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Petitioner: KARACHI FLOUR MILLERS' UNION AND 3 OTHERS VS Respondent: PROVINCE OF SIND JUDGMENT
Court Name: Sindh High Court Judge(s): I. Mehmood Title:KARACHI FLOUR MILLERS' UNION AND 3 OTHERS vs PROVINCE OF SIND
JUDGMENT
Reported As: PLD 1976 Karachi 623 Result: Suit dismissed Judgment JUDGMENT ' This suit is for a declaration and permanent injunction to restrain the taking of recovery proceedings for realizing the dues of the Government of Sind as arrears of land revenue, and for accounts. 2. The facts of this case are that the Karachi Steam Roller Flour Mills Co. Ltd., Sind Flour Mills Co. Ltd., and India Flour Mills (1936) Ltd., the plaintiffs Nos. 2 to 4 and Pakistan Roller Flour Mills, the defendant No. 5 owned Roller Flour Mills in Karachi. To facilitate joint dealings with the Government, they formed themselves into a partnership in 1950 under the name and style of Karachi Flour Millers Union (which will hereinafter be referred to as the "plaintiffs"). The Pakistan Roller Flour Mills retired from the partnership and was ultimately dropped from the suit. The defendant No. 2 is the Government of Pakistan in the Ministry of Food and Agriculture (Food Division), which controlled the production and distribution of foodstuffs, inter alia, wheat and wheat products as essential commodities, in the territory of Karachi through the Chief Commissioner's Directorate of Civil Supplies. The defendant No. 1 which was the Province of West Pakistan (and now the Province of Sind) took over the Food Department on 1-7-1962 after the merger of Karachi into West Pakistan. The 3rd and 4th defendants are formal parties. 3. With effect from st July 1950, the Government of Pakistan entered into an arrangement with the plaintiffs for milling indigenous and imported wheat into atta, maida, suji and bran (hereinafter referred to as the "wheat products". The Government used to fix the issue price of wheat, supply the same to the plaintiffs for milling into the wheat products in accordance with the extraction
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percentages prescribed from time to time and distribute the same at fixed prices to atta depots and ration shops and recover the sale proceeds. The wheat was supplied to the plaintiffs on credit and in the books of accounts maintained by the Director Civil Supplies, Karachi, the plaintiffs were debited with the cost or the wheat at the issue rate and were credited with lumpsum payments made to the Government on account. For these services, the plaintiffs were entitled to a milling remuneration which was represented by the difference between the issue price of wheat and the prices of wheat products fixed by the Government, which until it was revised on 25-5-1952 was at Rs. 124-6-0 per 100 maunds of wheat milled and was inclusive of all miscellaneous expenses. It is common ground that this arrangement was entirely oral and that no written agreement was ever entered into between the parties incorporating the terms and conditions of the arrangement relating to the milling of wheat and in particular the rate of the plaintiffs' milling remuneration. With regard to the milling of indigenous wheat, however, there was an agreement concluded by offer of the plaintiffs dated 27-9-1951 and acceptance of the Government dated 8-10-1951. But even 'this agreement did not specifically mention the milling rate payable to the plaintiffs. The agreement though not formally extended, formed the basis of the arrangement for the milling of indigenous wheat during the subsequent years 1951-57, upon which the plaintiffs rely for claiming quality allowance, which will be discussed later. 4. 4. On or about 25th May 1952, it became necessary for the Pakistan Government to increase the issue price of wheat from Rs. 11-9-0 per maund -to Rs. 12-4-0 per maund especially as the Government had to pay higher prices for imported wheat. But as the Government had decided not to 'increase the retail price of atta, the Director Civil Supplies and other officers of the Ministry of Finance, persuaded the plaintiffs during discussions at joint meetings, to agree to reduce their milling charges to Rs. 91-12-0 for a period of 3 months in the first instance, after which the matter was to be reconsidered in the light of the facts then prevailing. After the expiry of the period of 3 months, the plaintiffs repeatedly pressed the Government to restore their original milling charges of Rs. 124-6-0, but the Government did not do so (except for a nominal increase of Rs. 2-8-0 on account of corresponding rise in establishment charges), as a result of which the plaintiffs say that they went on suffering losses. The case of the plaintiffs is that the original milling charge of Rs. 124- 6.0 included milling loss of 4%. The plaintiffs say that in the process of milling wheat, there is always a loss in production called milling loss because of excessive moisture in the wheat and also impurities, such as foreign matter. More particularly, their case is that in order to produce 100 maunds of wheat products, they had to mill 1014 maunds of dean wheat and that while the Government was recovering from them the