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Petitioner: ABDUL HABIB RAJWANI VS Respondent: Messrs BROTHERS INDUSTRIES LTD. and others
Court Name: Sindh High Court Judge(s): Maqbool Baqar Title: ABDUL HABIB RAJWANI vs Messrs BROTHERS INDUSTRIES LTD. and others Case No.: Suit No,1522 of 2005 Date of Judgment:2006-10-30 Reported As: 2007 YLR 590 Result: Order accordingly
Judgment ORDER ' MAQBOOL BAQAR; J.---This is an application under Order XXXIX, rules l and 2, C.P.C., read with section 94 and section 151, C.P.C., filed on behalf of the plaintiff, seeking an order restraining the defendants from conferring on any party, any right, benefit or interest pertaining to the sole distribution agreement adverse to the rights, interest and benefits of the plaintiff and to direct the defendants and all persons through or under them not to interfere with such rights and interest of the plaintiff. ' The brief facts of the plaintiff's case are that the plaintiff is the sole distributor/agent for Pakistan of defendants Nos.1 and 2 in respect of the Industrial Sewing Machines, manufactured by defendant No,1, and supplied/exported by defendant No,2, under the brand name 'BROTHER', since January, 1984. The plaintiff was so appointed under and in terms of a sole distributorship agreement executed between the plaintiff and defendant No,1 and Japan Industrial Machines Corporation (JIMCO), the then supplier/exporter, on 1-1-1984. It is claimed that it was the plaintiff who was introduced the 'Brother' Industrial Sewing Machines in Pakistan in the year 1981 and being impressed by the excellent performance of the plaintiff. The defendant No,1 and JIMCO granted to the plaintiff that the sole distributorship for Pakistan through the above agreement. In the year 1988, the defendant No,1 informed the plaintiff that from then onwards the supply and export of the sewing machines shall be conducted by Brother International Singapore (Pvt.) Ltd., Singapore, (BIC) the defendant No,2, in place of JIMCO. It is further claimed that the plaintiff in order to promote the sale of the defendants sewing machines in Pakistan incurred huge expense and established various facilities, including offices, showrooms, spare parts outlets and after sales service centres and thus provided all necessary infrastructure of permanent nature for promotion and sale of
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Brother Industrial Sewing Machines in Pakistan, in addition the plaintiff also spent substantial amounts on training of his technical staff in Japan for various models of sewing machines introduced by defendant No,1, from time to time, and it was at the expense of the plaintiff and through his relentless efforts, over a period of twenty five years, that 'Brother' sewing machines were established in, and captured a sizeable share of the local market. The plaintiff also spent huge amounts, on sale promotion and marketing of 'Brother' sewing machines through advertisement and by organizing Exhibition and technical Seminar. It is claimed that the plaintiff throughout this long period of twenty five years, has conducted his business, as the sole distributor, to the utmost satisfaction of defendants Nos.1 and 2, who always expressed their satisfaction and never made any complaint regarding the business. However, on 30-9-2005, the plaintiff was shocked to receive from the defendant No,2 a letter, disclosing that in addition to the plaintiff, they have appointed another party namely, M/s. Salam and Company to market their products in Pakistan. Through E-mail dated 1-1-2005, the plaintiff strongly protested to the defendant No,2 against such appointment, as being violative of the agreement and called upon defendant No,2 to withdraw their letter dated 30-11-2005 and to confirm to the plaintiff, in writing, the fact that the plaintiff is the sole distributor of Brother Industrial Sewing Machines for the entire territory of Pakistan. However, in response; the defendant No,2 company, far from withdrawing the letter and/or issuing the requisite clarification, through E-mail dated 2-10-2005 contended that the impugned letter is not violative of the agreement as the defendants do not intend to terminate the plaintiff's distribution agency, and they merely intend to enhance their sale and strengthen their sales organization against their formidable competitors and invited the plaintiff to visit them in Singapore so that the misunderstanding may be removed through discussion. Through another E- mail of the same date the said defendant explained to the plaintiff that they do not intend to terminate the plaintiff's distributorship and only wanted to extend their market coverage to increase their sales and enlarge their market share through additional distribution channel. Through E-mail dated 3-10-2005, the plaintiff, whilst objecting to the letter dated 30-9-2005 from defendant No,2, also protested against their representative visiting several factories with the representative of M/s. Salam and Company during his stay in Pakistan