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Petitioner: Bank Alfalah Limited VS Respondent: Punjab Small Industries Corporation
Court Name: Lahore High Court Judge(s): Abid Aziz Sheikh, Muhammad Sajid Mehmood Sethi Title: Bank Alfalah Limited vs Punjab Small Industries Corporation Case No.: Case No. R.F.A No.29881/2017 Date of Judgment:2021-10-13 Reported As: 2021 LHC 5648 Result: Accordingly dismissed
JUDGMENT
JUDGMENT ABID AZIZ SHEIKH, J.- This appeal under section 96 of the Code of Civil Procedure, 1908 (CPC ) is directed against the judgment and decree dated 27.2.2017 (impugned judgment) passed by learned Civil Court, Lahore whereby suit filed by respondent agains t the appellant for recovery of Rs.8,01,78,996/- alongwith profit at the market rate from the date of maturity of Anmol Deposit Certificates purchased on 04.7.2002 till its realization was decreed in favour of the respondent. Brief Background:-. 2. The relevant facts are that appellant with the approval of State Bank of Pakistan launched an investment scheme in the name of Anmol Deposit Certificates (Certificates ). The appellant wrote letter to respondent dated 02.7.2002 (EX-D7) which states that profit at the rate of 15% would be given for seven years on the certificates. The respondent wrote letter dated 03.7.2002 (EX-D8) stating that respondent intends to invest Rs.190 Million of its pension fund in the certificates in two different denominations. On 04.7.2002, two Directors of respondent signed application form for the issuance of certificates. On 04.7.2002, Rs.190 Million was credited to the respondent pension fund account bearing No.02918061 (EX-D40). The appellant on 18.7.200 2 informed respondent that rate of profit has been reduced (EX-D1). The appellant wrote another letter dated 17.6.2003 (EX-D1 1) again informing the respondent that rate of profit has been reduced to 8%. Thereafter , appellant wrote letters dated 11.7.2003, 23.7.2003 and 24.7.2003 (EX-D12 to EX-D14) requesting respondent to accept revised rate of profit. The respondent vide letter dated 23.1.2004 (EX-D15) stated that new rate of profit is unacceptable to the respondent and respondent is entitled for profit @15% per annum. The appellant wrote letter dated 16.4.2004 (EX-D16) informing that the rate is in accordance with the rules and profit of 15% cannot be acceded to. On 25.8.2004, the respondent served a legal notice (EX-D17) demanding profit at the rate of 15% per annum for period of seven years in terms of appellant letter dated 02.7.2002 (EX-D7). The appellant responding to the legal notice on
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21.9.2004 (EX-D18) stating that the investment in certificates are done in Islamic mode on profit and loss share (PLS) basis, therefore, any contract for a fixed rate of interest would be void. The respondent in response filed first civil suit on 03.1.2005 challenging the appellant' s various letters informing respondent about revised rates, as being unlawful. The Civil Court granted interim relief against said letters vide order dated 1 1.1.2005 (EX-D9). 3. This correspondence and litigation led to a compromise agreement dated 28.3.2005 (EX-D19) and the first suit was withdrawn on 04.5.2005 (EX-P1 1) by respondent in the light of compromise agreement dated 28.3.2005 (compromise agreement ). After the compromise agreement, the appellant reiterated vide letters dated 11.1.2007 and 19.2.2007 (EX-D20 and EX-21) that respondent has not fulfilled its commitment under the compromise agreement dated 28.3.2005. The respondent on 31.3.2007 (EX-D22) wrote letter and stated that it is maintaining average balance of Rs.350 million as required in the compromise agreement dated 28.3.2005. The appellant vide letter dated 10.5.2007 (EX-D23) informed that Rs.350 Million was to be in addition to Rs.190 Million invested in the certificates. The respondent vide letter dated 23.5.2007 (EX-D24) reiterated its earlier stance which was replied by the appellant vide letters dated 03.7.2007 (EX-D25) and 08.10.2007 (EX-D26) to the effect that Rs.350 Million is in addition to Rs.190 Million certificates. The respondent also inquired about the prevailing rate of return from the appellant vide letter dated 08.11.2008 (EX-D28) which was responded by the appellant vide letters dated 10.11.2008, 23.2.2009 and 02.7.2009 (EX-D28, EX-D29 and EX-D34). However , the further deposit of Rs.367 Million was not made by the respondent with the appellant. Finally the respondent wrote letter dated 03.7.2009 (EX-D35) asking for encashment of certificates at the profit rate of 15% as certifica tes had matured. The appellant wrote letter dated 03.7.2009 (EX-D36) informing respondent that certificates will be encashed at the rate of 8% per annum. The appellant encashed certificates at the rate of 8% per annum on 04.7.2009 and after receiving original certificates, credited the principal amount of Rs.190000000/- and profit of Rs.94621004.66 in the respondent