oast of 100 maunds of wheat, they were in fact, consuming and paying for 1014 maunds of wheat to produce 100 maunds of wheat products. That the denial to them of this milling loss of 14%, as well the failure by the Government to restore their original milling charges, was causing them immense losses. On 14-5-1965 the plaintiffs sent a legal notice (Exh. P. 109) addressed to the Director Civil Supplies, Karachi, demanding compensation of Rs. 66,87, 932-3-0 for the losses suffered by them. 5. The question of revising the milling rate payable to the plaintiffs as well as their claims for milling loss continued to engage the attention of the Pakistan Government. With this objective in view, several meetings and 'negotiations took place between the Officers of the Ministry of Food, Government of Pakistan, the Karachi Administration and the plaintiffs' representatives. Thus, a joint meeting was held on 27-6-1955 and the minutes Exh. 12/28 show that the plaintiffs had agreed to accept milling rates for imported wheat at the rate of Rs. 102-11-0 for the period 1.9-1952 to 30-6- 1955 and at the rate of Rs. 104-4-0 with effect from 1-7-1955 onwards and with regard to the indigenous wheat, the plaintiffs agreed to mill at the rate of Rs. 91-12-0 for past milling but were to get the quality allowance on the basis of the specifications already agreed to by the Director of
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Civil Supplies, Karachi. The plaintiffs say that instead of implementing these decisions, the Government appointed a Cost Accounts Officer, Mr. E. K. Mumford to examine and report on the plaintiffs' cost of production of the wheat products in their flour mills. He submitted his report on 20- 12-1955 recommending payment of milling charges of Rs. 100 for indigenous wheat and Rs. 115 for imported wheat. That the Government also did not accept his .Report and on t-12-1958 appointed a High Power Committee of 4 persons to enquire into the working expenses of the mills and to recommend the rate at which milling charges should be paid to the Millers. The Committee after - making due enquiries and carrying out test milling in one of the plaintiffs' mills, recommended that the milling rates be paid at the rates agreed to at the meeting held on 27-6-1955 upto 30-4-1960 and after 1-5-1960 at an increased rate of annas 13 per maund for milling only, and in addition to milling loss of 14 per cent. From 1-5-1960. The recommendations of this Committee were also not accepted by the Government and, as the plaintiffs pressed for finalization of their claims, a meeting was finally convened on 31-12-1960 with the Joint Secretary, Ministry of Food and other Authorities including the Director of Civil Supplies. The final settlement recorded in the minutes- were that (1) the plaintiffs had agreed to accept milling rates at Rs. 102-12-0', for 100 maunds from 1-9-1952 to 30-6-1955 and (2) at Rs. 104-4-0 from 1-7-1975 to 30-11-1958 and (3) from 1-12-1958 onwards, to the recommendation of the 4-man Committee which, as stated earlier, had recommended payment of 1 per cent. Milling loss on imported wheat. That, despite this final settlement, the Government of Pakistan informed the plaintiffs by letter dated 8-7-1961 Exh. P. 207 that having fully considered their claims, it had been decided to fix the milling charges payable to the plaintiffs, (1) at the rate of Rs. 102-69 for the period 1-9-1952 to 30-6-1955, (2) at the rate of Rs. 104-25 for the period 1-7-1955 to 30.4-1960 and (3) from 1-5-1960, the date from which wheat was decontrolled, no milling charges were to be allowed so long as the millers complied with the Government instructions regarding extraction percentages and sale of wheat products at fixed prices. Accordingly, the plaintiffs were afforded credit of Rs. 37,05,127/1/9 on account of the said increased rates finally decided by the Government for the period of milling from the commencement until 30th April 1960. The plaintiffs accepted this credit under protest by their letter dated 7-9-1961 (Exh. P. 215). 6. With effect from 1-5-1960, the Pakistan Government decontrolled wheat products and removed restrictions on their movement between Karachi and West Pakistan. The extraction percentages of the wheat products as well as maximum ex-mill prices were fixed by Notification dated 30-4-1960. Accordingly, there was a book value appreciation of stocks of wheat and wheat products lying in the plaintiffs' mills on the morning of 1-5-1960, amounting to Rs. 16,32,88-3-0 which the plaintiffs were directed to pay to the Government by letter dated 17-5-1960 (Exh. P. 183) and this sum was debited to the plaintiffs' account. The plaintiffs dispute this amount and deny liability for the same. 7. On 1st July 1962, the Government of Pakistan ceased to supply wheat to the plaintiffs consequent upon the transfer of the Food Department to the Government West Pakistan. On that day, an amount of Rs. 69,29,347.59 stood as the debit balance against the plaintiffs. The plaintiffs accept this figure as correct, but they say that they are entitled to adjustment of their claims and to claim credit against this amount. The plaintiffs claims set out in paragraph 22 of