P L D 1968 Karachi 812 (PLP)

It was further agreed that the proper mode for dealing with the money claim of the plaintiffs would be to add a direction to the Commissioner, if one is at all appointed by the Court for taking accounts, to ascertain what sums are due to the plaintiffs from the defendants towards the former's excess investment in the said Mills and/or on account of expenditure incurred by the plaintiffs in discharging liabilities of the Mills at 30th Jute 1961, which liabilities, it is contended, were agreed to be borne by the defendants.

11. Question No. 1, as formulated above, would therefore cover Issues Nos. 5 and 6 in Suit No. 16 of 1963 and Issues Nos. 7, 8, 9, 11, 12, 13 and 14 in Suit No. 115 of 1964. Question No. 2 would cover Issues Nos. 6 and 8 in Suit No. 16 of 1963, and Issues Nos. 4 and 6 in Suit No. 115 of 1964. Issues Nos. 1, 2, 3 and 4 in Suit No. 16 of 1963 and Issues Nos. 1, 2, 3, 4 and 15 in Suit No. 115 of 1964 were neither argued, nor pressed before me by either of the parties, Issue No. 3 in Suit No. 16 of 1963 having already been decided against the defendants by Kharel, J., on 30‑9‑1963. Issues Nos. 9 and 10 in Suit No. 16 of 1963 and Issues Nos. 16 anti 17 in Suit No. 115 of 1964 relate to the reliefs claimed by the plaintiffs and the defendants, and the claims made by the Central Government and Provincial Government for special costs. The decision on these issues will follow the decisions under questions Nos.1 and 2 as formulated above. Issue No. 10 in Suit No. 115 of 1964 will be dealt with separately hereunder.

12. Besides filing voluminous documentary evidence, the plaintiffs and the defendants both produced oral evidence also. On behalf of the plaintiffs, Mr. Muhammad Akram, Director, and Mr. Muhammad Bilal Faruqui, Development Officer, of the plaintiffs, Mr. S. A. Ghaffar, an officer in the Industrial Development Bank of Pakistan and Mr. Bashir Ahmad, Assistant Director, Investment Promotion Bureau, Government of Pakistan, were examined in Court. On behalf of the defendants, evidence was given by S. Abdul Sattar, partner in S. H. Churigar & Co., and Mr. Jan‑e‑Alam, a Director of Fateh Textile Mills Ltd.

13. Question No. 1.‑With regard to the expansion of the said Mills, the defendants have taken different and inconsistent stands from time to time. From a perusal of the defendants' written statement in Suit No. 16 of 1963, the statement which their learned Advocate, Mr. Nasim Faruqui made in Court in this suit on 16‑12‑1963 under Order X, C. P. C., the defendants' plaint in Suit No. 115 of 1964, and the trend of examination of the defendants' witnesses and the cross‑examination of the witnesses for the plaintiffs, and the submissions of Mr. Nasim Faruqui made in the course of the trial of the two suits, the defendants' position with regard to this question may be summarised as follows: (i) that the intention of the parties was, and the P. I. D. C. held out assurances to the defendants, that the P. I. D. C. shall obtain sanction from the Government for expansion of the said Mills by 15000 spindles and 500 looms; (ii) that the condition precedent for the defendants entering into the promoters' agreement was that the P. I. D. C. shall obtain sanction for the expansion of the Mills; (iii) that there was oral agreement between the parties, antecedent to the promoters' agreement, under which the P. I. D. C. undertook to obtain this sanction; (iv) that clause (vi) of the promoters' agreement itself contains the stipulation that the P. I. D. C. shall obtain this sanction, and that evidence of verbal assurances held out by the P. I. D. C. will be given by the defendants to construe and interpret this clause; (v) that the assurances held out by the P. I. D. C. with regard to the Government's sanction for expansion of the Mills, constitute misrepresentations, and under section 19 of the Contract Act, 1872, the defendants are entitled to insist that the promoters' agreement be performed and the defendants be put in position in which they would have been if these representations had been true.

14. The material part of the promoters' agreement, as embodied in Exh. 17/6 and Exh. 13, is clause (vi) which reads as follows:‑

"It is contemplated to expand the said Textile Mills by installing another 15000 spindles and 500 looms and the cost thereof shall be raised by the issue of further share capital of the company, which shall be wholly subscribed for or procured by F. T. M. and P. I. D. C. hereby undertakes to forego its right under section 105 of the Companies Act."

