PLJ 2004 Lahore 722
Present;
MUHAMMAD GHANI, J.
JAVAID
IQBAL-Petitioner
versus
PAKISTAN AGRICULTURAL STORAGE & SERVICES
CORPORATION
LIMITED, LAHORE
through its Managing Director-Respondent
W.P. No. 13372 of 2003, decided on
23.12.2003.
Contract Act, 1872 (IX of 1872)--
—-S. 55-Constitution of Pakistan, 1973 Art.
199-Agricultural Storage and
Services
Corporation Ltd. (respondent-PASSCO) entered into agreement
with M/s Exporters (Regd.) Birdwood for sale of
wheat for export
through sea route-Petitioner
could not lift wheat without stipulated period—Intervenors to save agreement
hailed and agreement was
amended—Quantity was reduced with 2%
penalty—Early irrevocable special power of attorney was cancelled-Suit for
declaration was filed-
Interim injunction
was granted-compromise between the parties-Suit
decreed in terms of
compromise and given effect by respondent-Request
for further time by petitioner-Petition made all arrangements for export
of
wheat to foreign countries but respondents declined to accept export
documents on the ground that period of three
calender months-Held:
Time was not essence of contract and for this
reason impugned action of
PASSCO could not
be sustained in law-Further
Held:
That petitioner
shall be entitled to a period of three calender
months from the date of this
judgment to export wheat stock purchased
from PASSCO and to submit within that period of three months export documents
which would be
considered by respondent.
[Pp. 731,
750, 751 & 752] A, B, C
&
D
Mr. M.A. Karim Malik,
Advocate for Petitioner.
Kh. Muhammad Akram,
Advocate for
Respondent No. 1.
Mian Khalid Jamil,
Advocate for Respondent No. 2,
Dates of hearing:
23.10.2003, 5 and 20.11.2003.
judgment
On 31st of March,
2003, Pakistan Agricultural Storage and Services
Corporation Limited (herein mentioned
as respondent-PASSCO) entered
into an agreement with M/s The Exporters (Regd.),
Birdwood Road, Lahore
for sale of 25,000 metric tons of FAQ wheat (crop 2002)
"for export through
Sea Route." Since in order to resolve the present
controversy, extensive
reference
will have to be made to the terms of the Agreement,'therefore, the
same is reproduced,-for facility of reference:-
"AGREEMENT FOR SALE OF WHEAT FOR EXPORT
1.
Whereas Pakistan Agricultural Storage & Services Corporation
Ltd. (PASSCO) desired to sell wheat (hereinafter called the FIRST
PARTY)
and M/s The Exporters (Regd.) Bird Wood Road, Lawrence
Road,
Lahore (hereinafter called the SECOND PARTY) desires to
buy
25,000 M/Tons of FAQ wheat (crop 2002') ex-PASSCO storage
points for export through sea
route.
2.
Whereas the parties through their authorized agents
respectively
have
agreed to the
terms and
conditions given below for the
performances
of this agreement and in token hereof affix signatures.
3.
This agreement shall come into force at once i.e. on 31 March
2003 and shall remain valid for 60
days i.e. upto 30 May 2003 subject
to the conditions as per succeeding paras.
4.
The basic price of wheat stocks in fixed @ Rs. 8,625/- per M/Ton
ex-storage points. Second party will deposit @ Rs. 6,538/- per ton in
cash for
stock
cost for
every tranche
and balance amount of
Rs. 2,087/- per ton a refund claimed
by the Second Party on account
of upgradation/export expenses shall
be furnished by the Second
Party in the form of bank guarantee
for the entire contracted
quantity of wheat stocks. (Not more
than two instruments). Bank
Guarantee shall be returned by the
First Party to the Second Party
soon on submission of valid
prescribed export documents by the
Second Party claiming the refund and
after realizing any recovery
from the Second Party due from them on
account of lifting of wheat
at cascading refund rate or any other penalty etc.
5.
Delivery/lifting order will be issued by the First Party (Field
Wing) on confirmation of the deposit
of stock cost @ Rs. 8,625/- per
•M/Ton in PASSCO's bank by the Second Party.
6.
Delivery/lifting period shall be 60 days from the date of signing of
the contract. Second Party shall be
entitled for the refund on account
of upgradation/export expenses @ Rs.
2,087/- per M/Ton for the
quantity of wheat lifted.
7.
The Second Party can take delivery in lots of 500 M/Tons
(minimum) each either on upfront
payment in'cash at the rate of Rs.
8,625/- per M/Ton
OR
Provide bank guarantee relating to refund
amount on account of
upgradation/export expenses @ Rs. 2,087/- per M/Ton for
the
entire
contracted quantity of wheat and take delivery in lots of 500 M/Ton (Min) each
by depositing upfront the cost of wheat stock @ Rs. 6,538/- per M/Ton.
8.
Sale of the Goods will mean and imply taking proforma
invoice
and
actual delivery of the goods by the Second Party in parts
(Tranches
of at least 500 M/Tons of wheat) or whole contracted
quantity/shipment
load.
9.
The First Party shall ensure availability of FAQ wheat
crop 2002,
as per
attached specifications at Anx-A, duly bagged in jute bags of
sound
condition at the mutually agreed/designated PASSCO storage
points.
As far as possible,
however, the Second
Party may be
facilitated
in this regard.
10.
Loading charges will be borne by the Second Party.
11.
The documents of export of wheat and/or wheat products i.e.
Atta, Mai da, Fine, Bran etc. have to
be submitted within 3 calendar
months after completion of the lifting as per clause-3.
Export
quantity
of bi-products/milling products in lieu of wheat shall
correspond to established rate of recovery
from grains thereof and
Second Party can
export wheat bi-products accordingly.
12.
The Second Party shall provide Bank Guarantee as per the
specimen
enclosed
vide
Annex
"B"
for
the
amount
of
upgradation/export expenses per M. Ton for
the full contracted
quantity to the first party, release
of which shall be arranged upon
submission of valid export documents duly, verified by the bank i.e.
(a) Form-E (b) shipping bill/bill of export
(c) B/L supported with
MR/TR as applicable (d) Copy of
Commercial Invoice (e) Copy of LC
for export by sea route (f) Sale
proceeds realization certificate issued
by the bank (g)
Customs Declaration or any other documents
PASSCO may solicit in support of
export etc.
13.
If the Second Party fails to export and submit the
prescribed
approved
export documents within the stipulated period, their Bank
Guarantee
will be encashed and forfeited in favour of PASSCO.
14.
The
Second Party shall complete the lifting of the total quantity
of wheat within 60 days, failing which, the provisions of Clauses 16
& 17 as the case may be, shall operate.
15.
The Second Party has provided Performance Money in the
shape
of Bank Draft at the time of the signing of agreement @ 1% of
the cost of quantity
contracted in favour of the First Party. The same
shall be released upon successful completion
of the contract by the
Second Party.
16.
In case the Second Party fails to take delivery of the
total
quantity
within the stipulated period, the First Party will be entitled
to
impose a penalty at the rate of 1% of the value of undelivered
quantity
for the first 10 days and at the rate of 2% for the next 10
days.
Delayed lifting of wheat by the Second Party shall however not
affect
the cut off date of submission of valid export documents
claiming
refund amount as per Clause-11.
17.
If the Second Party defaults but deposits in lump sum the cost of
un-lifted/un-delivered quantity, then the penalty
vide
Clause-16
will
not be imposed and extension of 20 days may
be granted.
18.
Performance
Bond/Security
of Second
Party
shall
stand
forfeited in favour of the First
Party on non-performance of the
contract/agreement by the
Second Party within the
stipulated
period. First Party then have the
option, if deemed necessary, to
rescind the agreement, arrange the
sale/disposal Of the wheat stock
elsewhere and claim damages from the
Second Party.
19.
First Party may facilitate the Second Party in the performance
of the agreement as far as possible,
however, without .compromising
PASSCO's interest. Thus any provisions may be added^subsequently
with mutual consent of the parties in the agreement
ensuring such
facilitation and for
avoiding bottlenecks.
20. Regarding the issue of
jurisdiction in case of litigation between
parties hereto, the Court at Lahore shall have
the exclusive
jurisdiction to entertain such dispute.
Sd/-
Sd/-
First Party.
Second Party.
Col. (R) Shuja Ullah
(Khalid Jamil)
PASSCO HQ, Lahore
For M/s The Exporters
(Regd.) LHR.
Sd/-
Ijaz Ahmed
Khan."
2. It appears, Mian
Khalid Jamil, representing M/s The Exporters
(Regd.) being short of funds could not
lift the wheat as per Agreement,
within the stipulated period, which expired
on 30th May, 2003. However, he
had the blessings of PASSCO, since it admittedly elected
not to put an end to
the Agreement soon after 30th of May 2003 and in order
to save his contract,
Mian Khalid Jamil entered into an agreement, dated the
12th of June 2003
with Javed Iqbal (petitioner herein) and Muhammad Abrar, for lifting of
wheat stock of
PASSCO, at a mutually agreed rate of Rs. 7,600/- per M/Ton.. As the last date
for lifting of wheat had already expired on 30th of May 2003,
the above-named
intervenors agreed to pay to PASSCO price of wheat at the
rate of Rs. 8,797.50
per M/Ton, which amount was inclusive of 2% late
delivery charges, levied in terms of
afore-quoted Clause 16 of the Agreement.
