2008 PLP 236 (CLC)

KHILJI ARIF HUSSAIN, J.

Plaintiffs filed suit for recovery of Rs.502,226,

310. Brief facts for the purpose of deciding the listed suits are that plaintiff No.2 induced by the General Manager through Manager and Assistant Manager, Lahore branch of the defendant to purchase shares of plaintiff No.1 which were pledged with the defendants to purchase the shares of the plaintiff No.1 after the defendant negotiated, induced and misled the plaintiff No.2 with regard to the profitability of the project and upon the instance of the defendant, plaintiff No.2 agreed to purchase shares of the plaintiff No.1 at Rs.10 per share and at the instance of the defendant and one Ashfaq Ahmed the plaintiffs were asked to increase the share price from Rs. 10 to Rs.20. It was alleged that at the relevant time price of the shares in the market was Rs.5 per share. On 9-6-1987 when plaintiff went to take the possession of the factory and office of the plaintiff No.1 to the surprise of plaintiff No.2 it was revealed that the factory of plaintiff has been seized by the Customs Vigilance staff on 28-471987. It was alleged that the defendant at the time of finalization of the deal dated 8-6-1987 did not inform the plaintiff No.2 and due to their silence in this regard entire project went into financial collapse. On 8-10-1987 Customs Authorities issued show-cause notice to plaintiff No.1 for evasion of customs duties etc. to the tune of Rs.12,843,931 which was received by the plaintiff. It was further alleged in the memo. of plaint that due to negligence, misrepresentation of the defendant, the plaintiff suffered following losses:

Value of shares Rs.13,063,100 Customs duty Rs.185,000,000 Increase of liability from Rs.80 M to Rs.230 M. Rs.150,000,000 Loss of profit and damage Rs.154,300,000 Total claim: Rs.502,300,000 The defendant filed written statement and denied allegation made in the memo. of plaint. Besides raising preliminary objections that the suit is barred by res judicata, limitation and. under Order II, rule 2, C.P.C., specifically denied that defendant or their General Manager acting through Manager and Assistant Manager Lahore induced plaintiff No.2 to purchase the shares of plaintiff No.1 or that plaintiff has suffered any loss of damage and or defendant is liable for the same. . On the basis of the pleadings following issues were framed:

"(1) Whether the suit is barred by res judicata? (2) Whether the suit is barred by limitation? (3) Whether the suit is barred by Order II, rule 2, C.P.C.? (4) Whether the suit disclosed a cause of action against the defendants? (5) Whether the defendant induced and misled plaintiff No.2 to purchase the shares of plaintiff No.1? (6) Whether the amounts allegedly demanded by the Customs authorities were paid by plaintiff No. l or plaintiff No.2? (7) Whether plaintiff No.2 invoked the indemnification clause 'contained in Clause 15 of the Agreement for Sale of Shares and Transfer of Management? (8) Whether there were any arbitration proceedings as contemplated by Clause 16 of the Agreement for Sale of Shares and Transfer of Management? (9) Whether the defendant is liable to the plaintiffs for damages of Rs.502,226,310.00 or any other amount? (10) Whether the plaintiffs are entitled to any relief? (11) What should the decree be?" On behalf of the plaintiff, plaintiff No.2 filed his affidavit in evidence and produced Agreement of Sale, dated 23-4-1987 as Exh.5/1, telex, dated 29-4-1987 as Exh.5/2, letter, dated 25-5-1987 as Exh.5/3, orders passed by Collector of Customs and Central Excise, Peshawar, dated 7-9-1994 as Exhs.5/4 to 5/7, letter, dated 19-2-1995 as Exh.5/8, letter, dated 23-2-1995 as Exh.5/9, notice issued by Assistant Registrar Customs as Exh.5/10, judgment, dated 8-12-1995 as Exh.5/11, order, dated 13-8-1995 as Exh.5/12, Notice issued by the Assistant Registrar as Exh.5/13, order, dated 18-6-1997 as Exh.5/14, letter, dated 24-11-2003 as Exh.5/15. On behalf of the defendant Manager of the defendant filed his affidavit in evidence and produced Order passed by the Banking Court as Exh.D.W.1/1 to D.W.1/3. Heard Mr. Kazim Hussain, learned counsel for the defendant. Mr. Habibur Rehman, learned counsel for the plaintiffs, filed written synopsis and relied upon the same, perused the record, and my findings on the issues are as under:

