Respondent's willingness to go for arbitration, I find Section 6 of the Arbitration Act, Cap 15 [R.E.2002] permit the court to allow the parties to pursue the Arbitration first. In deed Section 6 of Cap 15 states that, Where a party to a submission to which this Part applies, or a person claiming under him, commences a legal proceedings against any other party to the submission or any person claiming under him in respect of any matter agreed to be referred, a party to the legal proceedings may, at any time after appearance and before filing a written statement or taking any other steps in the proceedings apply to the court to stay the proceedings; and the court, if satisfied that, there is no sufficient reason why the matter should not be referred in accordance with the submission and that, the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary for the proper conduct of the arbitration, may make an order staying the proceedings. So bearing in mind that, the parties have submitted to arbitration as shown in Clauses 20. 5 and 20.6 of Annexure DBS-1 and Respondent' s Counsel has expressed Respondent's willingness to go to Arbitration, I hereby by virtue of Section 6 of the Arbitration Act Cap 15 order stay of the Application for 30 days from today to enables the parties to do all things necessary for proper conduct of arbitration. Meanwhile, I abstain to make any order of injunction, pending the outcome of party's process of going to Arbitration" Page 3 of 15 The Ruling was delivered in the presence of Mr. Mrutu, Learned Advocate for the Applicant, and Mr. Mtafya, Learned Advocate for the Respondent. Therefore on the strength of the above -mentioned court order, the Proceedings of Misc Commercial Application No. 55 of 2016 were stayed for 30 days with the purposes of enabling the parties to do all things necessary for proper conduct of arbitration. Then after the expiry of 30 days, the Proceedings again resumed before the Court on the 2nd May, 2016 to hear reports on whether or not parties have initiated the process of going to Arbitration. In this respect the court was expecting to hear from parties, if they have initiated arbitration processes in accordance with the laid down procedure or they have filed a Petition to go for arbitration; or measures have been taken to necessitate an order for further stay of proceedings, pending determination of disputes by the Arbitrator. But on the 2nd May 2016 when the court resume it happened from arguments and reports from both parties that all arguments and ambition and undertaking of going to arbitration as it was agreed in the Contract annexed to the Application for temporary injunction, and even to the Plaint were again raised but in different style and Page 4 of 15 tone. The tone from both parties as I am about to explain is that "Parties" are not willing to go for arbitration. On his part Mr. Ayubu Mtafya, Learned Advocate for the Respondent/Defendant, retreated his previous stand that since the suit is based on contract which has arbitration clause, the court is not proper forum for adjudication of the present dispute. Then relying on the Ruling of this court which allowed them to go to arbitration, he insisted that the dispute should first be referred to Arbitration. Mr. Mtafya then turned to the Plaintiff, and said that since is the one who was aggrieved by what took place in the contract, and instituted the suit, then is the one who is under contractual obligation to refer the dispute to arbitration. The Respondent counsel then informed the court that on their part they have written two letters to the Plaintiff reminding him to refer the matter to international arbitration. The Respondent then firmly reported to the court that, it's the Plaintiff, who was aggrieved, and they have notified him to take necessary- steps of referring the matter to Arbitration and they are now ready to hear from the Plaintiff if he has taken necessary steps to go to Arbitration. Page 5 of 15 The Respondent/Defendant's Counsel then indicated that so far the Defendant does not see any dispute which he needs to refer it arbitration. The Counsel then said even if he assumes the disputes are the one which are in the Plaint, therefore it will be strange for Respondent/Defendant to refer a dispute to the Arbitrator which he is being sued. It was the views of the Respondent/ Defendant's Counsel that the big issue for consideration, is since they have no dispute at hand to refer to the Arbitrator the question remains is who between the Applicant and Respondent is supposed to initiate the Arbitration. The Counsel then submitted that if the Applicant/Plaintiff has not compiled with the court order of referring the dispute to Arbitration, the Defendant prayed that the suit be struck out for failure on the part of the Plaintiff to comply with the court order. In response to the Defendant's submission, Mr Roman Learned Advocate made extensive submissions on behalf of the Plaintiff. On Arbitration, the Applicant /Plaintiff's Counsel admitted that it is true the Contract has an arbitration clause, and Court ordered a stay of 30 days to allow the parties to refer the matter to Arbitration but the suit and the application for temporary injunctions was filed under Page 6 of 15 the "Certificate of Urgency" therefore. was supposed to be dealt and disposed with urgency it deserve. The Counsel then argued that instead of initiating arbitration process, the Defendant has continuing fraudulently receiving monies in a form of Advance Payment Guarantee No 01/gtee/0127 from M/s Barclays Bank (T) Limited and Advance Payment on the Performance Guarantee No. HKDVAV7028378001 from M/S Commerzbank of Hamburg Germany which are subject matter of the suit and application for temporary injunction. Next, the Counsel argued that since