and objected to issuing a pro forma invoice by defendant No,2 to a customer in Pakistan, without informing the plaintiff. The defendant No,1, however neither withdrew the letter dated 30-9-2005 nor issued the requisite clarification. The plaintiff, therefore, by Email dated 4-10-2005 reiterated its objection and demanded issuance of the clarification, however, since the request was not acceded to, the plaintiff on 14-11-2005 sent a legal notice to defendants Nos.1 and 2, and through E-mail dated 30- 11-2005, the Director and General Manager of defendant No,1 claimed that they have not yet appointed M/s. Salam and Company as their distributors, and contended that through their letter dated 30-11-2005, had only informed the plaintiff of their intention to do so. It is claimed by the plaintiff that as a result of the issuance of the letter dated 30-9-2005 and the defendant No,1 's failure to withdraw the same and on account of the adverse propaganda by M/s Salam and Company against the plaintiff, the plaintiff lost orders worth US$ 10,834,000, placed by Master Textiles Mills Ltd. For Brother Industrial Sewing Machine, who subsequently established L/C in favour, of 'JUKI', as in view of the foregoing the plaintiff, despite efforts, failed to persuade and convince. Master Textiles Ltd. That the plaintiff is the sole distributor of Brother. Industrial Sewing Machines in Pakistan and will ensure after sales service and availability of spare parts to them. Through E-mail dated 6-12-2005, the plaintiff informed the director of defendant No,2 regarding the above and that he reserve his right to claim commission on all the order that he will lose on account of defendant No,1"s conduct. Vide E-mail dated 9-12-2005, the General Manager of defendant No,1 expressed the defendants desire to solve the issue amicably, and whilst claiming that the letter/notice dated 30-9-2005, was addressed and communicated only to the plaintiff and was not
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made public, assured the plaintiff that they do not at all contemplate to interrupt the plaintiffs' business in Pakistan. The plaintiff further alleged that M/s Salam and Company had booked venues for organizing technical Seminars and Exhibitions of Brother Industrial Sewing Machines on 5th and 7th December, 2005, and the proposed seminar and exhibition was cancelled only after the plaintiff had served the aforesaid legal notice on defendants Nos.1 and Z. It is also alleged that M/s Salam and Company has, during the months of November/December, 2005 imported various models of Brother Industrial Sewing. Machines from defendant No,2. In support of his allegation, the plaintiff has annexed with the plaint a letter addressed by M/s Salam and Company to M/s Regent Plaza Hotel and Convention Centre and the daily list of import issued by Karachi Appraisement, Collectorate of Customs. It is submitted that although the defendant No,2 acknowledged the plaintiffs right as their dealer in Pakistan and informed the plaintiff that they have not yet appointed M/s Salam and Company as their distributor. However, their conduct is contrary to their assurance/commitment, and therefore, it is necessary that an order may be passed that the consignments/ shipment of Industrial Sewing Machines shall not be released without the consent of the plaintiff. ' In his counter-affidavit filed on behalf of defendants Nos. l and 2, the Director and General Manager of defendant No,2 submitted that the plaintiff's suit is not maintainable as the plaintiff's sale distributorship under the agreement dated 1-1-1984, was revoked in accordance with the agreement and the plaintiff has claimed damages from the defendant. It was alleged that the plaintiff, because of his other business interest, did not pay full attention to the agency business and failed to achieve the stipulated yearly sales target. The defendants pointed out that in terms of clause 10 of agreement the plaintiff was required to sell at least 2,000 sets of 'Brother' brand Industrial sewing machines in a year, and also to furnish to defendants Nos.1 and 2, market and business report at the end of every month, but he always lagged behind the minimum stipulated sales target; and also failed to submit the requisite monthly reports. It was alleged that during the years 2002 to 2005, the plaintiff sold only 638, 627, 1099 and 1,321, number of machines, respectively. Whereas during these years in Bangladesh the figures were 4,417, 7,284, 10,243 and 13,389 respectively, and in Sri Lanka the sales figures were 1,315, 1,594, 1,752 and 2,222 respectively. He further claimed that although the rate of commission as agreed between the parties was only 4%, however the plaintiff dishonestly charged commission at the rate of 16% to 20% through. Misrepresentation and by misleading the answering defendants. He rejected the plaintiff's claim that the defendants did not complain to the plaintiff about his poor performance and annexed to the counter affidavit a copy of letter dated 4-5-2005, complaining