Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: TRADING CORPORATION OF PAKISTAN (PVT.) LTD VS Respondent: Haji KHUDA BUX AMIR JUDGMENT
Court Name: Sindh High Court Judge(s): Muhammad Faisal Kamal Alam Title:TRADING CORPORATION OF PAKISTAN (PVT.) LTD vs Haji KHUDA BUX AMIR
JUDGMENT
Reported As: 2017 CLC 1387 Result: Suit dismissed Judgment JUDGMENT MUHAMMAD FAISAL KAMAL ALAM, J.--- By this common Judgment, the suits mentioned herein above are decided, as they involved identical issues framed as Court Issues by the order dated 10.02.2011. The subject action has been brought by predecessor-in-interest of present Plaintiff, viz. Cotton Export Corporation of Pakistan (Pvt.) Limited a Private Sector Company whose shareholding was wholly owned by the Government of Pakistan. 2. Through instant proceedings, the Plaintiff is seeking a Judgment and Decree against the Defendant, inter alia, for damages. Since different suits have been filed, therefore, amount of damages also vary, together with interest at 14% per annum. The other two prayers about costs of the proceeding and discretionary relief are common in all the cases. 3. Notices of title suits were issued to Defendants, which contested the claims of Plaintiff by filing their pleadings/written statements. 4. The transaction in question involved supply of raw cotton bales to various foreign buyers. The undisputed facts are that from 1973 upto 1987 export of raw cotton was a regulated activity and during this period only Plaintiff being a wholly owned Federal Government Organization, was allowed to export it. However, in order to boost exports, under various Agreements of different dates, including the Agreement dated 27.01.1985 (Exhibit-6) [the main Agreement] different persons/entities including present Defendant were appointed as Export Agent and as the subject contracts/agreements show that two types of schemes were in vogue; under Scheme/Category-I, an export agent could act as a mere agent of Plaintiff to fetch a viable offer from a foreign buyer
---
## Page 2
for supply of raw cotton (the said goods), which the Plaintiff used to supply from its own stock by entering into a formal contract with foreign buyer and in this transaction the export agent/Defendant used to get specified commission. Under Scheme Category-II, an export agent was allowed to fetch an offer from a foreign buyer and supply the said goods from his/ its own stock but under the name of Plaintiff; against this transaction the Plaintiff was entitled to, inter alia, service charges. The Parties hereto have termed these two categories in their respective pleadings as SCHEME NO,1-A and SCHEME NO,1-B, respectively. 5. Dispute in all these cases pertains to the cotton crop year of 1986-1987 when various orders from different foreign buyers were received by Plaintiff through Defendant, which though were subsequently fulfilled, but became the bone of contention between Plaintiff and Defendant. As per averments of Plaintiff, the Defendant's negligent acts caused Plaintiff losses, as Defendant backed out from its commitment to supply said goods of different grade to Plaintiff for onward sale/export to various foreign buyers, whereas, main defence of Defendant is that all these export orders were required to be fulfilled and completed by Plaintiff as envisaged under Category-I, that is, from Plaintiff own stock. It was further contended on behalf of Defendant that it only acted as an export agent of Plaintiff to bring such viable offers from foreign buyers under Category-I and Plaintiff/C.E.C. was exclusively responsible for fulfilling these Contracts. With regard to causing harm, injury and loss to Plaintiff, the Defendant side has argued that Plaintiff did not suffer any loss / losses and the present proceedings were initiated by erstwhile Cotton Exchange Corporation; present Trading Corporation of Pakistan with ulterior motives and in order to avoid payment of commission to Defendant for its services. It is further argued by Defendant that internal mismanagement of Plaintiff that caused national exchequer huge losses has been covered up by filing these numerous Court cases. 6. From divergent pleadings of the parties, though Issues were framed on 18.03.1990, but in supersession of earlier Issues, following were eventually agreed and adopted as Court Issues by the order dated 10.02.2011, for deciding the controversy in question. "(1) Whether there was a concluded contract under which the defendant agreed to supply cotton to the plaintiff for sale to the foreign buyer? In either event, what is effect? (2)Whether the plaintiff on defendant's commitment to supply cotton had entered into a contract with foreign purchaser. What is the effect? (3)Whether the price, of cotton increased and defendant refused to tender cotton to plaintiff? What is the effect? (4)What is the legal basis on which plaintiff has claimed damages? (5)Whether any commission