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Petitioner: Messrs SPLENDOURS INTERNATIONAL (Regd.) VS Respondent: Messrs M. Y. MALIK & COMPANY (Regd.)
1988 M L D 1187
1988 M L D 1187
[Lahore]
Before Abaid Ullah Khan and Muhammad Asadullah, JJ
Messrs SPLENDOURS INTERNATIONAL (Regd.)‑‑Appellant
versus
Messrs M. Y. MALIK & COMPANY (Regd.) and 2 others‑‑Respondents,
Regular First Appeal No.195 of 1983, heard on 2nd April, 1988.
(a) Contract Act (IX of 1872)‑‑--
-‑‑‑S.73‑‑Breach of contract‑‑Proof of‑‑Agreement of sale of establishment between plaintiffs and defendants‑‑Part‑payment received by plaintiffs and possession of establishment handed over to defendants‑‑Claim to a part of possession of premises and damages for dispossession therefrom given up by plaintiffs, during hearing of suit‑‑Presumption from such abandonment of claim would be that plaintiffs conceded that establishment as a whole, alongwith right of possession of disputed premises was sold by plaintiffs to defendants and that only stocks in godowns comprising disputed premises were not sold‑‑Terms of agreement, cancellation of insurance policies and refund claimed by plaintiffs, support the conclusion that establishment as a whole was sold by plaintiffs to defendants.
(b) Contract Act (IX of 1872)‑‑--
-‑‑‑S.73‑‑Breach of contract‑‑Illegal withholding of goods by defendants‑‑Proof of‑‑No evidence was available on record to prove that any item which was not sold by plaintiffs to defendants through sale agreement remained stored in stores transferred to defendants‑‑Plaintiffs have thus failed to prove their claim to damages for such item of goods.
(c) Contract Act (IX of 1872)‑‑--
---‑S. 73‑‑Breach of contract‑‑Establishment manufacturing medicines sold by plaintiffs to defendants‑‑Manufacturing of drugs by defendants objected to by plaintiffs‑‑Carrying on of such business by defendants‑‑Justification‑‑Terms of agreement. made it clear in itself that plaintiffs had given up business of manufacturing of drugs and had transferred and sold said business to defendants‑‑Defendants would have a right to carry on business of manufacturing of drugs in said premises with the material, machinery and the fixed assets lying therein‑‑Not only right to manufacture was sold by defendants but plaintiff also undertook not to start identical business as carried out by that establishment for a period of five years‑‑Terms of agreement thus clearly showed that not only the right to manufacture and right to obtain drugs manufacturing licence was transferred to defendants but also plaintiffs undertook not to conduct similar business in any name for specified period‑‑Plaintiffs' claim of damages based on such right would not be sustainable in circumstances.
(d) Contract Act (IX of 1872)‑‑---
‑‑‑S. 73‑‑Breach of contract‑‑Claim of building material lying in premises and damages on account of shock and loss of health including mental torture‑‑Proof‑ Disputed premises being on rent with plaintiffs, it was not expected that any building, material belonging to plaintiffs would be lying there‑‑No condition present in agreement that such material would be removable by plaintiffs‑ Damages on account of shock, loss of mental health including mental torture could not be claimed in view of fact that plaintiffs had withdrawn most of the other huge claims which they had made with regard to sale agreement which were proved to be false‑‑Plaintiffs having left the country at the relevant time and defendants being left to search out creditors of plaintiffs and for discharging their liabilities, question of shock, loss of health or mental torture would not arise in circumstances.
(e) Contract Act (IX of 1872)‑‑--
-‑‑‑S.73‑‑Breach of contract‑‑Cash payment of contracted amount to third party on behalf of plaintiffs‑‑Effect‑‑No prudent man could make payment to third party and that too in cash‑‑Under agreement defendants were to discharge liabilities of the limn [rut were not obliged and required to discharge their personal or extraneous liabilities‑‑Signatures of that third party were, however, not proved by defendants‑‑Payment made by defendants to a person who was not creditor thereof, would be of no effect.
