1999 PLP 1630 (CLC)

Acquisition of land. (Already acquired) Building construction started February, 1992 Machinery Order placed March, 1992 Building construction complete November, 1992 " Arrival of Machinery at site completed January, 1993 Installation of Machinery completed February, 1993 Unforeseen delays May, 1993 Trial Runs June, 1993 Commercial production started July, 1993. Obviously, such schedule had mutually been modified and the Financing Agreement was itself executed between the parties on 27‑6‑1993 meaning around the date when commercial production was initially supposed to (sic). Indeed, the 1st disbursement was made on 7‑12‑1993 and the 1st instalment towards repayment became due on 31st March, 1996. The parties had never protested in relation to delays committed by either of them prior to institution of the present proceedings. The concern about slow pace of work or non‑completion of project‑building and delay in non‑acceptance or under‑valuation of collateral securities etc. all stood waived due to concurrence and I am not impressed by the grievance made by the two parties subsequently, on such basis. What appears from the conduct of the parties, which is manifest from the record, is that the time schedule was never considered sacrosanct or of essence. Consequently, the contract between the parties, upon application of principle contained in section 55 of the Contract Act did not become voidable merely due to non‑fulfilment of time schedule by the two parties. The only right which can be pressed by the parties in such circumstances is compensation for the loss, if any, occasioned on account of failure to abide by the time schedule. I am mindful of the obligation specifically undertaken by the plaintiff under clause (e) of Article 4.01 of the Agreement and under Article 7.02 of the Agreement to comply with all the time limits prescribed for completion of the project. However, in the present case, I am of the considered view that such terms had lost their efficacy and cannot be enforced unilaterally. Moreover, as already observed, non‑completion of project within the stipulated time is not the ground mentioned in letter, dated 29‑8‑1995, Exh.5/13, for recall of finance. In the present case, while I propose to deal with the question of compensation under issue No.2 hereafter, suffice to observe that the defendant No.l had recovered Commitment Charges in relation to the entire limit of facility and mark‑up rate chargeable on the amount of facility availed by tote plaintiff had already been settled. The local manufacturers/suppliers of the machinery, had been selected by the defendants and part payment was also made to them directly. The delivery of machinery, as already found, could not be effected due to failure on the part of defendants to arrange pre‑delivery inspection thereof. In view of the admitted fact that the plaintiff had arranged Transit Risk Insurance cover for transportation of the machinery from the local manufacturers, the contention that it had failed to take delivery despite repeated written communications, cannot be accepted. Indeed, the defendants have failed to show if the plaintiff had lost interest in completing the project and had failed to take delivery of machinery with ulterior motives or for mala fide reasons. I am mindful of the fact that the issue presently being dealt with by me, is about breach of agreement, if any, committed by the defendant‑Bank and its effect. The various contentions raised by the defendants have been considered in order to ascertain the truth or otherwise thereof and I have found such adjudication relevant to the controversy herein. The plaintiff's assertions contextually are based on dual aspects. The first assertion about delay caused at different stages has already been found by me as immaterial and of no consequence. As regards recall of the finance, availed by the plaintiff, I have found that it was premature and unwarranted. The finance agreement between the parties, Exh.5/3, includes, by reference, the sanction letter as its integral part by virtue of Article 8.10 contained therein. Furthermore, under Article 5.02 of the financing agreement, Exh.5/3, the defendant‑Bank is entitled to suspend or terminate the agreement. In the event of suspension or termination of the agreement, the marked‑up price and the charges are postulated to become due and payable forthwith. The financing agreement could be suspended or terminated by virtue of Article 5.02 upon occurrence or continuance of any event of default. The events of default have been described under Article 5.01 of the agreement, and, under clause (a) thereof, non‑fulfilment of the conditions of disbursement by the customer (plaintiff) within the period(s) stipulated by the defendant‑Bank is classified as an event of default. However, the learned counsel for the defendants, during his arguments has clearly taken the position that the defendants have not terminated the agreement or taken action under clause 5.02 thereof but have merely recalled the financial assistance upon reaching the conclusion that the plaintiff had lost interest in completing the project. The agreement between the parties, however, does not permit recall of the finance or any reason whatsoever except as provided under clause 5.02 of the agreement. The defendants, having not chosen to terminate or suspend the agreement, as above, could not recall the financial assistance granted to the plaintiff. The repayment was agreed to be made in 16 equal half yearly instalments commencing on 31st March or 30th September falling after two D years from the date of 1st disbursement. The demand for repayment through letter, dated 29th August, 1995, Exh.5/13, therefore, was contrary to and in breach of the terms of the financing agreement and amounted to breach thereof. The defendants could, not demand what was not due, then. As to the effect of the said breach committed by the defendants, I propose to deal therewith under issue No.2 hereafter. My finding, therefore, on issue No. l is in the affirmative. Issue No.2: In relation to this issue, the plaintiff has based its claim on the averments contained in para.8 of the plaint and the break‑up therein, which is as follows:‑‑

