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Petitioner: SANDOZ LIMITED and anothers VS Respondent: FEDERATION OF PAKISTAN and others
Court Name: Supreme Court of Pakistan Judge(s): Fazal Karim, Mamoon Kazi, Ajmal Mian Title: SANDOZ LIMITED and anothers vs FEDERATION OF PAKISTAN and others Case No.: Civil Appeals Nos. 81, 171, 172 and 173 of 1993 Date of Judgment:1995-06-07 Reported As: 1995 SCMR 1431 Result: Appeal dismissed
JUDGMENT
JUDGMENT AJMAL MIAN, J.---These are two direct appeals filed under Article 185 of the Constitution of the Islamic Republic of Pakistan, 1973, which are directed against a common judgment dated 10-1-1993 of a Division Bench of the Lahore High Court passed in R.FA. No, 160 of 1979 filed by the respondents against the dismissal of their suit by the learned Civil Judge,- Ist Class, Lahore, through his judgment/decree dated 31--5-1979, allowing the same as under:-- "44. For the reasons given under each issue, we set aside the decree and judgment of the learned trial Court and allow the suit against defendant No, 1 and defendant No, 3 to the extent of Rs,56,05,395.89 plus Rs,5.50,800 that is, for Rs,61,56,195.89 in all. Both of them will be individually liable to pay the amount decreed and the payment made by any one of defendant No,1 and defendant No,3 shall discharge the decree. The suit in respect of other claims is however dismissed. The suit parties to bear their own costs in the suit." 2. The brief facts are that the Federal Directorate of Agricultural Supplies, Ministry of Food and Agriculture, Government of Pakistan, Islamabad, hereinafter referred to as the Federation, floated a tender inquiry dated 22-3-1977 for the import of Solverix 10-G for 5000 MT from abroad. In response to the above tender inquiry after negotiations Sandoz Limited, Basle, Switzerland, hereinafter referred to as the Sandoz (which is the appellant in Civil Appeal No, 81 of 1993) through its local agents, M/s. Agro Marketing Corporation Limited, hereinafter referred to as the A.M.C. (which is the appellant in Civil Appeal No, 173 of 1993) entered into a contract dated 10-4-1977, whereby it undertook to supply 390 M.T. Solverix technical 81% from Switzerland against an L.C., hereinafter referred to as the technical material, which was to be formulated into Solverix 10-G 3000 tons through A.M.C. The last contract date for the supply of total formulated material, namely, 3000 tons
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was 30-6-1977 positive. It seems that technical material to the extent of 390 tons arrived in Pakistan on various dates through air which was handed over as per terms of the contract (Exh.P.20) to A.M.C. For formulation into formulated material. It may be observed that as per clause 8 of Annexure 'Ato the contract, the specification for packingof the formulated material was provided as under:-- "8. PACKING The material will be packed in suitable, polyethylene lined water proof cloth bags containing 25 Kg. The packing will be able to withstand transit by rail and road." It appears that the Deputy Secretary, Ministry of Agriculture, Cooperatives and Land Reforms, through his letter dated 30-4-1977 (Exh.P.61) addressed to A.M.C. Asked for the change of above specification. It may be advantageous to reproduce the above letter which reads as follows:-- "Dear Sir, Please refer to this Ministry's endorsement No,F.2-5/77-Pest, dated the 7th April, 1977 on the subject mentioned above. As you are aware, Solverix 10-G are systemic granules and there is great danger of causing hazards to the persons who will handle the product while loading, unloading and carrying it to the field. 2. It is, therefore, requested that instead of supplying material in polythelene lined water proof cloth bags containing 25 Kg., it should be supplied in steel drums conforming to the tender specification." The above question remained under discussion and eventually on 30-5-1977 in the meeting held on the morning of above date between the Secretary, Ministry of Agriculture, Government of Pakistan, and the Managing Director, A.M.C., it was finally decided that the formulated material was to be packed in 25 Kg. Double polythelene lined water proof cloth bags. The above decision was confirmed by A.M.C. Through its Managing Director's letter dated 30-5-1977 addressed to the above officer (Exh. P.67 at page 397 of the paper book of R.F.A. No, 93 of 1979). The A.M.C. Also quoted its rates at Rs,1660 per ton in place of Rs,1,610. It may be stated that there are