(f) Qanun‑e‑Shahadat (10 of 1984)‑‑
‑‑‑Art.61‑‑Evidence of handwriting expert‑‑Value of‑‑Evidence of handwriting expert is not always sufficient to prove disputed signatures of a person‑‑Such evidence has to be weighed and judged keeping in view other evidence on record and circumstances of each case.
(g) Contract Act (IX of 1872)‑‑---
-‑‑‑S.73‑‑Breach of contract‑‑Contract of sale of establishment‑‑Goods of plaintiffs pledged with the bank‑‑Defendants first claimed re‑imbursement of specified amount for which goods were pledged and on realizing that they had never paid the pledged amount of goods, subsequently claimed loss of profit on supply of those goods‑‑Justification‑‑Defendants under the agreement, were not authorised to clear specified debt of plaintiffs and were not authorised to get the pledged stock from the bank on payment of specified amount‑‑Plaintiffs were, therefore, within their right to get the said goods released for their own use and benefit‑‑' Defendants could not claim any profit in respect thereof.
(h) Contract Act (IX of 1872)‑‑---
-‑‑‑S.73‑‑Breach of contract‑‑Liabilities discharged by defendants on behalf of plaintiffs were allowed to be deducted by Court from the amount payable by defendants to plaintiffs on account of sale of establishment‑‑Setting aside finding of Trial Court whereby suit of plaintiffs for recovery of amount of sale of establishment was dismissed, Appellate Court decreed suit of plaintiffs to the extent of sale amount after deducting therefrom amount already paid by defendants and the amount paid by them for discharging liabilities of the plaintiffs.
Sheikh Ziaullah for Appellant.
M. Saleem Shah Nazi and Syed Zahid Hussain for Respondents.
Dates of hearing: 5th to 8th and 12th December, 1987; 25th, 26th, 30th and 31st January; 6th to 9th, 13th to 16th, 20th to 23rd and 29th February; 1st, 5th, 7th, 20th, 21st, 26th to 28th March and 2nd April, 1988.
JUDGMENT
MUHAMMAD ASADULLAH, J.‑‑Messrs Splendours International, the appellants' firm, has been running the business relating to medicines and owned various projects relating thereto. One of their projects was Shifa Medico (Manufacturing Division). Its Managing Partner Chaudhry Sami Ullah belongs to Ahmadis Community. In 1974 there were communal riots between the Muslims and Ahmadis. Finding it difficult to run their business of Shifa Medico (Manufacturing Division) the appellants' firm agreed to sell the said Manufacturing Division to the respondents through an agreement dated 1‑11‑1974. According to the agreement (Ext.D.42/P.23) the appellants firm sold the project of Shifa Medico (Manufacturing Division) to the respondents for a consideration of Rs.15,00,000. It was agreed to hand over, under the said sale, to the respondents "all the fixed assets pertaining to manufacturing side, all the stocks of raw material, goods in process and that of finished goods manufactured by the Manufacturing Division of Shifa Medico "as were then lying in the godowns of the laboratory. A sum of Rs.2,00,000 was received in cash by Chaudhry Sami Ullah, the Managing Partner of the appellants' firm, on 30‑10‑1974 and apart from its separate receipt, the receipt thereof was acknowledged in the said agreement. A sum of Rs.2,00,000 had to be paid within three months through Bill of Exchange drawn at 90 days' sight from 1‑11‑1974. A sum of Rs.11,00,000 was left with the purchaser in regard to assumption of the liabilities of the appellants' firm. This amount had to be accounted for by the purchasers. The remaining conditions are contained in the said agreement. Chaudhry Sami Ullah, the Managing Partner, left for America in the end of December, 1974 and returned to Pakistan in October, 1975. Soon after the agreement dispute arose between the parties in regard to the performance of the said agreement. The appellants' firm, ultimately, filed this suit on 5‑4‑1976 for recovery of Rs.68,25,000 as also for possession of the disputed premises i.e., 10, 11 and 12 Vakeel Khana, Patiala Ground, Link Mcleod Road, Lahore and 7 Aziz Mansion, Link Mcleod Road, Lahore. They also claimed interest on Rs.13,00,000 which according to them remained unpaid as also interest at 15% per annum on the total claim. They also claimed the return of narcotics and books of accounts including the record.