to the plaintiff regarding his poor performance, he however claimed that usually such complaints were made to the plaintiff orally. He averred that despite repeated complaints the plaintiff did not improve his performance and therefore the answering defendants instead of extending the plaintiff's sole distributorship for another year decided to also try M/s Salam and Company as a distributor, but did not exclude the plaintiff from being considered as one of the agents. However, the plaintiff is no more the sole distributor of the defendants. He pointed out that the agreement dated 1-1-1984 was for a duration of one year and was renewable for the following one year by mutual written consent of the parties, three months before the expiry date. He submitted that investment, if any, was made by the plaintiff for his business and to earn commission. He further submitted that the plaintiff's staff was trained in Japan at the defendant's expense and certain other expenses such as for advertising were also incurred by the answering defendants. ' Through his affidavit-in-rejoinder, the plaintiff denied various allegations made in the counter affidavit. He referred to the correspondence exchanged between the parties commencing from the defendant No,1 's letter dated 30-9-2005, to show that the relationship between the parties was never terminated and submitted that even after filing of, the present suit, the defendant No,1 under
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cover of their letter dated 6-2-2006 forwarded to the plaintiff a draft memorandum/agreement for his signature, in terms whereof the defendants acknowledged that the plaintiff is their sole agent and agreed to withdraw their letter dated 30-9-2005 and also agreed not to appoint any other agent as their distributor in Pakistan. They further agreed not to export any 'Brother' Industrial Sewing Machines in Pakistan without prior consent of the plaintiff. The plaintiff submitted that the counter affidavit of a director of defendant No,2 cannot be treated on behalf of defendant No,1 also as no authority from the said defendant has been filed in that regard. As regards the defendants' allegation that the plaintiff has filed to achieve the stipulated sales target, he submitted that during the period from 1981 up to 1995, the plaintiff, on the average, sold more than 3000 machines a year and sold substantial number of machines up to the year 1998, however from year 1998, since on the one hand defendants Nos.1 and 2 increased their prices and on the other Chinese machines were available in the market at much cheaper price and thus the buyers switched over to such machines, subsequently the defendant No,1 stopped producing knit machines which 'constituted a large part of plaintiff's sale and in 2004 the defendant No,1, also discontinued the production of all Chain stitch machines. From 2002 the defendant discontinued the production of automatic machines also. Another factor attributed by the plaintiff to reduction in sales was that in the year 2005 the defendants reduced the number of their models from 80 to only 20, whereas, the defendants' formidable competitor 'JUKI' introduced new models to the range of their existing models. He also attributed depletion in sales to acute shortage of machines with the defendants in the year 2005. The plaintiff claimed that in the circumstances, the plaintiff was fully satisfied with the sale performance of the plaintiff who otherwise would have certainly raised objection which he did not and would not have continued the business exclusively with the plaintiff over such a long period which they did. He denied that the plaintiff's staff was trained in Japan at the expense of the defendants and reiterated his claim that all expenses in that regard were incurred by him. He also denied the allegation that he charged commission in excess of the agreed rate and submitted that commission varied from transaction to transaction and was paid accordingly and without any objection. He reiterated that the defendants never ever complained to him regarding his performance and claimed that the alleged complaint filed along with the counter affidavit (Annexure D-1) is a fictitious and fabricated document. He claimed that except during the last three years all advertisements and sales promotion expense was borne by him. ' It is an admitted position that it was under and in terms of a sole distributorship agreement executed between the plaintiff on the one had and the defendant No,1, the manufacturer of Brother Industrial Sewing' Machines, and Japan Industrial Machine Corporation (JIMCO), the exporter of Brother Industrial Sewing Machines on the other, that the plaintiff was appointed the sole distributor for 'Brother Industrial Sewing Machines for the entire territory of Pakistan. The agreement took effect from 1-1-1984 for one year and is terms of clause 11 thereof, was renewable for the following one year by mutual written consent of the parties, three months before the expiry date. In terms of clause 