the plaint may now be summarised. They comprise of 3 main Leads of claims, namely, (1) quality allowance on indigenous wheat, (2) difference in milling charges on imported wheat for the period 1-9-1952 to 30-6-1962 on the basis of the final settlement reached at the meeting held on 31-12-1960 including milling loss at % on imported wheat with effect from 1-12-1958 to 30-6-1962 (3) reversal or deletion of entry of Rs. 16,32,888-19-0 wrongly debited in the account on account of appreciation of the value of stocks of wheat and wheat products lying in the plaintiffs' mills on 1-5-1960, the date on which the wheat was decontrolled. The breakup of these figures is mentioned in statement Exh. 12/4 submitted to the Court by the plaintiffs during the course of arguments in lieu of the-statement Annexure 'H' to the
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plaint (Exh. 12/3). According to the revised statement, after deducting the amount of Rs. 36,05,127/1/9 which was credited to plaintiffs' account on account of increase in milling charges finally allowed on 8-7-1961, and also after deducting the admitted amount. Of Rs. 69,29,347.59, a sum of Rs. 45,89,008.93 would become due and payable., to the plaintiffs. 8. The plaintiffs further state in the alternative, that as the Pakistan' Government has pleaded that the settlement reached at the meeting on 30-12-1960 was not confirmed and, therefore, was not binding on the Government, the plaintiffs would be entitled to claim milling charges at the original rate of Rs. 124-6-0 per 100 maunds from the commencement viz. 1-9-1952 to 30-6-1962 or in any case, reasonable milling charges including 1% milling loss, as may be fixed by this Court and for ascertaining which, the Court may order the taking of accounts against the Government of Pakistan. 9. After 1-7-1962, the Department of Food was taken over by the Government of West Pakistan and wheat was being supplied to the plaintiffs from time to time under various agreements, two of which are on record as Exh. 12/64 dated 6-7-1964 and Exh. 12/6 dated 2-10-1965. The plaintiffs used to make payments on account of wheat supplied from time to time. Against the cost of the wheat supplied, the plaintiffs claim credits in respect of the for amounts totalling Rs. 48,36,712.82 mentioned in paragraph 26 of the plaint and, more particularly, in Annexure 'K' thereto (Exh. 12/5). In addition, the plaintiffs claim milling charges at such reasonable rates as this, Court may allow for the total quantities of wheat milled by the plaintiffs from 1-7-1962 to 30-6-1966. The plaintiffs say that if their claims are allowed to be adjusted against the dues of the Provincial Government, it would be found that a large sum of money would be due and payable by the Provincial Government to the plaintiffs. 10. That plaintiffs say that the Government of West Pakistan continued the same arrangement with the plaintiffs for milling wheat, and carried forward in its own accounts, the book balance of wheat and the debit balance of Rs. 69,29,347.59 standing against the plaintiffs in favour of the Pakistan Government on 1-7-1962. Thereby, the Provincial Government treated the entire account as one running and continuous account. Therefore, the plaintiffs are entitled to have the whole account settled and taken from the commencement as one continuous and running account and to have their various outstanding claims against the Government of Pakistan also settled and credited in the said accounts. 11. On 9-4-1966, the plaintiffs reported shortages of wheat stocks. By their undertaking dated 8th June 1966 they agreed to replenish the shortages of some 17,793.5 tons of wheat or 4,84,378 maunds valuing Rs. 77,50,058.00' within a period of 3 months by the purchase of indigenous wheat from the open market. After further supplies were made to the plaintiffs, physical verification of the stocks was conducted by the Inspectorate of the Food Department on 21-6-66 and on 22-6-66 when it was found that there was a shortage of 5,72,555-15-12 maunds of imported wheat valuing Rs. 98,76,588.44 at the rate of Rs, 17.25 per maund. Accordingly, the Provincial Government demanded a revised bank guarantee for Rs. 99 lakhs and as the plaintiffs failed to furnish the same, the bank guarantee for Rs. 35 laks which had been previously furnished as security against the stocks under the agreement dated 2-12-1965, was realised, leaving a balance of Rs. 63,76,588.44 due and' payable by the plaintiffs. On 26-10-1966, the Government of West Pakistan passed an order Annexure '0' to the plaint, directing that the said balance amount be recovered from the plaintiffs along with penal interest at 10 per cent. Per annum, as arrears of land revenue in pursuance of clause 7 of the-agreement dated 2-12-1965 (Exh. 12/6) and under the West Pakistan Government Dues Recovery Ordinance, 1962. Recovery proceedings were instituted by the City Deputy Collector, Karachi (the defendant No. 4) through his notice dated 29-10-1966 Exh. 12/62. The plaintiffs have, therefore, filed the present suit on 21-11-1966 praying for a declaration that the order dated 26-10-1966 passed by the Government of West Pakistan directing recovery of Rs.