15. The problem, in the first instance, is one of construction of this clause and the rules of evidence according to which this clause should be interpreted are now well settled. I would, however, make only a brief reference to the rule: which a Court should apply in the construction of documentary evidence. Chief Justice Tindal observed in Shore v. Wilson ((1842) 9 C L V. Fin 355, 556, 565 566=8 E R 450) that "no extrinsic evidence of the intention of the party to the deed from his declarations, whether at the time of his executing the instrument, or before or after that time, is admissible; the duty of the Court being to declare the meaning of what is written in the instrument, not of what was intended to have been written", and that it is a general rule that "where the words of any written instrument are free from ambiguity in themselves, and where external circumstances do not create any doubt or difficulty as to the proper application of those words to claimants under the instrument, or the subject‑matter to which the instrument relates, such instrument is always to be construed according to the strict, plain, common meaning of the words themselves; and that in such case evidence dehors the instrument, for the purpose of explaining it according to the surmised or alleged intention of the parties to the instrument, is utterly inadmissible." In Cross v. Nugent ((1833) 5 B and A D 58=110 E R 713) it was held that "if there be a contract which has been reduced into writing, verbal evidence is not allowed to be given of what passed between the parties either before the written instrument was made, or during the time that it was in a state of preparation so as to add to or subtract from, or in any manner vary or qualify the written contract." Mayor of London v. Sandon ((1872) 26 L T R 86) held that oral evidence of what took place at meetings between the parties at which meetings the terms of the agreement, which was afterwards reduced to writing, were discussed, was not admissible. According to Monro v. Taylor ((1848) 8 Hare 51, 56=68 E R 269) in constructing an agreement, acts of the parties subsequent to the making of it are inadmissible for the purpose of determining its meaning. Halsbury, L. C. observed in The North Eastern Railway Co. v. Lord Hastings ((1900) A C 260) that: "the words of a written instrument must be construed according to their natural meaning, and it appears to me that no amount of acting by the parties can alter or qualify words which are plain and unambiguous . . . . . So far as I am aware, no principle has ever been more universally or rigorously insisted upon than that written instruments, if they are plain and unambiguous, must be construed according to the plain and unambiguous instrument itself." The Judicial committee of the Privy Council also held that oral evidence of the intention of the parties to an instrument is inadmissible to construe the instrument itself: See Balkishan Das and others v. Legge (27 I A 58), Maung Kyin v. Ma Shwe Law (AIR 1917 P C 207) and Raja Bahadur Narasingerji Gyanagerji v. Raja Panuganti Parthasarabhi Rayanim Garu (AIR 1923 P C 226). As regards the construction of a document by reference to the subsequent conduct of the parties, the Privy Council's view also is the where the language of the document is plain and unambiguous evidence of subsequent conduct of a party is inadmissible to interpret the document. Reference in this connection may be made to Flonrie Edridge and others v. Rustomji Danjibhoy Sethna (AIR 1933 P C 233) and Baraboni Coal Concern Ltd. v. The Servitors and Shebaits of Sree Gopinath Jiu, Gokulananda Mohanta Thakur and others (A I R 1934 P C 58).

