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Petitioner: MESSRS BUBNA MORE & CO. (PAKISTAN) LTD. CHITTAGONG VS Respondent: MESSRS MODERN TRADING CO. (PAKISTAN) LTD.CHITTAGONG
P L D 1960 Dacca 668
P L D 1960 Dacca 668
Before Akbar and Asir, JJ
MESSRS BUBNA MORE & Co. (PAKISTAN) LTD. CHITTAGONG‑Appellant
versus
MESSRS MODERN TRADING Co. (PAKISTAN) LTD. CHITTAGONG AND ANOTHER‑Respondents
First Appeal No. 137 of 1954, decided on 16th February 1960.
(a) Civil Procedure Code (V of 1908), S. 20 Explanation II- Foreign Company not resident in country entering into contract through agent in Pakistan‑Extent of authority of agent not such as to indicate that company did business by them‑Company sued on basis of contract in Pakistan‑Company not amenable to jurisdiction of Pakistan Courts.
Where a foreign company, not resident in Pakistan, entered into a contract with a local company through an agent residing in Pakistan but whose extent of authority was not such as to indicate that the foreign company did business by them, in a suit based upon such a contract, it was held that although the foreign company as principal was admittedly bound by the terms of the contract made on their behalf and by their authority yet it‑ was not amen able to the jurisdiction of the Courts in Pakistan.
Dunlop Pneumatic Tyre Company, Limited v. Actien‑Gesellschaft and Fur Motor Und Motorfahrzeugbau Yorm. Cudell & Co. (1902) 1 K B 342 ref.
Messrs Eagle Star Insurance Co. Ltd. v. Messrs Rahmania Trading Company Civil Revision Case No. 408 of 1958 (unreported) rel.
(b) Contract Act (IX of 1872), S. 230‑Application.
There was a contract between the plaintiff company and foreign company through their agent in Pakistan. Throughout the body of the contract the foreign company bad been described as principal. Further, the Arbitration clause in the contract clearly asserted that the Agent would have no personal liability in the matter. It was held that in such circumstance no question of undisclosed principal could arise in the case and therefore, section 230 of the Contract Act, 1872 was not applicable so as to make the agent liable for any loss sustained by the plaintiff company.
Fazal Illahi v. The Imperial Chemical Company, Delhi 67 I C 157 disting.
Sirdar Gurdyal Singh v. The Rajah of Faridkote 21 I A 171 ref.
B. C. Das and S. C. Bose for Appellant.
S. M. Hossain for Respondents.
JUDGMENT
AKBAR, J.‑This first appeal by the plaintiff, Messrs Bubna More & Co. (Pakistan), Ltd. (hereinafter referred to as the Company), arises out of a suit filed by them for recovery of Ks. 39,000 under the following circumstances.
2. The said Company carried on business at Korbaniganj, Chittagong. The case set up by them in the plaint is that they agreed to purchase from defendant No. 2, Messrs Cotonificio Villorio Oleese, Milan (hereinafter referred to as the foreign Company), through their Agent, defendant No. I Messrs Modern Trading Co. (Pakistan) Ltd. (hereinafter referred to as the Agent), 125 bales of CHANDTARA brand cotton yarn under two contracts in writing dated 3‑10‑51 and 12‑10‑51 respectively, and opened irrevocable Letters of Credit in favour of the foreign Company for total value of the contracted goods. The contracted cotton yarn reached Chittagong Port in early 1952 in two lots by S. S. Onda and S. S. Laagerk. The Company on taking delivery found that the bales were not booked according to standard packing and hence they had the cotton yarn surveyed by Messrs K. Khalil & Co. The survey report showed a total shortage of 12,500 lbs. of cotton yarn. They also found that the yarn supplied was not according to standard specification. They then submitted their claims for the shortage along with the survey report to the Agent. As the Agent failed and neglected to pay their claims, they filed this suit for recovery of a sum of Rs. 39,000.
3. Only defendant No. 1, Messrs Modern Trading Co. (Pakistan) Ltd., i e. the Agent, filed a written statement denying their liability under the contracts mainly on the ground that the contracts were with the foreign Company and that they, as Agent, undertook no personal liability in the matter.
The learned Subordinate Judge who tried the suit found:
(i) that he had no jurisdiction to entertain the suit as against defendant No. 2, the foreign company ;
(2) that defendant No. 1, the Agent, was not liable for the amount claimed in the suit ; and
(3) that the plaintiff ‑Company had also failed to prove the alleged short delivery of the cotton yarn.