is payable to the defendant under the circumstances of this case? (6)Whether in the absence of "back to back contracts" executed between plaintiff and defendant, the defendant was required to (7)Whether the defendant committed breach of contract by not tendering cotton bales to the plaintiffs for onward shipment to the foreign buyers? (8)Whether the suit has been filed for mala fide purposes so as to detract attention from the losses caused by TCP's policies? (9)What should the decree be?" 7.By the order dated 02.04.2013, the. following Additional Issue was also framed with regard to Suits Nos,30, 31 and 32 of 1990, filed by private parties / present Defendant in Suit No,1052 of 1988. ADDITIONAL ISSUE "Whether the Suits Nos,30/1990, 31/1990 and 32/1990 are maintainable in view of the contract if any." 8.Since both parties have filed cases against each other, thus for the purpose of description, Trading Corporation of Pakistan (TCP) can be referred to as "Claimant", whereas, Export Agents who / which are Defendant in Suit No,1052 and other consolidated cases and Plaintiff in Suits Nos,30, 31
---
## Page 3
and 32 of 1990, be referred to as "Objectors". Respective parties led the evidence by filing their consolidated affidavit-in-evidence and were subjected to cross-examination. Evidence recorded in Suits No,1052 of 1988 and 1054 of 1988 have been referred to and relied upon by both the counsel representing. Claimants and Objectors. 9.Findings on the issues are as follows:- ISSUE NO.1 In Negative ISSUE NO.2 In Negative ISSUE NO.3 Redundant ISSUE NO.4 As under ISSUE NO.5 In Negative ISSUE NO.6 In Negative ISSUE NO.7 As under ISSUE NO.8 Redundant ADDITIONAL ISSUE In Negative ISSUE NO.9 Suit dismissed 10. At this juncture, it would be pertinent to mention that after conclusion of arguments, the learned counsel for the Claimant has filed an interlocutory application (CMA No,4438 of 2016) through which he has sought to bring on record certain documents, which as per his plea, should be read as part of the evidence. This application was vehemently opposed by Objector. The documents, which Claimant intends to bring on record are:-- (i) General Power of Attorney dated 10.04.1988 in favour of Mr. Fasihuddinson son of (late) Waziruddin, the General Secretary of Plaintiff, contained authority, inter alia, to file legal proceedings. (ii) Resolution dated 11.11.2003 from the Board of Plaintiff Company empowering Mr. Mehboob Akhtar, .who appeared as PW-1, inter alia, to give evidence. (iii) A Performa/Draft Agreement with the heading' "type purchase contract crop 1984-85 (Export out of Agent's own stock), which in fact is the draft of back to back agreement, which was to be signed between Plaintiff and its export agent in pursuance of transaction falling within Category-I, as mentioned -hereinabove. (iv) Different International Bulletins of period 1986-87 in which price of cotton prevalent at that time is mentioned. 11. It is also a matter of record that evidence in all, these cases was concluded many years back and the case law relied upon by learned counsel for the Claimant is not at all applicable to the present cases. Gist of case law is that Courts have allowed filing of additional documents while the matter was still at the evidence stage. So much so, in one of the reported decision relied upon by the Claimant's counsel, viz. 2005 CLC Page-1305 (Messrs Trading Corporation of Pakistan v. Messrs Rahat and Co.) this Hon'ble Court has observed that if an application of the nature is made prior to recording of the evidence then it would not be treated as an application at a belated stage. Conversely, in instant cases, the Claimant has filed this application many years after conclusion of evidence,which is not acceptable. More so, no one should be allowed to take undue advantage of Procedural Law (Civil Procedure Code), which can result in delaying the matter instead of deciding it expeditiously; this tantamounts to abuse of process of Court. No good cause has been shown by learned counsel for Plaintiff for not producing the above listed documents earlier either with their pleadings or during evidence, particularly when admittedly all the above listed documents were always in the possession and custody of Claimant.</u> Taking a lenient view, I am not dismissing this application with cost, as the counsel for parties have already concluded their final arguments in these cases. Accordingly, the above mentioned application under Order XIII, Rule 2 of C.P.C., is
---