16. These principles for construction of documentary evidence are embodied to sections 91 and 92 of our own Evidence Act (Act I of 1872). Under section 91, if the terms of a contract, grant or of any other disposition of property, have been reduced to writing, and in all cases in which any matter is required by law to be reduced to writing, no evidence can be given in proof of the terms of such contract, grant or other disposition of property, or of such matter, except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the Evidence Act. Under section 92, when the terms of a contract, grant or other disposition of property, or any matter required by law to be reduced to the form of document, have been proved by the tender in evidence of the document itself, no evidence of any oral agreement or statement is admissible, as between the parties to any such instrument, or their representatives in interest, for the purpose of varying, adding to or subtracting from, its terms. The rule in section 92 is, however, subject to the several exceptions contained in provisos (1) to (6) of the section. The defendants' learned Advocate, Mr. Nasim Faruqui, attempted to invoke provisos (2), (3) and (6) in support of the defendants' contentions that the plaintiffs are under obligations to obtain Government's sanction for expansion of the Mills. In my opinion, however, none of these provisos to section 92 can be made applicable to the present case. Under proviso (2), the existence of any separate oral agreement as to any matter on which the document is silent, and which is not inconsistent with its terms, may be proved, but in considering whether or not this proviso applies, the Court is required to have regard to the degree of formality of the document. But the onus of proving such oral agreement is on the person who sets it up. See Motabhoy Mulla Essabhoy v. Mulji Haridas (AIR1915PC6). Further, before' this proviso can be applied to the present case, the question which will have to be considered is whether the promoters agreement, contained in Exh. 17/6 and Exh. 13, was not intended to express the whole agreement between the parties, because it is only in such a case that proof may be given of any omitted or supplementary matters. The defendants, however, have not set up any such case. Their written statement in Suit No. 16 of 1963 is silent on this question, and their plaint in Suit No. 115 of 1964 also is not explicit and clear in this connection. The plea of a separate oral agreement was not advanced even in the statement which the defendants' learned Advocate, Mr. Nasim Faruqui, made in Court on 16‑12‑1963 under Order X, C. P. C. The defendants' case, on the contrary, is that the promoters agreement contains all the matters which were agreed to between the parties, including the question of the expansion of the said Mills. The Defendants' director, Mr. Jan‑e‑Alam, was asked the following question in cross‑examination by Mr. Muhammad Halim, the learned Assistant Advocate‑General: "Would you give any reasons why the assurances regarding the expansion of the Mills were not set out in Exh. 13 ?" Mr. Jan-e-Alam s answer is: "there is a clause regarding expansion and it is clause‑ (vi)." In answer to a question by the Court, Mr. Alam further stated that: "clause (vi) is strictly in accordance with the assurance held out to us." Thus, Mr. Jan‑e‑Alam's answers effectively repel the contention that there was a separate oral agreement, either antecedent to or simultaneous with, the promoters agreement, whereby the P. I. D. C. undertook to obtain sanction from the Government for the expansion of the said Mills. Even Mr. Nasim Faruqui, in his statement under Order X, C. P. C., armed that the stipulation with regard to the expansion of the Mills was contained in clause (6) of Exh. 13 and that evidence of verbal assurances allegedly held out by the P. I. D. C. will be given only to interpret this clause, which according to the learned Advocate, placed obligation on the P. I. D. C. to obtain sanction for this expansion, thereby making it clear that there was no separate oral agreement. Another important consideration in applying proviso (2) is the degree of formality of a document which comes up far interpretation by a Court. Where a document makes derailed previsions as to matter agreed to between the parties, and sets out hose matter in writing with care and elaboration, evidence of soy additional or separate oral agreement would be admissible. I would in this connection refer to Raja Ram Rao v. Tulja Rare Rao (17 I C 43) and Abdul Hamid v. Abdul Majid (21 I C 305) and Jagjewan Mulji v. Nathji Jagesowar (32 I C 938). In all these cases, litigations between the parties were compromised by writings, which set out the terms of agreements with care and in detail. Subsequent attempts to prove separate oral agreements on matters on which tire written agreements were silent proved unsuccessful, as the Courts did not allow evidence to be given of such oral agreements, holding that proviso (2) to section 92 of the Evidence Act would not apply to such cases. A promoters' agreement, entered into for the purpose of setting up a limited liability company under the Companies Act, 1913, is; by its very nature, highly technical instrument, and usually contains detailed arrangements with regard to such matters as the incorporation of me company, proportion of the parties' participation in the share‑capital, the management and control of the company upon incorporation and other matters, and the parties' obligations incidental thereto. Exh. 17/6 and Exh. 13 are both documents of this nature and contains detailed provisions for the incorporation of a new company and transfer to it of the Talpur Textile Mills with all its assets including a reference to the intended expansion of the Mills. In view of the degree of formality which attaches to this agreement, the defendants cannot be permitted to set up a case of a separate oral agreement with regard to any under taking allegedly given by the P.