The excess amount payable by the petitioner
was to be refunded to him by
Mian Khalid Jamil, who had also executed an irrevocable
Special Power-of-
Attorney in
favour of the above-named Muhammad Abrar for receiving the
wheat from respondent-PASSCO. Moreover, by means of
an amendment
dated the 24th of June
2003, introduced in the original Agreement, at the
request, of Mian Khalid Jamil, PASSCO had reduced
the quantity of wheat
from 25,000 M/Tons to 15,000 M/Tons. Whereas the
remaining terms of the
original Agreement
were to remain intact, the amendment introduced
provided that "M/s The Exporters shall remit the cost of the total/balance
quantity of wheat upto 15,000 M/Tons
(as the case may be) in cash @
Rs.
8,6257- per M/Ton alongwith 2% penalty and shall be bound to take
delivery of stock/lifting from the designated
PASSCO Storage points by 30th
June 2003." Needless to point out that
the period of'60 days, as originally
stipulated
in the Agreement, dated the 31st of March 2003 for lifting of
entire agreed wheat stock had expired on 30th of
May, and, as per Clause 17,
only a
grace period of 20 days could be given. Moreover,-PASSCO did not opt
to exercise its power of forfeiture as contained
in Clause 18 of the
Agreement. Be that as it may, M/s The Exporters did
not lift the wheat stock
and, it appears,
the petitioner was allow i y PASSCO, of course with the
consent of the original purchaser, to liii the
wheat. The petitioner then
deposited
with PASSCO the price of the wheat lifted by him, including 2%
penalty (liquidated damages) in cash. When the
petitioner had already
deposited the amount as afore-mentioned, and had
also lifted some quantity of wheat, Mian Khalid Jamil cancelled the irrevocable
Special Power-of
Attorney earlier executed
in favour of Muhammad Abrar. This gave rise to a
dispute between the
parties and consequently Javed Iqbal (petitioner herein)
and Muhammad Abrar filed on 28.6.2003 a suit for
declaration and
injunction,
impleading M/s The Exporters (Retd.), Mian Khalid Jamil and PASSCO,
respectively as Defendants 1, 2 and 3. Some of the averments in the plaint,
relevant for the present purposes, were as follows:-
"Since the Defendants Nos. 1 and 2 did
not have the financial resources, therefore, in order to save the contract with
Defendant
No. 3, the
Defendant No. 1 through Defendant No. 2 entered into an
agreement dated 12.6.2003 with the Plaintiff No. 1 for purchase of
the above stated quantity of wheat at the rate of
Rs. 7600/- per Metric Ton in terms of the agreement with the plaintiff. It was
agreed
between the parties that the party of the second party will be
able to lift the wheat from the office of the
Defendant No. 3 on behalf
of the
Defendants Nos. 1 and 2 after paying Rs. 8797/- per M.T
which included 2% late delivery charges which
stood levied in terms
of the agreement of the Defendants Nos. 1 and 2
with the Defendant
No. 3 on account of non
lifting of the stock of wheat from the
Defendant
No. 3 by Defendants Nos. 1 and 2 within the stipulated
period of time because of lack of financial
resources of the
Defendants No. 1 and 2. The Defendant No. 3 also in
terms of the
agreement with the plaintiff
executed a special irrevocable power of
attorney in favour of Plaintiff
No. 2, the person nominated in the
agreement
by the Plaintiff No. 1 for being appointed as special
irrevocable attorney of the Plaintiff No. 1 for
receiving the wheat.
"That per terms of the agreement
of the Defendants Nos. 1 and 2
with the plaintiff, the Plaintiff No. 1 had to originally
deposit price of
wheat i.e.
8797.5 per M/Ton which included Rs. 2087/- per M/Ton
the amount to be deposited in the shape of bank guarantee. The
Plaintiff
No. 1 instead of depositing a bank guarantee," however,
deposited the complete price of wheat in cash with
the Defendant
No. 3."
"It is pertinent to mention here
that soon after, execution of
agreement
dated 12.6.2003 of the plaintiff with the Defendants Nos.
1 and 2, it was realized by the Defendant No. 2
that it would be
difficult to replace the bank guarantee deposited by
Plaintiff No. 1
with Defendant No. 3 on or
before 20th August, 2003 in terms of the
agreement, therefore, with the consent of the Plaintiff No. 1, the
defendant acknowledged in black and white the
alteration in terms
of agreement
whereby the Defendants Nos. 1 and 2 undertook to
supply the bank guarantee to the
Defendant No. 3. The Defendant
No.
2 submitted a bank guarantee. However, the plaintiff learnt that
the Defendant No. 3 did not accept the bank
guarantee of the
Defendants Nos. 1
and 2 for the reasons known to Defendant No. 3.
As already stated above the plaintiff No. 1, therefore, in order to save
his interest had to deposit the
amount of bank guarantee in cash to
the
Defendant No. 3 provisionally as per the term of original
agreement of
the Plaintiff No. 1 with the Defendants Nos. 1 and 2
which stood revived on non acceptance of the bank guarantee by the
Defendant No. 3 submitted by Defendants Nos. 1 and
2. On the
request of Defendants Nos. 1
and 2, the quantity of wheat was
reduced
from 25000 MT to 15000 MT by Defendant No. 3 which was
mutually agreed between the plaintiffs and the
Defendants Nos. 1
and 2."
"That the Plaintiff No. • 1 as per
the terms of agreement received
some quantity of wheat. However, the Defendant No. 2 on learning
about the complete payment made by the Plaintiff No.
1
in order to
defraud the plaintiff and to devour his amount
illegally and
fraudulently cancelled
irrevocable power of attorney executed by
him in favour of the Plaintiff No. 2 without issuing any prior notice
to
him bringing the same to his knowledge or notice. The plaintiffs
have complete documentary proof of all the
payments made by. the
plaintiff to the Defendant No. 3 in pursuance of
the agreement dated 12.6.2003 of the plaintiff with Defendants Nos. 1 and 2.
These are
being enclosed alongwith the
plaint."
"That the plaintiff on learning about
the fraud immediately through
an express telegram sent to the Defendant No. 3 at 2 a.m.
on
27.6.2003 requested the
Defendant No. 3 not to allow lifting of the
wheat
stock by the Defendantsj Nos. 1 and 2. A detailed legal notice
addressed to the Defendant No. 3 alongwith copies
sent to
Defendants Nos. 1 and 2 was
also served on 27.6.2003. The plaintiff
requested the Defendant No. 3
vide
his notice to immediately stop
the Defendants Nos. 1 and 2 from
lifting the wheat on the basis of
the permit issued by Defendant No. 3.
On the one hand, declaration was sought that the cancellation of
irrevocable
Special Power-of-Attorney by Mian
Khalid Jamil was illegal, and was
binding on him and, on the other,
injunction was sought against all the three
defendants
in the following terms:—
"It is also prayed that a decree restraining the
Defendants Nos. 1 and
2 may kindly be
passed from lifting the wheat from the godowns of
Defendant No. 3 and
the Defendant No. 3 may kindly be restrained
allowing
the Defendants Nos. 1 and 2 to lift the wheat from the
godown of Defendant No. 3".
When the suit came up before the
learned Civil Judge, to whom it had been entrusted, he passed an interim
injunctive order on 28.6.2003, restraining defendants "from lifting the
wheat from PASSCO/from disputed zones".
During pendency of the suit, the
plaintiff-petitioner and the first two
defendants entered into a compromise on 3rd
of July 2003, some of the
terms whereof took the following form:-
"Whereas the party of the Second
Part (petitioner herein) has offered for the total payment of Rs. 61,56,250/-
to the party of the first -part
(M/s The Exporters through Mian Khalid Jamil)
as consideration
for purchase of the complete rights of the party of the first part with
.M/s PASSCO."
"The party of the second part
will be under obligation to export
15000 MT of wheat."
"All the documentation in terms of
the export of wheat and wheat
products will be done by the party of the second part
exclusively and
the party of the first shall assist the party of the second part."
The petitioner had
inter alia
agreed
to purchase the reduced quantity of
wheat as per terms of the Agreement, dated
31st of March, 2003, in
consideration of Rs. 61,56,250.00 The petitioner was made
bound to export 15,000 metric tons of wheat of PASSCO and the documentation was
to be in
the
name of the petitioner whereas Defendants 1 and 2 were to assist him.
Besides, as per the
said agreement/compromise, an account was to be.
opened by the petitioner, though in
the name of the firm "M/s the Exporters"
but it was to be
operated "exclusively" by the petitioner. Mian Khalid Jamil
unequivocally
undertook and made himself "bound to intimate and get
registered the newly
opened account with M/s PASSCO with a request in
black and white to remit all
amounts" in the said account which may be due
to M/s. The Exporters
under the original Agreement, dated the 31st of
March 2003. The compromise was filed in
Court and was recorded by- the
learned Civil Judge who passed decree in terms thereof on
5-7-2003,
operative
part of which reads as follows:-
"Learned counsel for the Plaintiffs
Nos. 1 and 2 has stated that compromise Ex-C-1 has been effected between the
parties and
Defendant No. 1 has received pay order No. 207441 of
Rs. 26,00,000/-
issued by the Habib Bank, Co-operative Branch,
Lahore and Rs. 24,56,250/- through
cross-cheque No. MIN6147891 to be drawn from Metropolitan Bank, Associated
House, 7-Egerton Road, Lahore in the Court.
