Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: ALHUDA HOTELS AND TOURISM CO. and otherss VS Respondent: PAKTEL LIMITED and others
Court Name: Sindh High Court Judge(s): Zahid Kurban Alavi Title: ALHUDA HOTELS AND TOURISM CO. and otherss vs PAKTEL LIMITED and others Case No.: Suit No,711 and Civil Miscellaneous Application No,3731 of 2000 Date of Judgment:2000-11-06 Reported As: 2002 CLD 218 Result: Application dismissed
Judgment ORDER ' By this order I shall dispose of C.M.A. 3731 of 2000 which is an application under Order 39, rules 1 and 2 read with section 151, C.P.C. In this application the plaintiff has prayed that the defendants be restrained from selling/transferring or giving effect to any sale/transfer of any shares by defendant No,2 in the defendant No,1, to any person other than the plaintiff and also to restrain the defendant No,2 from divesting itself of or relinquishing in any manner whatsoever the management and/or are control of the defendant No,1 to any person or from inducting any person in the affairs of the sak defendant other than the plaintiff. In support of the applicator the plaintiff has filed a detailed affidavit and the defendants in turn have filed their counter-affidavits. A rejoinder affidavit has also been filed by the plaintiff. ' This application was moved and an interim order was passed on 29-5-2000. By this order a status quo was ordered to be maintained in connection with the shares of defendant No, 1. Thereafter, an application under Order 39, rule 4 was filed for modification of the order passed. This is C.M.A. No,4167 of 2000. This application is also supported by a detailed affidavit and against this application also counter-affidavit and rejoinders have been filed. ' Briefly the facts of the case are that the defendant No,1 is a public limited company engaged in the business of providing cellular (mobile phone service in Pakistan ). The defendant has over a number of years established and extensive network throughout the country and it is fast expanding both in Pakistan and world-wide. The cellular telephone is part of the communication revolution world-wide and is also becoming very popular in Pakistan. Defendant No,2 is a large multinational corporation that is providing information technology service world-wide. Defendant No,2 was instrumental in promoting and setting up defendant No,1 and is, therefore, 80% owner of the shares.
---
## Page 2
The balance 20% share is held by defendants Nos.3 and 4. Defendants Nos.3 and 4 being minority shareholders, for all practical purposes defendant No,1 is being controlled and run by the defendant No,2. ' In September 1999 the plaintiff was informed that defendant No,2 was desirous of selling its shareholding in defendant No,1 and was looking for purchasers. Plaintiff No,1 was interested in acquiring a shareholding. With the objective of undertaking the acquisition of defendant No,1, plaintiff No,2 approached defendant No,2. Separate confidentiality agreements were executed on 4-10-1999 and 18-10-1999. Before these agreement could be entered into defendant No,2 provided the audited balance-sheet and profit and loss account of defendant No,1 as well as other information which would normally be given to a person who is interested in purchasing 100% equity of the share holding owned by defendant No,2. Assurance was also given that the minority share holding would also be available. During the course of negotiations the transaction was valued at US $ 10 million with the condition that the foreign currency debt which was outstanding would be paid by defendant No,2. It is claimed that such offer was orally accepted by defendant No,2. It is further claimed that an oral agreement was entered into between the Director of defendant No,2 Mr. Roger Mortimer and plaintiff No,2. It is claimed that this oral agreement was to be reduced in writing through a letter and accordingly a letter, dated 10-12-1999 was sent confirming the terms which was returned by defendant No,2 with certain hand-made changes. Plaintiff No,2 did not make the changes as requested where after defendant No,2 accepted the offer letter through its covering letter, dated 15-12-1999. However, the letter contained a condition on its top, which read as follows----Subject to contract---. It is claimed that the use of the phrase did not mean that the agreement has not been finalized ' Several meetings were held to finalize the agreement and after each subsequent meeting a demand was put forward to finalize the process of due diligence and to provide necessary answer which were required by the plaintiff. During the course of these negotiations a point came up where the question of settling the debt of defendant No,1 was debated. On the other hand the due diligence was commenced with financial technical and legal advisors collecting such information as was made available to them. A shares sale and purchase agreement was also negotiated and a draft was presented for the purposes of vetting by the legal advisors. Both sides were eager to complete the transaction and yet delay due to a constant demand of more information occurred. Thereafter, defendant No,2 took up the issue that its liability as guarantor for the local currency debt of defendant No,1 be extinguished completely. According to the plaintiff this was not the condition precedent. This resulted in further correspondence and negotiations. Once again each side insisted that they were keen on closing the transaction. ' Thereafter, when the movement of the transaction did not take the desired turn the parties to the alleged agreement became more rigid and then apparently came the stand taken by defendant No,2 that they