2001 PLP 1473 (CLC)

MALI K MUHAMMAD QAYYUM, J.‑‑‑ As the judgment and decree challenged in R.F.A. No. 165 of 1990, R.F.A. No. 11,6, of 1990 and R:F.A. No.96 of 1990 is the same .these appeals are being disposed of together.

2. All these appeals arise out of a suit for recovery of Rs.11 lacs filed by Messrs Samsung a Limited Company against the three appellants. In the plaint .it was alleged that the Government of Pakistan appellant in R.F.A. No.165 of 1990 had invited tenders for the supply of 6000 metric ton of fertilizer on terms and conditions mentioned in the invitation notice. The respondent's tender was accepted by the Government and a contract was executed in this behalf on 11‑12‑1980. In terms of the agreement respondent No.2 Bank of America had on 11‑12‑1980 furnished a bank guarantee in favour of the appellants for due performance of the agreement.

3. It is common ground between the parties that the goods were shipped and placed on a vessel at Ulsan Port Republic of Korea on 10‑1‑1981. Unfortunately .the vessel went aground at the Japanese Coast on 11‑1‑1981 which resulted in total loss of the consignment.

4. Even otherwise according to the plaintiff as the fertilizer had been loaded on the ship by the seller it has performed its part of the agreement and the title in the goods had passed to appellant No.1. However, the Government encashed the bank guarantee which could not have been done.

5. The suit was contested by the appellants which took up the plea that under the terms and conditions of the tender arid the contract respondent No. I was obliged to supply the fertilizer at Karachi which it failed to do and as such the bank guarantee was rightly encashed. It has been asserted that the title in the goods never passed to the appellants who as such has no liability.

6. The learned trial Court by means of its judgment and decree, dated 14‑2‑1990 held that the appellant‑Government was not entitled to have the bank guarantee encashed inasmuch as respondent No. I had performed its part of the contract by placing the goods on the vessel and that the ship was sailing at the risk of the purchaser. The trial Court further came to the conclusion that as the supply was to be made on C&F Karachi basis the delivery was complete when respondent No.1 handed over the goods to the carrier.

7. We have heard the learned counsel for the parties and have perused the record.

8. The only controversy between the parties is as to whether by placing the goods on the vessel in Korea respondent No.1 had performed its part of the contract and the delivery was complete or was the respondent liable to supply the goods at Karachi. Unfortunately the learned trial Court while coming to the conclusion that the moment the goods were handed over to the shipper the delivery was effective to the purchaser has completely misunderstood the legal position. The C&F contract means that the freight is included in the cost of goods and the seller is liable to deliver the same at the place named in the contract which in the present case was Karachi. Furthermore, according to the contract between the parties it was the responsibility of respondent No.1 to have supplied the goods at Karachi. Therefore, it could not have been held that the title in the goods had passed to the purchaser when the goods were loaded on the vessel. It is an admitted position that the terms and conditions of the tender inquiry were to form part of the contract between the parties. A perusal of the agreement between the parties clearly shows that the supply was to be made by respondent No.1 at Karachi failing which the respondent was entitled to cancel the contract and to take other measures.

9. There is another aspect of the matter which is that admittedly at the behest of respondent No.1 Bank of America had furnished the bank guarantee Exh.P.4, dated 11‑12‑1980 clause (a) of which stipulated as follows:‑‑ "That the supplier shall within December, 1980 execution of the contract ship and have delivered to you at Karachi the contracted quantities of fertilizer. " This bank guarantee is addressed to the Government. It is clear in law that so far as the bank guarantees are concerned they constitute an independent contract quite separate from the main agreement between the seller and the purchaser. As no delivery of goods was made at Karachi as undertaken by the Bank the appellant was well within its rights to enforce the guarantee and receive the amount. In Messrs National Construction Limited v. Aiwan‑e -Iqbal Authority PLD 1994 SC 311 it was held that the performance guarantees are independent contracts and should be construed independent of the primary contract between the parties according to its covenants The Bank was entitled to encash the guarantees notwithstanding any dispute arising out of the original contract between the parties. To the same effect is the judgment of the Supreme Court in Haral Textile Limited v. Banque Indosuez Belgium S.A. and others 1999 SCMR

591. It follows from the above that the Government, of Pakistan had justifiably invoked the bank guarantee on the failure of the respondents to deliver the goods at Karachi as undertaken in clause (a) of the Bank guarantee itself. W 1

10. It may be mentioned that learned counsel for respondent No.1 has reiterated that the title in the goods passed to appellant No.1 the purchaser as soon as the goods were shipped. He has referred to Mehta & Co, v. Messrs Parmeshwardas Parshotamdas AIR 1924 Sindh 4 and Law and Bonar. Limited v. British American Tobacco Company Limited 1916 KB

605. He has also referred to the Carriage of Goods Act, 1925 particularly Article 4 Schedule 2(c). There is, however, no merit in the contention of the learned counsel. As has been pointed out that the bank guarantee itself provided in unequivocal terms that the plaintiff‑respondent N6.1 was under an" obligation to supply the goods at Karachi. Consequently on their failure to do so for any reason whatsoever the appellant was entitled to encash the bank guarantee.

11. In these circumstances, the trial Court could not have held that the bank guarantee had been wrongly encashed and that respondent No.1 was entitled to recover a sum of Rs. 11 lacs from the appellants. As a result of what has been stated above all these three appeals d succeed. These are accordingly allowed and the suit of respondent No.1 is dismissed with no order as to costs. Q.M.H./M.A.K./P‑30/L Appeal allowed.