1. D. C. to obtain the Government's sanction for expansion of the said Mills.

17. The provisos (3) and (6) to section 92 of the Evidence Act also do not have any application to the present case. Mr. Nasim Faruqui failed to make clear as to how the principle of proviso (3) could assist the defendants in their contentions. Under this proviso, oral evidence is admissible to prove a collateral verbal agreement to the effect that a contract apparently complete and operative on its face, should be conditional upon, and not operate until the happening of a certain event. The two documents relevant in this connection are Exh. 10 and Exh. 13, and both on their face are complete and operative. Under Exh. 10, the Management and possession of the said Mills was given to the defendants on the condition that the proposed limited company would be incorporated within six months from 3rd July 1961. Exh. 13 is the promoters agreement proper, which sets out the arrangements between parties with regard to the setting up of the new limited liability company. 1t was not contended that Exh. 13 is not binding on the parties as the alleged conditions precedent with regard to the Government's sanction for the expansion of the said Mills had not been performed. Apparently, the stand on proviso (3) has been taken with regard to Exh. 10; and what I understand this stand to be is, that the defendants are not bound by the stipulation for the incorporation of the new company unless permission of the Government for the expansion of the said Mills is first obtained. If this is the stand of the defendants, then proviso (3) will have no application. This proviso is not applicable to a case where a written agreement has been performed as to its material part. It is applicable only to a case where the written agreement is agreed to remain in operative and of no effect at all, until the condition precedent is performed. Reference in this connection may be made to the case of Jugtanund Misser v. Nerghon Singh and another (I L R 6 Cal. 433). In the present case, Exh. 10 has, in fact, come into operation as to one of its essential parts, that is, with regard to the delivery of the Management and possession of the said Mills by the P. I. D. C. to the defendants. To the extent that the defendants have made contribution to the capital of the said Mills and have paid to the P. I. D. C., its excess investment therein, even Exh. 13 has come into effect. Both these contracts have come into operation and, therefore, the principle of proviso (3) will have no application. If it is assumed that both these documents still remain inoperative and ineffective due to the failure of the P. I. D. C. or of the plaintiffs to obtain the Government's sanction for the expansion of the said Mills, the defendants then would have to return the possession and management of the Mills to the plaintiffs and receive back from them whatever they have paid to the P. I. D. C. under Exh.

13. In such a case, the defendants would also be account able for the profits of the Mills for the period they have remained in possession thereof. But the defendants declined to face this situation.

18. As regards proviso (6), this would have application only if the written contract or any part thereof, is doubtful in its meaning. But where the contract does not suffer from as ambiguity, no evidence can be given of facts to show in what manner the language of the document should be interpreted.' Section 94 of the Evidence Act expressly excludes such evidence if the document is plain in itself. Clause (vi) of Exh. 13 and Exh. 17/6 is very clear as to its meaning whey it refers to the expansion of the said Mills. What this clause provides is: (i) that it was intended to expand the said Mills by addition of 15,000 spindles and 500 looms, and (ii) that if such expansion did take place, and the share capital of the proposed company was consequently increased the P. I. D. C. would forego its rights under section 105‑C of the Companies Act, 1913. This section 105‑C provides that where the capital of a company is increased by the directors by issue of further shares, such shares shall be offered to the existing members in proportion to the existing shares held by each member. It is the second part of clause (vi) which gives out its purpose, which is, that the P. I. D. C. should not claim additional shares in the new company if its capital is increased due to the expansion of the Mills. The clause does not place any obligation on either party to obtain the sanction of the Government for the expansion of the Mills in the manner aforesaid.

19. During the trial of the suits before me, Mr. Nasim Faruqui also attempted to take the aid of section 19 of the Contract Act, under which a party to a contract, whose consent is obtained by fraud or misrepresentation, may insist that the contract be performed and that he be put in the position in which he would have been if the representations had been true. It was urged that an assurance was held out to the defendants that the P. I. D. C., being a Government Corporation, shall obtain the requisite permission for the expansion of the Mills, and that to the extent that this assurance has not come true, the P. I. D. C. should be deemed to have made misrepresentations to the defendants, and the plaintiff's should be compelled to make good this representation. But a representation, or misrepresentation, can be with regard to an existing fact only. If the P. I. D. C. had held out that the requisite sanction for the expansion of the Mills had been obtained; this would have been a misrepresentation. The promise, to do an act in future (and the assurance that the P. I. D. C. shall obtain sanction for the Mills' expansion is nothing more than such promise), cannot be said to constitute misrepresentation. It may be a breach of promise or an agreement, but it is not a misrepresentation as to existing fact within the meaning of section 19 of the Contract Act.