were not bound by any agreement. The dispute seems also stemmed from the local currency loans and the alternate local financing which had to be arranged. Defendant No,2 insisted that its exposure of the local currency debt be extinguished on completion of the transaction and they wanted written confirmation of the financial commitment by Al-Faisal Investment Bank Limited. According to the plaintiff for the first time on 4-5-2000 the defendant (s) took the stand that the agreement, dated 10-12-1999 was subject to contract and therefore, did not have legal affect. Once again correspondence took place and the plaintiff has accused defendant No,3 of breach of legal obligations as it has come to the knowledge of the plaintiff that defendant was negotiating with a third party of the sale of his shares. This came about due to the higher offer made by the third party to defendant. According to the plaintiff the excuse of local currency financing and alternate arrangement was a ruse to mislead the plaintiff. The plaintiff has, therefore, sought the assistance of this Court and has filed this suit for specific performance for US $ 10 million
---
## Page 3
as per the terms contained in the letter of Pak Kuwait Investment (Pvt.) Limited, dated 10-12-1999. They have also sought a permanent injunction and damages in the sum of US $ 12 million and Rs, 10 million. ' Both the counsels after putting forward their respective view-points in the some what detailed pleadings also put forward a case for the grant and refusal of the injunction. The counsel for the plaintiff drew this Court attention to the contents of the plaint specifically paragraphs 20 and 21 and paragraphs 19, 20 and 21 of the written statement. According to the counsel these paragraphs speak volumes of the intention of both the sides. I have gone through these paragraphs and the allegation on behalf of the plaintiff is that the defendant in violation of its legal obligation carried out secret negotiations with the third party for the sale of defendant No, 1. He has further alleged that since the defendants controlled a sizeable portion of the market of cellular phones in Pakistan, therefore, the temptation to solicit bids from other quarters was too great. Especially when overtures were made by a third party to defendant No,2. According to the plaintiff the reply given in the written statement where they have denied that they were in any way doing something that was illegal and that there was no binding obligation on defendant No,2 to engage in negotiations reflects the intention of defendant which has necessitated the filing of the suit. The learned counsel has then drawn my attention to several documents which have been brought on record both by the plaintiff and the defendants but from the very outset he has drawn my attention to those documents where the parties have shown their interest in defendant No,1 and who in turn has agreed through defendant No,2 to allow "Due Diligence" and then settle on the price. He has further taken me through the official and unofficial correspondence between the two sides where after agreeing to a detailed "Due Diligence" the question of the price for the shares has been taken up. The price obviously included the local and dollar debt of the company. My attention was drawn to letter, dated 4th October, 1999 where a confidentiality agreement is sent for the first time to defendant No,2's legal advisor. Thereafter, this confidentiality agreement was signed and exchanged. The counsel has then drawn the Court's attention to the several correspondence where the price was negotiated. However, according to the learned counsel the main document on which the entire suit hinges is the letter, dated 10th December, 1999 sent to Mr. Roger F. Mortimer Director Global Business of defendant No,2. This document was a direct offer, which was supposed to be signed and returned ending in a binding contract between the two. The counsel has gone further to rely on a unsigned copy of the letter on which several changes have been made which are more in the nature of grammatical changes rather than anything tangible. According to the counsel for the plaintiff this was the only change made by the defendant but the same was returned with the stipulation that it was to be accepted as it was offered. Ultimately without any changes the document was signed and sent under cover of a letter, dated 15th December, 1999 where the only addition made was the word "Subject to contract" even the covering letter contained that word. ' The counsel in support of this contention for granting the injunction application has insisted that in spite of the word "subject to contract", by signing the document the defendant had entered into a full-fledged contract and there was no justification on part of the defendant to try and get out of it. He has laid great emphasis on the intention of an agreement and associated chain of events through the documents produced by him which according to him reflects the bona fides of the plaintiff and the mala fides of defendant. According to the counsel even if the word "subject to contract" was written on the letter, it was still a valid and subsisting contract. The intention of the parties according to him is to be seen rather then what is written on a particular document. He has, therefore, filed several documents which are not only between the plaintiff and defendant but also their respective legal advisors. According to the counsel the documents reflect that change in the mood from October, 1999 till March, 2000 when several types of objections were raised and it seemed that defendant was nut interested in completing the transaction.