some letters on record, which indicate that during the relevant period the law and order situation in Karachi and Lahore was not up to the required level and on some dates curfew was imposed. The A.M.C. In some of its letters pointed out the above fact and also the factum that there was change in the specification. It intimated to the Federation that it could not be possible to complete the formulation up to the contracted date i,e. 30-6-1977. Be that as it may the General Manager, Federal Directorate of Agricultural Supplies, Government of Pakistan, through his letter dated 22-6-1977 addressed to A.M.C. (Exh.P.75 - at page 447 of the file of R.FA. No,93 of 1979) intimated to it that after 30-6-1977 no delivery of the formulated material would be accepted and no payment would be made to them. It was also stated that the department shall proceed against A.M.C. As per relevant terms of the contract as well as of the tender inquiry. It was also pointed out that negligible quantity of formulated material i,e. 120 M.T. Was supplied by the A.M.C. To Sindh Government by that date. It seems that up to 30-6-1977 the A.M.C. Was able to supply formulated material to the extent of 206 metric tons. After that litigation commenced inasmuch as A.M.C. Filed Civil Suit No, 422/1 of 1977 in or about August, 1977, in the Court of Civil Judge, Ist Class, Lahore, inter alia against the Federation for the recovery of Rs,45,61,980 plus an amount in Pakistani Rupee equivalent to Swiss Franks 159900. 3. It also appears that the A.M.C. Filed another suit, namely, Civil Suit No, 126 of 1978 in or about April, 1978, in the above Court of Civil Judge, Ist Class, Lahore, for the recovery of Rs,11,77,818 equivalent to Swiss Franks 222490, being the difference in air freight actually paid on the import of technical material 390 tons and the amount received by it from the Federation. 4. The above two suits are not the subject-matter of the present two civil appeals. It may be stated that Suit No, 422/1 of 1977 was decreed by the learned Civil Judge on 31-5-1979 for a sum of Rs,12,36,350 being the amount of damages; Rs,3,39,199 price of part of goods sold and delivered
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and Rs,9,13,029 equivalent to Swiss Franks .159900, being the amount of commission to A.M.C. Against the above judgment/decree Federation filed R.F.A. No, 73 of 1979 in 'the Lahore High Court, which was allowed by a Division Bench through a separate judgment dated 10-1-1993, against which A.M.C. Filed Civil Appeal No, 171 of 1993 in this Court. It may further be stated that Suit No, 126 of 1978 was also decreed by the learned Civil Judge on 21-5-1979 for a sum of Rs,12,70,419 against which the Federation filed R.FA. No, 139 of 1979 which was allowed by the above Division Bench of the Lahore High Court through a separate judgment dated 10-1-1993, against which A.M.C. Had filed Civil Appeal No, 172 of 1993. The aforesaid Civil Appeals Nos. 171 and 172 of 1993 are being disposed of through separate judgments. 5. It appears that while Suit No, 422/1 of 1977 was at the stage of arguments the Federation filed Civil Suit No, 165/1 of 1978 for the recovery of Rs,1,10,001,587.68 as damages for the breach of contract against Sandoz, Sandoz (Pakistan) Limited and A.M.C. On the basis of the averments that the above defendants had committed breach of the contract inasmuch as they supplied 206.2 M.T. As against the contracted quantity of 3000 M.T. It was further pleaded that the time of completion was of great importance as the formulated material was to be used early June, 1977, for boosting the cotton crop. It was also pleaded that on account of delay the imported technical material was to lose its potency upon expiry of one year. The break-up of the claim was given in para. 11 of the plaint. 6. The Federation filed an application before the learned Civil Judge for consolidation of its above suit with the aforesaid earlier suits of the A.M.C. The aforementioned application was declined by the learned Civil Judge by his , order dated 7-4-1979. Thereupon, the Federation filed a civil revision in the Lahore High Court, which was disposed of by an order dated 7-4-1978 whereby the learned Civil Judge was directed that the above suit of the Federation should also be heard from day to day and all the suits be decided together on one and the same day. 7. The above suit was resisted by the above three defendants. Each of the defendants filed separate written statement. The main plea taken by