5 of the agreement, the defendant No,1 and JIMCO, the exporter, agreed not to sell or offer for sale the Machines directly to any party organized within the territory of Pakistan. Clause 5. Also stipulated that in case, the defendant No,1 or JIMCO receives any business inquiry from any party organized within the territory of Pakistan regarding defendant No,1 's products, JIMCO shall inform the plaintiff about the inquiry for materializing such transaction. Correspondingly in terms of clause 9, the plaintiff agreed not to sell any competing product. The plaintiff in terms of the clause 10 of the agreement was also obliged to sell not less than 2000 sewing machines during the one year currency of the agreement and was also obliged to send monthly market and business reports to defendant No,1 and JIMCO at the end of every month. Clause 10 of the agreement stipulates that the agreement must not be changed, modified or amended during its life, without so being done in writing, duly signed by the said three parties. However, the parties were at liberty to alter the terms
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and conditions of the agreement at the time of its renewal, and in terms of Article 13, the parties were set at liberty to terminate the agreement anytime during its life, in the event of its non- performance or violation by any party, subsequently JIMCO was replaced by defendant No,2, who stepped into the shoes of JIMCO, as the exporter of defendant No,1 machines. ' It is case of the plaintiff that in pursuance of the agreement and with a view to fulfil his obligation in terms thereof, the plaintiff incurred heavy expenditure in establishing his distribution network in Karachi, Lahore and Faisalabad, and setting up various showrooms and workshops. He claimed to have spent enormous amount towards sale promotion of Brother Industrial Sewing Machines through advertisement and by holding exhibitions and seminars. He has also claimed to have spent a substantial amount in training of his technical staff in Japan. It is claimed that it was only a result of relentless efforts made by the plaintiff over a period of 25 years since his appointment as the sole distributor, and huge expense .That he incurred towards marketing and sales promotion of the defendant's machines that the Brother brand was established in the Pakistani market and, thus the plaintiff acquired vested right in the continuation of the agency and the agency acquired the status of an agency coupled with interest and as such, the same attracts the prohibitions as contemplated by section 202 of the Contract Act and cannot therefore, be terminated by its makers or suppliers to the prejudice of the plaintiff's rights. It is also claimed by the plaintiff that during the entire period of 25 years since his appointment as the sole distributor and till filing of the suit, the defendant Nos.1 and 2, being fully satisfied with the performance of the plaintiff, never ever raised any objection or made any complaint to the plaintiff regarding the agency business. However, despite the above and without any justification and in violation of the agreement, particularly, of clauses 3, 5, and 12 thereof, in the first instance, the representative of defendant No,2 during his stay in Pakistan in the month of September 2005 visited several potential customers in Lahore and Faisalabad along with the representative of M/s Salam and Company and to the surprise of the plaintiff, through letter dated 30-9-2005, the defendant No,2, whilst stating that the plaintiff will continue to be their distributor in future, informed him of appointment of M/s Salam and Company as another distributor for marketing their products, particularly their knitwear machines. In response, the plaintiff through E-mail dated 1-10-2005 strongly protested against such appointment, as being violative of the agreement, and called upon the defendant No,1 to withdraw the announcement/letter and to verify the fact in writing that the plaintiff is the sole distributor of Brother Industrial Sewing Machines for the entire territory of Pakistan as the aforesaid act of defendant No,1 is adversely affecting the plaintiff's sales. However, in response the Director and General Manager of the defendant No,1 through E-mail dated 2-10-2005, instead of withdrawing the letter or issuing the requisite clarification contended that the impugned letter is not violative of the agreement as the defendants have no intention to terminate the agreement in favour of the plaintiff. The defendant No,2, through another E-mail of the same date, explained to the plaintiff that they do not intend to terminate the plaintiffs distribution agency and only wanted to expend their market coverage to increase their sales and market share through additional distribution channel. The defendant No,1, however neither withdrew the letter dated 30-9-2005 nor issued the requisite clarification. The plaintiff, therefore, by E-mail dated 4-10-2005 reiterated its objection and demanded issuance of the clarification, however, since the request was not exceeded to, the plaintiff on 14-11-2005 sent a legal notice to defendants Nos.1 and 2, and through E-mail dated 30-11-2005, the Director and General Manager of defendant No,1 claimed that they have not yet appointed M/s Salam and Company as their distributor and contended that through their letter dated 30-11-2005 had only informed the plaintiff of their intention. ' The learned counsel for the plaintiff submitted that on the one hand, the defendants claimed that they have not yet appointed M/s Salam and Company as their distributor and on the other, M/s Salam and Company was making, arrangement for organizing an exhibition of defendants'
