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Petitioner: SHAHZAD TRADE LINKS through Sole Proprietor and another VS Respondent: MTW PAK ASSEMBLING INDUSTRIES (PRIVATE) LIMITED through Representative and others
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar Title:SHAHZAD TRADE LINKS through Sole Proprietor and another vs MTW PAK
ASSEMBLING INDUSTRIES (PRIVATE) LIMITED through Representative and others Case No.: Suit No.975 of 2015 Date of Judgment:2015-09-18 Reported As: PLJ 2016 Karachi 8, 2016 CLC 83 Result: Application dismissed Judgment ORDER MUHAMMAD ALI MAZHAR, J: This order will dispose of CMA No.9104/2015 filed by the plaintif fs under Order XXXIX, Rules 1 and 2, CPC read with section 151, CPC. The brief facts of this suit for declaration and permanent injunction are that the plaintif f No.1 is a proprietorship concern and its proprietor is Shahzad Riaz who is also cofounder of plaintif f No.2 with the defendant No.2. The defendant No.6 is manufacturer of Belarus Tractors in the Republic of Belarus and plaintif f No.1 used to import tractors in Pakistan. On 12.1.2 015 the plaintif f No.1 through its proprietor and defendant No.4 entered into a memorandum of understanding (MOU) and Joint venture agreement in Karachi through which they agreed to form a company . Consequently a joint venture company i.e. The plaintif f No.2 was formed and the defendant No.5 was authorized by the plaintif f No.2 to sign all documents and transaction etc. With the defendant No.6. In the month of May, 2015, the plaintif fs came to know that the defendant No.2 who is also a shareholder of the plaintif f No.2 in connivance with defendant No.3 fraudulently incorporated a company i.e. Defendant No.1 for the same object and purposes without informing the plaintif fs and without taking their consent. 2. In the injunction application, the plaintif fs prayed for the following relief:- "For the facts and reason disclosed in the accompanying affidavit, it is most respectfully prayed on behalf of the plaintiff above named that this Hon'ble Court may be pleased to restrain the defendant No.2 and 3, its agent, servant and all persons claiming through or under him from entering into any agreement/license with the defendant No. 6 for import of Belarus Tractor and establishing of assembly Plant for assembling of Belarus Tractors and further restrain the defendant No.6, its agent servant and all person claiming through or under them from executing any contract and or license agreement with the defendant No.2 its company and or agent servant and all person claiming through or under for exporting Belarus tractor in Pakistan
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and granting license for establishment of Assembly Plant for assemblin g of Belarus Tractors of the defendant No.6, in Pakistan except through plaintiffs. And also further restrain the defendants Nos.1 and 2 from committing breach of terms of MOU dated 12.01.2015, Joint V enture Agreement. Furthermore, restrain the defendant No.1, its Directors i.e., Defendants Nos.2 and 3 and 4 and or any other person acting on their behalf including the defendant No.6 from carrying on any trade and business relating to Belarus Tractors-510 or taking any steps and or entering into any agreements in relation to sale, and or towards establishment of Assembly Line for manufacture of Belarus Tractors-510 in Pakistan, till the final disposal of the suit. Ad-interim order is solicited. The above prayers are made in the interest of justice". 3. The matter was fixed for orders on injunction application on 9.6.2015, when the learned Single Judge was pleased to issue notice to the defendants through all modes except publication , however till the next date of hearing, ad-interim order was granted as prayed. Against the interim order dated 9.6.2015, the defendant No.1 filed HCA No.195/2015 which was disposed by the learned division bench in presence of counsel for the appellants and respondents Nos.1 and 2 in the following terms:- " This appeal arises from the order passed by the learned Single Judge on application under order XXXIX Rums 1 & 2 CPC, filed by the plaintiffs (respondent herein) and on the very first day when the same was fixed for orders all the prayers made therein were granted. There is no discussion on the factual aspect while granting such ad-interim order . In any case as the order was ad-interim, the opportunity to seek its recall is still available with the appellants. It is pointed out that the impugned restraint order is adversely affecting the day to day business affairs of the appellants as 300 Tractors, which were imported are stuck up at the Port. In case the respondents/plaintiffs succeeded in the suit, the monetary compensation can be claimed with regard to any benefit derived on these 300 Tractors that have already been imported. We, therefore, while disposing of this High Court Appeal hold that the appellant shall be free to seek release of 300 Tractors so that their commercial interest is not jeopardized. With these directions this