## Page 4
hereby dismissed being meritless. ISSUES NOS.1, 6 AND 7. 12. Mr. Malik Muhammad Riaz, the learned counsel representing the Claimants has strenuously argued that Exhibits-7, 8 and 9, which are the Letter of Export Sale Confirmation, Export Sale Contract and Sales Confirmation Slip, all of same date; 20.09.1986 (in Suit No,1054 of 1988) are the tripartite concluded contracts between Claimants, Objectors and respective foreign buyers. The above mentioned documents collectively be referred to as "foreign contracts". The learned counsel has referred some of the Clauses of the foreign contracts, in particular Clause-21 of Letter of Export Sales Confirmation, in support of his arguments. This Clause-21 says that arrangement of the said goods would be from Objectors own stock. He further submitted that in terms of the above undisputed documentary evidence, Objectors were under a contractual obligation that the said goods were to be exported from Objector's own stock. It was further argued by learned counsel representing the Claimants that in the presence of the above mentioned documents / foreign contracts there was no requirement of back to back contracts as pleaded by Objectors. Mr. Malik Muhammad Riaz, learned counsel has cited a good number of reported decisions (mentioned herein under) to augment his arguments that the Objector committed breach of contract, which has caused enormous losses to Claimants: (i) PLD 1981 Karachi Page-170 (ii) 2010 SCMR 286; (iii) AIR (3) 1944 Nagpur Page-124, (iv) AIR (29) 1942 Page-33 (v) PLD 1977 Karachi Page-48 (vi) AIR 1958 Karachi Page-195, (vii) 1991 CLC Karachi Page- 1844, (viii) 1998 MLD Lahore Page-595 (ix) PLD 1960 (W.P) Karachi Page-346, (x) PLD 1958 (W.P.) Lahore Page-63, (xi) AIR 1979 SC Page-621, (xii) 1992 CLC Lahore Page-2344 (xiii) 1994 SCMR Page- 2189, (xiv) PLD 1958 Privy Council Page-61, (xv) PLD 1979 Karachi Page-95, (xvi) 1985 PSC page 800, (xvii) 1999 MLD Karachi Page-2750, (xviii) 1999 CLC Karachi Page-483, (xix) PLD 1959 (W.P) Karachi Page-472, (xx) 1999 CLC Lahore Page-1522, (xxi) 1982 CLC Karachi Page-495, (xxii) PLD 1983 Karachi Page-63, (xxiii) PLD 1967 Karachi Page-318, (xxiv) AIR 1964 Patna Page-250, (xxv) AIR 1928 Privy Council Page-200 (xxvi) PLD 1973 SC Page-311. 13.On the other hand, Mr. S. Afsar Ali Abidi, representing the Objectors/Export agent in all suits has vehemently argued that since the said goods were to. be supplied from Objector's stocks, therefore, a back to back agreement was necessary. The crux of his defence is that in absence of a back to back agreement in which important terms were to be mentioned, including the price on which the Claimants were required to purchase the said goods from Objector, for its onward export to foreign buyers/in the International Market, no concluded contract came into existence. To a query, learned counsel of Objectors replied that though the foreign contracts, which are being termed as concluded contracts by Claimants, were entered into by Objectors, but, it was the initial stage / one part of the entire contractual transaction and since the basic component, that is, back to back agreements were never signed, therefore, contract between Objectors (Defendants/Export agent) and Plaintiff (Trading Corporation of Pakistan) could not materialize and since there was no privity of contract between Objectors and Claimant, therefore, question of breach of contractual obligation on the part of Objectors did not arise at all. In support of his arguments, the learned counsel has cited following reported decisions:-- (i) PLD 1968 Lahore Page-1419, (ii) PLD 1982 Karachi Page-76 (iii) 1996 CLC Page-117, (iv) 2002 CLD 218 (v) PLD 2005 Lahore Page-419 14.With the assistance of learned counsel for the Parties, record of the cases have been examined. Evidence has been minutely evaluated. In the opening part of his cross-examination PW-1-Mehboob Akhtar, who was the then Deputy General Manager of Claimant, admitted the fact that no resolution of the Board of Director or any other authority was filed. However, the said PW-1 states that he has been duty authorized to depose on behalf of the Claimant Company, but the fact remained that the said PW-1 did not produce any document either in the shape of Board
---
## Page 5
Resolution or the Articles of Association (of Claimant), which can confirm the fact that PW-1 was duly authorized to give the evidence. However, legal effect of this factual aspect will be dealt in later part of this Judgment. The said PW-1 was extensively cross-examined on the factum that whether the contract between the parties hereto was concluded or not. Even otherwise, this is the core issue going to the very root of the case. It would be useful to reproduce herein below the relevant portions of the deposition of PW-1: <i>"The offer procured by defendant through Ex.7 was accepted by CEC. The CEC communicated the acceptance of the offer to the Export Agent. The contract was executed between CEC and Foreign buyers on 20.09.1986 through Export Agent. In this contract CEC is seller and foreign buyer is the buyer. It is correct that defendant is not a party to this Contract. Voluntarily says, the contract is based on Ex-7." "I cannot produce the Board Resolution authorizing me to give evidence on behalf of T.C.P right now, but I can produce it later on. It