2. The details of their claim in regard to the recovery of Rs. 68,25,000 are contained in para.21 of the plaint and are as follows:‑
(a) Balance unpaid consideration
Rs.13,00,000.
(b) Interest and bank charges on amount at (a) above.
Rs.2,00,000.
(c) Risk purchases by Army and Civil Government etc. approx.
Rs.3,00,000.
(d) Deterioration of stocks pledged with Bank which could not be released due to mala ride non‑payment of Rs.13,00,000
Rs.2,00,000.
(e) Business loss sustained approx.
Rs.5,00,000.
(f) Goods illegally withheld and not delivered lying in the premises 10, 11 and 12, Vakilkhana, Link Mcleod Road, Lahore, Approx.
Rs.10,00,000.
(g) Illegal dispossession of premises 10, 11 and 12, Vakilkhana, Link Mcleod Road, Lahore.
Rs.6,00,000.
(h) Illegal dispossession of premises 7‑Aziz Mansions, Link Mcleod Road, Lahore, including stocks equipment etc.
Rs.8,00,000
(i) Fraudulent withdrawal of amounts from bank.
Rs.5,00,000.
(j) Damages on account of misuse of manufacturing licence.
Rs.6,00,000.
(k) Building material lying in the premises.
Rs.75,000.
(l) Damages on account of shock and loss of health including mental torture to the plaintiff.
Rs.5,00,000.
(m) Damages on account of non‑payment by the defendants.
Rs.2,00,000.
(n) Two Volks Wagon Ambulances
Rs.50,000.
Rs.68,25,000.
3. in regard to their claim for possession of the abovementioned premises the case of the appellants' firm was that they sold only the goods lying in the said godowns and did not agree to pass over physical possession to the respondents. Damages to the tune of Rs.6,00,000 and Rs.8,00,000 (totalling Rs.14,00,000) contained in items `g' and `h' above were claimed on account of illegal dispossession from the said premises. The claim to possession of the said premises was at first given up by the appellant firm in arguments on 5‑12‑1987, and then, the claim in regard to the said items `g' and `h' was also given up on the last day of arguments. The appellant firm also gave up the claim in regard to items b, c, d, e, i, n and m above during the arguments and the learned counsel for the appellants confirmed the giving up of the said items including items `g' and `h' in writing after the arguments.
4. The suit was contested by the respondents alleging that a sum of Rs.2,00,000 in lieu of payment through Bill of Exchange was made to the appellants through their General Manager Azam Qureshi on 27‑2‑1975 and the remaining amount was consumed in discharging the liabilities of the appellant firm. They claimed that a total sum of Rs.13,37,311.09 was paid by the respondents in addition to the said payment of Rs.2,00,000 by discharging the liabilities of the appellant firm. As such they claimed that they had paid Rs.13,37,311.09 to the appellant firm although they were liable to pay a sum of Rs.13,00,000 as the balance of sale prise which remained outstanding after the payment of Rs.2,00,000 on 30‑10‑1974 as initial instalment of the sale prior. They alleged that the manufacturing division was sold to turn as a whole alongwith the said premises which are owned by other persons and were on rent with the appellant firm since before the execution of the said agreement and that they became the tenants of the landlords in place of the appellant firm. They also claimed the cost of the movable property which was not delivered to them under the terms of the agreement.