appeal stands disposed of. " Though in the HCA order , the learned division bench while disposing of appeal allowed the appellants to seek release of 300 tractors so their commercial interest may not be jeopardized but defendant No.1 also filed Civil Petition No.2286/2015 in the Supreme Court and vide order dated 7.9.2015, this civil petition was disposed of by the hon'ble Supreme Court in the following terms: " 2. In view of the above, this petition is disposed of with the observation that in pending suit No.975/2015, the learned Judge seized of the matter in the High Court of Sindh shall hear and decide C.M.A. No.9104/2015 finally within two weeks from today . In case of failure, the ad-interim order passed on the said application on 09.06.2015 shall stand vacated. A copy of this order be sent to the Registrar , High Court of Sindh for information and record. " 5. Since the learned judge seized of the matter , vide order dated 18.6.2015, directed the office not to fix this matter before him in future with connected suit, therefore, the office had fixed the matter before me. The Learned counsel for the plaintif fs referred to page 51 of the court file which is a MOU signed on 12.1.2015 between the plaintif f No.1 and defendant No.4 through which an understanding was developed for the improvement of procedure for the organization of sales of tractors manufactured by defendant No.6 and parties agreed to establish a company "Pak Belarus Industries Inc." in Pakistan, thereafter , learned counsel also referred to page 61 which is an agreement of joint venture between the plaintif f No.1 and defendant No.4. This joint venture agreement was made for creation of assembly line for tractors, establishment of a service centre for the provision of warranty , post-warranty services for tractors produced by JSC "MTW". They further agreed that Private Limited Company will be incorporated in Pakistan under the name and style of "MTW Pak Industries (Private) Limited." (i.e. Plaintif f No.2). In clause 10 it was agreed that the first party plaintif f No.1 shall advance and finance for the delivery of 732 units of MTW tractors, which will entitle the proposed company to get right of sole and exclusive agency for Pakistan. Learned counsel
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also pointed out clause 15, in which it was agreed that agreement shall continu e with full force and effect until commencement of the winding up proceedings, the parties unanimously agreed in writing to replace this agreement or winding up, receivership, insolvency or administration of any of the parties. This agreement was executed between the plaintif f No.1 and defendant No.4. Thereafter , the learned counsel referred to page 85, which is memorandum and articles of association of MTW Pak Industries (Pvt.) Limited, in which the proprietor of plaintif fs No.1 Shahzad Riaz and defendant No.2 are the shareholders. In order to show the nexus of defendant No.6 with the joint venture agreement of the company incorporated in Pakistan, the learned counsel further referred to page 57 which is a letter dated 10.2.2015, sent to the Council of Ministers, Republic of Belarus in which it was communicated that the registration of "MTZ Pak Industries Ltd." company founde d by Belarussian Investors and "Shahzad Trade Link" company has been finalized. Shahzad, Trade Link Company has been chosen as a co- founder of the newly established Company on the ground of its actual financial potential and cooperation experience with MTW over 2007 to 2014 period 26493 tractors were delivered to this partner . It is further stated in the same letter that Shahzad Trade Link has established letter of credit for supply of 732 tractors. It was further contended by the learned counsel that the defendant No.4 bypassed MOU and joint venture agreement and created defendant No.1 through defendant Nos.2 and 3 while defendant No.2 is also Director of the plaintif f No.2 but they have fraudulently and due to some misrepresentation and concealment formed defendant No.1 with slight change of name. The defendant No.2 and defendant No.4.1 are the same person who has 42% shareholding in the plaintif f No.2 but he possesses 99% shareholding in the defendant No.1 while the defendant No.3 has only 1% share in defendant No. 1 . Learned coun sel also shown the grievance that the defendant No.2 did not invest any amount in plaintif f No.2 despite having 42% share but all the formalities required for incorporation were completed by the plaintif f No. 1. Learned counsel for the plaintif f has also attached draft of unsigned agreement exchanged between the defendant No.6 and plaintif f No.2 for the SKD Belarus tractors in which it was stated that the delivery and assembling of goods would be effected on the basis of license agreement dated 31.3.2015. He then drawn my attention to license agreement for trade mark dated 31.3.2015 which is also unsigned. These documents are available in court file from pages 201 to 237. Learned counsel further referred to a sale agreement dated 30.4.2015 which was signed between Adam Motors Company Ltd. And the proprietor of plaintif f No.1 and argued that in order to assemble the tractors in Pakistan the proprietor of the plaintif f No.1 purchased Adam Motors Company equipped with plant and machinery and other assets. The court asked a question how the plaintiff can rely upon an unsigned agreement to show the relationship of an agent. The learned counsel then referred to Pages-293 to 339 and argued that earlier he referred to the unsigned copies, but subsequent agreements were signed by the Director of the plaintif f No.2 on 30.4.2015 and forwarded the same to defendant No.6 for their signatures but he admitted that the defendant No.6 never signed any such agreement. 