P L D 1997 Karachi 134 (PLP)

This suit inter -alia is tiled for recovery of Rs.42S,045.54. The brief facts as per plaint are that the plaintiff is a banking company known as U.B.L Airport Branch, Karachi, defendant No.l a businessman and defendant No.2 P.I.A. a Corporation having its Head Office at the Karachi Airport The defendant No.2 had arranged to open Duty Free Shops at the Karachi and Islamabad Airports and appointed the defendant No. l as its Managing Partner, The arrangement between the two was that the defendant No. l will equip the said duty free shops exclusively with his own finances. The plaintiff agreed to grant a loan/cash credit to the defendant No. 1 to import goods to be kept and sold at the Duty Free Shops at Karachi and Islamabad Airports. The defendant No.2 had issued a certificate dated 21-11-1972 to 'the effect that the defendant No .l was its managing partner/managing agent who will manage the Duty Free Shops at Karachi and Islamabad Airports for and on behalf of defendant No.2. The defendant No. l requested the plaintiff to open L.C. for import of goods and for this purpose the plaintiff granted loan/cash credit to the extent of Rs.5,12,348.01 on the condition that goods will be kept in the bonded warehouse of defendant No.2 and will be released on the requisition of the plaintiff. The defendant No.2 by its letter dated 26-7-1973 confirmed that the duty free items being imported by the defendant No. l will be kept at the bonded warehouse of defendant No.2 and will not be released unless a requisition is signed by the plaintiff's nominee. The defendant No. l , in consideration of the loan/cash credit advanced to him by the plaintiff executed a Power of Attorney dated 31-7-1973 in favour of the plaintiff authorising it that in the event of termination of the agency under orders or instructions of the Government or due to happening of events beyond control of man's power, the P.I.A. shall pay the balance of the sale price to the plaintiff after making deductions as per clause 24 of the agreement. The contents of this power of attorney were communicated to, and were confirmed by the defendant No.2 by its letter dated 1-8-1978. The plaintiff by its letter dated 4-8-1978 addressed to the defendant No.2, confirmed that a payment of Rs.12,348.01 is being made to the defendant No.l on its request and that the defendant No.2 will store the goods in the Customs Bonded Warehouse under plaintiff's lien as per arrangements mutually agreed between the plaintiff and the defendant No.2 by letter dated 26-7-1973 and the Power of Attorney dated 1-7-1973. This position was also confirmed by the defendant No.2 by its letter dated 4-8-1974. The loan/cash credit was renewed in October, 1974 to Rs.4,00,

000. Subsequently, the plaintiff opened two more Letters of Credit for Rs.2,58,695 in pursuance to defendant No.2's letter dated 1-4-1974 and for Rs.1,70,000 on the same terms as mentioned in the letter dated 6-7-1973. The defendant No.2 once again confirmed that the goods imported under these L/Cs will be kept under plaintiff's lien in their bonded warehouse. In accordance with the terms and conditions agreed between the parties the defendant No.2, from time to time, had sent inventories of goods, stored in their bonded warehouse, to the plaintiff. The plaintiff, to secure the repayment of tire Loan/cash credit or any balance that might at any time be found due and payable by the defendant No. l to the plaintiff, got the defendant No. f execute a Promissory Note dated 19-2-1975 for Rs.3,50,000 payable on demand to the plaintiff with interest at 4 % per annum above the bank rate with d minimum of 13 % per annum and also the other documents which were Agreement for Pledge dated 19-2-1975, Letter of Continuity, Letter of Acknowledgement and Letter of Disbursement, all of even date. The defendant No. l fully utilized the said loan/cash credit from the account maintained by the said defendant with the plaintiff's Airport Branch, Karachi. The goods which were imported by defendant No. l were released from the warehouse of the defendant No.2 on requisition vouchers duly signed inter alia by the plaintiff, and the defendant No. l deposited the sale proceeds of the said goods with the plaintiff's Airport Branch. On 30-9-1976 the account of defendant No. 1 reflected a debit balance of Rs.3,74,

669. After coming to know that the . defendant No.2 had terminated the agency agreement with the defendant No.l the plaintiff, by its letters dated 30-8-1975 and 26-11-1975, requested the defendant No.2 to deposit with the plaintiff the sale proceeds of the goods imported and sold but instead o1 depositing the sale proceeds the General Manager, P.I.A., Duty Free Shops, by his Letter No. GM/DES/56/76/25, dated 27-11-1975 informed the plaintiff that the sale proceeds against the stocks of the Duty Free Shops cannot be deposited for any so-called adjustment of the plaintiff as they were not aware of any such dealings which were existing between the plaintiff and defendant No.