In the light of the compromise Ex-C-1
the suit is accordingly decreed
in terms of compromise Ex-C-1 because the
Defendant No. 3
(Passco) is proforma defendant. The Defendant No. 3 is directed to
allow the plaintiffs
to carry wheat within period of 5 days from today in terms and condition of
compromise Ex-C-1."
3. Doubtless, PASSCO
(respondent herein), though Defendant No. 3
in the suit, was not a party to the
afore-mentioned agreement/compromise,
in terms whereof the suit was disposed of,
but PASSCO cannot plead lack of
knowledge of the contents of the plaint in
the suit of the petitioner or those
of the agreement/compromise, dated the 3rd of
July 2003 between the
petitioner and Defendants 1 and 2. Moreover, it is not
the case of the
respondent that the afore-quoted order, dated 5-7-2003 of the learned
Civil Judge was ever challenged by it. On the other hand, the decision of the
Civil
Hourt
was accepted and given effect to in letter and spirit, by Respondent-
3
ASSCO
inasmuch as it wrote the following letter on 17th of July 2003:--
PAKISTAN AGRICULTURAL STORAGE & SERVICES
CORPORATION LTD.
COMM WING 54 LAWRENCE ROAD, LAHORE
FAX NO. 6370296
No.
PASSCO/Comm/977
Dated:
17 Jul 2003
Muhammad Abrar S/o Joil Bakhsh
Provincial Line Street No. 5
Bungalow No. 4-1
Attok Oil Company
Rawalpindi.
Mr. Javed Iqbal S/o Muhammad Iqbal House No. 55-C, Jinnah Town
Quetta.
SUB:
SALE OF WHEAT CROP 2002 FOR EXPORT TO M/S
EXPORTERS
Reference agreement
dated 31 Mar 2003.
In deference to the Court orders
dated 05 July 2003 you are allowed to lift 2,987.026 M/Tons wheat crop 2002.
Lifting of wheat shall be
completed up to 22 July 2003 positively.
Sd/-
General Manager (Comm)
Brig. (Retd.) Aftab Ahmed"
Pursuant to the afore-mentioned letter, thp
petitioner lifted the remaining
quantity of wheat on 17th
;
18th and
19th of July 2003, after making
payment to the respondent-PASSCO of its purchase price, plus 2%
penalty.
It was so averred in paragraph 6
of the Writ Petition which, for facility of
reference, is reproduced:-
"That in the meantime in
pursuance of the Agreement dated
3.7.2003 the petitioner lifted the entire
remaining quantity of 15,000 metric tons of wheat on 17th, 18th, 19th of July
2003 after paying to
the
PASSCO the entire purchase price plus 2% penalty as per terms
of Agreement dated 31.3.2003.
In reply, the
respondent has taken stance in the following terms:-
"Admitted that wheat stocks were
lifted after payment of penalty. All
actions however were in the wake of 31.3.2003 agreement and on
behalf of the firm "The
Exporters"/proprietor Mian Khalid Jamil.
The petitioner as such did not figure in any individual independent
capacity vis-a-vis Passco. He acted as an
attorney."
4.
The
case
of the petitioner is that he
had then
made all
arrangements for export of the wheat to foreign countries as per spirit
of the
original Agreement, dated 31st of March
2003, but when approached, the
respondent declined to accept export
documents on the ground that the
period of three calendar months as
stipulated in Clause 11 of the said
Agreement, had expired inasmuch as
in terms of Clause 3 thereof, the cut off
date was 30th of May 2003, and the
period of three calendar months
reckoned from the cut off date,
expired on 30th of August 2003. However,
before expiry of the said period, the
petitioner, through his counsel's letter,
dated 28.8.2003, approached the
Managing Director of respondent-PASSCO
with the request to enable him to
export wheat, but nothing having been
heard from the respondent, the petitioner filed the instant Constitutional
petition on 25.9.2003.
5.
When
the petition came up for hearing on the 25th of September
2003, respondent-PASSCO was directed to depute some responsible officer
to appear in this Court, alongwith the
record. Khawaja Muhammad Akram,
Advocate, entered appearance on behalf
of the said respondent and sought
adjournment to obtain instructions.
On 6th of October 2003, learned counsel
for the respondent produced, before
the Court, Minutes/Recommendations,
dated the 30th of August 2003 of Wheat Export Committee of Respondent-
PASSCO and the order of its Managing
Director. The same are to the
following effect: ~
"MINUTES/RECOMMENDTIONS OF WHEAT
EXPORT
COMMITTEE
MEETING HELD ON 30 AUG.-2003.
1. The Committee proceeded to examine
the request of the parties
for
extension in shipment period. It may be recalled that number of
parties were given the contract for export of
3,00,000 M/Tons of wheat in various quantities and parties had sufficient
period spread
over about five months
to complete the export of PASSCO's
contracted
wheat. Besides the element of force major conjured up by
the parties do not seem to be tenable. The
Committee does not
recommend to accede to the request of the parties for
extension in
shipment period beyond the
contracted period.
Sd/-
Sd/-
Maj. (R) Muhammad
Akram
Brig. (R) M. Parwaiz Akbar
GM
(Audit)/Chairman.
GM (Field)
Sd/-
Sd/-
Muhammad Shwkat Haidry
Brig. (R) Aftab Ahmed
GM (F&A)
GM (Comm)
Sd/-
Ch. Abdul Majeed
AGM (S&C)
2.
Submitted for approval of para 1 please.
Sd/- 30-8-2003 Brig. (Retd.) Aftab
Ahmed
General
Manager (Comm).
M.D.
3.
Para 1 above approved.
Sd/-(Illegible)
30/8"
A photostatic copy of the following letter statedly issued
pursuant to the
afore-quoted decision, was
also produced by the learned counsel for the
respondent:—
"PAKISTAN AGRICULTURAL STORAGE & SERVICE CORP. LTD.
COMM WING 54 LAWRENCE ROAD LAHORE
FAX NO. 6370296
UMS
No. PASSCO/Comm/3836
'
Dated 01 Sept. 2003.
M/s The
Exporters (Regd.)
Mumtaz Abad.
Near Coca Cola Factory
.Multan
SUB:-
SALE
OF
WHEAT
FOR
EXPORT-REQUEST
FOR
EXTENSION
IlM SHIPMENT PERIOD.
Reference agreement dated 31 Mar. 2003
and your letter dated 25
Aug. 2003
It is to intimate you that your request for
extension in shipment
period beyond the contracted period was considered but has
not
been
acceded to.
Sd/-
General Manager (Comm)"
When confronted with the above
situation, learned counsel for the
petitioner, on instructions, emphatically denied receipt of any
such letter by
M/s The Exporters or by the
petitioner. Be that as it may, in view of the
changed position, learned
counsel for the petitioner sought time to file an
application to amend the Writ Petition. Consequently, the petitioner filed
application under Order I, Rule 10 CPC and under Order VI, Rule 17 CPC,
for arraying Mian Khalid Jamil of the Firm M/s The
Exporters as
Respondent No. 2 and for
amendment of the Writ Petition, which was
allowed, whereupon amended petition was filed,
inter alia
with
the following prayer:--
"In view of the above submission, it is most
respectfully prayed that
it may kindly be
declared that the petitioner is entitled to file the
export documents within three calendar months
after adjudication
of the matter by
this Hon'ble Court, in circumstances of the case".
The Writ Petition was admitted to
hearing and notices were issued to both
the respondents. Respondent No. 1 (PASSCO) has filed written
statement.
6.
I
have heard the learned counsel for the parties and have perused
the record.
7.
Kh.
Muhammad
Akram,
learned
counsel
for
respondent-
PASSCO has raised a preliminary objection to
the maintainability of this
petition, by contending that the
enforcement of contractual obligations
through a Constitutional petition is
not permissible. In support of this
submission, reliance has been placed
on
Kaanay Construction Co. v. WAPDA
(2001 YLR 734),
Maj. (Retd.)
Shehzad Hussain Khan v. Government of the
Punjab
(2001
PLC
(CS)
249),
Mian Ansar Hayat v.
Punjab Mineral
Development Corporation
(2001 YLR 2670) and
Sqjjad Hassan v. Additional
Director-General, Lahore
Development Authority, Lahore
(2001
MLD 18).
8.
There is no hard and fast rule that Constitutional
jurisdiction
cannot, at all, be invoked where the
rights and obligations of the parties flow
from a contract. So far as the case-law, relied upon by the learned counsel for
the petitioner is concerned,
Kaanay Construction Co. v. WAPDA
(2001 YLR
734) is inapt for the reason that in
the said case writ was refused on the
grounds that disputed questions of
fact were involved; that there was an
arbitration clause, and the liability
to pay regarding the amount claimed by
the contractor was also not admitted by WAPDA. The case reported as
Maj.