20. It is now to be considered whether the evidence brought on the record by the parties supports in any way the defendants' contention that the P. I. D. C. agreed or undertook, or held out any assurance, to obtain sanction of the Government for expansion of the said Mills. I would first take up the documentary evidence on this question. For the defendant reliance was placed on Exhs 14, 17/8, 17/17, 17/21, 17/23, 17/25 and 17/39. None of these documents has any bearing on the question under consideration. But Mr. Nasim Farooqi vehemently insisted that these documents support the defendants' case and it therefore becomes necessary to refer to these documents in some detail, even at the risk of making the judgment lengthy. Exh. 14 is the letter dated 31st July 1961, under which the P. I. D. C. submitted to the Secretary, Ministry of Industries, Government of Pakistan, a scheme prepared by Mr. Muhammad Bilal Faruqui, its Development Officer, for the expansion of the said Mills. The letter refers to clause (vi) of the promoters agreement, Exh. 13, and states that: "it is contemplated to expand the textile mills by installing another 15000 spindles and 500 looms with bleaching printing, mercerizing, dyeing and finishing units", sad that "it is also proposed to install the air‑conditioning Unit . . . ." Exh. 18/8 is the defendants' letter dated 2nd December 196', to the P. I. D. C , which, after referring to the objections of the Ministry of Industries to the application for the expansion of the Mills, requests the P. I. D. C. to again take up the matter with the Government. Mr.Nasim Farooqi has placed reliance on the following note put on this letter by Mr. Y. S. Ahmad, then a Director of the P. I. D, C.:'" "M. Subhan, Joint Secretary Industries told me that he might sanction 25000 spindles and 250/300 looms if an application is made immediately," According to the plaintiffs' witnesses, this application had to be made by the defendants on account of the transfer of the Mills from public to private sector. Exh. 17/17 is an extract from the minutes of the meeting of the P. I. D. C's. Board of Directors held on 15th May 1961, in which the scheme for the expansion of the Mills was approved, as also amendments to clause 3 (iii) (iv) of the proposed promoters agreement. Exh. 17/21 is the letter dated 15th August 1961, from the Ministry of Industries to the P. I. D. C., seeking clarification as to why the scheme for the expansion of the said Mills wag submitted by the P. I. D. C., when this expansion was to be financed wholly by the defendants. Exh. 17/23 is the P. I. D. C's, reply to Exh. 17/21, stating that the scheme for expansion had been submitted by the P. I. D. C. as this body still had 49 per cent. shares in the said Mills. Exh. 17/28 is again a letter of the Ministry of Industries to the P. I. D. C., dated 28th September 1961, inquiring whether Government's approval had been obtained to the expansion of the said Mills, as such expansion would upset the proportion of the shares of the P. I. D. C. and of the defendants in the capital of the Mills. Exh. 17/26 is the reply dated 16t October 1961, to Exh. 17/25, to the effect that approval by the Government of the promoter agreement, including its clause (vi), amounts to approval of the Government to the reduction of the P. I. D. C's. share in the Mills. Exh, 17/39 is P. I. D. C's. letter dated 14th May 1962, to the defendants, in which the defendants' contention that the P.I.D.C. was under contractual obligation to obtain Government's sanction for the expansion of the Mill is repudiated, but it is added that the P. I. D. C., as "shareholder of the proposed company shall support the application of the defendants to the Government for the expansion of the Mills." This is all the documentary evidence on which Mr. Nasim Farooqi tested the defendants' case. But this evidence does not in any way support the defendants' case. Most of the documents are self‑explanatory. The scheme for the expansion of the gills was submitted by P. I. D. C. as holder of 49 per cent. shares in the Mills. The note of Mr. Y. S. Ahmed on Exh.17/8 does not refer to any undertaking or assurance given by the P. I. D. C. but refers to the assurance stated to have been given by the then Joint Secretary of the Ministry of Industries that expansion of the Mills will be permitted if an application for this purpose is made immediately. The defendants were aware of this note, and it is they who had to make the application, but Mr. Jan‑e-Alam admitted that at no litre the defendants made application to the Government for sanction for 15000 spindles and 5001ooms Exh. 17/17, the extract from the minutes of the meeting of the P. I. D. C's. Board of Directors, also does not show that the P. I. D‑ C. undertook the obligation to obtain sanction for such expansion. The Board merely approved the expansion of the Mills, and it did so as the P. I. D. C. did not intend then to divest itself completely of all its interest in the said Mills Exh. 17/39 expressly repudiates the suggestion that the P. I. D. C. was under contractual obligation to obtain sanction for the Mills' expansion. Mr. Nasim Farooqui, however, con tended that the fact that the P. I. D. C. did submit a scheme for expansion of the Mills to the Government could be consistent only with the P. I. D. C's. undertaking to obtain this sanction. This contention carries no weight, because, firstly, the scheme was submitted by the P. I. D. C. as holder of 49 per cent. shares in the Mills and, secondly, subsequent conduct of the parties to an agreement is not relevant for its interpretation. I would refer to the discussion of the legal position on this point in paragraph (15) above.