In this view of the matter, he dismissed the suit.
4. Mr. Das, the learned Advocate for the appellant, has first contended that the foreign Company was doing business in Chittagong by their Agent, Messrs Modern Trading Co. (Pakistan) Ltd., and hence they were liable for the amount claimed in the suit. In support of his contention, he has relied on the decision in the case of Dunlop Pneumatic Tyre Company, Limited v. Actien- Gesellschaft Fur Motor Und Motorfahrzeugbau Vorm. Cudell & Co. ((1902) 1 K B 342). In the said case, Collins M. R., observed at page 346:
"It has been held in a number of cases, beginning with Newby v. Van Oppen L R 7 Q B 293, and ending with the case of La Bourgogne (1899) L I that the true test in such cases is whether the foreign corporation is conducting its own business at some fixed place within the jurisdiction, that being the only way in which a corporation can reside in this country. It can only so reside through its agent, not being a concrete entity itself ; but, if it so resides by its agent, it must be considered for this purpose as itself residing within the jurisdiction.
Therefore the question is whether the foreign Company was carrying on their business in this country by their Agent, Messrs Modern Trading Co. (Pakistan), Ltd., in, such a way as to be resident within the jurisdiction.
5. The plaintiff‑Company have described defendant No. 1, Messrs Modern Trading Co. (Pakistan), Ltd,, in the plaint as the local Agent of the foreign Company. In paragraph 1 of the plaint they clearly say that the said foreign Company has got no place of business in Pakistan. In paragraph 2 of the plaint it is stated that the plaintiff agreed to purchase from the foreign Company cotton yarn "through the agency of defendant No. 1." The plaint also shows that they established Letters of Credit in favour of the foreign Company.
6. The contracts also show that the Agent entered into the said contracts on behalf of the foreign Company. All through the contracts the foreign Company was described as the principal and the Modern Trading Company as the Agent. The corres pondence that passed between the parties also shows that the plaintiff‑Company treated defendant No. 1, Messrs Modern Trading Co., as the Agent of the foreign Company.
7. On 19‑2‑52, the plaintiff‑Company wrote to the Agent that a copy of their letter regarding shortage "should be forwarded to your Principals in Italy." On 15‑3‑52, they wrote:
"We are, however, confident that you will strongly stress the matter to your principals and request them to compensate us for the loss."
On 28‑3‑52, they again wrote:
" . . . . kindly arrange with your principals for an early settlement of our claim."
From the above it is clear that the foreign Company not only never carried on business in this country but they also never gave any such impression to the plaintiff‑company. Furthermore, in this case, we find no such elements or condition from which it can be inferred that the foreign Company was conducting its business by its agent at some fixed place in this country. In other words, in this case, there are no such elements necessary to constitute residence within the jurisdiction. We are therefore, unable to accept the contention of Mr. Das.
8. We may here notice an unreported decision of this Court in the case of Messrs Eagle Star Insurance Company, Limited v. Messrs Rahmania Trading Company (Civil Revision Case No. 408 of 1958) in which one of us was a party. In the above case, Rahmania Trading Company sued for recovery of certain sums on the ground that the insured goods had been damaged by the perils of the sea. The Insurance Company's main contention was that the Court had no jurisdiction to try the suit. The Court, after referring to the various decisions including the decision in the case of Dunlop Pneumatic Tyre Company, held:
"There is nothing in the judgment of the Court below to show that the extent of authority of the agent was such as to indicate that the petitioner Company did business by them. Even if they did business through them as agent, that alone would not make the Company amenable to the jurisdiction of Chittagong Court. For these reasons, we are of the opinion that even on the finding of the learned Subordinate Judge the defendant Company in this case did not reside or carry on business within the jurisdiction of the Court below."
We understand that this judgment has been upheld by the Supreme Court in C A 22‑D of 1959 (1). We have already found that upon the construction of the written contracts it is not open to any doubt that the contracts were between the plaintiff‑Company and the foreign Company. The contracts say so in plain terms. Further the plaintiff's letters also show that they treated Messrs Modern Trading Co. as Agent of the foreign Company. There is nothing to show that the foreign Company acted by the said Agent in this country. Hence the unreported decision referred to above is fully applicable to this case.