is incorrect to suggest that I have not been authorized by the Board to give evidence on behalf of T.C.P, but I cannot say if Fasihuddin was authorized to file suits on behalf of T. C. P. I had not dealt with these cases personally. I am giving evidence on the basis of record. In Ex-7, entry at serial No,9 shows the price between CEC and foreign buyer in foreign currency." "Q. I put it to you that scheme 1-B referred to in your plaint envisages two separate Contracts one between CEC and foreign buyer and the other between CEC and local Export Agent" Ans: Yes:" "Q". Does the document Ex-7 disclose anywhere as to on what price the CEC would purchase Cotton from the defendants? Ans: No, it does not. Voluntarily says, it was already settled as minimum support price as per past practice. Q: Can you produce any document confirming that the defendants had agreed to supply Cotton to CEC at minimum support price? Ans: No it was already settled as per past practice." Q: Did CEC call upon the defendants between 20.9.1986 till 4.11.1986 to come forward and execute formal back to back contract and supply the cotton accordingly? Ans: No, as there was no need of it because of Ex. 7 and inability if Agent to supply Cotton 6 months before Shipment period, as per Ex.12. "We did not call upon the defendants between 4.11.1986 to April/May, 1987, the shipping period, for executing back to back contract and supply the cotton. Voluntarily says the defendants vide Exh.12 categorically expressed their inability to supply cotton." 15. Documents produced, exhibited and relied upon by respective parties are not disputed, except the photocopies of Debit Notes, which were produced in the evidence by one of the Objectors-Star Cotton Corporation (Pvt.) Ltd., the Plaintiff of Suit No,32 of 1990. The authenticity of these Debit Notes, which are Bills for Commission, has been seriously questioned by Claimant, particularly in their Reply of 28.01.2008 (Exhibit-108), written in response to the Notice dated 25.01.2008 (Exhibit-107) under Order XII, Rule 8 of C.P.C., sent on behalf of Objector. Exhibit-6-the main Agreement regulates the relationship between parties hereto (Claimant and Objectors) and as already mentioned hereinabove that this Agreement envisages two categories of transactions. Although this main Agreement (Exhibit-6) does not specifically mentions that whenever the said goods were to be exported from Objector/Defendant's own stock, then the Claimant (Plaintiff) and Defendant (Objector) ought to have entered into a back to back contract, but in paragraph-5 of its pleadings and also in their Affidavit-in-Evidence it has been acknowledged by Plaintiff (Claimant TCP) that when the said goods were to be exported from the stock of Objector / Export Agent, for which it had to purchase cotton directly from open market and subsequently tendered it to the
---
## Page 6
Claimant (TCP), then this type of sale transaction was to be done through and was covered under a back to back contract between the parties, inter alia, for receiving payments from Claimant in respect of the price, business procurement commission, export expenses, etc. The afore referred foreign contracts relating to the transactions in question also confirm that initially contracts for export of said goods to different foreign buyers were to be executed through present Defendant (Objector), as Clause-21 of Letter of Export Sales Confirmation [dated 20.09.1986-Exhibit-7] clearly mentions that said goods were to be supplied from agents (Objectors) own stock, whereas, over leaf (on the back page) under Clause-17 it is mentioned that shipment is to be handled by the present Defendant / Objector. Similarly another document Exhibit-8, which is a contract dated 20.09.1986 between Plaintiff and one of the foreign buyers in Switzerland, it is mentioned that the selling agent for such cotton consignment is the present Defendant (Objector). Sale price has been mentioned as 34.00 US Cents FOB (Free on Board), the Commission Column of this contract did not contain any figure but mentions "nil". 16.In other connected suits more or less same factual position exists with the exception of date of foreign contract, foreign buyers, sale price and quantity of the said goods. 