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machines. He referred to a letter dated 15-11-2005 (Annexure-N to the plaint), whereby M/s Salam and Company has sought confirmation of booking of a board room and exhibition hall in a hotel for the purpose and submitted that the proposed seminars and exhibitions were cancelled only after the plaintiff has served the legal notice on defendants Nos.1 and 2. He also referred to the daily list of imports issued by Karachi Appraisement, Collectorate of Customs, to show import of Brother Industrial Sewing Machines by M/s Salam and Company from defendant No,2 during the months of November and December, 2005, the learned counsel submitted that as a result of the above, the plaintiff lost a number of potential customers who had in fact placed orders for purchase of Brother sewing machines but later on switched over to other brands on account of the confusion created regarding the distributorship of the plaintiff and because of their apprehensions regarding after sales service and future supplies of spare parts by the plaintiff. The learned counsel submitted that neither the defendants have terminated the plaintiff's agency nor could they do so, firstly because of the prohibition as contemplated by section 202 of the Contract Act as the distribution agency in question is of the nature of an agency coupled with interest and secondly neither has the plaintiff committed any breach of the agreement nor was any breach complained by the defendants during the long period of 25 years of their relationship with the plaintiff. However, despite the above legal and factual position, and in breach of the agreement not only by the representative of defendant No,1 visited various potential customers but the defendant No,1, supplied to the said concern their sewing machines, who made reservation of venues for organizing exhibition and seminars causing serious set back to the plaintiff's business. Regarding the sales target, the learned counsel submitted that during the period from 1981 to 1995 the plaintiff has, on the average, sold more than 3000 machines a year, however reduction in sale was thereafter caused due to the reasons firstly, that the defendants have increased the prices of their machines and the customers thus switched over to Chinese machines which were/are far cheaper and secondly for the reason that from the year 2002, the defendants stopped(production of automatic machines which constituted substantial part of the plaintiff's sale during the period of 1996 to 2002 and thirdly that during the period from 1987 to 7004 the defendant which they now say was excessive, but neither they raised any objection nor threatened discontinuation or termination of the agency and also continued to pay commission at different rates. He submitted that in the circumstances, the plaintiff has conducted himself illegally, in violation of the agreement and with mala fide and ulterior motive and requested that the plaintiffs' application may be granted, and the defendants may be restrained as prayed. ' The learned counsel relied upon the following judgments:- (1) Muhammad Aref. Effendi v. Egypt Air. (1980 SCMR 588), (2) Unreported Judgment of Honourable Supreme Court in M/s Beecham Group and another v. Universal Trading Corporation (Pvt.) Ltd. (PLD 1982 Karachi 796), (4) Zubair Ahmed v. Pakistan State Oil Co. Ltd. And another (PLD 1987 Karachi 112), and (5) M/s Universal Trading Corporation (Pvt.) Ltd. v. M/s Beecham Group PLC and another (1994 CLC 726). ' On the other hand, Mr. Munawar Akhtar, the learned counsel for defendants Nos.l and 2, submitted that the sole distributorship agreement between the parties came into effect on 1-1-1984 for one year only and was renewable for the following one year by mutual written consent of the parties, three months before the expiry date, however, though it was never extended in writing but the relationship between the parties as envisaged therein continued even after the expiry of the one period on 1-1-1985, over the years and till 30-9-2005 when the defendant No,l sent the letter of even date to the plaintiff, informing him of appointment of M/s Salam and Company as a distributor for Brother Industrial Sewing Machines in Pakistan. The learned counsel submitted that the defendants were…
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