5. During the arguments before us the respondents have confined their claim to the following items and amounts, the details of which were placed on record by the learned counsel for the respondents during the arguments:‑
(a) Total cash/cheque payments made to the plaintiff and his creditors as per Ext.D.4G.
Rs.8,21,844.09
(b) Payments made to employees of Shifa Medico by order of MartialLaw Authority as per Exts. D.41/1 to D.41/13.
Rs.15,467.00
(c) Claim of the defendants from the plaintiff on account of non‑delivery/short delivery of agreed items as per details attached.
Rs.5,34,000
Rs.13,71,311.09
Further, details of item‑c above as given by the respondents are as follows:‑
(1) Morphine Injection (1,00,000) ampoules
Rs.1,00,000
(2) Delivery Vans (2 Nos.)
Rs.90,000
(3) Cycolostyle Machine (1. No.)
Rs.15,000
(4) Electronic Calculators (3 Nos.)
Rs.6,000
(5) Typewriter Machine (No.1)
Rs.3,000
(6) Ampoule Printing Machnine (1 No.) (with accessories)
Rs.20,000
(7) Total value of pledged stocks(LIM A/C of raw materials, etc. lying in the godown at 13 Vakilkhana).
Rs.7,00,000
Note: This stock was to be got released by the defendants after payment of Rs.7,00,000 to the Bank but on account of fluctuation of prices of stocks plaintiff himself got it released and sold for more than Rs.10,00,000 and thus deprived the defendants of the profits worth Rs.3,00,000
Rs.3,00,000
Total
Rs.12,34,000
Less liability as per item `7
Rs.7,00,000
Net claim:
Rs.5,34,000
6. Out of the pleadings the following issues (including the additional issues) were framed by the learned trial Court:‑
(1) Whether the plaintiff is entitled to recover any amount from the defendants? If so, what amount? O.P.P.
(1‑A) Whether the suit is within time?
(2) Whether the plaintiff is entitled to the possession of the premises mentioned in the prayer of the plaint? O.P.P.
(3) Whether the defendants are in possession of any narcotics and books of accounts including record as pleaded in para. Nos.13 and 14 of the plaint? If so, whether the plaintiff is entitled to their return? O.P.P.
(4) Whether the suit is bad for misjoinder of parties? If so, to what effect? O.P.D.
(5) Whether the suit is liable to be dismissed in view of the preliminary objections Nos.2 and 3 in the written statement? O.P.D.
(6) Whether the plaintiff has no cause of action? O.P.D.
(7) Whether the plaintiff has not come to the Court with clean hands? O.P.D.
(8) Whether the suit is not maintainable? O.P.D.
(9) Whether the plaintiff's suit is misconceived and is incompetent? If so to what effect? O.P.D.
(10) Whether the defendant is entitled to special costs/under section 35‑A, C.P.C.? If so to what quantum? O.P.D.
(10‑A) Whether the plaintiff firm has ceased to exist, if so, its effect? O.P.D.
(11) Relief.
7. The learned Civil Judge, 1st Class, decided issues Nos.1, 2, 3, 4, 8, 10 and 10‑A in the negative while issues Nos.1‑A, 5, 6 and 7 were decided in the affirmative. Issue No.9 was decided partly in favour of the appellants and partly in favour of the respondents. As a consequence of decision of issues Nos.1, 2, 3 and 6 he dismissed the suit through judgment and decree dated 11‑10‑1983, leaving the parties to bear their own costs. ‑This appeal has been filed by the appellants to challenge the said judgment and decree. We have perused the record and have. heard the arguments.
8. As narrated above in paras Nos.2 and 5 the. parties have confined their clamm to the items and amounts detailed therein. The parties have advanced their arguments only on issue No.1. The remaining issues are either consequential thereto or are not material and as such have not been pressed. In other words it is to be determined as to whether the respondents have paid the remaining sum of Rs.13,00,000 to the appellants under the said agreement or what amount they have paid out of the same to the appellants. It has also to be seen as to whether the claim f the appellants other items as detailed above is Allowable to them and if so to what extent. As a result it will have to be determined as to whether any amount is due to the appellants from the respondents and if so what is the extent of the said amount.