it is the Respondent/Defendant and his Counsel who in their appearance to this court initiated to go to arbitration, there are the ones who are duty bound to refer the matter to arbitration. On Jurisdiction of the Court, Mr. Roman insisted that it is not ousted by the Arbitration clause. He then indicted that with the language used in court, it appear that the Respondent/Defendant are not willing to start, or initiate arbitration process and even are not even willing to pursue the arbitration-. Mr. Roman then vividly pointed out to the Court that the Applicant/ Plaintiff will not start the Arbitration because it is the Respondent/ Defendant who applied for it, and there are not even willing to go to Arbitration. Page 7 of 15 Also, Mr Kilindu Learned Advocate for the Applicant/ Plaintiff very much supported submission of Mr. Roman by clarifying the Plaintiff applied for an ex-parte injunction was denied, and Respondent/Defendant moved the court to go for arbitration are now saying they don't want to go to arbitration. The Counsel then explained that the Defendant were even given order to go to arbitration, and has refused to go. Next the Counsel contested that the Defendant's action of refusing to go to arbitration frustrates the resolution of Plaintiff's disputes which has also anomaly in banking system. Mr. Kilindu then prayed to the court that the suit should now proceeds to its finality notwithstanding the fact that there is arbitration clause. The Court has considered parties report on going to Arbitration and submissions from both parties in line with its previous order and finds there two questions which need to be addressed. The first one is who between the Plaintiff and Defendant was under obligation to refer the dispute to the Arbitration. Regarding o point on who was under the legal obligation to refer the dispute to arbitration, I noted from submissions from both parties that there was a tug of war between the parties. The Applicant/ Plaintiff was contesting that it is the Respondent/ Defendant who applied to the court to refer the matter to Arbitration while the Defendant has Page 8 of 15 insisted that the dispute belonged to the Plaintiff, and for that reason is the one who has obligation to initiate the process of arbitration. I have carefully considered arguments from both sides and find clause No. 20.5 of the Contract Annexure DBS -1 and it state in black and white that it is the "Parties" who shall attempt arbitration. Indeed the second sentence of clause 20.5 states and I quote; "Parties shall attempt to settle the dispute amicably before the commencement of arbitration". Going by the actual words used in the Arbitration clause it is obvious the contractual obligation to refer the dispute to arbitration is a joint contractual obligation and none of the parties is above the other as far as pursuing arbitration is concerned. It seems to me that once the court has ordered a stay a proceedings and proceedings are stayed under Section 6 of the Arbitration Act Cap 15 to allows Parties to initiate Arbitration as it was stated by order of this court the work now turn to both "Parties" to do all things" necessary for proper conduct of arbitration and the Order was not aimed-to one of the parties. It follows therefore that "stay of proceedings" may be initiated by one of the Party; but Arbitration initiatives must be taken by "Parties" in the Arbitration. Page 9 of 15 The court's finding that the obligation of initiating arbitration process is under the shoulders of both "Parties" is in line with Arbitration Clause 20.5 of Annexure DBS -1 to the Applicant Application. Further, the court find that both " Parties" are under obligation to initiate Arbitration was even re-stated and emphasized in Civil Appeal No 115 of 2005 between Tanzania Motor Services Ltd and Another and Mehar Singh t/a Thaker Singh CAT Dodoma Registry where the Court of Appeal addressed the issue of whether or not the Arbitration Act compel, the Plaintiff who instituted the suit or Defendant who raised an objection that the contract has arbitration clause and the court quoting the decision in the case of Heyman v. Darwins Ltd. (1942) AC 356 at page 375 states as follows; ...... the true nature and function of an arbitration clause in a contract. It is quite distinct from other clauses. The other clauses set out the obligations which the parties undertake towards each other but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that if any dispute arises with regard to the obligation which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. So going the words from the above cited Court Appeal decision which reads that Arbitration clause does not impose on one of the parties an Page 10 of 15 obligation in favour of the other like that of initiating arbitration process , plus the order of this court which requested the parties to initiate process of arbitration the court finds and decide the Respondent/ Defendant's assertion that it is the Plaintiff who was supposed to initiate the arbitration process, because is the one who refer some of dispute to this court rather than referring to the Arbitrator or subjecting them to Arbitration is not proper and quite misplaced for reasons that is not supported by any of clauses of the Contract - Annexure DBS -1 to Applicant Application, and even Clause 20.5 which requires parties to refer the dispute to Arbitration. Likewise the argument is not supported by the provisions of the Arbitration Act Cap 15. Section 6 of the Arbitration Act Cap 15, guides the court in ordering stay of the proceedings which includes an application like the present one or the suit. But in the Act, the Court is not given powers to determine, or to select, or pick who between the parties is under obligation to refer the dispute to