21. The oral evidence led by the parties on the question under discussion consists only of (lie depositions of Mr. Muhammad Akram, Director of the plaintiffs, and Mr. Jan‑e-Alam. Director of the defendants. During the period when negotiations were in progress with regard to the participation of the defendants in the said Mills, Mr. Muhammad Akram as Secretary of the P. I. D. C. He was actively associated with these negotiations. Mr. Muhammad Akram impressed me as a straightforward and truthful witness. He does not bear any prejudice against the defendants. At one stage, in the course of the trial, he, on my suggestion, made genuine efforts to assist the defendants to get out of the difficulty in which they seem to have placed themselves. Mr. Akram stated that the negotiations on behalf of the defendants were conducted by the late Mr. Barkat Bhai the then Chairman of the defendants' Board of Directors. He denied that any agreement was made or undertaking, promise or assurance given, by the P. I. D. C. to obtain sanction of the Government for the expansion of the said Mills. The defendants' Director, Mr. Jan‑e‑Alam, on the other hand. asserted in his statement that' the negotiations with the P. I. D. C. were conducted on the Defendant's behalf by him and the late Mr. Barkat Bhai, and that the P. I. D. C. did hold out the assurance to obtain sanction for the expansion of the Mills "within 3 or 4 months". According to this witness, this assurance was given by all the persons who took part in. the negotiations on the P. I. D. C's. behalf, that is, the Chairman, Lt.‑Genl. Haji Iftikhar. Mr. Y. S. Ahmad, the Director, and Mr. Muhammad Akram; who was then Secretary of the P. I. D. C.. But Mr. Akram repudiated the suggestion to this effect. Both L:.‑General Haji Iftikhar and Mr. Y. S. Ahmad are not now with the plaintiff, and the latter, as admitted by Mr. Jan‑e‑Alam, is not even in Pakistan. The defendants did not make any attempt to summon or examine on commission, these persons on the question at issue. Moreover, it is not possible to attach any importance to Mr. Jan‑e-Alam's evidence on this point, in view of his own admission, noted above, that the assurances given by the P. I. D. C. with regard to the sanction for the expansion of the said Mills were incorporated in clause (vi) of the promoters agreement, Exh.

13. But this clause does not contain any such assurance or undertaking on the P. I. D. C's. behalf, but merely provides that the P. I. D. C. would forego its rights under section 105‑C of the Companies Act if the share capital of the proposed company was increased due to the expansion of the Mills.

22. A further point which should be taken note of is, 'that according to the defendants' own admission, contained in paragraph 6 of their plaint in Suit No. 115 of 1964, the P. I. D. C. did not give unconditional assurance or undertaking to obtain the requisite sanction for the expansion of the Mills. The following passage from this paragraph is relevant on this point; "The P. I. D. C. represented and assured the plaintiffs that on execution of promoters agreement between the parties steps would be taken by them to acquire the grant of expansion of Talpur Textile Mills to the extent of its original permission of 25000 spindles and .500 looms, subject to available licensing." Thus, if any assurance was given, it was subject to there being provision in the Government's economic plans for grant of licence to import 15000 spindles and 500 looms. Exh. 19/17 is the extract from the minutes of the Ministry of Industries, in which it is stated that it was not possible to entertain the scheme for expansion of the Mills submitted by the P. I. D. C. for the several reasons mentioned therein, one of them being that "the share of West Pakistan of spindles and looms under the planned target of 2.5 million spindles and 41666 looms has been exceeded by ‑ about 13000 spindles and 1200 looms". There was, therefore, no provision with the Government to give a licence to import 15000 spindles and 500 looms for West Pakistan, and this being so the P. I. D. C., or the plaintiffs, cannot be deemed to be in breach of any undertaking, promise or assurance given to the defendants with regard to the sanction for the expansion of the Mills.