9. The foreign principal is admittedly bound by the terms of the contracts made on their behalf and by their authority. They, however, did not carry on any business by an Agent of this country. We have also found that the foreign Company was not resident in this country. From the order, dated 14‑3‑53 passed by the learned Subordinate Judge, it appears that the summonses had also not been properly served on them. In these circum stances, no decree could be pronounced against the said foreign Company by this Court. I may further observe that a decree pronounced in absentia by this Court, to the jurisdiction of which the foreign Company has not in any way submitted themselves, will by International Law be an absolute nullity : See Sirdar Gurdyal Singh v. The Rajah of Faridkote (21 I A 171).
10. The next question is if the Agent is liable for the claim in this suit. Mr. Das has contended that notwithstanding the terms of the contract that the Agent is only an Agent, it is possible to imply a contract that the Agent will accept liability as the principal. In support of his contention, he has relied on the following terms and conditions in clauses B and C of the Contract.
"B.‑Failure to Establish Letters of Credit
Should the Buyers from any cause whatsoever fail to open an irrevocable Letter of Credit within 5 days of being called upon to do by the Firm the Buyers hereby undertake to compensate the principals and the Firm for loss of profit by payment of an amount equal to 15% of the C. I. F. or F. O. B. value of this Contract as the case may be according to the Price terms men tioned in the face of this Contract. This amount shall be paid to the Firm in Chittagong/Calcutta. Such compensation shall be in addition to the payment of all other losses or damages and the Principals and Firm will be at liberty to consider the Contract as cancelled, the Principals of the Firm may at any time or times either at the place of shipment or at the place of destination or any other place or places thereafter without notice to the Buyers re‑sell the goods or any part thereof and/or the documents in respect of the same as they may think fit on account and risk of the Buyers, by Public Auction or by private treaty. Upon any such resale the Buyers shall pay to the Principals or the Firm forthwith on demand any shortfall, deficiency or loss resulting from such resale and all costs, charges, and expenses incidental thereto and the Buyers waive all claims to any advantages to the Principals or the Firm on any such resale.
C.‑Payment against Shipping Documents.
If payment as mentioned in the face of the contract is to be made against shipping documents, payment shall, on receipt by the Buyers of notice to pay, be made forthwith to the Principals or to the Firm or to their order in cash at Chittagong/Calcutta against shipping documents which shall consist of:‑--
(i) The Principals' or the Firm's Invoice ;
(ii) Bill of Lading or at the Principals' or the Firm's option delivery order or Letter of Guarantee or Delivery Telegram.
(iii) Policy of Insurance or at the Principals' or the Firm's option Certificate of Insurance or Letter of Insurance.
No payment or any part thereof when due hereunder shall under any circumstances be withheld by the Buyers owing to any claim whatsoever in respect of the goods and all such claims if any shall be notified in writing to the Firm in accordance with clause 10 of this Contract. Interest will be charged to the Buyers at the rate of 6% per annum on all amounts remaining unpaid to the Principals and/or the Firm after the same shall have become due and payable hereunder to the principals and/or the Firm."
He has relied on the side‑lined portion of the clauses referred to above. Mr. Das has argued that in certain eventuality the payments were to be made to the Agent and hence the Agent was also bound by the contract.
11. We are, however, unable to infer from the above clauses that the Agent made himself liable under the contract. Under clause (B), the buyers undertake "to compensate the principal" in the event of his failure to open Letters of Credit. Then it says that the said compensation shall be paid to the Agent in Chittagong. The clauses B and C clearly show that the Agent was to receive the payments on behalf of his principals. We have really failed to appreciate how these clauses can be interpreted to mean that the Agent was making himself liable for the contracts.
12. On the other hand, the arbitration clause clearly shows that the Agent was not accepting any liability under the said contract. The said Arbitration clause is as follows
"C.‑Arbitration.
In the event of any dispute as to quality, damage, difference from samples and any other reason whatsoever of any shipment such dispute shall be referred by the Buyers and the Firm to the authorised Chamber of Commerce of either dominions whose decision shall be conveyed and/or communicated to the Principals but the Buyers specifically and absolutely absolve the Firm [Modern Trading Co. (Pakistan), Ltd.] from any liability arising from such a claim and the Buyers shall not hold the Firm responsible for payment of any claim should it arise."