Sandoz Pakistan Limited was that it had nothing to do with the contract, whereas Sandoz and A.M.C. In their written statements inter alia pleaded that the contract was not bilateral but multilateral inasmuch as first part of the contract for the supply of 390 tons technical material was between the Federation and the Sandoz; whereas the second part of the contract, namely, formulation of above technical material 390 tons into 3000 tons formulated material was between the Federation and the A.M.C. It was also pleaded by both of them that the breach was on the part of the Federation. It was further pleaded that time was not the essence of the contract. On the basis of pleadings of the parties the learned Civil Judge framed as many as 15 issues. The Federation in support of the suit's claim examined nine witnesses and inter alia produced documentary evidence Exhs.P.1 to P.53. The above witnesses included P.W.1. Syed Aftab Ahmed Bukhari, who was in fact the Managing Director of the A.M.C. And who was also examined at a later stage by the A.M.C. As D.W. 12. Whereas A.M.C. And Sandoz examined 13 witnesses and inter alia produced documentary evidence Exhs. D1 to D. 93. 8. The trial Court through its judgment/decree dated 31-5-1979 dismissed the above suit, against which the Federation filed R.FA. No, 160 of 1979, which was allowed to the above extent. Thereupon, Sandoz filed aforesaid Civil Appeal No, 81 of 1993 and the A.M.C. Filed Civil Appeal No,173 of 1993. 9. Before dealing with the contention of the learned counsel for the parties, it may be observed that both the learned counsel have referred to the paper books of R.FA. No, 160 of 1979 from which the present two appeals have arisen and also the paper book of R.FA. No, 93 of 1979 from which Civil Appeal No, 171 of 1993 has arisen for the purpose of relying upon the documentary evidence. This fact has also been noted by the High Court in the judgment under appeal.
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10. In support of the above appeals, Messrs Fakhruddin G. Ebrahim and Aftab Ahmed Khan, learned ASCs appearing for the appellants, have vehemently contended that the contract was multilateral and not bilateral inasmuch as from the contract documents two separate contracts can be spelt out, namely, the contract for the supply of 390 tons technical material between the Federation and the Sandoz and the contra t for formulating 390 tons technical material into 3000 tons formulated mat rial between the Federation and the A.M.C. In furtherance of the above submissions, both have referred to clause 11 of Appendix No, 2 wherein inter alia it has been provided that after clearance of the store Federation would hand over the same to the formulator, A.M.C. At Karachi Airport for formulation purpose and that the latter would arrange formulation of the store into 3000 M.T. Of formulated material. It also contains the other detail as to the payment of the charges for formulation to A.M.C. In local currency etc. They have also referred to some letters. On the other hand, Raja Muhammad Bashir, learned Deputy Attorney-General appearing for the respondents, has urged that the High Court has given cogent reasons for holding that the contract was bilateral, which reasons he supports. 11. It may be stated that the High Court has very elaborately and ably dilated upon this aspect of the case. We fully concur with the reasoning and the conclusion arrived at by it: However, it will suffice to reproduce the first page of the agreement which reads as follows:- "An agreement made on the 10th day of April, 1977 (One thousand nine hundred and seventy- seven) between the President of Pakistan (hereinafter called the "Purchaser") of the one part and M/s. Sandoz Limited, Basle, Switzerland (hereinafter called the "Suppliers) of the other part. Whereas it is agreed that the Purchaser shall purchase and the Suppliers shall supply the stores described in the attached schedule and at the prices mentioned therein subject to the conditions attached as Appendices and Annexures to this contract and those laid down in the Tender Enquiry No,FDAS- 2464-Proc-dated 22-3-1977 opened on 30-3-1977." SIGNATURE SUPPLIER SIGNATURE SUPPLIER (Sd.) MAZAHIB (Sd.) Nasir-ud- Din Name MAZHAR HUSSAIN. CHAIRMAN General Manager M/s. AGRO-MARKETING Corporation Limited, 140/A, Shadman Phase II, Lahore. Federal Directorate of Agricultural Supplies For & on behalf of the President of Pakistan For & on behalf of the M/s. Sandoz Limited, Basle, Switserland."