23. I would here refer to another aspect of the case, which comes under Issue No. 10 in Suit No. 115 of 1964. The Government did, in fact, allocate U. S. 116000 to the said Mills for import of 2800 spindles. This is evident from Exh. 19/18 and is confirmed by the plaintiffs' witnesses, namely, Mr. Bashir Ahmad, Assistant Director, Investment Promotion Bureau, Government of Pakistan, and Mr. S. A. Ghaffar, an officer in the Industrial Development Bank of Pakistan. According to these witnesses, the Government of Pakistan had a scheme, under which Textile Mills, whose capacity was below 12500 spindles, were permitted to import spindles out of the Japanese Credit available in 1961, so as to relies their capacity to this limit. The Japanese credit was made available to, the importers through the Industrial Development Bank of Pakistan, and accordingly this bank wrote Exh. 22/1 to the defendants on 21st June 1961, requiring them to complete the various formalities in connection with the import of the spindles. The bank sent further reminders to the defendants, which are Exhs. 22/3, 22/4 and 22/5, dated 7th June, 23rd June and 16th July 1961, but the defendants failed to complete the formalities, and therefore, the bank wrote Exh. 22/7 to the Director of Textiles, Government of Pakistan that it would not be possible for the bank to open any letter of credit on the defendants' behalf by the target date, that is, 3rd of November 1961, due to the defendants' failure to complete these formalities. Mr. Bashir Ahmad stated that sanction to the Talpur Textile Mills to import 2800 spindles ultimately lapsed due to the defendants' defaults. The conclusion from these facts is that the defendants themselves were not ready and willing to expand the Mills by addition of further spindles. They allowed the sanction for 2800 spindles to lapse and failed to respond to the repeated reminders of the Industrial Development Bank of Pakistan in this connection or to make any application to the Government for sanction to import 15600 spindles and 500 looms. It is not for the defendants to complain now that the requisite sanction, which the P. I. D. C. and allegedly assured would be given, was not given by the Government. Issue No. 10 in Suit No. 115 of 1964 has therefore to be decided against the defendants. Question No. 2

24. It has now to be considered whether the management of the said mills should be returned to the plaintiff's. Under Exh. 10, the possession of the said Mills was handed to the defendants with effect from 1st July 1961, so that the defendants should manage .the business and affairs of the Mills on behalf of the P.

1. D. C. until the incorporation of the new company, which the defendants agreed to carry out within 6 months from 3‑7‑1961, failing which, it was stipulated, the P. I. D. C. would resume the Management of the Mills. The defendants' contention is that Exh. 10 was superseded by Exh. 13, the pormoters' agreement, which was executed between the parties on 4th July 1961. This contention, therefore, has to be considered as the primary point under Question No.

2. It has been pointed out above that the terms of the promoters agreement, which were formally incorporated into Exh. 13, were agreed to, and settled between, the P.

1. D. C. and the defendants, on 12th May 1961 and reduced to the writing which is Exh. 17/6. This writing was initialed by P. W. Mr. Muhammad Akram, the then Secretary of the P. I. D. C. and the late Mr. Barkat Bhai Akbarji, the Chairman of the defendants' Board of Directors to evidence the agreement of the parties to these terms which were to take effect on approval of the Central Government. The writing was sent for approval to the Central Government under the P. I. D. C's. letter Exh. 17/7, dated 13th May 1961 and this approval was first communicated on telephone on 1‑4‑1961 to the P. I. D. C.., and P. W. Mr. Muhammad Akram, in turn, conveyed this approval the same day by telephone to the late Mr: Barkat Bhai; and on the same day, the defendants paid to the P. I. D. C. Rs. 23,00,000 by cheque under their letter Exh. 16/1, dated 1st July 1961. The payment was acknowledged by the P. 1. n. C. by its receipt Exh: 16/2 dated 3rd July 1961, on which date Exh. 10 itself was executed by the parties. These facts have been deposed to both by P. W. Mr. Muhammad Akram, the then Secretary of the P. I. D. C. and P. W. Mr. Muhammad Bilal Farooqi, its Development Officer. I have no reason to doubt the statements of these witnesses, who impressed me as truthful and straightforward persons. Thus, the promoters agreement, reduced to the writing Exh. 17/6 on 12th‑May 1961, and having been made subject to the approval of the Central Government became a concluded contract between the parties on 1‑7‑1961 when the Central Government's approval was communicated to the P. I. D. C. on telephone, which approval was in turn conveyed to the defendants' on the same day, when also the defendants paid to the P. I. D. C. Rs. 23,00,000, which sum was provided to be payable under the promoters agreement and not under Exh.