(Retd.) Shehzad Hussain Khan v. Government of
the Punjab
(2001 PLC
(C.S.) 249) has also no bearing. It
was a case of contractual service,' the
appellant having been employed as Chief Officer in Municipal
Corporation,
Multan, on contract basis, his services were
terminated prematurely before
the expiration of the contract
period. Order of termination was assailed
through a Constitutional petition,
which was dismissed by observing that in
such circumstances the only remedy available
was action in tort for damages
both in terms of monetary, and physical or mental loss,
which could be quantified in money. It was further held that forcing an
unwilling employer to allow the employee to complete the period of contract was
legally as
vulnerable in tort as the employer in the opposite situation could be.
It.was
also
held that deciding of such a matter in the Constitutional jurisdiction was
tantamount to making an order for specific performance of contract
which was not
possible in exercise of such jurisdiction.
Sajjad Hussain v.
Additional
Director-General, Lahore Development Authority, Lahore
(2001
MLD 18) was a case
where contract was cancelled on the ground that the
goods to be supplied
were not according to the specifications. In the contract,
there was an
arbitration clause. It was also found that disputed questions of
facts were involved.
It was, therefore, held by this Court that enforcement of
contractual liability
in such circumstances through Constitutional
jurisdiction was not permissible. In
the case reported -as
Mian Ansar Hayat
v. Punjab Mineral Development
Corporation
(2001 YLR 2670), relying on
All
Sher alias Ajab Ali v. The State
(1994 SCMR 1884),
Project
Director,
Baluchistan Miner Irrigation and Agricultural Development Project,
Quetta
Cantt. v. Messrs Murad Ali & Company
(1999 SCMR 121) and
Mumtaz
Ahmed
v. Zila Council, Sahiwal
(1999 SCMR 117), writ was refused for the
reasons that the
contract contained an arbitration clause; that disputed
questions of facts
were involved; that the petitioner had alternate remedies
of appeal (which was
provided by the Rules governing the matter), and to file
a suit and that the
material brought on record was deficient to record a
finding with regard to
alleged ulterior motives//ncz/a
fides.
It was further
observed that the
dispute between the parties could better be resolved
through arbitration;
that the suit filed by the petitioner having been
dismissed, his appeal
was pending before the learned District Judge;.'and
that the petitioner
had not approached the Court with clean hands. The writ
petition was not
entertained for yet another reason, the same being that the
respondents acted in
good faith and did not act against the petitioner with
ulterior motives. It
was found, as a fact, that the petitioner had failed to
complete the
contracted work within the prescribed period; that at the
request of the writ
petitioner time for completion of work was extended, but
still he failed to
abide by the revised schedule and could not complete the work even within the
extended time.
9. In this case, the
parties are not at issue so far as the facts are
concerned. It is also not denied that
the matter involved is of an urgent
nature. Therefore, if the petitioner is
directed to resort to the remedy of a
suit, even the Court of first instance would
take a long time to decide his
fate, whereafter the process of appeal, revision etc.,
would start. In the
circumstances, the remedy by itself would get frustrated.
The Hon'ble
Supreme Court has laid down the law in
Nizamuddin v. Civil Aviation
Authority
(1999 SCMR 467) in the
following terms:
"It is axiomatic principle of
law that every case is to be adjudged on
its own facts, circumstances and merits. If
in a particular case both
the parties admit the factual aspects which give rise to
the dispute and the Court feels that the matter is of such an urgent nature
that
the
veiy remedy would get frustrated, if the aggrieved party is
directed to seek redress through
alternative remedy available under
the law,
then in that case it would be proper for the Court to
entertain the writ petition."
In
M.H.Abidi v. State Life Insurance Corporation
(1990 MLD 563),
the view
taken
was:—
"On principle, contractual
rights and obligations have to be enforced
through Courts of ordinary jurisdiction.
However, where rights are
based on statute law or rules framed thereunder or when
an
obligation or duty vests
in a public functionaiy or a statutoiy body,
performing
function in relation to the affairs of the Federation or a
Province or a local authority, constitutional
jurisdiction can be
attracted. In
such and allied situations even contractual rights and obligations may be
enforced in constitutional jurisdiction. This,
however, is subject to
the important rider of corresponding absence
of
an adequate remedy."
"Thus merely, because a contract
is involved in a constitution
petition is not by itself sufficient to oust the
constitutional
jurisdiction under Article 199 of the Constitution."
In
Anwar Muhammad Khan v. Director of Industries
(PLD 1994
Lahore 70),
it was observed as follows :--
"Arguments of the learned counsel for the respondents
to the effect that the Writ Petitions having arisen out of contractual
obligations,'
hence no relief can be
granted to the petitioner is misconceived. It is
now well established legal proposition that a person has a right to come
to the Court in Constitutional jurisdiction for issuance of a
direction to the public functionaries to act
strictly in accordance with
law in
case the public functionaries have not acted in accordance
with the statute and have passed adverse orders
even without
issuing of a show-cause
notice. Power of judicial review in such like
cases is available to this Court even in cases where the grievance has
arisen on account of violation of the contractual
obligations."
In
Wak Orient Power and Light Ltd. v. Government of Pakistan
(1998
CLC
1178),
after striking a note of caution
viz:
"While exercising writ jurisdiction,
which is essentially discretionary
in nature, superior Courts in Pakistan will
not hesitate a moment to
refuse relief to a suitor seeking enforcement of
contract against State
or statutory Corporation, if the national interest is
hereby likely to
be endangered, in the least, despite
the fact that the legalistic right of such suitor for issuance of appropriate
writ stood established.
Relief would also be refused if the contract is shown to
be
unconscionable/ma/a
fide
/unreasonable or against public policy."
it was held:-
"Likewise, a situation may arise
where the Constitutional
jurisdiction of this Court under Article 199 may be
permitted to be
invoked by an aggrieved person for declaration of the act of
representative of
State/statutory Corporation, about entering into a
contract with third
party, to be without lawful authority, on the
above grounds."
In view of above, the preliminary objection of the learned counsel for
respondent-PASSCO
fails, and is hereby repelled.
10.
Before dealing with the case on merits, there are certain
important aspects of
this case to which a reference seems to be necessary:-
(i) The contract of
PASSCO with M/s The Exporters was an
"AGREEMENT OF- SALE OF WHEAT FOR
EXPORT".
Thus, the Agreement itself made it abundantly clear that
PASSCO was selling
wheat for the purpose of its export.
(ii) In Clause 1 of
the Agreement, the purpose of sale of wheat
was re-iterated by unequivocally providing
that M/s The
Exporters were buying wheat "for export through sea route".
(iii) The life of the
Agreement was limited to 60 days
vide
Clause
3 thereof, having come
into force on 31st of March 2003, and
expiring on 30th of May 2003, but the
provisions of this
Clause were made dependant on and subject to the
conditions contained
in the succeeding Clauses.
(iv) The basic price
was fixed at Rs. 8,625.00 per metric ton, out
of which an amount of Rs. 6,538.00 per
metric ton was
payable to PASSCO in cash for each tranche, and for the balance amount of
Rs. 2,087.00 per metric ton, which was
payable on account of upgradation/export
expenses, the
purchaser was required to furnish bank guarantee (not more than two
instruments) for the entire contracted
quantity of wheat stocks (returnable by
PASSCO to the
purchaser "soon on submission of valid prescribed export
documents".
(v) While making
refund, PASSCO could realize any recovery
from the purchaser "on account of
lifting of wheat at
cascading refund rate or any other penalty etc."
(vi) Field Wing of PASSCO was to issue
delivery/lifting order
only "on confirmation of the deposit of stock cost @
Rs.
8,625.00 per M/Ton in PASSCO's Bank" by the
purchaser.
(vii) It was
re-iterated in Clause 6 that the delivery/lifting period
was 60 days from 31st
of March 2003, and the purchaser was
entitled for refund on account of
upgradation/export
expenses @ Rs. 2,087.00 per M/Ton "for the quantity of
wheat lifted."
(viii) The purchaser
was given option
vide
Clause 7 to take
delivery in lots of 500 M/Tons
(minimum) each "on upfront
payment in cash at the rate of Rs. 8,625/-
per M/Ton" or to
lift wheat in terms of Clause 4, subject to the further
condition that
lifting of stocks in lots shall not be less than
500 M/Tons each.
(ix) Vide Clude 11,
"documents of export of wheat" or its
products specified therein were "to be submitted
within 3
calendar months after completion of
the lifting as per Clause
3".
(x) Whereas the
release by PASSCO of the amount of
upgradation/export expenses in favour the
purchaser was
made dependant on "submission of valid export documents duly
verified by the bank" as specified and particularized in Clause 12, PASSCO
retained power to ask for "any other
document" "in support of export
etc.". Such a stringent
provision
was made a part of the contract with a view to
vouchsafe transparency of export and enswathing any effort
on the part of unscrupulous elements resorting to
fake
exports.
(xi) In case of
failure on the part of purchaser to take delivery of
the quantity within
the stipulated period, PASSCO was
entitled
vide
Clause 16 to impose a
penalty at the rate of 1% of the value of undelivered quantity for the first 10
days and at the rate of 2% for the next 10 days.