It may be observed that there are two parties to the above contract, namely, President on behalf of the Federation and Sandoz Basle. The A.M.C. Has signed the contract as the local agent for and on behalf of Sandoz which is evident from the abovequoted portion of the contract documents. This has been done by A.M.C. Pursuant to authorisation Sandoz. In this regard reference may be made to Exh. D.4 equivalent to Exh. P.23. 12. Besides the above factual position, it may be pertinent to refer to the following documents, which militate against the appellant's learned counsel's above contention:-- (i) Exh.P.2, which is a letter dated 25-3-1977 of Sandoz Pakistan Limited which inter alia contains the quotation for formulation at the rate of Rs,1,610 per metric ton ex-factory Karachi which was the
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rate quoted by A.M.C. On behalf of Sandoz; (ii) sub-clause (2) of clause 11 of above Appendix No,2 makes it clear that the formulation charges at the rate of Rs,1,610 per metric ton would be paid to A.M.C. In Pakistani currency not remittable and convertible in foreign currency. If the above contract was not with Sandoz Limited and was factually with A.M.C., it was not necessary to clarify the above factum that the formulation charges would be paid in Pakistani currency not convertible; (iii) Exh.P.19 is a, letter dated 2-6-1977 from the General Manager, Government of Pakistan, Federal Directorate of Agricultural Supplies addressed to M/s. Sandoz Limited, Switzerland, through M/s. A.M.C. Limited Lahore informing it that sub-clause (f) of clause 11 of Appendix No,2 to the contract and clause 8 of Annexure 'Ato the contract on account of change of specification of the packing were amended. If the formulation contract was not between the Federation and the Sandoz, there was no occasion for the above officer of the Federation to have forwarded the above amended sub-clauses of the contract documents to it. However, it was submitted by Mr. Aftab Ahmed Khan that this letter was not factually received by Sandoz. But, it is not denied that A.M.C. Had received this letter. It was the duty of the latter to have forwarded the same to Sandoz Limited. (iv) The A.M.C. In para. 1 of its letter dated 8-8-1977 (at page 291 of the paper book of R.F.A. No, 160 of 1979 addressed to Mr. Ghulam Ishaq Khan. The then Secretary-General-in-Chief, Government of Pakistan, admit the- factum that it had signed inter alia the contract for formulation on behalf of Sandoz Limited as under:-- "We Agro-Marketing Corporation Ltd. Representatives of M/s. Sandoz Limited, Basle, had signed, on behalf of M/s. Sandoz Limited, a contract for the supply of 390 tons of Solvirex Technical and subsequent formulation of the material into 3000 tons of Solvirex 10-G. This contract was signed between M/s. Sandoz Limited and F.DA.S. On 10th of April, 1977." (v) Sandoz's letter dated 28-11-1977 (at page 341 of the paper book of R.FA. No, 160 of 1979) addressed to General Manager, Federal Directorate of Agricultural Supplies inter alia contains the following statement:- "1. We are ready to assist you to the best of our abilities, in whatever arrangement you may decide upon for the formulation of the balance of the technical material. Further, we are also prepared to delegate from Basle, Mr. Eugen Rutz, Vice-Director, who can fly out to Pakistan for discussion with you at short notice." 13. The tenor of the above two letters affirms the factum that A.M.C. Had signed the above contract on behalf of Sandoz which included the formulation work. Mr. Fakhruddin G. Ebrahim has also contended that while deciding the above controversy the Court should not look into any correspondence between the parties preceding to the conclusion and execution of the contract. In furtherance of his submission he has relied upon para. 715 from Chitty's Law of Contract, 24 Edition (1971), the case of A. & J. Inglis v. John Buttery & Co. (1878 Appeal Cases (3) 552), and the case of National Bank of Australasia, Limited v. J. Falkingham & Sons (1902 Appeal Cases 585). Whereas Mr. Aftab Ahmed Khan has referred to the case of Muhammad Akram and others v. Ch. Muhammad Salim (PLD 1964 (W.P.) Lahore 490), the case of Pakistan Tobacco Co. Ltd., Karachi v. Pak Cigarette Labour Union and another (PLD 1977 Karachi 586), the case of Mahendra Nath Mandal and another v. Sheikh Samsuddin and others (AIR 1921 Calcutta 146) and the case of Midnapore Zamindari Co. Ltd. v. Muktakeshi Patrani (AIR 1926 Patna 340), in order to contend that if two constructions of a document are possible, the construction which goes against the party, who had drafted the document should be preferred. He also submitted that since the contract documents were drafted by the Federation, the same be construed against it. 14. In our view, the contract itself is explicit on the question, whether it is bilateral or multilateral i,e. Tripartite. The above cases have no application to the case in hand. It may be observed that it is well-settled proposition of law that in case of any ambiguity in a contract document, the Court in