17.It is also not disputed that shipment period for all these goods/consignments in different connected suits was between November/ December 1986 to May, 1987. However, by its correspondence of 04.11.1986 (Exh-611), the Objector showed its inability to continue with these foreign contracts on account of increase in cotton price in local market and requested Claimant to take over contracts in question. A list of these foreign contracts has been mentioned in the above correspondence, which are subject matter of various connected suits. Thereafter nothing was heard from either party. After a silence of 15 (fifteen) months, legal notices of same date, that is, 27.02.1988 but with different claims were sent to all these Objectors. One such legal notice (Exhibit- 16) was served upon present Defendant (Objector) on behalf of Plaintiff (Claimant), calling upon the former, inter alia, to pay a sum of Rs,9,161,250.00/- (Rupees Ninety One Lac Sixty One Thousand Two Hundred Fifty Only) towards losses/damages, which the Claimant allegedly suffered on account of breach of obligations by Objector, vis-a-vis contracts for sale and supply of cotton bales (said goods) to foreign buyers under the foreign contracts. The Objector (Defendant) responded by their letter dated 12.03.1988 (Exh: 5/7) and while denying claim of Plaintiff, has categorically mentioned that all these transactions in question was a past and closed matter. In its above Reply (of 12.03.1988), the Objector (Defendant) admittedly has not mentioned any amount, which they now claim as their commission from Claimant/ Plaintiff and for which these Objectors have filed separate Suits Nos,30, 31 and 32 of 1990. 18.From the pleadings of the parties and on the basis of testimony of witnesses a conclusion can be drawn that Defendant (Objectors) in effect handed over the foreign contracts to Claimant rather surrendered these International Contracts to Claimants, which were accepted by the latter (Claimants) for the reasons that the latter (Claimant) itself exported consignment of cotton bales (said goods) to various foreign buyers under different foreign contracts, which are subject matters of present consolidated suits; (ii) and Claimant (TCP) did not raise any objection by addressing any correspondence in response to the above letter of 04.11.1986 (Exh:6/1), which for the sake of reference be referred to as withdrawal letter; (iii) the only correspondence after the above withdrawal letter from Claimant (Plaintiff's) side was the above referred legal notice dated 27.07.1988 (Exhibit-16), <u>that is, after almost fifteen months. </u>Consequently through their conduct, the Claimant has actually acquiesced to the above withdrawal letter of Defendant by acting upon it accordingly, as discussed hereinabove. From a minute examination of the case record, which obviously includes pleadings and evidence of respective parties, it is apparent that the present controversy had two stages; stage one was when initially by virtue of Exhibits-7, 8 and 9-the foreign contracts for the export of said goods to foreign buyers were entered into between
---
## Page 7
Claimants (TCP) and Objectors;<u> and the second or stage two of the present controversy is post withdrawal letter of 04.11.1986 </u>when the Objectors (Export Agents) of these connected suits surrendered or transferred all these foreign contracts to Claimant (TCP). What actually has happened that on account of increase in cotton price in the local market, the Defendant on commercial consideration withdrew from the foreign contracts and handed over all such contracts to Claimant for its direct sale to different foreign buyers, to which the Claimant acquiesced. The plea taken by Objector as its defence for not supplying the cotton to foreign buyers from the Objector's own stock, stands proven after consideration of the evidence of the parties and in view of the discussion contained in preceding paragraphs. Thus, Section-63 of the Contract Act (1872) is applicable to the present nature of dispute; it would be advantageous to reproduce herein under the above provision:-- "63. Promisse may dispense with or remit performance of promise.--- Every promisee may dispense with or remits wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit. Illustration (a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise. (b) A owes B 5,000 rupees, A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which the 5,000 rupees were payable. The whole debt is discharged. (c) A owes B 5,000 rupees, C pays to B 1,000 rupees, and B accepts them in satisfaction of his claim on A. This payment is discharge of the whole claim. (d) A owes B, under a contract, a sum of money, the amount of which has not been ascertained A, without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount. (e) A owes B 2,000 rupees, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a composition of eight annas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B's demand." 19. With their written arguments, Claimant's side enclosed number of documents, which were filed by them with their above listed application, one of which is Annexure No,3-the Export Sales Procedure, which has been mentioned at Serial No,3 in the Index of written arguments of Claimant (TCP). Paragraph-7 of this Export Sales Procedure Document (Booklet) explains the mechanism about Export Sales of Goods through Local Export Agent, in the instant case, the present Defendant/Objector. It would be advantageous to reproduce herein under the Scheme No,1 as mentioned in…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.