9. As mentioned above the appellants have giver, up their claim to possession of the premises in dispute and to damages for dispossession therefrom. This would mean that the appellants concede that the Shifa Medico (Manufacturing Division) as a whole alongwith right of possession of the premises in dispute was sold by the appellants to the respondents and that only the stocks in the godowns etc. were not sold. It may, however, be added that a perusal of the agreement Ext.D.42/Ext. P.23 will also show that the Manufacturing Division as a whole and not the stocks etc. were sold by the appellants, to the respondents. Similarly the cancellation of insurance policies and the refund claimed and made thereunder through Ext. D.46 and Ext.D.47 also supports the said conclusion. The temporary retention and then shifting of telephone from 7‑Aziz Mansions evidenced by Ext.D.30 to Ext.D.33 also supports the same thing. Letter dated 4‑11‑1974 Ext.P/f'.7 written by the appellants to the Health Department regarding the said sale also lends support to this conclusion. Further, notices Ext.D.1 to Ext.D.4 issued in various newspapers regarding the change of ownership, which notices were never objected to or refuted by the l appellants, also prove the same fact.
10. Item 'a' of para. 2 above relating to the payment or adjustment of the remaining sale price of Rs.13,00,000 will be taken up separately as alongwith the same the claim of the respondents regarding cash payment and discharging of liabilities will have to be discussed item by item. Taking up the next item, i.e. item 'f' relating; to goods illegally withheld by the respondent% it will be sufficient to say that there is no evidence on record to prove that any item which was not sold by the appellants to the respondents through the said agreement remained stored in the stores transferred to the respondents. Therefore, the appellants have failed to prove their claim to Rs.10,00,000 on this item.
11. Coming to item 'j' of para. 2, i.e., damages on account of misuse of manufacturing licence it is to be seen as to whether under the said agreement, Ext.D.42, the respondents were entitled to have manufacturing licence to carry on the business of manufacuturing drugs in the said premises. Agreement Ext.D.42 makes it clear in itself that the appellants had given up the business of manufacturing of drugs and had transferred and sold the said business to the respondents. Therefore, the respondents had a right to carry on the business of manufacturing of drugs in the said premises with the material, machinery, the fixed assets etc. lying therein. Not only the right to manufacture was sold to the respondents but also the appellants undertook "not to start identical business carried out by manufacturing division of Shifa Medico which he is selling to the purchasers in Lahore for at least 5 years". This is contained in clause 7 of the agreement and it clearly means that not only the right to manufacture and the right to obtain the drugs manufacturing licence was transferred to the respondents but also the appellants undertook not to carry on similar business in any name in Lahore for 5 years. This is why the appellant firm wrote a letter dated 4‑11‑1974, Ext. P/PW‑7, to the Health Department intimating that they had disposed of the Manufacturing Division to the respondents and it is on the basis of this letter that manufacturing licences Ext.D.43 and Ext.D.44 were issued in favour of the respondents. Accordingly the respondents have not misused the manufacturing licence or any manufacturing right of the appellants. The claim contained in item‑j, is therefore, disallowed.
12. The premises in dispute were on rent with the appellants and, therefore, it was not expected that any building material belonging to the appellants would be lying there. However, there was no condition in the agreement Ext.D.42 that any such material would be removable by the appellants. In any case there is no cogent evidence to prove that any such material was lying there. The claim contained in item `k' of para 2 is disallowed.