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order to resolve it and to ascertain the real intention of the parties, can have resort to the correspondence preceding and/or subsequent to the execution of the contract document, conduct of the parties and the attending circumstances. If we were to hold that Appendix No,2 to the contract documents by mentioning A.M.C. Instead of Sandoz has created an ambiguity, the above principle of construction of documents can be pressed into service; It will, not be out of context to point out that the reason for mentioning A.M.C. In the above Appendix No,2 is obvious, namely, that A.M.C. Was to arrange for execution of formulation work in Pakistan as the local agent of Sandoz and the charges for the same were to be paid in Pakistani currency. A perusal of the contract documents as a whole makes it clear that reference to A.M.C. In Appendix No,2 is in fact reference to it as the local agent of Sandoz. 15. The second point of controversy is, as to whether time for the completion of formulation work, namely, 30-6-1977 was the essence of the contract. Before touching upon the argument advanced by the learned counsel for the parties, it may be pertinent to reproduce section 55 of the Contract Act, 1872, hereinafter referred to as the Act, which reads as follows:-- "55. When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such any thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure." A perusal of the above-quoted section indicates that it provides that when a party to a contract fails to do anything which he promised to do under the contract at or before the specified time, the contract or the remaining portion of the contract which has not been performed becomes voidable at the option of the promisee if the intention of the parties was that the time should be the essence of the contract. It further lays down that if the intention of the parties was not to make the time as the essence, in the above eventuality, the contract does not become voidable by the failure to do such things at or before the specified time, but in such case the promisee is entitled to compensation B from the promisor for any loss occasioned to him by such failure. It may further be noticed that the last part of above section deals with the failure on the part of a promisee by laying down that in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts the performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss unless at the time of acceptance he gives notice to the promisor of his intention to do so. 16. It is evident from the above provision of the Act that it does not specify the nature of contracts in which the time would be the essence of the contract. It lays down a general principle that the time of a contract can be B made the essence of a contract if the parties so intended. 17. The Courts inter alia in the sub-continent while dealing with the contracts involving sale of immovable property have consistently held that unlers the contract itself expressly provides that the time of the performance of the contract is the essence, it would not be so. Suffice it to refer to some C judgments of this Court on the above legal proposition, namely, to the case of Abdul Hamid v. Abbas Bhai-Abdul Hussain Sodawaterwala (PLD 1962 SC 1) and to the case of Ghulam Nabi and others v. Seth Muhammad Yaqub and others (PLD 1983 SC 344). 18. However, generally in commercial transactions like sale of goods, the time for the delivery of the goods is considered as the essence of the contract. D In this regard reference may be made to the case of Chair Muhammad v. Abdul Hamid (1982 CLC 101), to the case of Mahabir Prasad Rungta v.
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Durga Datta (AIR 1961 SC 1990) and to the case of M/s. China Cotton Exporters v. Beharilal Ramcharan Cotton Mills Ltd. (AIR 1961 SC 1295). 19. At this juncture it will be instructive to reproduce para. 333 from American Jurisprudence, 2nd Edition, Vol. 17, para. 352 from Chitty on Contracts, Twenty-First Edition, and a portion of para. B from Pollock on Contracts, Thirteenth Edition, which read as follows:-- Para. 333 from American Jurisprudence: "333. What makes, and determination whether, time of the essence.--There is no legal taboo against making time of the essence of a contract, and if it sufficiently appears that such was the intention of the parties, it will be so regarded, both at law and in equity, even where damages may compensate for the delay. It is clear therefore that the parties may make time of the essence of their contract by stipulating therein that 'time is of the essence', although those exact words are not essential. Any words which show that the intention of the parties is that time shall be of the essence of the contract or any clause which provides in unequivocal terms that if the fulfilment is not within a specified time the contract is to be void will have that effect. Furthermore, time may, even in equity, be deemed of the essence of the contract by a manifestation of intention from the contract or subject-matter involved, or by implication from the nature of the contract or circumstances of the case, such as by reason of the fact that the benefit to accrue from the consideration to be paid or the conveyance to be executed materially depends upon strict performance in point of time, or, as it is sometimes said, by reason of considerations arising from the nature of the subject-matter of the contract or the character of the interest bargained for. If time becomes material to the rights and interests of the parties to any substantial degree, it will be regarded as of the essence. A rule as to when the facts and circumstances, the nature of the subject-matter of the contract, or the character of the interest bargained for make time of the essence cannot be stated in any…
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