---
## Page 4
' Whilst dwelling at length on the interpretation of a document and the concept of a concluded contract as well as the grant of injunction the counsel has relied upon the following case-laws: ' Major (Retd.) Ahmed Khan Bhatti v. Mst. Masooda Fatmi PLD 1981 Karachi 398; Custodian of Enemy Property, Islamabad v. Hoshand M. Dastur and 6 others PLD 1977 Karachi 377; Pakistan Industrial Development Corporation v. Aziz Qureshi PLD 1965 (W.P.) Karachi 202; Harichand Mancharam v. Govind Luxman Gokhale AIR 1923 Privy Council 47; Branca v. Cobarro (1947) 2 All ER 101; Damon C.I.A. Naviera SA v. Hapag-Lloyd International SA v. The. Blankenstein, The Bartenstein, The Birkenstein (1985) 1 All ER 475; Ateni Martime Corporation v. Great Marine Limited (1990) 2 Lloyed's Rep. 250; Perry v. Suffields, Limited (1916) 2 Ch. D 187; Voest Alpine Intertrading v. Chevron International Oil Co. (1987) 2 Loloyd's Rep. 547; Gloval Container Lines Ltd. v. State Black Sea Shipping Co. Amber Seatrade S.A. And Clifton Navigation S.A. (1999) 1 Llyods Rep 127. ' In the case of Major (Retd.) Ahmed Khan Bhatti, Justice Saeeduzzaman Siddiqui (as he then was) observed:-- "It appears to be well-settled by the authorities that if the documents or letter relied on as constituting a contract contemplate the execution of a further contract between the parties it is a question of construction whether the execution of the further contract is a condition of term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored." ' In the case of Hoshang M. Dastur and 6 others Justice I. Mahmud has observed: "In each of these cases, the agreement relied on constituting the completed contract was held to be inchoate, which provided either that the agreement was subject to 'solicitors approving the lease or 'the covenants to be contained in the lease' or was subject to 'usual' terms'. The proposition of law laid down in these cases is, no doubt well-settled. But, the question whether the parties had reached a concluded contract or not, in a question of fact to be deduced from the correspcndence and other documentary and oral evidence. The true test for deciding the question is to ascertain whether the parties were of one mind on all the material terms at the time it is said to have been finalized between them and whether they intended that the matter was closed and concluded between them." ' In the case of Harichand v. Govind Luxman, Mr. Ameer All has observed:--- "Whether an agreement is a completed bargain or merely a provisional arrangement depends on the intention of the parties as deducible from the language used by the parties on the occasion when the negotiations take a concrete shape. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway v. Walton (1) the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to an agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the preposition that they cannot be bound by a previous agreement." ' In Branca's case it was held: 'The language of the final clause, and more especially the word 'until' implied that the agreement was intended to be immediately fully binding and to remain so unless and until superseded by subsequent agreement of the same tenor but expressed in a more precise and formal language." ' In Damon cia Naviera SA v. Hapag-Lloyd Internation SA it was held:-- 'The company's appeal would be dismissed for the following reasons-The execution of a memorandum of agreement was not contemplated by the parties as being a prerequisite to the fact that the terms of the standard form memorandum of agreement were incorporated into the contract did not prevent a binding agreement being reached, notwithstanding the fact that it was
---
## Page 5
anticipated that the concluded contract would be drawn up and the standard terms amended so as to reflect the specific terms that had been agreed between the parties. The alterations subsequently made were undertaken merely to give effect (by amendment of the form agreed to be used) to the specific terms agreed between the parties, and to give effect to minor variations agreed between them after the date of the re-cap telex message. The matter is not affected by the fact that the first obligation to be performed was dependent on the signing of the memorandum of agreement, because the signing was not a condition precedent to the contract. Nor was clause 25 of the agreement, which required