arbitration. That is the reason behind the Order of this court dated 31st March, 2016 was addressed to the "Parties to take initiative of pursuing arbitration. Likewise the Plaintiff' s assertion that it is the Defendant who was under legal obligation to initiate or to refer the dispute to Arbitrator because is the one who moved the court to order stay is not supported by any of the clauses of the Contract - Annexure DBS -1 to Applicant Page 11 of 15 Application, even Clause 20.5 which requires parties to refer the dispute to Arbitration. Likewise the Plaintiff argument is not supported by the provisions of the Arbitration Act Cap 15. So to conclude and clarify on the issue of whom between the Plaintiff and Defendant had an obligation of initiating Arbitration Process before and even after the Court order the court finds as explained above, the answer is both Parties are under joint obligation to initiate and pursue arbitration process. None of the parties may shift any obligation stated in the Arbitration clause to the other. Bearing mind that the Court offered 30 days to both parties, and each party has explained to the Court that he did not take any initiative to initiate arbitration process, because was thinking that it is responsibility of the other, and then it is obvious the initiative was not taken. To conclude on the Applicant and Respondents points and arguments on who was supposed to refer a dispute to Arbitration, the Court decides it was a joint responsibility of both parties. Both parties they have return to the court with answers that no initiative has been taken and they are not willing to go to Arbitration. The second legal point for consideration from arguments of both parties is in view of court order of staying the proceedings, which parties have reported and submitted that are not going to Arbitration Page 12 of 15 what is the fate of the stayed proceedings that they are not going to arbitration. In addressing the above, the court finds its order, that the proceedings including Inter-Parties application for temporary injunction were stayed for 30 days effective from 31/3/2016. So by casual counting 30 period of moratorium of court proceedings ended on or about 30/4/2016. From the day, of 31/4/2016, the order of stay of proceedings elapsed, there has been no application or request to extend the court order for stay of proceedings from either party, and as it was reported from both parties, there is no initiatives which enables the parties to go to Arbitration. In view of the fact that the 30 days order for stay of proceedings has elapsed and there has been no extension, it obvious now the court proceedings including the Inter-Parties Application for temporary injunction has resumed to their finality. Regarding Respondent's argument that since the court ordered stay proceedings, and allowed the parties to go for arbitration the court is " functus official" to hear and determine the Application for temporary injunction is miss-placed for reasons that as was stated in the case of Moderate Versus Kenya Commercial Bank and others Page 13 of 15 [20021 2 EA 194 the court is functus official only when it makes an Order which is final and binding upon the parties. But as it can be seen from the order of this court dated 31/3/2016, that there was an order to stay proceedings, and hearing of the Application for temporary injunction for 30 days. The legitimate question to be asked is whether an order staying proceedings for 30 days may be classified as final order of the court in the Application for an order of temporary injunction or a pending suit. It seems to me the answer is obvious that an order for stay of the application for 30 day or the suit may not be a final order in application for temporary injunction as Mr. Mtafya seems to suggest. So the Respondent Counsel argument that the court is functus officious also fails. Also, in the Applicant submission, there were concerned that the Application was under a certificate of urgency, but the Respondent instead of.initiating the Arbitration fraudulently collected the monies from the two banks. The Court relying on its record found that the matter was treated with urgency it deserved and in the sense the Application was filed Page 14 of 15 on the 29th March, 2016 and on the same day of 29/3/2016 Applicant was heard on Ex- Parte Application. The Ruling of Ex Parte Application was delivered on the same and is known to the Applicant. But the Court did not grant an order of injunction or stay or any order of maintaining of status quo on reasons that there was an arbitration clause on the contract which supported the application was touching the capacity of this court to deal with the Application, which previously parties wished to refer their dispute to arbitration. In view of the court record there was attention, and urgency on the part of the court, in dealing with application. On other concerned on what took place between the Applicant and Respondent outside the court premises and at the two banks , the court finds those issues were prematurely raised by the parties and possibly they may be dealt at the appropriate, and opportune time. In view of the above, and that fact that parties are no longer interested to go for arbitration as per their contract and arbitration clause, the Court finds, that it has no reason to stay the hearing of the Application for temporary injunction and the main suit and it orders that the hearing of the Application is hereby fixed on the 20/5/2016 at 9.00am Dated at Dar es Salaam this 19th day of May, 2016 Page 15 of 15 H.T.SONGORO JUDGE Delivered at Dar es Salaam this 19th of May, 2016 H.T.SONGORO JUDGE The Ruling was delivered in the presence of Mr. Roman, Learned Advocate for the Applicant and Mr. Mtafya, Learned Advocate for the Respondent.