(xii) Delayed lifting
of wheat by the purchaser was not to affect
the cut off date of submission of valid
export documents claiming refund amount as per Clause No. 11.
(xiii) In Clause 17
it was laid down that in the event of default of
the purchaser, "but deposit by
him in lump sum the cost of un-lifted/undelivered quantity" "the
penalty
vide
Clause 16
will not be imposed and extension of 20 days may be
granted." But, as shown above, this
was not adhered to by
PASSCO itself.
(xiv) Clause 18 conferred on PASSCO the power
of forfeiture, to
rescind the
contract and to get the Agreement performed by
some one else at the risk and • cost of the other
party/purchaser.
(xy) PASSCO retained
power
vide
Clause 19 to facilitate the
purchaser in the performance of the
agreement as far as
possible, without compromising its interest. It was
provided
in
the said clause:-
"Thus any provisions may be added
subsequently with mutual consent of the parties in the agreement ensuring
such facilitation
and for avoiding bottlenecks".
(xvi) It has come on
record that due to financial constraints, it
had become difficult for the original
purchaser, i.e. M/s The
Exporters to strictly adhere to the terms of the agreement
inasmuch
as PASSCO had expressed reservations to accept
the bank guarantees furnished by the
purchaser and the
latter had
failed to adhere to time in the matter of lifting of
wheat stock.
(xvii) M/s The
Exporters had executed an
"Iqrarnama" in
favour
of the petitioner on
the 12th of June 2003 and an irrevocable Special Power-of-Attorney of the same
date authorizing the
petitioner to do all the necessaiy acts for collecting
wheat
from
PASSCO in terms of the Agreement, dated the 31st of
March 2003. The said
arrangement was followed by a formal
Agreement dated the 3rd of July 2003 between M/s The
Exporters and the petitioner whereby the latter had
purchased "complete rights"
of the' former "with M/s
PASSCO"
on terms and conditions stipulated in the
Agreement just mentioned.
(xviii) According to the learned counsel
for the petitioner all the documents mentioned above were filed with PASSCO and
the same received its approval. The
submission of the
learned counsel
finds support from the subsequent conduct
of PASSCO to which reference will be made presently.
(xix) Pursuant to an
agreement, dated 12th of June 2003, entered
into between M/s The Exporters and the
petitioner herein
(including one Muhammad Abrar), the petitioner paid to PASSCO entire
price of the un-lifted/un-delivered quantity of wheat in lump sum at the rate
of Rs. 8,797.50 per M/Ton
which was inclusive of Rs. 2,087.00 (for which amount
bank
guarantee was to be
provided) and 2% penalty in terms of
Clause
16 of the Agreement.
(xx) At the request of
M/s The Exporters, PASSCO had also
reduced the contracted quantity of 25000
M/Tons of wheat
to 15000
M/Tons and had extended the period for lifting of
wheat stock upto 30th of June 2003, though only a grace
period of 20 days could be given
vide
Clause
17.
ixxi) After the
payment had been made to PASSCO by the
petitioner and he had also lifted a little
more than 12000
M/Tons of wheat, the original purchaser proceeded to cancel
the agreement, dated
the 12th of June 2003 with him as well as the irrevocable Special
Power-of-Attorney given to him, which compelled the petitioner to file a suit,
against M/s The
Exporters, its Proprietor, Mian Khalid Jameel, as well as
against PASSCO. The learned trial Judge
had passed an
injunctive order, restraining
the original purchaser from
lifting
wheat from PASSCO's storage points.
(xxii) During the
pendency of the suit, the first two defendants
entered into a compromise, terms
whereof were reduced
into writing in the form of Agreement, dated 3rd of July,
2003 on the basis of which the suit was disposed of
vide
order, dated
5.7.2003, reproduced in paragraph 3 above.
(xxiii) The plea of
the petitioner that copies of the plaint,
Agreement, dated 3rd of July 2003 and of the Court's order,
dated 5.7.2003 were filed with PASSCO finds
support from
PASSCO's own letter,
dated 17.7.2003.
.(xxiv) PASSCO
permitted the petitioner (and Muhammad Abrar)
to lift the remaining quantity of
wheat, i.e. 2,987.025
M/Tons out of 15000 reduced quantity,
vide
its
letters, dated 17.7.2003. Since the period of 60 days for lifting wheat, as
originally stipulated in the Agreement dated 31.3.2003, had
expired on 30.5.2003, the petitioner and
Muhammad Abrar
were bound down in the
following terms:—
"Lifting of wheat shall be completed upto 22 July 2003
positively".
(xxv) It is common
ground between the parties that the petitioner has lifted the remaining
aforementioned quantity of wheat
on 17th, 18th and 19th of July 2003, after
payment to
PASSCO of the entire purchase price plus 2% penalty.
It is in the above backdrop of events that the following contentions of
the
learned
counsel for respondent-PASSCO, have to be attended to:--
(a)
That Javed Iqbal, petitioner has no privity of contract with the
respondent-PASSCO;
and
(b) That Clause 16 of the Agreement, dated
31.3.2003 wherein it
was provided that "delayed lifting of wheat by the
Second Party
shall not affect the cut off date of submission of valid export
documents claiming refund amount as per
Clause 11" does not entitle the petitioner to claim extension in time for
submission
of export documents.
11.
So far as the first contention that there is no privity
of contract
between PASSCO and the petitioner is concerned, it is contradictory to the
preliminary
objection raised by the learned counsel for the respondent
himself to the effect that
contractual obligations cannot be enforced through
a Constitutional petition. Be that as it may,
the general rule indisputably is
that no .one but the parties to a contract can be bound by it, or
entitled under
it and this principle is known that of
privity of contract. It would have been
perfectly fair and reasonable that
PASSCO should not be bound by way of
agreement between the petitioner and
M/s The Exporters, but here the
petitioner acted not only for the
benefit of the original purchaser but also for
PASSCO inasmuch as not only the price of the wheat lifted was paid by
the
petitioner, but 2% penalty over and above as
well. Thus, all three had the
intention that the petitioner should have all the rights under the
Agreement,
dated the 31st of March 2003. PASSCO cannot
claim that it was entirely
ignorant of the arrangement between
the petitioner and M/s The Exporters.
PASSCO has undeniably taken benefit of
the Agreement, dated the 31st of
March 2003. It is also not the case of
PASSCO that no consideration has
passed on to it from the petitioner.
Thus the
vinculum juris
is not personal
to PASSCO and M/s The Exporters;
PASSCO has received full benefit of the
Agreement dated the 31st March 2003 from the petitioner.
12.
The
matter can be looked at from another angle. It was, in fact,
an assignment of original contract in favour
of the petitioner with the tacit
knowledge,
rather
with
the
concurrence
of
PASSCO
that,
M/s
The
Exporters dropping out and petitioner taking their place, the burden of the
contract and liabilities arising
therefrom were assigned to the petitioner-. If I
may say
so,
it
was,
in
effect, the
rescission
of one
contract and the
substitution of a new one or, in other
words, a novation. PASSCO having
, received not only the entire sale price
of wheat, but also 2% over and above
as penalty
in terms of Clause 16, cannot be allowed to back out to perform its
obligations arising out of the Agreement, dated
31st of March 2003, or to treat the petitioner differently, rather
discriminately, as compared to the
defaulting party,
viz.:
M/s
The Exporters.
13.
There is yet another aspect. In the instant case,
respondent-
PASSCO allowed the wheat to be
lifted by the petitioner, knowing fully well
that it was for the purpose of
export. If there was no intention on the part of
PASSCO to permit export thereof, it owed a duty to the
petitioner-purchaser
to tell him in unmistakable terms that he would not be allowed to export the
wheat in accordance with the Agreement, dated the 31st of March 2003. The
plea of respondent-PASSCO is that in the absence of
its express contract
with the
petitioner that the latter would be allowed export of the wheat,
there was no sufficiently close relationship
between the parties to give rise to
any
such duty. It is not denied that Respondent-PASSCO sold the wheat to
M s The Exporters whose obligation of lifting the
wheat was assumed by the
petitioner,
for the purpose of export. PASSCO indubitably knew that the petitioner was a
potential investor and was lifting the wheat on a clear
understanding that it was meant for export. Therefore,
apart from any
express contract, the
bare knowledge of facts by PASSCO paves the way for holding that it owed a duty
of common honesty of having refully apprised
the petitioner of its
ultimate intention. PASSCO remained reticent, though it
was under obligation to have made an adequate disclosure of its intention
not to allow the petitioner to go
ahead with the export of wheat. The
contention
that PASSCO acted from the best of its motives is no answer.