pension fund account (EX-D40). The respondent objected to the encashment of certificates at the rate of 8% vide letter dated 11.7.2009 (EX-D37). The respondent served legal notice to the appel lant on 25.7.2009 (EX-D38) and demanded that profit be paid at the rate of 15% per annum for entire period of seven years. The appellant responded to legal notice on 24.8.2009 (EX-D39) asking to withdraw notice. The respondent in response filed suit for recovery of Rs.80178996/- alongwith profit. In said suit, written statement was filed by the appellant on 02.6.201 1 and issues were framed on 22.6.201 1. The respondent produced only one witness namely Shaheen Khawar , Director of the respondent/plaintif f as PW-1 and exhibited documents as EX-P1 to EX-P14. The appellant/ defendant on the other hand also produced one witness namely Muhammad Rafiqu e (Branch Manager LDA Plaza) as DW-1 and produced documents as EX-D1 to EX-D67. Learned Civil Court after recording of evidence decreed the suit on 27.2.2017 for amount of Rs.80178996/- alongwith profit at the market rate from the date of maturity of certificates till realization. The appellant being aggrieved has filed this appeal. Arguments of respective parties 4. Learned counsel for the appellant submits that letter dated 02.7.2002 in which, 15% profit for the certificates was mentioned was not an offer rather the said letter was in the nature of precontract inquiry and invitation to treat. He submits that the original contract was executed on 04.7.2002, which was duly signed by two Directors of the respondent and on face of the said application form, it was specifically mentioned that respondent will abide by bank rules governing PLS Term Deposit and the profit and loss determined by the bank will be acceptable to the respondent. He submits that the certificates were issued subject to rules governing PLS Term Deposit which were also printed on the back of application form. He submits that it was also printed on the face of the certificates that customer is entitled to receive the face value of the certificate alongwith profit accrued on profit and loss basis, according to the rules and regulation enforced governing PLS Terms Deposit. He argued that once it was specifically written in the application form as well as certificates that the same are subject to rule governing PLS Terms Deposit, then the respondent was not entitled for 15% fixed rate per annum but the rate as determined by the bank as per instruction of State Bank of Pakistan, relating to PLS Term Depo sit were applicable. He submits that even on the back of the certificates, rates per annum were expected rates and not fixed rates. Learned counsel for the appellant placed reliance on Executive Vice President etc vs. Brig. Mian Hameed-ud-Din (2010 CLD 823) and Sheikh Inayat Ali vs. National Bank of Pakistan etc. (2007 CLD 99). He further submits that in any
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case, after the original contract conclud ed on 04.7.2002, parties entered into compromise agreement dated 28.3.2005, which novated the original contract, under section 62 of the Contract Act, 1872 (Contract Act). Submits that when respondent failed to perform its own part of obligation under the compro mise agreement, it cannot claim the enforcement of appellant' s obligations, in view of section 54 of the Contract Act. He submits that even if the original contract is not novated, the original contract was to be governed by rules as well as terms and condition printed on the application form and certificates, under which, the profit was to be determined on profit and loss sharing basis. He finally submits that once the previous suit was withdrawn by the respondent without permission to file fresh suit on 04.5.2005, the second suit is not maintainable under Order XXIII, Rule 1(3) CPC. 5. Learned counsel for the respondent on the other hand supported the impugned judgment and decree and submits that the letter dated 02.7.2002 was an offer letter and once investment was made in pursuant to said offer letter , the rate of 15% is binding on the appellant. He submits that nature of investment under the certificates is different from Profit Loss Sharing System (PLS System) and therefore, PLS system cannot be applied to the rates determined in the certificates. He placed reliance on Muhammad Javaid Anjum vs. Industrial Development Bank of Pakistan (2004 CLD 520). It is further argued that the compromise agreement dated 28.03.2005 was not novation of original contract , rather the same was ratification of the original contract under which, appellant was bound to pay 15% annual profit on the certificates. He placed reliance on Muhammad Afaz Shamsi etc vs. National Accountability Burea etc (PLD 2001 Karachi 24), Mst. Waris Jan etc vs. Liaqat Ali etc (PLD 2019 Lahore 333) and Messrs Digital Link etc vs. Messrs Hangzhou Hikvision etc (2020 CLC 2108 ). He further submits that in any case, respondent performed its part of the obligation under the compromise agreement dated 28.03.2005, therefore, the appellant was bound to pay 15% profit per annum on certificates. Finding of the Court . 