P L D 1975 Karachi 454 (PLP)

The facts relevant to the controversy between the parties are not in dispute. The defendant by its letter dated 13th June 1966 informed the plaintiff that they had applied for an import licence from C. C. L & E. for import of balancing machinery of the value of ; 34,500.00 against their future export performances and to obtain this licence they had to export goods worth $ 69,000.00 which they were prepared to make and, therefore, requested to issue guarantee on their behalf on the standard pattern prescribed by C. C. I. & E. against their counter‑guarantee. The guarantee given by the plaintiff Bank in pursuance of this request reads as follows:‑ "To: The President of Pakistan. In consideration of your having granted Import Licence No. 804460 dated for Rs. 1,76,131.50 Messrs Associated Fisheries Corporation, Karachi, hereinafter called the licensee for import of Cold Storage Machinery and Ice Plant we hereby agree to guarantee as follows:‑ `If the licensee fails to comply with the conditions of the aforesaid import licence including export of goods worth Rs. 3,53,263 (Rupees three lacs fifty two thousand two hundred sixty three only) equivalent to double the value of the licence, within the stipulated period of 12 (twelve) months from its date of issue, we, the aforesaid Bank undertake to surrender to you foreign exchange worth Rs. 1,76,131.50 (Equivalent to the face value of the above‑mentioned import licence) in the shape of Bonus Vouchers within a month after the expiry of the period stipulated above'."

2. The counter‑guarantee given by the defendant to plaintiff‑Bank reads as follows;‑‑ "In consideration of your signing a Letter of guarantee in our favour of the President of Pakistan as follows:‑ `In consideration of your having granted Import Licence No. 804460 dated ...for Rs. 1,76,131.50 to Messrs Associated Fisheries Corporation, Karachi, hereinafter called the Licensee for Import of Cold Storage Machinery and Ice Plant, we hereby agree to guarantee as follows:‑‑ If the licensee fails to comply with the conditions of the aforesaid Import Licence including export of goods worth Rs.3,52,263.00 (Rupees three lacs fifty‑two thousand two hundred sixty three only) equivalent to double the value of the licence, within the stipulated period of 12 (twelve) months from its date of issue, we, the aforesaid Bank undertake to surrender to you foreign exchange worth its. 1,76,131.50 (equivalent to the face value of the above‑mentioned Import licence) in the shape of Bonus Vouchers within a month after the expiry of the period stipulated above'. `We hereby indemnify you against all claims, actions, proceedings and loss and shall hold you harmless from all consequences arising from your having done so and further undertake to comply with the conditions of the aforesaid con tract by an export performance of Rs. 3,52,263 within the stipulated period of 12 months from its date of issue'."

3. Following the aforesaid guarantee the defendant was issued an import licence dated 29‑7‑1966 for Rs. 1,76,131 and in terms of his guarantee he undertook to export within 12 months goods worth Rs. 3,52,263.00 failing which bonus vouchers of the face value of Rs. 1,76,131.50 had to be surrender ed to the Government.

4. The correspondence brought on record show that on 21st Septem ber 1967 the Chief Controller of Imports & Exports called upon the plaintiff Bank to submit bonus vouchers equivalent to the amount of the utilization of the licence with a certificate that the licence dated 29‑6‑1967 granted to the defendant had been utilized and remittances against the same were made up to Rs. 33,206.25 only, and the balance amount surrendered as unutilized and to get the bank guarantee released On 9th October 1967, the plaintiff Bank wrote to the defendant in which they stated that since the defendant utilized the import licence to the extent of Rs. 33,206.25 and failed to export the goods within the stipulated time of 12 months they had been called upon to surrender Bonus Vouchers of the value of Rs. 33,206.25 and he should, therefore, under the guarantee given. place funds at the disposal' of the plaintiff‑Bank before 15‑10‑1967 to enable it 0 purchase the Bonus Vouchers of the requisite value. On 27th November 1967 the defendant complained to the bank, with a copy to the Chief Controller of Imports & Exports that they had without his authority surrendered their import licence of the value of Rs. 1,76,131.50 to the Chief Controller of Imports & Exports intimating that only Rs. 33,206.25 had been utilized and that the surrender of the foreign exchange by the bank to the Chief Controller of Imports & Exports will be entirely at the risk and cost of the bank. The C. C. I. & E. in their letter dated 6th December 1967 to the plaintiff Bank referred to the complaint made by the defendant and took the view that the bank had no right to unilaterally surrender the import licence and called upon the bank to submit Bonus Vouchers of the value of Rs. 1,92,131.00 under the terms of their guarantee. In their reply dated 10th January 1968 the bank took up the position that they could not be liable for the entire amount of the guarantee for Rs. 1,76,131.00 "when the greater portion of the foreign exchange allowed to Messrs Associat ed Fisheries Corporation (the defendants) under our guarantee had remained unutilized and when the purpose for which the licence was issued has for all practical purposes, not been fulfilled." The C. C. I. & E. by their letter dated 25th March 1963 referred to the guarantee in their favour and asserted that commitments made under it cannot be avoided on the ground that import licence had not been utilized in full but held their demand for Rs. 1,76,131.00 in abeyance pending consideration by the C. C. I. & E. of the request made for revalidation of the licence. On 27th March 1969 the plaintiff‑Bank was again called upon by the Chief Controller of Imports & Exports to surrender Bonus Vouchers of the value of Rs. 33,207.00, "recover able from you under the guarantee for the failure of the licensee to make required exports against the above advance licence". This request was com plied with by the bank who purchased the Bonus Vouchers of the face value of Rs. 33,207 for Rs. 63,187.44 and forwarded the same to C. C. I. & B. on 28‑3‑1969. The plaintiff‑Bank seeks to recover the cost of Bonus Vouchers from the defendant under its counter‑guarantee referred to above.