Lest I am misunderstood to say that PASSCO had
acted
mala fide
or dishonestly. I would make it clear that
non-disclosure of its intention,
translated
into the impug-ned action, may have been quite innocent, or even
due to misconception of legal position, which might
not be on account of
mala fides
or with dishonest intention. What
I mean to say is that it is a case
of breach
of duty in which dishonesty is not a necessary factor. Further, there can be no
universal rule that in the absence of contract, an innocent
but negligent act of non-disclosure cannot give
rise to an action. It is a typical
case where petitioner agreed to
assume responsibility of M/s The Exporters
with
whom PASSCO had an express contract and, I think, any reasonable
man in the petitioner's shoes would have believed
that he would be meted out the same treatment by PASSCO to which his
predecessor was entitled
and he would
not be discriminated. Even in the absence of any direct dealings between one
person and another, there are many and varied
situations in which a duty is owed by one person to another. Learned
counsel
for respondent-PASSCO
submitted that in order that the petitioner may
avail himself of relief on alleged breach of the duty of disclosure, he
must
show that there was such a proximate relation between him and
PASSCO as
to bring them virtually into the
position of parties contracting with each
other. The contention has no
merit. The duty of care arising from implied as
well as express contracts and duty of care arising from other special
relationship which may be found to exist in
particular cases, still remains,
and
I can see no logical stopping place short of all those relationships, where
it is plain that one party was twisting the other
to exercise such a degree of care to disclose as the facts and circumstances of
a particular case required. In the instant case, PASSCO wrote the letter, dated
the 17th of July 2003 to
the
petitioner not only to lift stocks, but gave a dead line also, wherefrom an
inference could straightaway be drawn by any reasonable person of ordinary
prudence
as to the purpose for which he was being allowed to lift the wheat.
In fact, the petitioner was indued to believe that
he would be allowed to
export the
wheat and in the absence of a clear warning to the contrary, in
point of law, PASSCO incurred a duty and obligation
of care towards the
petitioner. Such a duty need not
necessarily arise from a written contract; it
may arise from circumstances and relations of the parties
and may give rise
even to an implied
contract at law. Further, in a sphere where PASSCO is
placed, petitioner would have reasonably relied on
it and, therefore, the
former should have taken reasonable care to avoid
acts of omissions which
one could
reasonably foresee could be likely to cause loss to the petitioner. It
is not PASSCO's sheet anchor that all that was
being done by it was
gratuitous and, therefore, it incurred no
liability. It cannot capitalize its own
negligence,
arising out of its failure to indicate in its letter, dated 17th of July
2003, that the lifting of wheat by the petitioner
would not mean that he
would be
allowed its export as well. By the impugned act of PASSCO, the
petitioner is bound to suffer colossal financial
loss, without any fault
attributable
to him. I am, therefore, clearly of the view that the petitioner is
entitled to succeed against PASSCO even on account
of breach of duty of
disclosure.
14. PASSCO, in
essence, performs functions which squarely fall
within the executive authority of the
State itself. Indisputably, the
Government, which represents the executive
authority of the State acts, through the instrumentality or agency of either
natural or juridical persons
to
carry out its functions. It is of common knowledge that as incidental to or
in aid of governmental functions in the fields of
specialized and technical
character, need was felt to forge a new
administrative device, consequently
the
Government exercised its power to charter public corporations as its
third arm. Such corporations, whether established
by statutes or
incorporated under the
law but controlled by the Government and bound, in
policy matters, by directions of the Government,
are
ex-hypothesi
agencies of
Government
and manage public enterprises, which ordinarily should be
carried.by Government itself departmentally. The
corporations, such as
PASSCO, acting
as instrumentality or agency of Federal Government,
because of enjoyment by it of monopoly status are
impregnated with
governmental character and are obviously subject to the
same limitations in
the performance of their
functions as the Government itself, though in the
eyes of law, they are distinct and independent
entities. If Government, acting
through
its officers, in subject to certain Constitutional and public law
limitations,
it must follow a
fortiori
that Government,- when it acts through the
agency of a corporation, the latter should equally be subject to the same
limitations in the exercise of its power or
discretion. The rule inhibiting arbitrary action by the Government applies
equally to-a corporation which
deals
with the public, by way of entering into contracts, it cannot act at its
sweet will and pleasure, but its actions must be
in conformity with the
principles
which meet the test of justice, reason, fairness, equality of
treatment, and must qualify standards and norms
that are not arbitrary,
irrational,
whimsical and discriminatory. It must not be guided by any
extraneous consideration. Every act of PASSCO
respondent must be dictated
by public
interest and must not be unreasoned or unprincipled, and any
departure therefrom can certainly be held to
be invalid. It can hardly be
disputed by any one that for a society which claims to be
organized, civilized
and law abiding, it is imperative to stand by its
commitments, undertakings
and
to be honest and fair in its dealings. It is moreso for any functionary
believing in rule of law not to discriminate
between the citizens, nor to exercise discretion at its pleasure. It is well
settled rule that an authority
must
be rigorously held to the standards by which it professes its actions to be
judged and it must scrupulously observe those standards on pain of
invalidation
of an act in violation of them. The principle of reasonableness and rationality
which is an essential element of equality or non-arbitrariness
is projected by Article 25 of our Constitution,
and it must characterise every State action, whether it be under authority of
law or in exercise of executive power. Article 25 speaks of equality before law
and equal protection of law.
PASSCO, as an instrumentality of the
Government, in the sense brought out
above,
has to observe equality, and cannot exclude a person by
discrimination. In the instant case, the petitioner
is entitled to equal
treatment with
others similarly circumstanced. In this view of the matter
also, the impugned action of respondent-PASSCO,
since it offends against
Article 25 of the Constitution, being
discriminatory in character, is liable to
be
struck down.
15. The impugned
action of respondent-PASSCO declining export of
wheat by the petitioner is liable to be
set at naught on yet another ground.
When the petitioner was allowed to lift the
remaining quantity of wheat
vide
letter, dated 17th of July 2003, a new time
frame was provided. He was to complete lifting by 22nd of July 2003. Therefore,
there was an implied
promise
that the terminus date in his case would be computed by giving him
benefit of three calendar months as from the 22nd
of July 2003. It would
have been 21st of October 2003. When the original
purchaser (M/s. The Exporters) defaulted in lifting the wheat within the
stipulated period of sixty
days, PASSCO,
resorted to an amendment in the original Agreement, and extended the period
upto 30th June 2003 although, as pointed out above,
extension could not travel beyond twenty days
commencing from 31st of May
2003. Moreover, the power of forfeiture and
rescission of the contract.and
getting the
work done at the risk and cost of the original purchaser was not
exercised, meaning thereby that there was no
definite intention on the part
of
PASSCO to strictly press into service the terms of the Agreement.
Therefore,
while allowing the petitioner to lift the remaining wheat stock by 22nd of July
2003, an implied promise was held out to him, founded on the most invincible
argument of common sense that he would not be required to
account for the defaults of his predecessor which
had been condoned by
PASSCO for its
own convenience, and, therefore, the condition of submission
of export documents within three calendar months
would not be pressed
against him as
from the 30th of May, but from 22nd of July 2003 which, in
his case,
could be the cut off date and to this extent the original Clause 3 of
the Agreement, date the 31st of March 2003 stood
superseded or, at least,
varied. Having given the petitioner time to
lift remaining wheat stock by
22nd of July 2003, PASSCO cannot be allowed to count
down three calendar
months
from 30th of May 2003. In this contest, the equitable doctrine of promissory
estoppels can also be pressed into service against respondent-
PASSCO. In
Central London Property Trust Ltd.
v. High Trees House Ltd.
[(1956)
1 All ER 256)], by making reference to some of the earlier decisions,
it
was observed that:
"They are cases of promises which
were intended to create legal relations and which, in the knowledge of the
person making the
promise, were going to be acted on by the party to whom the
promise was made, and have in fact been so
acted on. In such cases th& Courts have said these promises must be
honoured. I prefer to
apply the principle
that the promise, intended to be binding,
intended to be acted on and in
fact acted on, is binding so far as its
terms
properly apply."
A very appropriate case from the Indian
jurisdiction is
Union of India v.
Messrs Anglo-Afghan Agencies
(AIR 1968 SC 718)
wherein an export
incentive Scheme had been notified to the public under Section 3 of the
Imports and Exports
(Control) Act, 1947 by the Export Promotion Bureau of
the Indian
Government. After the party had acted on the inducement,
satisfied the required
conditions, there was an attempt to resile. The relief
was granted in that
case in terms of the representation as hereunder
reflected in para 23 of that judgment:
"Under our jurisprudence the
Government is not exempt from
liability to carry out the representation made by it as to
its future
conduct and it cannot on some undefined and undisclosed ground of
necessity or expediency fail to carry out the promise solemnly made by it, nor
claim to be the judge of its own obligation to the citizen on
an
ex-parte
appraisement
of the circumstances in which the
obligation has arisen. We agree with the High
Court that the
impugned order passed by the Textile Commissioner and confirmed
by the Central
Government imposing cut in the import entitlement
by the respondents
should be set aside and quashed and that the
Textile Commissioner and the Joint Chief Controller of
Imports and
Exports be directed to issue to
the respondents import certificates
for
the total amount equal to 100 per cent of the f.o.b. value of the goods
exported by them unless there is some decision which falls
within Clause 10 of the Scheme in question."