6. It was further averred that the plaintif fs came to know in the month of May, 2015 that the defendant No.2 in collusion with the defendant No.3 and defendant No.4.2 incorporated the defendant No.1 for the same object and purpose without informing the plaintif f and without taking his consent, but on the basis of forged and fabricated documents they applied for incorporation. A news was published on 5.6.2015 that the first Deputy Director Minsk Tractor (MTW) and defendant No.2 have created a new assembly plant in Hub under the joint venture of defendant No.1 and Omni Group. He further argued that proprietor of plaintif f No.1 has also filed a Constitution Petition No.D- 2898/2015 which is pending in this court. He further argued that though the defendant No.2 is shareholder of plaintif f No.2 but he failed to contribute a single rupee in equity of the company despite making request by the plaintif f No.1 on several occasions. He further argued that the plaintif fs incurred heavy amount for establishing assembly plant at Karachi, therefore, the defendant No.6 cannot enter into any agreement with defendant No.2. The plaintif fs have a prima facie case, balance of convenience lies in their favour and in case the injunction application is dismissed they will suffer irreparable loss. However , he admitted that there is no concluded contract with the defendant No.6 but some draft of agreements were exchanged between the plaintif fs and the defendant No.6. He claims that in view of the oral agreements the plaintif fs are entitled for injunctive relief. The Learned counsel for the plaintif fs relied on 1999 CLC 1989 (Nizam Hashwani v. Hashwani Hotels Limited & others), in which
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it was held that "prima facie, function of court was to ensure smooth and effective running of a company and at the same time not to permit any member , Director or even a shareholder to violate any provisions of Memorandum and Articles of Association or provisions of Companies Ordinance, 1984. Plaintif f/petitioner had successfully established a good prima facie case for grant of interim injunction. Other two ingredients namely suffering of irreparable loss and injury and balance of convenience were also present in plaintif f/petitioner's favour . Interim injunction was granted to plaintif f/petitioner , in circumstances, till final decision of the case". 7. Mr. Behzad Haider , Advocate for the defendants Nos.1 to 4 and 6 argued that the contract dated 9.12.2014 is between the plaintif f No.1 and the defendant No.6 but it has nothing to do with joint venture agreement or the incorporation of plaintif f No.2. So far as the license agreement dated 31.3.2015 is concerned it was merely a draft, but it was never signed by the defendant No.6, so this cannot be considered a contract. He also referred to clause 14.1 of the same agreement, in which it is clearly mentioned that the agreement is valid for a period till 31.12.2016 and will become effective from the date of signing by both the parties. Learned counsel argued that the said license agreement never acquired a status of concluded contract simply for the reasons that it was not signed by the defendant No.6. Learned counsel also referred to an email dated 8.5.2015 (page 357 of the court file) communicated by the defendant No.6 to the proprietor of plaintif f No. 1. Through this email various concerns had been shown by the defendant No.6 including that the draft of commercial contract and license agreement signed by the plaintif f will not be taken into consideration for the reasons that the draft of contract was provided for consideration and comments as a draft only, but not a final document to be signed. Besides, other reasons which are self-explanatory it was further stated in the email that it is not acceptable to have contracts be signed by the person other than indicated in preamble of the document and finally it was stated that MTW has no legal basis to consider L.C. Draft as they do not have any official ground in favour of valid contract signed by both the parties. He also referred to Page-775 of the court file, which is a license agreement executed between the defendant No.1 and defendant No.6 through which exclusive rights for Belarus trademark were conferred to defendant No. 1. Learned counsel also