"(i) On account of commitment and Rs.1,92,243 documentation charges, cash amount paid by the plaintiffs to the defendant/Bank. (ii) On account of opening of L.C. charges. Rs.57,710 (ii) Technical appraisal fee. Rs.84,200 (iv) Inspection fee. Rs.15,000 (v) On account of purchase of land and Rs.1,44,00,000 construction of building at the present rate of Rs.400 sq. ft. of 36000 sq. ft. (vi) On account of investment as pre-operating Rs.15,00,000 expenses. (vii) On account of losses of expected income for Rs.1,50,00,000 the period of 5 years, if the machinery would have been received in time. (viii) The plaintiffs were doing the iron business, Rs.15,00,000 cultivating their lands, doing business at Gambat Iron Store, Ranipur, having tractors and threshers which has been closed since then, therefore, estimated losses thereof for the 5 years. (ix) On account of persuasion of the matter at Rs.1,00,000 Sukkur, Karachi and other offices. (x) On account of mental torture and other Rs.90,00,000 damages sustained by the plaintiffs of which the details will be submitted in due course. (xi) Since the building is lying vacant and is Rs.85,00 000 subject‑matter of the alleged mortgaged, therefore, on account of rent of the same for the period of 5 years. Total Rs.5,00 00 000 The plaintiff has produced receipts showing payment of Commitment and Documentation Charges besides the Technical Appraisal Fee and L.C. Charges. The learned counsel for the defendants, however, in quite unequivocal terms, has contended that the financing agreement has not been terminated. The Commitment Documentation and L.C. Charges had been paid in relation to the entire amount of financial assistance undertaken to be provided by the defendant No.

1. The recall of finance through letter, dated 29‑8‑1995, Exh.5/13, in the context of plea to the effect that the agreement itself has not been terminated cannot lead to the conclusion that the payment of the various charges amounts to loss suffered by the plaintiff. Although the demand for refund of amount by the defendants from the machinery suppliers tends to negate the stand taken by the learned counsel for defendants about non‑termination of the agreement, I would prefer to accept the position now taken about non‑termination of finance agreement in the larger interest of both the parties particularly on account of the affirmative answer given by the Chief Executive of the plaintiff in response to the question during his cross‑examination to the effect that the plaintiff was still interested in setting up Textile Weaving Mill at the project site. Whatever be the reservation from either side, in my view, setting up of an industrial unit always advances the cause of national economy which surely needs a boost towards setting up of an egalitarian society visualized by the Holy Qur'an and the founders of this country. The plaintiff has not been able to offer any evidence in relation to items Nos. IV to XI mentioned in para. 8 of the plaint. What remains to be considered is if the plaintiff, in absence of tacit proof, is entitled to grant of general damages on account of premature recall of finance through letter, dated 29‑8‑1995, Exh.5/13. The cardinal principle governing award of damages is to compensate the plaintiff for the loss suffered by it. The plaintiff can only claim restoration of the position as it would have enjoyed but for the breach. As a result of finding that the letter, dated 29‑8‑1995 had been issued in violation of the terms of financing agreement and was unwarranted, the agreement for finance has to be treated as valid and subsisting which position is taken by learned counsel for the defendants as well. In order to restore the plaintiff to the same position, I consider it appropriate to burden the defendants with token damages in the terms that the machinery undertaken to be supplied by Messrs Fine Engineering Company and Messrs Manstock Engineering Company Ltd. may be arranged to be delivered to the plaintiff by the defendants for the originally contracted price upon payment to be made by the defendants to the account of the plaintiff according to the agreement between the parties, the same being treated subsisting and valid; the difference in price, if any, would be borne by the defendants; the repayment schedule shall be re worked in a manner so that the position prior to the issuance of letter, dated 29‑8‑1995 shall be deemed to have existed on the date of the decree herein. The defendants shall also not be entitled to claim any Commitment Charges or mark‑up on the amount of finance for the period from 29‑8‑199 till the date of decree. Issue No.3: In the result, the suit is decreed in the foregoing terms with costs of the proceedings. Q.M.H./M.A.K./E‑17/K Suit decreed.