From our own jurisdiction reference, in the
first instance, may be made to
Army Welfare Sugar Mills Ltd. v. Federation
of Pakistan
(1992 SCMR 1652)
wherein it was held as follows:
We are inclined to hold that the above SRO 560(1 )/82
contained
standing representation to the
effect that if a factory would
manufacture
sugar in a financial year exceeding from the average
production in that factory for the proceeding two
years, such an
excess quantity of
sugar shall he exempt from the payment of excise
duty. The above
representation could have been rescinded before it
was acted upon or if it was acted upon, its effect could have been
nullified
by a statutory provision like Section 31-A of the Customs
.Act
(ibid)
and not by an executive act. In
the present case, the
appellants
acted upon the above representation before it was
rescinded, to their detriment as, according to
them, they went on
with the
production of sugar even when the recovery of sucrose from
the sugarcane
was comparatively low on account of change in the climate and thus, they had
acquired vested right before the issuance
of
one of the two impugned SROs. However, if the appellants had
passed on the additional burden of the exercise
duty after the two
impugned SROs were
issued, they are not entitled to press into
service the doctrine of
promissory estoppels as it will be inequitable
to deny the State excise duty on the excess quantity of sugar referred
to hereinabove, in terms of Section 3-C of the Act. We may observe
that
doctrine of promissory estoppel has been evolved by the Courts as an equitable
doctrine with the object to pre-empt suffering of any loss by a promisee and
was not designed or intended to provide a
windfall
profit to him though Bhagwati, J. in the case of Motilal Padampat Sugar Mills
(supra) had held that it
wps
not
necessary in
order to attract applicability
.of doctrine of promissory estoppel, that
the promisee, acting in reliance on the promise, should suffer any
detriment,
but this view was contrary to the Indian Supreme Court's
earlier view and also to the subsequent view taken
by Bhagwati, as C. J., in the case of
Union of India v. Godfrey Philips
India Ltd.
(supra).
It may be pertinent at this juncture to refer to a
passage
from Law of Contract by D.W.
Grieg and J.L.R. Davis (supra) on the
above
aspect, at pages 165 and 166, which reads as follows:-
"8.
Promissory estoppel
is based upon equitable principles,
(a)
Founded in
equity."
In
Messrs M.Y. Electronics
Industries (Put.) Ltd. through Manager v. Government of Pakistan through
Ministry of Finance and 2 others
(1998
SCMR 1404) it was
inter alia
held by
the Hon'ble Supreme Court as follows:
"The doctrine of Promissory Estoppel is founded on
equity. It arises
when a person acting on
the representation by the Government or a
person competent to represent on behalf of the Government,
changes his position to his detriment, takes a
decisive step, enters
into a binding
contract or incurs a liability. In such case, the
Government will not be
allowed to withdraw from its promise or representation."
In
Fecto Belarus Tractors Limited u.
Pakistan
(2001 PTD 1829), while
reviewing earlier judgment, the Hon'ble
Supreme Court authoritatively
declared
the law thus:
"It will be necessary to touch the true concept of the
doctrine of
Promissory Estoppel. Before
proceeding further this doctrine has
been
variously called 'Promissory Estoppel', requisite estoppel,
'quasi-estoppel', and 'new estoppel'. It is a
principle evolved by
equity to avoid
injustice and though commonly named 'Promissory
Estoppel', it is neither in the realm of contract nor in the realm of
estoppel. The true principle of Promissory
Estoppel seems to be that
where one
party has by his words or conduct made to the other a
clear and unequivocal promise which is intended to
create legal
relations or effect a legal relationship to arise in the
future, knowing or intending that it would be acted upon by the other party to
whom
the promise is made and it is in fact so
acted upon by the other
party, the
promise would be binding on the party making it and he
would not be entitled to go back upon it, if it
would be inequitable to
allow him to do so having regard to the dealings
which have taken
place between the parties
and this would be so irrespective of
whether there is any pre-existing
relationship between the parties or
not. The
doctrine of Promissory Estoppel need not be inhibited by
the same limitation as estoppel in the strict sense
of the term. It is
an equitable principle evolved by the Courts for
doing justice and there is no reason why it should be given only ,a limited
application
by way of defence. There is no
reason in logic or principle why
Promissory
Estopple should also not be available as a cause of
action".
The following limitations for invoking the
doctrine of Promissory Estoppel
were laid down by the Hon'ble Supreme Court in the case of
Pakistan
v.
Salahuddin
(PLD 1991 SC 546):--
"(1) The
doctrine of Promissory Estoppel cannot be invoked against the Legislature or the
laws framed by it because the Legislature
cannot make a representation.
(2)
Promissory
Estoppel cannot be invoked for directing the doing
of the going which was against law when the
representation
was made or the promise held m_it.
(3)
No agency or authority can be held bound by a promise or
representation
not lawfully extended or given.
(4)
The doctrine of
Promissory Estoppel will not apply where no
steps
have been taken consequent to the representation or
inducement
so as to irrevocably commit the property or the
reputation of the party
invoking it; and
C5) The party which has
indulged in fraud or collusion for obtaining
some benefits under the representation cannot be rewarded by
the enforcement of the promise."
The aforementioned limitations were
reiterated also in the cases
of Messrs
Gadoon Textile Mills Limited and 814 others v. WAPDA and
others
(1997
SCMR 641)
Messrs M.Y. Electronics Industries,
(Pvt.) Limited through
Manager
v. Government of Pakistan through Secretary, Finance and 2 others
1998
SCMR 1404),
Collector of Customs and others v. Ravi Shipping Ltd.
and
others
(1999 SC 412) and
Government of Pakistan, through Ministry of
Finance and Economic Affairs and another v. Fecto
Belarus Tractors
Limited
(2000 SCMR 112). But none of them is attracted to
the facts and
circumstances of the
present case. Relying on
A.R. Khan v. P.N. Bogha
through Legal Heir
(PLD 1987 S.C. 107) it was held in
Sajjad
Hussain v.
Mussarrat Hussain
Shah
(1989 SCMR 1826) as
follows:--
"The compromise, its sanctity and
efficiency in putting a stop to
further litigation was considered by this Court in the case of
A.R.
Khan. In this case but for the compromise that was reached between
the parties, the plaintiff would not have been
prompted to deposit
the amount asked
for by the respondents as price of the land. Having
thus entered into a compromise and prompted the
appellant to
deposit the amount the
respondents could not challenge it on the
ground that the suit was barred by limitation."
(Emphasis supplied
by me.)
I have, therefore, no doubt that in the
instant case whereas PASSCO will not
suffer any financial burden, the petitioner is bound to suffer
loss if he is not
allowed to export the wheat
purchased for the purpose by him from
PASSCO.
For this reason also the impugned action of respondent-PASSCO
cannot be
sustained.
16. So far as the
second submission of the learned counsel for
respondent-PASSCO, based on Clause 16
of the Agreement, dated 31.3.2003, that delayed lifting of wheat could not
affect the cut off date of submission of
export documents and, therefore, the
petitioner is not entitled to extension of
time is concerned, the same too is devoid of force. Besides what I
have said above, the primary question that arises is whether time was of the
essence of
the contract. In Clause 17 of the
basic Agreement, it was stipulated: "If the
Second Party defaults but deposits in lump sum the cost of un-lifted/un-
delivered
quantity, then the penalty
'vide
Clause 16 will not be imposed and
extension of 20 days may be granted". Then,
by virtue of Clause 16, PASSCO
was entitled to impose penalty at the
rate of 1% of the value of undelivered
quantity
for the first 10 days and at the rate of 2% for the next 10 days. Besides, by
mutual consent of the parties, original Agreement could be
amended to facilitate the purchaser in the
performance of the Agreement and for avoiding bottlenecks. Moreover, rescission
of the Agreement was
optional with PASSCO, and it was not hedged by any
compulsion to put an end to the Agreement once the purchaser had gone into
default, particularly
in the absence of time
limit. As held above, defaults committed by the
original purchaser were not visited with penalties, rather the same were
condoned. Not only that, petitioner's substitution
in place of the original purchaser received blessings of PASSCO, rather a new
contract had come
into being. Therefore, PASSCO cannot be allowed to
bind the petitioner to
time as originally
stipulated
vide
Clause 11 of the Agreement. Even
otherwise, the
provisions of Clauses 16, 17 and 19 are inconsistent with the
time being of the essence of the contract. To say
in one breath that time is of
the essence of the contract, but that the
period provided in the contract may
be
extended and that the default to adhere to time could even be
compensated, is a contradiction in terms. It is
settled law that if in a contract,
there is power of extension, and
provisions for penalties/damages, time will
not
be of the essence of the contract. In
Shambhulal v. Secretary of State
(AIR 1940 Sind 1), after reviewing the case-law on
the subject, it was held as
follows:-
"It would appear therefore that the inclusion of
clauses in a contract
providing for
extension of time in certain contingencies, and
providing for the payment of a fine or penalty for every day or week
the work undertaken under the contract remains
unfinished on the
expiry of the time provided in the contract is
inconsistent with time
being of the essence
of a contract, and would be calculated to render ineffective an express
provision in a contract to that effect. And this
certainly accords with commonsense."
It appears to us that the question
whether or not time is of the
essence of a contract is a question of the intention of
the parties to be
gathered
from the terms of the contract. Whereas in the case of Ex. 104 there is an
express provision that time is of the essence of the
contract and at the same time provisions for extension of time
without limit or qualification and for the levy of
penalty, it cannot be
said that it was
intended that time should be of the essence of the
contract.
