Law:

Section:

(a) Contract Act (IX of 1872)--S. 126---Arbitration Act (X of 1940), S.34---Stay of proceedings---Bank guarantee submitted by the party for due performance of the contract was an absolute and unconditional Bank guarantee of which encashment could not be stayed by the court which became functus officio by staying the proceeding of the suit by invoking the provisions of S.34 of Arbitration Act, 1940. Orix Leasing Pak Ltd. v. Zahid Industries and others NLR 1992 CLJ 693; Arbab Abdul Qadir v. Mst. Bibi Fatima 1984 CLC 546; Messrs Commodities Trading International Corporation v. Trading Corporation of Pakistan Ltd. and another 1987 CLC 2063; Fareed Yaqub Ali v. Haji Muhammad Tahir, Haji Muhammad Tahir v. Fareed Yaqub PLD 1989 Quetta 16 and Ch. Abdur Rauf v. Mrs. Zubeda Kaleem and others 2001 CLC 664 distinguished. Shipyard K. Damen International v. Karachi Shipyard and Engineering Works Ltd. PLD 2003 SC 191 and National Construction Company Limited v. Aiwan-e-Iqbal PLD 1994 SC 311 ref. (b) Contract Act (IX of 1872)--- ----S. 62---Arbitration Act (X of 1940), S.41---Notice for recission of contract was an independent act undertaken by the party and was subsequent to the stay of the proceedings---Issuance of notice could have given rise to an independent cause of action and party might have opted to file fresh proceedings for assailing the notice which was not subject matter of main suit and court having become functus officio after stay of proceedings could not entertain the application moved under S.41 of the Arbitration Act, 1940 to issue interim injunction. ORDER NASIR SAEED SHEIKH, J.---A suit was instituted by the respondent in respect of the\contract entered between the parties wherein there was an arbitration clause. The petitioner who is the defendant of the suit moved an application under section 34 of the Arbitration Act 1940 before the learned Civil Judge Lahore where the suit instituted by the respondent was pending. This application was accepted by the learned Civil Judge vide order dated 19-4-2012 and the proceedings of the suit were stayed and the file was consigned to the record and the respondent was directed by the learned Civil Judge to have…

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