1. The plaintiff by its letter dated 26-11-1975 again requested the defendant No. l to adjust his liability in the said account but the defendant No. l failed and neglected to do the same. Again the plaintiff by its letter dated 27-5-1976 addressed to the Managing Director of defendant No.2 made it clear that the goods imported under the different Letters of Credit by the defendant No. l were kept in P. I.A.'s. bonded warehouse under the pledge/lien of the plaintiff and the same could not be removed without the consent and written authority of the plaintiff as was agreed between them and if the goods have been removed from the said bonded warehouse and sold through the Duty Free Shops, the sale proceeds of the said goods must be deposited with the plaintiff in the account maintained by the defendant No.

1. The defendant No.2, by its letter dated 15-11-1976, replied to the plaintiff's letter that under the agreement between the defendant No. l and defendant Nv.2, the defendant. No.2 has the first lien on the goods lying in the bonded warehouse acrd that the plaintiff's claim is only secondary and can be settled after the defendant No.2' dues have been fully paid. This contention was denied by the plaintiff vide its letter dated 15-12-1976 and requested defendant No.2 to pay it the sum of Rs3,62,906 due and outstanding from the defendant No. l to the plaintiff as on 30-10-1976. A reminder was also sent to the defendant No.2 but the said defendant refused to comply with the request made in tire letter of 15-12-1976, hence the present suit cods filed for the recovery of Rs.4,28,045..)4 which was the sum due as on 30-9-1977 with the prayer to pass, judgment and decree against the defendants jointly and severally for the said amount with interest at 14% per annum from 1-10-1977 till realization, cost o1 the suit and any other relief which may be deemed fit and proper in.-the circumstances of the case. 1n response to the notices issued, the defendants Nos. l and 2 filed their . written statements dated 24-3-1980 and 7-10-1978 respectively. The defendant No.1 while generally admitting the contents of the plaint, denied having executed any Promissory Note and also denied the', verification of the contents of para. 15 for the reasons that the defendant No.2 '.had taken over all the documents, memorandum, accounts books etc. The defendant No.2 in its written statement contended that it strictly complied with and fulfilled its commitment relating to the release. of the goods . on requisition vouchers signed by the plaintiff but denied its liability to the plaintiff in any manner whatsoever. It also denied that the plaintiff had the first lien and charge on the goods imported by defendant No. l and lying in the bonded warehouse of defendant No.2, as claimed by the plaintiff. It claimed that the claim of the plaintiff in respect of the said goods is only secondary as PA.-A. has the first charge over the goods as per agreement which was reached between the defendants Nos. I and