13. In item `1' of para.2 the appellants have claimed the damages on account of shock and loss of health including mental torture to the tune, of Rs.5,00,000. Appellants have withdrawn the claims in regard to items `d' and `e', `g' to `i' and `m' and `n' para.2 above and as also claim to possession of the premises in dispute and interest. Therefore, it were the appellants who made false and huge claims. Further, Chaudhary Sami Ullah the Managing Partner of the appellants' firm had left for America leaving the respondents to search out the creditors of the appellants for discharging their liabilities. In these circumstances the question of any shock, loss of health or mental torture to the appellants does not arise. Therefore, the claim contained in the said item `1' is also disallowed.
14. This leaves us with item 'a' of para. 2 above, amounting to Rs.13,00,000. It is admitted that a sum of Rs.2,00,000 was paid by the respondents to the appellants by the time the agreement Ext.D.42 was executed. It is also admitted that the bill of exchange for Rs.2,00,000 was not honoured by the, respondents and as such the payment of Rs.2,00,000' was not made as stipulated in item 'b' of condition No.1 of the said agreement. The respondents alleged that the said amount of Rs.2,00,000 was paid in cash: to Azam Qureshi on behalf of the appellants on 27‑2‑1975 through EA. D.15. It has been explained by the learned counsel for the respondents that the amount was paid in cash so that the same could be utilized by the family of Chaudhary Sami Ullah because if the payment had been made through cheque in the name of Chaudhary Sami Ullah he would not have been able to encash it for the benefit of his family. Leaving apart the question whether Azam Qureshi was authorised to receive the money on behalf of the appellants' firm and leaving aside the question whether he actually received the same and signed Ext.D.15 or not, it is difficult to believe that the said payment was made to Azam Qureshi or was made to him on behalf of the appellants. The explanation that if the payment had been made by cheque the amount could not be utilized by the family of Chaudhary Sami Ullah does not sound reasonable and is not acceptable. If the payment had been made even through a crossed cheque it would have gone to the account of Chaudhary Sami Ullah or the appellant firm. In these days of so fast communications and prompt bank facilities it could not have been difficult for Chaudhary Sami Ullah to issue a cheque in favour of any member of his family and they could easily get the cash in Pakistan very promptly. It is the contention of the respondents that the dispute had arisen between the parties long before the alleged payment of Rs.2,00,000 on 27‑2‑1975 through Ex.D.15. It is the case of the respondents that the dispute was referred to Chaudhary Ghulam Rasool for arbitration and he gave the award dated 27‑1‑1975 Ext.D.19. With the existence of this dispute, leaving aside the other disputes, no prudent man could make such a big payment to a third person and that too in cash. Apart from that, the signatures of Azam Qureshi were not attempted to be proved by the respondents through any handwriting expert. Although we would give little significance to the evidence of Mr. Zaka A. Malik (PW.8) yet it will be worthwhile to mention that he has given the opinion that Ext.D.15 is not signed by Azam Oureshi. The signatures of Azam Qureshi were F attempted to be proved through Abdul Hafeez (DW.10), Manager of Allied Bank, but his evidence does not support the case of the respondents because he also states that all his alleged signatures on many documents differ from each other. Therefore, he is not definite as to which are his real signatures and as to which signatures tally with Ext.D.15. The payment of Rs.2,00,000 through Ext.D.15 is not proved and is disallowed.
15. The other big payment is of Rs. 50,000 to Mst. Azra Sheikh on 31‑12‑1974 through Ext.D.16 read with Ext.D.9, Ext.D.27 and Ext.D.28. It is difficult to dispute that this payment was not made to Mst. Azra Sheikh mostly because the payment is proved by the bankers and is admitted by Mst. Azra Sheikh as DW.20. However, the real question is as to why and on what account the said payment was made to her, even, if the appellants had desired that such payment should be made to her. Under the agreement the respondents were to discharge the liabilities of the firm and they were not obliged and required to discharge their personal or extraneous liabilities. Mst. Azra Sheikh was not a creditor of the firm and nothing was due to her from the firm. Therefore, no payment could be made to her legally. The respondents should have refused the payment even if the appellants had desired that it should be made and that too through an authorised agent. Accordingly, the said…
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