the sellers to furnish the buyers with specific documents in London in exchange for payment of the purchase price, a term upon the agreement of which the contract was conditional. The parties clearly envisaged that agreement on this term could be readily reached, as indeed it was; and the clause provided its own criteria for determining its precise content." ' In the case of Parry v. Suffields, Limited it was observed:--- "Mere arrangements which in the ordinary course of business are left to the legal advisers to settle, such as the date for completion, are subsequent matters which do not prevent the two letters constituting a concluded agreement." ' In the case of Voest Alpine Intertrading G. m. It was observed by Justice Hirst as follows:- "This is a case where, having regard to my findings of fact, there was constituted orally a contract containing important established terms; it is, therefore, wholly in appropriate to seek to categorize it as a mere agreement to negotiate, or, as Mr. Pollock rather incautiously suggested at one point, a situation where 90 per cent of the terms remained to be settled. Here, on the contrary, everything was agreed other than the base price, and it seems to me fully consistent with Sykes, case, and the principles laid down in Chitty, to conclude by saying that in default of agreement as to a base price, it should be given to the contract by saying that in default of agreement as to a base price, it should be such reasonable base price as might be ascertained by the appropriate independent adjudicator; moreover, as in Sykes' case. I consider that any other view would be completely contrary to the intention of the parties. Mr. Pollock's main point of principles, therefore, fails." ' In the case of Global Container Lines Ltd. Justice Sir Roger Parker has observed:- `That (1) the words to be finalized', in the January and April agreements is the relevant paragraph i,e, Global has the exclusive right to proceed with the sale of the--- BALASCO Ro/Ro-60 vessels--- under the MOA to be finalized as per terms and conditions stated hereinabove.' Did not relate to leaving anything to be agreed but related to questions of formalization or performance of documents and transactions; the words to be finalized as per terms and conditions stated hereinabove indicated that there had already been a definition of what was required as per terms and conditions stated hereinabove; it was merely a reference to the mechanics which were involved in the implementation of this agreement along the same lines as former agreements which had been made with ocean; the words could not be read as carrying any indication or inference that this paragraph was not to be treated as a concluded agreement or was provisional (see P.156, Col. 1)." ' The counsel has also relied on the case-laws where it was held that the Court had powers to imply a reasonable term in the contract. ' Foley v. Classique Coaches Limited 1934(2) K.B. 1; Sweet and Maxwell, Ltd. v. Universal News Services, Ltd. 1964(3) All. E.R. 30; Finchbourne Ltd. v. Rodrigues 1976 (3) All. ER. 581; Beer v. Bowden 1981 (1) All.E.R. 1070 and Greater London Council v. Connolly 1970 (1) All E.R. 870; ' In the case of Foley v. , Classique Coaches Ltd. It was observed:-- "By analogy to the case of a tied house there is to be implied in this contract a term that the petrol shall be supplied at a reasonable price and shall be reasonable quality. For these reasons I think
---
## Page 6
the Lord Chief Justice was right in holding that there was an effective and enforceable contract, although as to the future no definite price had been agreed with regard to the petrol." ' It is a quite true that one cannot add to a contract an implied term inconsistent with or which contradicts the express terms of the contract, but a suitable case one can imply a term, and in my judgment to imply a term in this contract that the price of the petrol supplied by the respondent shall be reasonable is in no way inconsistent with the agreement." ' In the case of Sweet & Maxwell, Ltd. It was observed: -- "I say at once that I cannot accept that view. It seems to me that if A. Agrees with B. To grant him a lease at such a rent on such and such terms beginning on such a day and no more, that is a specifically enforceable agreement and the Court will insert in it what are called 'usual' covenants. Those were