2. On the basis of the pleadings of the. parties, the following issues were framed and adopted: "(1) Whether the defendant No. l was partner of the defendant No. 2? ,;, (2) whether the defendant No.2 was aware of the amounts advanced to the defendant No. l by the plaintiff for the import of goods in question? ? (3) Did the defendant No.2 confirm to the plaintiff that the goods imported under the Letters of Credit in question will be stored in the bonded warehouse of the defendant No.2 under the plaintiff's .lien? or whether the defendant No.2 had a first charge or lien on the goods? (4)Whether suit is not maintainable against the defendant No.2 as stated in para. 16 of its written statement? (5) Whether the documents referred in paras. 14 and 15 of the plaint were not executed by the defendant No. l as alleged by him? (6) Whether the plaintiff is entitled to the decree in the suit? If so, against which of the defendants and to what extent? (7) What should the decree be? ' ' By an order dated 26-10-1994 which was passed with the consent of the counsel for the plaintiff and the defendants, it was agreed that the plaintiff will ,file affidavit-in-evidence of its witness on which he wits be cross-examined. By" another order date 11-a-t99-,. Mr. Akbar Mirza, appearing for the defendant No. 2, stated that he does not wish to cross-examine the witness and as such the case was fixed for arguments. I have perused the pleadings, documents produced in evidence and have heard the arguments of the learned counsel and my findings on the Issues are as under: Before I proceed any further, the admitted position is that the agreement reached between the defendant No. l and defendant No. 2 was never communicated or its contents made known to the plaintiff except that after the cancellation of the agency the same was mentioned in the correspondence addressed to the plaintiff: The said so-called Agreement has not been produced even during the present proceedings. ' Mr. Mamnoon Hasan the learned counsel for the plaintiff has contended that as against defendant No. l a decree can be passed under Order 22, Rule 4(3), C.P.C., as in spite of the mandatory provisions the defendant No. l failed to file the List of Legal Heirs and though he filed written statement but the said defendant failed to appear subsequently and no evidence was led by him. He has relied on the case of Khairunnisa v. Muhammad Ishaque PLD 1972 SC 25, wherein the Court was pleased to hold that "under the provisions of section 27(b) of the Specific Relief Act, 1877 a contract can be specifically performed against any other person claiming title to the property arising subsequently to the original contract but an exception has been made in the case of transferee for value who has paid him money in good faith and without notice of the original contract". According to him the only reference to the original contract made between me said two defendants was made the Power of Attorney executed by defendant in favour of the plaintiff. Bill, neither the said agreement nor its copy was ever produced by tire defendant No.]. or the defendant No.2'. According to the learned counsel:, the document Exh.6/5 was executed utter the credit was made available: to the defendant No.1 on the representation of the defendant No.2 and this was made in good- faith with out knowledge of any existing contract between the said two defendants. As regards to a decree against defendant No.2, he has relied on the representation/undertaking made by the defendant No.2 through various letters written to the plaintiff. According to him under section 8 of the Partnership Act, a partner can be taken even for a single venture. He has further relied on section 328 of the Partnership Act in regard to doctrine of 'holding out' and partnership by estoppel'. He has also relied on section 114 of Qanun-e -Shahadat and section 115 of Evidence Act as well as on the following, cases: (1) Pakistan Insurance Corporation v. United Liner Agencies 1988 CLC 425, ,'(2) Abbasin Limited v. Metal Exports 1988 MLD (Kar.) 440, (3) Province of West Pakistan v. G.V. Ratanchand Pir Mehfooz PLD 1958 Kar. 251, and ' (4) Sarshar Ali v. Roberts Cotton Association Ltd. PLD 1963 SC

244. According to the learned counsel, the defendants are liable jointly and severally for the amount advanced to defendant No. by the plaintiff. Mr. Akbar Mirza, the counsel appearing for the defendant No.2, has contended that the case of the plaintiff is that the loan was advanced to defendant No. I as an individual and not to a partnership firm or to the Duty Free Shops, or to the defendant No.2 and that the plaintiff had never asked the defendant .No.2 to repay the loan taut lad made a request to sell the goods belonging to defendant No. i as they were under the lien of the plaintiff. According to him the letter dated 21-11-1972 Exh.6/3 stating that the defendant No. l is the managing partner of the defendant No.2, was not addressed to the plaintiff but was a general letter and if the plaintiff had advanced loan on this letter it was not the responsibility of the defendant No.2. His next contention was that in Exh.6/4 the defendant No.2 did mention of a contract between the P.I.A. defendant No.2 and Ghaffar Azeem defendant No. l but the plaintiff never inquired in regard this contract. According to WILL, the only undertaking which was given by the defendant No.2 to the plaintiff was that it will not release the goods, belonging to defendant No. l and kept in the bonded warehouse of defendant No.2; without the requisition slips signed by the plaintiff. Now coming to the, issues Nos.l, and 2 the letter dated 7-11-1972 Exl..Q/L, addressed by defendant No.2 to the Secretary, Central Board of Revenue, clearly indicate that Ghaffar Azeem defendant No.1 was appointed as Managing Partner for the Duty Free Shops at Karachi and Islamabad and as such he was authorised to deal with all matters concerning the Duty Free Shops with the Government Agencies and outside parties on behalf of P.I. A defendant No.