6. We have heard learned counsel for the parties in detail and perused the record with their able assistance. 7. For convenience, the issues framed by learned trial Court are reproduced hereunder:- 1. Whether the instant suit is not competent and not maintainable and same is liable to be dismissed?OPD 2. Whether the plaintiff has no cause of action and suit is barred by law?OPD 3. Whether the plaintiff has approached before this court with un-cleaned hands?OPD 4. Whether the instant suit has been filed with malafide intention and ulterior objective?OPD 5. Whether the plaintiff is stopped from claiming the disputed amount on the basis of agreement dated 28.3.2005 and letter dated 03.7.2009?OPD 6. Whether on the basis of terms and conditions of the contract between the parties the rate of interest on the investment made by plaintiff was fixed at 15% per annum?OPD 7. If the above issue is answered in positive then whether arrears on the accou nt of interest on the investment made by plaintiff to the tune of Rs.8,01,78,996/- alongwith profit/interest are outstanding against the defendant? OPP 8. Relief. The most relevant issues are issues No.5 to 7, which are interconnected. However , there are number of ancillary legal and factual questions arising out of these issues. 8. The first legal question is that whether letter dated 02.7.2002 (Ex.D-7) was an "offer" or it was "an invitation to treat". The distinction between "invitation to treat" and "offer" is highlighted in the Anson' s Law of Contract as under:- "It is sometimes difficult to distinguish statements of intention which cannot, and are not intended to, result in any binding obligation from offers which admit of acceptance, and so become binding promises. A person advertises goods for sale in a newspaper , or announ ces that they will be sold by tender or by auction; a shopkeeper displays goods in a shop window at a certain price; or a bus company advertises that it will carry passengers from A to Z and will reach Z and other intermediate stops at certain times. In such cases it may be asked whether the statement or act made is an offer capable of acceptance or merely an invitation to make offers, and do business; one that contemplates that further negotia tions will take place. A statement or act of this nature, if it is not intended to be binding, is known as an invitation to treat?."
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Same distinction is also discussed in "T reitel' s the law of Contract" as under: "When parties negotiate with a view to making a contract, many preliminary communications may pass between them before a definite offer is made. One party may simply respond to a request for information (e.g. by stating the price at which he might be prepared to sell a house), or he may make such a request (e.g. where he asks a prospective supplier whether he can supply goods suitable for his purpose). That party is then said to make an "invitation to treat": he does not make an offer but invites the other party to do so". Similarly in "Cheshire and Fifoot' s Law of Contract", this dif ferent is discussed as under:- "An offer, capable of being converted into an agreement by acceptance, must consist of a definite promise to be bound, provided that certain specified terms are accepted. The offeror must have completed his share in the formation of a contract by finally declaring his readiness to undertake an obligation upon certain conditions, leaving to the offeree the option of acceptance or refusal. He must not merely have been feeling his way towards an agreement, not merely initiating negotiations from which an agreement might or might not in time result. He must be prepared to implement his promise, if such is the wish of the other party . The distinction is sometimes expressed in judicial language by the contrast of an offer? with that of an invitation to treat?. 9. The relevant case law on difference between "offer" and "an invitation to treat" and law settled therein is as under:- (i) Bank of India v. O.P. Swarnakar (2003 AIR (SC) 858) "22............. Once it is held that the provisions of the Indian Contract Act, 1872, would be applicable, the scheme admittedly being contractual in nature, the provisions of the Act shall apply . The Scheme having regard to its provisions as noticed hereinbefore would merely constitute invitation to treat and not an offer. A proposal is made when one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence (see Section 2(a)). Herein the banks by reasons of the scheme or otherwise have not expre ssed their willingness to do or abstain from doing anything with a view to obtaining assent of the employees to such act. It will bear repetition to state that not only the power of the bank to accept or reject such application is absolutely