denied in a case before F.I.R. George Jessel, M.R. Being very usual indeed. In a later case Maugham, J., said that what were 'usual covenants' was a question of fact and that the Court would accept evidence from surveyors or conveyances of the kind of covenants which were usual in lease of the kind of property which was the subject-matter of the agreement. Consequently, if this agreement had been merely an agreement for 'usual covenants' the Court could have completed it in ways that are well-recognized. It is not that, of course; but it gives the lessors further rights. It gives them rights beyond that which the law would give them in the way of usual covenants in reasonably requiring further covenants. The only limit is that the requirements must be reasonable. The Court is constantly required to suggest as between A and B what is or is not reasonable and in so far as the lessors demand things which are unreasonable the Court will say 'you cannot have them'; in so far as they are reasonable the Court will say 'those are conditions which you may impose and which must be accepted by the lessors and the lessees are contractually bound to accept them'. Therefore, in my judgment, there is nothing in this point that the agreement is not a specifically enforceable agreement." ' In the case of Finchbourne Limited v. Rodrigues it was held as under:-- "it could not have been intended between the parties that the plaintiffs should have an unfettered discretion to adopt the highest conceivable standard of maintenance for the block of flats and to charge the tenant with the cost thereby incurred. Accordingly, in order to give business efficacy to the lease, a term was to be implied that the costs recoverable from the defendant should be fair and reasonable (see P.578 a. Tod and h. Post)." ' In the case of Beer v. Bowden it was held as follows:-- "Since there was a subsisting lease and it was conceded that some rent was payable in default of agreement, the Court could, despite the absence of an arbitration clause, imply a term to fill the gap in the lease where there was no agreement on the new rent, in order to given business efficacy to the lease, and, since the parties clearly intended that a fair rent should be fixed by agreement on the rent reviews, the Court would imply a term that in the absence of agreement the rent payable during the second five years should be the fair market rent excluding tenant's improvements see P.1074 d.e.h. P. 1075 g. To j. And P. 1076 c. To j. Post; ' In the case of Greater London Council v. Connolly it was held as follows:-- (1) The rent increases had been validly made under Condition 2 which was not void for uncertainty, because--- (a) it was possible to imply into the condition that reasonable notice of increase was required, and reasonable notice was given by the notice of June, 1968 see P. 874 e. And g. P. 876 g. And P. 878 j. Post); (b) rent was sufficiently certain where it could be calculated with certainty at the time when it became payable, even though the increase was dependent on the whim of the landlord, and here the notice of June, 1968 enabled the rent to be calculated."
---
## Page 7
' Lastly he has relied on the case of Muhammad Latif v. Province of West Pakistan PLD 1970 SC 180 where it was held that for the purposes of granting of temporary injunction the plaintiff has to make out that he has a good prima facie case and that a serious question is to be tried. ' In the case of Mian Muhammad Latif, Justice Wahiduddin has observed as follows:-- "It is needless to mention that in a case where temporary injunction is claimed, the plaintiff has only to make out that he has a good prima facie case meaning thereby that a serious question is to be tried in the suit and that in the event of success if the injunction is not issued he will suffer irreparable injury. The appellant has, in the present case, fulfilled all these conditions. Even the learned Additional Advocate-General and Mr. Nathu Lal, learned counsel for respondent No,2 have not opposed the issue of injunction." ' The counsel for defendant has in reply restricted his entire line of arguments to the fact that the so-called contract which is the letter dated 10-12-1999 is not capable of specific enforcement. According to him the entire document is a conditional document. To begin v 4th the…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.