From the other parts of the contracts also, we can find no trace of any intention on the part of the Agent to incur any personal liability in the contracts in question. We are, therefore, unable to accept Mr. Das's contention that it was possible to imply from the contract that the Agent had accepted liability as Principal or otherwise. Here we may mention that the buyers looked for payment to the Principals is also clear from the letters referred to in the earlier part of the judgment.
13. Mr. Das has next argued that defendant No. 1, Modern Trading Co. (Pakistan), Ltd., has not acted merely as an Agent but also conducted themselves in a manner as if they were the Principals and hence they were liable under section 230 of the Contract Act. In support of his contention, he has relied on the decision in the case of Fazal Illahi v. The Imperial Chemical Company, Delhi (67 I C 157).
The opening words of the contract are "between Messrs Bubna More & Company (Pakistan), Ltd., and Messrs Modern Trading Company (Pakistan), Ltd., on behalf of Messrs Cotonificio Vittorio Oleese, Milan." The contract then recites : "Messrs Bubna More & Co. (Pakistan), Ltd., having my/our place of business at 1Cdrbaniganj, Chittagong (hereinafter called the 'Buyers') hereby jointly and severally agree to purchase from Messrs Cotonificio Vittorio Oleese Milan (hereinafter called 'the Principals') through the agency of Messrs Modern Trading Co. (Pakistan), Ltd., (here inafter called 'the Firm')." It is thus clear that no question of undisclosed principal arises in this case. Throughout the body of the contract the foreign Company has been described as the Principal. The letters of the plaintiff‑Company also show that they looked to the Principal for payment. Lastly, in view of the conclusive assertion in the Arbitration clause, namely, that "the Buyers specifically and absolutely absolve the Firm Modern Trading Co. (Pakistan), Ltd., from any liability arising from such a claim and the Buyers shall not hold the Firm responsible for payment of any claim should it arise," it cannot be said that the provisions of section 230 of the Contract Act are attracted to this case.
14. The decision in the case of Fazul Illahi v. The Imperial Chemical Company, Delhi, on which Mr. Das has relied is not of much assistance in this case.
15. In the said case, the Imperial Chemical Company, Delhi, placed orders with Fazal Illahi for some acid to be imported from Japan and claimed to recover from him the amount which they had to pay on account of surcharges owing to shipments having been made late. The defendant denied his liability mainly on the ground that the contract was with the merchant in Japan and the defendant was "merely their Agent." The Court found that the Company looked to the defendant for performance of the contract, that the correspondence between the parties showed that the plain tiffs were dealing with the defendants in the matter, and that the contracting parties were the plaintiffs and the defendant. Hence the Court held (1) that there was nothing to show that the defendant was acting only as an Agent for the dealer in Japan and hence he was liable for the amount claimed in the suit and (2) that even if the defendant was acting as an Agent for the foreign principal the presumption contained in section 230 (1) of the Contract Act had not been repelled.
16. In the instant case, we have found that the contract was between the plaintiff‑Company and the foreign Company through their Agent in Chittagang. Further, the Arbitration clause in the contract clearly asserts that the Agent will have no personal liability in the matter. Hence the presumption raised by section 230 (1) is rebutted here. Thus this case is clearly distinguishable from Fazal Illahi's case. In the instant case, the foreign Company was the seller. The Modern Trading Company (Pakistan), Ltd., undertook no personal liability. In view of the clear terms of the contract, we have also held that section 230 of the Contract Act is not applicable to this case. Under all these circumstances, we have come to the conclusion that the Agent, the Modern Trading Co. (Pakistan), Ltd., is not liable and we do not think the mere circumstance that they had a foreign principal is enough to make them liable.
17. Before leaving this case, we would like to observe that, as the Surveyor was not examined in this case, the learned Sub ordinate Judge was unable to accept the plaintiff's story of short delivery. We do not express any assent or dissent with the said findings. It is true that the plaintiff should have examined the Surveyor. In view of our findings that this suit does not lie against defendant No. 2, the Foreign Company, and that the Agent, defendant No. 1, is also not liable for the amount claimed in the suit we do not think any useful purpose will be served by remand ing the case to enable the plaintiff Company to examine the said Surveyor.
18. For the reasons given above, we are of opinion that the judgment appealed from is right.
19. The appeal is, therefore, dismissed. Having regard to the facts and circumstances of the case, we direct that each party will bear its own costs throughout.
ASIR, J.‑I agree.
Appeal dismissed.