invited my attention to page-661 which is a termination letter dated 17.6.2015 and argued that through this termination letter even the agreement dated 9.12.2014 entered into between the defendant No.6 and the plaintif f No.1 was also terminated, which is available at Page-849. He further argued that there is some typing error in the termination letter and instead of 9.12.2014 the date 9.12.2015 is typed which is merely a typing error but the contract number mentioned in the termination letter and the agreement dated 9.12.2014 is one and the same. He further referred to L.C. Documents available Page-373 to on wards to show that the tractors were imported by the plaintif f No.1 on the strength of agreement dated 9.12.2015 which were being imported in the individual capacity of plaintif f No.1 and not by the plaintif f No.2. So far as the relationship of the defendant No.1 with Omni Group is concerned, the learned counsel argued that the Omni Group have been given 50% share in the defendant No.1 for using and allowing their plant and machinery for assembling purposes. He further argued the proprietor of plaintif f No.1 has already filed a constitution petition in this court which is pending and similar relief has been sought in the petition but since no interim orders were granted therefore, the plaintif fs have filed the suit. He further argued that the plaintif fs have failed to make out any prima facie case and there is also no question of balance of convenience or irreparable injury rather on account of ad-interim order granted by this court as prayed which in fact amounts to grant of final relief in shape of interim relief, the defendants are suffering from problems and monetary losses. In support of his arguments he relied upon 2007 MLD 2019 (M/s. Maxim Advertising Company (Pvt.) Ltd. v. Province of Sindh & others) in which the learned division bench of this court held that irreparable losses would mean and imply such loss which is incapable of being calculated on yardstick of money . Contracts involving collection of monetary benefits having been obtained on specif ic monetary consideration, could not involve irreparable loss. No injunction can be issued unless all required ingredients namely prima facie case, balance of convenience and irreparable loss to aggrieved party , were found to subsist. 8. Heard the arguments. It is an admitted fact that before filing the suit the proprietor of the plaintif f No.1 who is also shareholder/director of the plaintif f No.2 filed a Constitution Petition No.2898/2015. (Copy of memo of petition is available at page-953) and the respondent Nos.3, 4 and 5 in the petition are the same as defendant Nos.2, 3 and
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4.2 of this suit. In the petition the plaintif fs have sought the direction against the official respondents including SECP to take action against the respondents Nos.3 to 5 and restraining order was also sought against the respondent Nos.3 and 4 from operating the company which is defendant No.1 in the suit. In the injunction application filed in the constitution petition prayer has been made to stay all busine ss doing by the defendant Nos.3 and 4 under the name and style of (MTW Pak Assembling Industries (Pvt.) Ltd). However , learned counsel for the plaintif fs admitted that no restraining orders were passed in the constitutional jurisdiction but during pendency of the petition he has filed the suit on 9.6.2015. No doubt by dint of joint venture the plaintif f No.2 came into existence and the defendant No.2 is also shareholder but the fact remains that this company was never conferred any agency or franchise by the defendant No.6 to claim any exclusive-right or agency in Pakistan. In the JV Agreement, it was the responsibility of plaintif f No.1 to run assembly plant and service centre of necessary attributes such as allocation of land, buildings and structure s, technological equipment's, human resources and obtaining necessary licenses and permits from government of Pakistan. In order to show the fulfillment and conformity of its role, only a copy of sale agreement dated 30.4.2015 with Adam Motor Company limited has been bring forth which shows advance payment of 29,00,000/- with balance payment of Rs.261,000,000/- and completion date of transaction was not later than 19th May 2015. Though a plea of irreparable or irretrievable loss was taken but the plaintif fs failed to place on record any conveyance deed if registered before the concerned registrar for materializing and finalizing the deal with Adam Motors and without having required infrastructure or assembling plant or transfer of technology , they are claiming exclusive rights and wish for restraining order against the defendants particularly the defendant No.6 not to engage in any business activity with defendant No.1 which has already activated its assembling plant before filing of this suit with the collaboration of another group under a valid license of defendant No.6. Nothing in support of interim relief argued that the plaintif