1. Exh.6/3 is a letter dated 21-11-1972 which is as under: "This is to advise all concerned that Mr. Ghaffar Azim Khan is associated with us as a Managing Partner of our Duty Free Shops, which will be totally equipped by him with the entire saleable stocks from his own finances. These goods will be bounded by P.I.A. as per. our contract. However, for banking transactions Mr Ghaffar Azim Khan being the sole buyer of these goods, can pledge these to any bank he wishes." (Sd.) M. AQUIL, . DEPUTY DIRECTOR GROUND SERVICES." These two exhibits very clearly show that the P.I.A. defendant No.2 had authorised the defendant No. l as its Managing Partner to deal with all matters concerning Duty Free Shops and this was addressed to "all concerned'. In Exh.6/3 it is further clarified that for banking transactions Uhaffar Azim, being the sore buyer or the goods, could pledge the same to any 'tank he wished. These two documents did not indicate at all that there was any contract between the said two defendants which restricted the powers of the defendant No.l in regard o the financial matters or the repayment of any advancers in regard to the pledged goods by any financial institution. The subsequent correspondence also indicate that a clear understanding was reached between the defendants and the plaintiff that the imported goods, for which finances were advanced by the plaintiff were die sole property of the defendant No.2 and will be kept in the bonded warehouse of defendant No.2 which could be released only on the requisition slip of the plaintiff. In pursuance to the agreement between the petition, the P.1.A, also supplied to die plaintiff front entire to time inventories of me stock lying it in, this bonded warehouse. In the entire dealings nowhere the P.I.A. defendant No.2 bad made it clear to the plaintiff bank that it had a oust charge over the goods of the defendant No. I under some existing contract, !it the absence of any such information to the plaintiff, either by defendant No. I or by defendant No.2, the plaintiff advanced the cash credit facilities to the defendant No. I which were fully availed by the said defendant who was managing the Duty Free Shops as the managing partner of the defendant No.2. As such, after the termination of the agency of the defendant No. l; the defendant No.2 could not lay a claim on the goods std pledged with the plaintiff The defendant No.2 did not even had the authority to remove the said goods from its bonded warehouse as under the agreement between the parties, the said goods could only be removed on the requisition slips signed by the plaintiff, As such my answer to issues No. l and 2 in the affirmative. Issue No.3: In the light of the discussion, under Issues No. 1 and 2 the first part of Issue No.3, if the defendant No.2 confirmed to the plaintiff that "the goods imported under the Letters of Credit in question will be stored in bonded warehouse of the defendant No.2 under the plaintiff's lien": is also answered in affirmative, white to regard to the second part of the same issue, i.e. "whether the defendant No.2 had a first charge or lien on the goods" is answered in negative as the alleged agreement between the two defendants was never produced and as such cannot be considered in deciding this issue. Issue No.4: As already discussed, there existed an agreement between the plaintiff and the defendants to the extent that the goods imported by the defendant NoA will be kept in the bonded warehouse of defendant No.2 and will be released only on the requisition of the plaintiff, the defendant No.2 violated the said terms by removing the pledged goods from the bonded warehouse without the requisition of the plaintiff, and after the sale of the same, failed to deposit the sale, proceeds in the account maintained by the defendant No.l with the 8 plaintiff's Airport Branch and as such a cause accrued to the plaintiff against the said defendant. Answer to this issue as such is in affirmative. Issue No.5: Although the defendant No.l has denied the execution of the promissory note and ether documents, But he has not denied his signatures, on these documents which have been produced by the plaintiff-. The reply to para. 15 of the plaint is that the execution of any of the documents alleged in para. 15 will C be without consideration as the duty free shop and goods therein belonged to defendant No.2. The above qualifying reply `cannot be termed a denial of the executor, of documents. The said defendant has also failed to appear and produce any evidence in the rebuttal.. As such, answer to this issue is that the, ' said documents were executed by the defendant No.1 Issues No.6 and 7: As answers to the previous issues have been given in affirmative I find that the plaintiff is entitled to a judgment and. decree for Rs.428,045.54 with 'interest at 6% per annum jointly and severally against the defendants from the date of filing of the suit till payment. The said decree as against the defendant No.2 will be to the extent of the value of goods which were lying in the bonded :,. warehouse of defendant No.2 at the time when the said agency was terminated and the said defendant took over the control of the Duty Free Shop at Karachi. 'However, there will be no order as to costs. The above are the reasons for the short order dated 13-9-1995. A.A./U-8/K Suit decreed.