discretionary , it, as noticed hereinbefore, could also amend or rescind the scheme. The scheme, therefore, cannot be said to be an offer which, on the acceptance by the employee, would fructify in a concluded contract. The proposal of the employee when accepted by the bank would constitute a promise within the meaning of Section 2(b) of the Act". (ii) Ganeswar Biswal v . State of Orissa (Orissa) (2012(109) AIC 893 D.B) "7. A proposal is made when one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence (Section 2(a) of the Contract Act). Herein the O.P.G.C., by reason of the scheme, has not expressed its willingness to do or abstain from doing anything with a view to obtaining assent of the employee to such act. Further the power of the O.P.G.C., as found from the scheme to accept or reject any application for voluntary retirement is absolutely discretionary . The scheme, therefore, cannot be said to be an offer, which, on the acceptance by the employee, would fructify in a concluded contract. The scheme having regard to its provisions merely constitutes an invitation to treat and not an offer. The proposal of the employee when accepted by the O.P.G.C. would constitute a promise within the meaning of Section 2 (b) of the Contract Act. Only then the promise becomes an enforceable contract." (iii) Sri Gopal Chandra Jaiswal v . M/s. Birla T yres, (Calcutta)( 2017(2) Cal. L.T . 303 DB) "9. An advertisement intended to lead to the making of a bilateral contract is not generally an offer. It is commonly regarded as an invitation to treat. At an auction sale, the general rule is that the auctioneer's request for bids is not an offer that can be accepted by the highest bidder . It is the bid that constitutes an offer, which the auctioneer may, but generally is not bound to accept. An acceptance is a final and unqualified expression of assent to the terms of the offer". (iv) Carlill v . Carbolic Smoke Bali Company , ((1893) 1 QB 256) "L.J. Bowen..........It is an offer made to all the world; and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition? It is an offer to become liable to anyone who, before it is retracted, performs the condition, and, although the offer is made to the world, the contract is made with that limited portion of the public who come forward and perform the condition on the faith of
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the advertisement. It is not like cases in which you offer to negotiate, or you issue advertisements that you have a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate - offers to receive offers - offers to chaffer , as, I think, some learned Judge in one of the, cases has said. If this is an offer to be bound, then it is a contract the moment the person fulfils the condition." 10. From above text books and case law, the test deduced is that if the statement or act contemplates that further negotiations will take place, then the statement or act is not binding but merely a preliminary communication before a definite offer is made. Such communication is not an "offer" but an "invitation to treat". The evidence in this case when examined in above context, it shows that letter dated 02.7.2002 was written by Chief Manager of appellant to the respondent introducing Annual Deposit Certificate and other facilities. No doubt it was mentioned in the said letter that after seven years accumulative profit at the rate of 15% shall be paid at maturity , however , in the said letter , neither any amount or quantum of investment, which was to be made, was mentioned nor it was highlighted that in which, denomination certificates are to be issued . The letter dated 02.07.2002 mentions the feature of Anmol Certificates but it does not indicate duration of investment or particular fund or accounts which was to be used by respondent to purchase the certificates. The lack of above mentioned particulars in the letter dated 02.7.2002 manifests that same required further communication between the parties. The letter dated 02.7.20 02 on face of it was intended to lead to the making of a bilateral contract between the parties for investment in the certificates. Such letter is not generally an offer rather it is commonly regarded as an invitation to treat. The party making invitation to treat does not make an offer but invites the other party to do so. However , proposal made by a person in response to the invitation to treat when accepted constit utes a promise within the meaning of section 2(b) of the Contract Act. Though the word "offer" is used in letter dated 02.07.2002 but lack of particulars mentioned above indicates that this letter was too uncertain to be an of fer. 11. Though after letter dated 02.07.2002, the respondent wrote letter dated 03.7.2002 (EX-D8), however , said letter made neither any reference to letter dated 02.7.2002 nor same was addressed to the same person (Chief Manager), who wrote letter dated 02.7.2002. The letter dated 03.7.2002 by the respondent