fs have done substantial acts or suffered losses in consequence of contract capable of specific performance as provided under Section 22 of Specific Relief Act. 9. The exclusive right is conditional to the accomplishment agency contract or license. According to Section 182 of the Contract Act an agent is a person employed to do any act for another or to represent another in dealings with third person. The person for whom such act is done or who is so represented is called the principal. The basic ingredient of contract of agency includes that the agent has a power on behalf of principal to deal with third person as to bind the principal the subject matter of the agency has to be dealt with as proprietor of principal and not of the agent. The agent acts as intermediary for consideration. In ordinary legal parlance and phraseology the agency is a relation between two parties created by agreement express or implied by which one of the parties confides to the other management of same business to be transact in his name or his account and by which the other assume to do the business and for render an account of it. 10. I have mentioned the various documents in the chronological order referred to by the learned counsel appearing for the parties. In order to reach just and apt conclusion, it is imperative to first look into whether there is or there was any concluded contract between the plaintif fs and the defendant No.6 or not? Though the learned counsel for the plaintif fs pointed out correspondence anterior to exchange of draft of license agreement for negotiation purpose but when the draft of license agreement by which rights were to be given to the plaintif fs for assembling the tractors reached to the plaintif fs, the agreements were signed and forwarded to the defendant No.6 for their signature but the defendant No.6 never signed any such agreement rather they communicated their disagreement for various reasons through their email that the draft of contract was provided for consideration and comments as a draft only but not a final document to be signed. So far as the import of tractors directly by the plaintif f No.1 is concerned, the L.C(s) were opened vide contract No.112/00236091/140135-1 dated 9.2.2014 which is not the subject matter of the suit. It is an admitted fact that even no relief has been claimed by the plaintif fs in the suit in relation to aforesaid contract which is an independent entity with plaintif f No. 1. So far as the plaintif f No.2 is concerned, no L.C. Was opened by this joint venture company for the import of tractors from defendant No.6 rather the plaintif f No.1 shown the grievance that the defendant No.2 failed to invest any amount in the joint venture company despite having 42% shares. 11. Though this is a suit for declaration and permanent injunction but in the prayer clause (a) the plaintif fs have also sought direction against the defendant Nos.2 to 5 to specifically perform their contractual obligations under the
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MOU, joint venture agreement and license agreement, which was signed by the plaintif f on 30.4.2015 and transmitted to the defendant No.6 for their signature but it was refused for the reasons mentioned in the email of defendant No.6. Even in the case of authentically and validly executed contract between the parties, the court has to visit section 21 of the Specific Relief Act germane to the contract not specif ically enforceable. The learned counsel adopted a line of argument that though the contract was not finally execu ted with the defendant No.6 but surrounding circumstances profusely demonstrate that the plaintif fs and the defen dant No.6 were engaged in the correspondence, so the plaintif fs are entitled for the specific performance. Section 21 of the Specific Relief Act pertains to the contract not specifically enforceable which includes a contract for the non-performance of which compensation in money is an adequate relief. A contract which is in its nature revocable cannot be specifically enforced. The specific performance is an equitable relief which is not granted as a matter of course or as a matter of right but it is in the discretion,of the court to be exercised on the basis of established sound and judicial principles and or consideration of circumstances of each particular case. In order to invoke the specific performance it is necessary that there should be a contract, enforcement of which is not barred in the Act; the act to be done is in respect of trust and there is no standard for ascertaining the actual damage caused; pecuniary compensation is not adequate relief and the court deems it fit to exercise its discretion in favour of the plaintif fs. 12. The defendant No.6 has executed the agreement with the defendant No.1 on 27.4.2015 and the plaintif fs have themselves mentioned in paragraph 31 of the plaint that a news item was published in the daily Jang on 5.6.2015 relating to inauguration of assembly plant in Hub by the…
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