5. Issues in this case were framed on 24‑8‑1970 and they read as under: (1) Whether defendant utilized any import licence? (2) Whether the defendant became liable to surrender Bonus Vouchers of the face value of Rs. 33,207 or any amount to the Government of Pakistan? (3) Whether the plaintiffs rightly surrendered Bonus Vouchers to the Government of Pakistan? (4) What was the prevailing market rate of Bonus Vouchers at the rele vant time? (5) To what relief if any the plaintiffs are entitled to?

6. Issue No. L‑It is an admitted position that though the defendant received the import license no import was effected by him as all that happen ed was that a letter of credit was opened through the plaintiff‑Bank for a sum equivalent of Rs. 33,206.25 but no shipments were effected by the foreign A suppliers within the period of validity of the import licence and no part of foreign exchange was remitted. It cannot, therefore, be said that any part of the import licence had been utilized by the defendant for utilization must mean if not actual import of goods covered by it, at least payment of its price to the suppliers. This issue is, therefore, answered in the negative.

7. Issues Nos. 2 and 3.‑Mr. Z. C. Valliani, the learned counsel for the plaintiff‑Bank contended that the liability of the plaintiff Bank under the guarantee was quite precise and clear and would arise under two circum stances, namely, failure to comply with the conditions of import licence by the licensee‑defendant and/or his failure to export goods worth Rs. 3,52,263.00 within the stipulated period. It was sought to be argued that the defendant did not import and thus failed to comply with the conditions of the import licence which was to import goods covered by it. The argument pre‑supposes that grant of an import licence obliges the licensee to import. In the absence of any such specific condition, to which my attention has not been invited, I cannot read any such obligation in the act simpliciter of the grant of an import licence. Moreover, in the plaint it is not alleged that the defendant failed to comply with any condition of the licence. The plaint on the other hand contains the assertion that the import licence had been utilized at least in part. It may also be noted that at no time any demand was made by the C. C. I. & E. against the plaintiff‑Bank on the ground that the defendant had not complied with any terms of the import licence. The ground on which the claim was made by C. C. I. & E. was the utilization of the import licence in part and the failure of the defendant to export the goods. It was then argued that admittedly the defendant failed to export and thus became liable to surrender Bonus Vouchers, of the requisite value under the guarantee. But then the question that arises for consideration is whether defendant's obligation to export was independent of utilization by him of the import licence. It is obvious from the correspondence referred to earlier that neither the plaintiff‑Bank nor the C. C. I. & E. understood the position to be so for the claim for Bonus Vouchers of the face value of Rs. 33,207.00 was made on the ground that import licence had been utilized to this extent. It was for this reason that the C. C. I. & E. gave up its claim for Bonus Vouchers of the face value of Rs. 1,76,131.00 being the sum equivalent of the value of the import licence. The whole purpose of imposing this obligation to export was that the foreign exchange utilized in the import was earned by such export. There would thus be no occasion to export if no import had been effected and import licence utilized. In this context utilization must mean remitting of foreign exchange by the importer and not merely upon opening a letter of credit as was wrongly understood by the C. C. 1. & E. and the plaintiff‑Bank.

8. It was next argued that the liability of the plaintiff‑Bank under its guarantee was simpliciter, that is, on demand made by tile C. C. I. & E. irrespective of the merits of their demand. The terms of guarantee itself does not support this argument. The guarantee was for consideration, namely, utilization of the import licence by the defendant and his failure to export o Even the plaintiff so understood the guarantee for they enquired from the defendant whether any export had been effected and entered into lengthy correspondence with C. C. I. & E. and parted with the Bonus Vouchers as according to them part licence had been utilized. The plaint itself proceeds on this basis. These issues are, therefore, answered in the negative and against the plaintiff.

7. Issue No. 4.‑This issue has become redundant in view of my finding on issues Nos. 2 and 3.

8. Issue No. S.‑It follows, therefore, that the suit is dismissed and since cost must follow the event, the defendant will have his cost from the plaintiff. S. A. H. Suit dismissed.