shows that it neither accepts any offer from the appellant nor it amounts to a contract, rather it simply states that respondent intends to invest in the certificates and requested to arrange for issuance of certificates in the amount of Rs.190 Million in the different denomination. The said letter dated 03.7.2002 is not an acceptance but can at best be treated as an "offer" which could still be accepted or rejected by the appellant. This legal and factual position is also evident from the fact that after letter dated 03.07.2002, the respondent submitted duly signed application form on 04.7.2002 (Ex.D- 6) for the investment in the certificates. The above discussion leaves no doubt that letter dated 02.7.2002 was not an "of fer" rather the same was merely an "invitation" to treat. 12. The next ancillary mixed question of law and fact also arising from issues No.5 to 7 is that whether under the original contract the investment in certificates was subject to bank rules relating to Profit and Loss sharing (PLS) Accounts. In this regard, it is convenient to reproduce relevant statement appearing on the application form (Ex.D-6) as under:- "In the name of PSIC Pension Fund. Under Profit/Loss Sharing system. The deposit should made payable to Me/Us/either or Survivor , I/we agree to abide by the Bank's rules governing the PLS Term Deposits. I/We authorize the Bank to invest the deposit in any manner it likes and profit/loss as determined by the Bank it will be acceptable to me/us. I/we have read the Bank's rules relating to PLS Account overleaf and agree to comply and bound by the same". Similarly on Anmol Certificates (Ex.D-6), the following statement was printed:- "PSIC Pension Fund is entitled to receive, on demand, the face value of this certificate alongwith profit accrued on profit and loss basis according to the rules and regulations of the bank in force governing PLS T erm Deposits". Rates of profit mentioned on the back of Anmol Certificates were also expected rates per annum and not fixed rates.
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13. The above statements on the Account opening form and Certificate (Ex.D-6) manifest that Anmol certificates were subject to PLS Term Deposit rules. The argument of learned counsel for the respondent that as in letter dated 02.7.2002, 15% per annum profit was offered, therefore, the PLS Term Deposit mentioned in the Account opening form and Certificates will not apply , is misconceived. As already discussed above, the letter dated 02.7.2002 was merely an invitation to treat and not an offer. In any case, it is settled law that when the parties signed a document containing terms on which, both the parties agreed, the invitation to treat or corres pondence led parties to stage at which, they signed the contract, will not have precedent and the signed document will be binding on the parties. 14. Once the respondent signed the Account opening form on 04.7.2002 (Ex.D-6), then the terms of said document will be binding on the parties and not letter dated 02.7.2002. The case of Muhammad Javaid Anjum vs. Industrial Development Bank of Pakistan (2004 CLD 520) relied upon by learned counsel for the respondent is not applicable in the present case. The said case relates to Mahana Munafa Certificate (MMC) for investing deposit for fixed period against promise of fixed rate of profit/return at the rate of 14% per annum and there was neither any clause on the said certificate or on the account opening form that said MMC will be subject to PLS Term Deposit. On the other hand, case of Executive Vice President etc vs. Brig. Mian Hameed-ud-Din (2010 CLD 823) relied upon by learned counsel for the appellant supported his case as in the said matter , certificates were subject to PLS Term Deposit. 15. Though from the above discussion, it is established that under the terms and conditions of the original contract, the rate of profit was subject to rules governing PLS Term Deposit and not fixed rate of 15% per annum. However , the core issue and crux of the matter is that whether after the compromise agreement dated 28.3.2005 (Ex.D-9), the same position prevailed or after the compromise agreement, the respondent would be entitled for profit at the rate of 15% per annum. In this regard it is admitted position on record that after the first suit filed by respondent on 03.1.2005, the parties entered into compr omise agreement dated 28.3.2005 (EX-D19). The relevant clause 10 and the agreed terms of the compromise agreement are reproduced hereunder for convenience:- "10. That in the meanwhile the authorities of M/s Bank Alfalah Limited in order to restore its credibility and good relationship approached the management of the Punjab Small Industries Corporation for negotiation and settlement of the matter amicably . Different meetings were held in this regard and both the parties i.e. Punjab Small Industries Corporation and M/s…
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