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63,76,588.44 as arrears of land revenue is illegal and ultra vires and also praying for a permanent injunction to restrain the taking of recovery proceedings. They also pray for an order against the Pakistan Government to supply all the inspection notes and wheat notes in respect of indigenous wheat supplied to the plaintiffs from Punjab, Bahawalpur and Sind between the year 1951-57 in order to work out the quality allowance payable to the plaintiffs. The plaintiffs further pray for rendition of accounts by the Government of Pakistan and the Government of Sind in respect of their respective dealings with the plaintiffs either as one account or separately if the Court so orders and that all the claims of the plaintiffs be worked out and the amount due on each such account to the plaintiffs be finally determined and ascertained. 12. The Government of Pakistan filed a written statement denying the claims of the plaintiffs. Therein it pleaded that the plaintiffs had agreed to reduce their milling charges for a period of three months but denied that they were to be restored automatically to their original rate after the expiry of three months. That the decisions recorded at the meeting held on 27-6-1955, the recommendation of Mr. Mumford, and those of the 4 man Committee and those recorded at the final meeting on 31-12-1960, were not accepted; nor were they binding on the Government. That the milling charges were finally determined by the Government by its letter dated 8-7-1961 which were at the rate of Rs. 102-69 per 100 maunds for the period 1-9-1952 to 30-6-1955 and at the rate of Rs. 104.25 for the period from 1-7-1955 to 30-4-1960. That from 1-5-1960. On which date wheat was decontrolled, no milling charges were pay able so long as the millers complied with the Government instructions regarding extraction percentages and sale of the wheat products at the fixed prices. It was further denied that the plaintiffs were entitled to any accounting against the Government and that the claims of the plaintiffs were barred by limitation. 13. In their joint written statement filed on behalf of the defendant Nos. 1, 3 and 4, the Provincial Government submitted that it had no concern with the alleged claims of the plaintiffs against the Pakistan Government pertaining to the period prior to 1-7-1962, except the book value of the stocks which it had taken over from the Pakistan Government on that date. It was denied that the plaintiffs were entitled to claim milling charges including milling loss as alleged. It further submitted that it was entitled to recover from the plaintiffs the sum of Rs. 98,76,588.44 as the value of the shortages of wheat found in stock, both under the agreement dated 2-12-1965 as well as under their undertaking to replenish the same by purchase from the local market. It denied that the plaintiffs are entitled to claim the amounts mentioned in Annexure 'K' to the plant, which it denied. It further denied that the plaintiffs are entitled to ask for accounts from it or that the plaintiffs had any cause of action and prayed that the suit be dismissed. 14. The following issues were framed. Two legal issues, namely, issues Nos. 10 and 11 were added by consent after the evidence was closed. (1) (a) Was any meeting held on 31-12-1960 between the plaintiffs and the representatives of the Central Government? (h) Was any decision taken at this meeting for payment to the plaintiffs of milling charges and milling loss allowance on the lines mentioned in para. 17 of the plaintiff? (c) Does this decision constitute an agreement binding on and enforceable against the Central Government? (2) Are the plaintiffs not liable for payment of Rs. 16,32,888.19 to the Central Government on account of the appreciation of wheat prices for the reasons stated in paragraph 15 of the plaint? (3) (a) Was there any agreement between the plaintiffs and the Central Government for payment to the plaintiffs of quality allowance on the lines mentioned in paragraphs 22 and 29 of the plaint? (b) If so, what is the amount of this quality allowance. (c) Is the claim for quality allowance not barred by limitation?