In
Roberts v. Sheikh Hyder
(AIR 1923 Nagpur 140) the
condition as to the
time at or before which
the work was to be completed was:—
"The whole work will be completed in 4 months from the
date of
getting permission in writing from
Mr. D.W. Roberts. A fine of
Rs. 5/-
per day will be exacted for every day after that date that the
work is not completed within the above-noted
time."
It was held as
follows:-
"It seems to me that time was not
of the essence of the contract in this case. The very fact that a penalty was
stipulated for in case of
failure to complete the work within the stipulated time
indicates
that in case of such failure it was
not the avoidance of the contract by
the defendant that was contemplated but acceptance of performance
after the stipulated time, subject to payment of
damages which were
fixed. The case in
my opinion falls within paragraph 2 of S. 55 of the
Contract Act and the only question is, what is the
compensation to
which the defendant is
entitled for the loss occasioned by the
plaintiffs failure to complete
the work within the stipulated time."
The case reported as
Pakistan v. Lodhi
House
(PLD 1968 Lahore 923) is
almost on all fours. Relying on AIR 1940
Sind 1
(supra),
it was held: "In the
case before me, notwithstanding the
provision that the time was of the
essence of the contract, there were other
clauses, which indicated that the
intention of the parties was not to strictly enforce the clause
regarding time.
The clauses regarding
suspension of the work, and the payment of penalty
for the non-performance of the contract in time,
clearly indicate that the
parties
never intended that the time was of the essence of the contract." In
Aslam Khan v. Government of N.W.F.P. etc.
(1985 CLC 814), the facts were
that the petitioner, Aslam Khan was allowed to
extract timber from Inder Sen Guzara, Compartment No. 1, Gilliant Forest
Division. Under Clause
19(d) of the Contract
Agreement the petitioner was to remove the timber
beyond the limits of the Depot by 9.8.1970 and
beyond the limits of Galies
before
24.8.1970. The petitioner could not remove the entire timber within
the stipulated period. Therefore, on his application
the time was extended by 45 days on 5.9.1970. The time was once again extended
by 40 days, but the
petitioner was
unable to remove the entire timber from the forests within
the extended
period. He applied third time for the extension of time but his application was
refused. It was directed by the Conservator of Forests,
Abbottabad, on 2-6-1971 that since a warning was administered while
granting
last extension that no further period will be granted, it was not a fit
case for acceding to the request of the
petitioner. It was also mentioned that
if snowfall had occurred then it
was the duty of the contractor to inform the
Divisional
Forest Officer to get the period of forest operations deferred
appropriately. For these reasons it was directed
that the balance stock in
forests as
well as in road side depots reverts back to the Government under
Clause 9(d) of the Agreement. The contract was
also terminated accordingly.
Relying
on AIR 1940 Sind 1 and PLD 1968 Lahore 923, it was held as
follows:-
"In the case in hand it is also clear
that time was not of the essence of
the contract and there were circumstances
which justified the
request
of the petitioner for the grant of further time to complete the
operation and his request was turned down without
any sufficient
cause.
*******************. Under Section 55 of the Contract Act,
1872 if it is not the intention of the parties
that time should be of the
essence of
the contract, the contract does not become voidable by the
failure to do such thing at or before the specified
time; but the
promisee is entitled to compensation from the promisor for
any loss
occasioned to him by such failure. In the facts and
circumstances of
the case it can
legitimately be inferred that the parties to the
contract never intended the time to be of the essence of the contract
and,
therefore, the termination thereof was not justified in law".
Similarly, in
Eskandar All v. Al-hamra
Begum
(PLD 1969 Dacca 214) the
following
view was expressed:-
.
"The question whether the time
mentioned in an agreement is or is
not of the essence of the contract depends
upon the intention of the
parties to the agreement which is to be gathered from'the
facts and
circumstances
of the case. The mere fact that certain time is
mentioned in the Agreement for the
performance of an act would
not
necessarily lead to the conclusion that the time specified was of
the essence of the contract. The real intention of
the parties to the
Agreement is the
determining factor, and it is to be deduced from all
the surrounding circumstances of the case. The
intention of the
parties can be best ascertained from the Agreement
itself. ***** As
the time specified in the
agreement for sale was subject to more than
one condition, it cannot be said that the parties thereto intended the
time
mentioned therein to be of the essence of the contract."
UThus, the time was not of the essence of the contract, and for this
reason
IJ
also, the impugned action of PASSCO cannot be sustained in law.
17. I have held above
that on the facts established on record, to the
extent of the petitioner, it was a case of novation of
contract and that the cut
off date,
viz:
30th
of May 2003, as originally provided in the Agreement, dated 31st of March 2003,
stood substituted as 22nd of July 2003 and the
petitioner was well within his right to claim the period of three
calendar
months in terms of Clause 11, to be reckoned with effect from
22nd of July
2003 and not from 30th of May
2003. Petitioner's substitution for the
original purchaser was also
permissible
vide
Clause 19 of the Agreement. PASSCO is, therefore,
estopped by its own words and conduct to press into
service the provisions of Clause 11 of the Agreement, compelling the
petitioner
to time as originally stipulated. Needless to add that the petitioner
had approached, through his counsel's letter, dated
28th of August 2003,
which was
written even before the expiration of the target date, as per the
original Agreement,
viz:
31st of August
2003 (three calendar months
reckoned from 31st of May 2003), wherein it
was
inter alia
mentioned as follows:-
"As the aforesaid wheat was meant for
export, my client had made
arrangements to export it to foreign countries and as
Clause 11 of
the agreement dated 31.3.2003 stipulates that documents of export
of wheat and or wheat
products have to be submitted within 3
calendar months after completion of lifting of wheat therefore, it
is
understood that lifting having been
allowed by you to be completed
by 22.7.2003, but these having been
already completed by 19.7.2003,
the period of 3 calendar months for submission
of export documents
to you
shall be either ending on 19.10.2003 or 22.10.2003. It shall
thus entitle my client to claim rebate of Rs. 2087
P.M.T."
"My client Mr. Javed Iqbal is
making all efforts to export the Wheat without any loss of time. But firstly,
due to litigation, as between the
parties, as indicated above, secondly, recent
rains at
Karachi
and
thirdly,
the problems created by disastrous episode of Greek oil
tanker, Tasman
Spirit, have all hindered the export performance of
my client."
"My client understands that after
the date of lifting of entire wheat
stock export documents can be submitted within 3 calendar months
so as to claim rebate."
During hearing of the petition, when
questioned, Kh. Muhammad Akram,
learned counsel for Respondent No. 1 frankly
stated that PASSCO will suffer
no loss if the petitioner exports wheat after the target
date. On the other
hand, the petitioner is bound to suffer loss if not allowed to export,
after
having
lifted such huge quantity of wheat, upon payment not only of its price
but 2% penalty as
well, on clear understanding that it was meant for export
and he would be entitled to the benefits
arising out of the Agreement, dated
the 31st
of March 2003. In the circumstances, there is neither any legal nor
moral justification to allow PASSCO being itself
beneficiary of the said
Agreement to
push the petitioner to wall, when his turn has come to derive
benefits
therefrom.
18.
Needless to mention that on 27th of October 2003,
during the
course of hearing of the case,
learned counsel for PASSCO
raised an
objection that the petitioner has not
approached the Court with clean hands
inasmuch as he had allegedly disposed of wheat in the market and no
stocks
were left with him for export. The petitioner sharply reacted to this assertion
and besides filing an affidavit, dated 31st of October 2003 controverting the
allegation, offered for inspection of his stocks by a Local Commission to be
appointed by this Court. After submission of
the said affidavit, since the
learned counsel for the respondent
did not press the objection any further,
the necessity to appoint a Local
Commission for the purpose stood obviated.
19.
As a last resort, learned counsel for'
respondent-PASSCO
submitted that there is eveiy likelihood of the petitioner not exporting
wheat
and by providing fake documents, he may get
benefits under the Agreement,
dated the 31st of March 2003. The
apprehension is not well-founded. The
draftsman of the said Agreement took special care in this behalf
vide
Clause
12, wherein production of almost all
requisite documents was made a
condition precedent to the release of
the amount of ungradation/export
expenses. Moreover, PASSCO retained authority to demand "any other
document" in proof of export
from the petitioner. Even PASSCO can depute
its own representative to be physically present at the time of shipment
of wheat by the petitioner. This should, therefore, allay all apprehensions
entertained by the said respondent.
20. For the foregoing reasons, this
petition is allowed, the impugned
letter,
dated 1st of September 2003 is declared to be illegal and without
lawful authority, consequently the petitioner
shall be entitled to a period of three calendar months from the date of this
judgment to export wheat stock purchased from PASSCO, and to submit, within the
said period of three
months, export
documents which shall be entertained by the said
respondent, and the petitioner shall be entitled to benefits in terms of
the
Agreement, dated the 31st of
March'2003, as if no breach thereof has taken
place. This order shall not, however, affect already recovered amount of
penalty
(liquidated damages) from the petitioner. There shall be no order as
to costs.
(B.A.)
Petition allowed.This judgment is reproduced from a publicly available source for informational purposes and does not constitute legal advice. If you believe this listing contains an error,
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