Issue No.2. By an agreement, dated 23-4-1987 (Exh.5/1), plaintiff No.2 purchased the shares of the plaintiff No.1. This agreement was executed by shareholders of plaintiff No.1 by which they agreed to sell A their shareholdings to plaintiff No.2, along with Mr. Muhammad Salim Sandhu and Mr. Sabihuddin Rana. By this agreement the seller gave warranties to hold the buyers harmless and indemnified against any and all claims and liabilities in excess of the disclosures in the agreement, and likewise buyers shall hold the sellers harmless and indemnify against any and all claims in respect of which responsibility have assumed by the buyers. It is an admitted position that on 18-6-1987 plaintiff No.2 agreed to purchase the shares of plaintiff No.1 and on 9-6-1987 plaintiff came to know that the factory premises of plaintiff No.1 has been seized by the Customs Vigilance staff on 28-4-1987 for some demand of customs duty which according to the plaintiff has not been disclosed by the seller in the agreement. Although agreement of sale has been produced but Schedules II to V which were part of the agreement of sale were not produced by the plaintiff along with the agreement of sale. It further transpires from the agreement that defendant is not party to the agreement of sale except that in the schedule of the agreement, it is mentioned that shares are pledged with the defendant Bank. It was not disputed that shares and management of the firm were transferred to plaintiff No.2 pursuant to the agreement executed between the plaintiff No.2 and previous management. From the orders Exhs.5/4, 5/5, 5/6 and 5/7, it appears that cases against the plaintiff No.1 were instituted on 5-4-1988 i.e. much after the agreement of sale by which plaintiff No.2 agreed to purchase the share of the plaintiff No.1. The plaintiffs filed suit against seller of the shares being Suit No.1092 of 1988 on 12-12-1988 alleging about the alleged misrepresentation by them. In the said suit plaintiff joined defendant as one of the parties, however, defendant was deleted as one of the parties in the said suit on 1-11-1992. Cause of action for filing the suit inducing the plaintiff to enter into an 'agreement by misleading with regard to profitability of the project accrued on 23-4-1987 when the agreement to purchase shares of the plaintiff No.1 was executed and then on 8-6-1987 when said agreement was finalized and then on 9-6-1987 when plaintiff came to know that factory premises of plaintiff No.1 has been sealed by the Customs Authorities. It also appears on 31-8-1992 Exh.D.W.1/3 letter addressed by the plaintiff No.2 to defendant requested the defendant to have patience till they recovered huge liabilities from the seller of the shares. In the said letter plaintiff has not levied any allegation that defendant has induced the plaintiff to enter into an agreement of sale by misrepresenting about the profitability .of the project and by this time plaintiff had full knowledge about the alleged liabilities, which buyer according to him was not disclosed at the time when the agreement to purchase shares was entered into. The cause of action for filing the suit accrued to plaintiff, if any, against the defendants firstly on 23-4-1987 when plaintiff No.2 agreed to purchase the share of plaintiff No.1 and finally on 9-6-1987 when the plaintiffs came to know that the factory has been sealed by the Customs Authority, and present suit has been filed on 9-2-1994 i.e. after about seven years of final cause of action on the face of it is barred by limitation. The issue is answered in affirmative. Issues Nos.1 and 3 to

11. In view of my findings that the suit is barred by time, there is no need to give findings on the other issues. The plaintiffs suit is, therefore, dismissed, however with no order as to costs. S.A.K./S-88/K Suit dismissed.