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(4) Have the plaintiffs been wrongly debited with items (i) and (ii) of paragraph 26 of the plaint? If so, are these entries liable to be reversed ? (5) Are the plaintiffs entitled to payment by the Provincial Government of Rs. 12.00,000.00 as allowance for supply of inferior quality of wheat as from the period commencing from the date of the Government's letter dated 12-10-1962? (6) Are the plaintiffs entitled to claim any allowance from the Provincial Government on the basis of any agreement between the plaintiffs and the Central Government allegedly reached at the meeting held on 31-12-1960? If so, in what amount? (7) Whether the Provincial Government is entitled to recover from the plaintiffs Rs. 63,76,588.44 as arrears of land revenue? (8) Has the defendant No. 5 any share in the amount claimed by the plaintiffs from the Provincial Governments? If so, is this amount recoverable in the present suit? (9) Whether the plaintiffs are entitled to claim milling charges for wheat consumed at the original rate of Rs. 124/6 per 100 maunds or in the alternative such reasonable milling charges including 11% milling loss as may be fixed by this Honourable Court from 1-9-1952 and upto the final decree in the suit and if so from which of the defendants? (10) Whether the dues demanded by defendant No 1 in this case are covered by the provisions of Revenue Recovery Act 1890 read with the West Government Dues Recovery Ordinance 1962? If so, whether the suit is barred under the provisions of the said Act and Ordinance? (11) Whether the suit for accounts is maintainable against defendants? 15. The plaintiffs examined two witnesses namely, Fakhruddin Tawawalla (P. W. 1), the Managing Director of India Flour Mills (1936) the plaintiff No. 4 and the Secretary of the Union, the plaintiff No. 1. The second witness of the plaintiffs was Ahmed Tamizuddin who retired as Director of Accounts in the Ministry of Food, Government of Pakistan. He was a member of the 4 man Committee appointed by the Chief Commissioner on 1-12-1958 to enquire into the milling charges of the plaintiffs. He was examined to prove the report of the Committee. One witness Irshad Mohammad Baig, an Officer on Special Duty in the Ministry of Food and Agriculture was examined on behalf of the Government of Pakistan, while the 'Government of Sind examined Noor Mohammad Memon, an Assistant .Accounts Officer, Food Department. 16. After giving my anxious consideration to the documentary and oral evidence on record and after hearing arguments of counsel for several days, I have come to the following conclusions on the issues: 17. Issues Nos. 1, 6 and 9.-These three issues may conveniently be considered together. On issues Nos. 1 and 6, Mr. Ajmal Mian learned counsel for the plaintiffs conceded, and rightly so, that although a meeting was held on 31-12-1960 between the plaintiffs and representatives of the Pakistan Government, the decisions taken as recorded in the minutes of the meeting Exh. D/3 were in the nature of recommendations and did not constitute a binding and enforceable agreement. As stated in the minutes, although certain proposals offered to the plaintiffs were reluctantly accepted by them, nevertheless, they yet needed the "final concurrence of the Financial Adviser, so that this outstanding issue is settled once for all". It is not in dispute that the required final concurrence of the Financial Adviser was not given. Therefore, in the absence of a concluded agreement, the plaintiffs' claims on the basis of the decisions recorded in the minutes against the bot the Government of Pakistan as well as the Provincial Government cannot be sustained. Accordingly, my findings on issues Nos. 1 and 6 are as follows: Issue No. 1(a) Yes, 1(b) No. 1(c) No, Issue No 6 No. 18. Turning now to issue No. 9, on the first part, the main question is whether the plaintiffs have established a concluded agreement on the part of the Government of Pakistan to pay milling charges at the rate of Rs. 124-6-0 per 100 maunds to the plaintiffs for milling wheat on behalf of the
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Government. As stated in the narration of the facts, no written agreement was concluded and none has been produced by the plaintiffs. Indeed Mr. Fakhruddin Tawawalla' (P. W. 1) candidly admitted in his examination by the Court under Order X, C. P. C. As follows: "There was no separate agreement by which the Central Government fixed Rs. 124-6-0 per 100 maunds as milling charges." ' As stated earlier, the milling charges of the plaintiffs were the difference between the issue price of wheat and the prices fixed for the respective wheat products extracted in accordance with the extraction percentages prescribed from time to time, taking 100 maunds of wheat as the unit for computation of the price structure which was supposed to produce 100 maunds of wheat products. In the beginning, in agreement with the plaintiffs, the pricer structure was so worked that it gave the plaintiffs a milling remuneration of Rs. 124-6-0 per 100 maunds, and it is contended by the plaintiffs that this rate was to apply to all future milling on behalf of the Government. But I find that this contention of the plaintiffs is not supported by the evidence. Neither the plaintiffs' solitary witness Mr. Fakhruddin Tawawalla (P. W. 1)' has so stated categorically in his evidence, nor is there…
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