10. It is, therefore, the promoters agreement, which became effective from 1‑7‑1961, which is prior in point of time and not Exh.

10. Had it not been so, the defendants would not have given their cheque for Rs. 23,00,000 on this date to the P.

1. D. C. towards the discharge of its excess investment in the said Mills. The in corporation of the promoters agreement into a stamped document on 4‑7‑1961 was a mere formality, which would not detract from this agreement being treated as having become a concluded and effective contract on 1st July 1951. That the effective date of the promoters , agreement is this date, is also borne out by the terms of Exh. 10, the relevant passage of which in this connection is paragraph (1), which reads as follows; "As per derision of the Board of Directors of P. I. D. C. the management of Talpur Textile Mills, Tando Muhammad Khan is banded over to Messrs Fateh Textile Mills with effect from 1st July 1961 who will manage the business and affairs of the said Talpur Textile Mills Ltd., on behalf of P. I. D. C. till such time when a public limited company shall have been jointly sponsored and promoted by P. I. U. C. and Messrs Fateh Textile Mills, in terms of the Promoters' Agreement approved by the Central Government. Messrs Fateh Textile Mills shall honour all the commitments and liabilities made by P.

1. D. C., in respect of Talpur Textile Mills as at 30th June 1961." The reference to promoters agreement in this paragraph clearly shows that on 3rd July 1961, when Exh. 10 was executed, the promoters agreement had been accepted as a binding contract between the parties. This being so, Exh. 10, having been executed on 3‑1‑1967, is a later contract and cannot to said to have been superseded by, or to have become merged in, the promoters agreement.

25. Another objection to the defendant's contention is that the purpose of Exh. 10 is quite different from that of the promoters agreement contained in Exb. 17/6 and Exh.

13. The promoters agreement made provision primarily on the following matters; (i) Payment by‑ the defendants to the P. I. D. C. of the latter's investment in the said Mills ; (ii) incorporation of a new public company with limited liability, with P. I. D. C. holding shares of Rs. 24,50,000 and the defendants of Rs. 25,50,000 in its capital ; (iii) transfer to this company of the said . Mills with all its assets ; (iv) the defendant's option to acquire the P. I. D. C's. shares in the said company for the value to be arrived at in accordance with the formula contained in the agreement ; (v) the representation of the P. I. D. C. on the proposed company's Board of Directors and the appointment of the defendants as managing agents of this company. Both Exh. 17/6 and Exh. 13 do not contain any provision for handing over the possession and the Management of the said Mills by the P. I. D. C. to the defendants before the incor poration of the new company, and the defendant's appointment as its Managing Agents. However,' the parties agreed that the said Mills should be given into the defendant's Management with effect from 1st July 1961, notwithstanding that the new company had not then been incorporated: The purpose of Exh. 10 was therefore to make provision for this situation, and to guarantee that the defendants, who were being given complete control of the Mills, would duly perform their obligations under the promoters agreement. This was the reason why Exh. 10 provided that the proposed company should be incorporated within six months from 3rd July 1961, failing which the P. I. D. C. should resume the Management of the said Mills and that the defendant's Management of the said Mills should be as agents of the P. I. D. C. In this respect, Exh. 10, being later in time, superseded the provisions of clause (ii) of Exh. 17/6 and Exh. 13, which required that the parties should cause the new company to be incorporated with "convenient speed". The same was the reason for superseding the arrangement contained in clause (i) of this document that the P. I. D. C's. excess investments in the said Mills would be paid within one month from the date of the formal execution of the promoters agreement. If Exh. 10 was not later in point of time to the promoters agreement, and if these two documents were not intended to provide for different matters, then the defendants should not have paid Rs. 23,00,000 to the P. I. D. C. on 1‑7‑1961, but should have waited for the formal execution of Exh. 13. 1 would therefore hold that Exh. 13 was neither intended to supersede, nor has the effect of superseding, the arrangement set cut in Exh. 10, on the contrary, it is this document which superseded same of the terms of the promoters' agreement as contained in Exh. 17/6 and Exh.

13. Hence I would reject the defendants' contention that they were not under any obligation to get the new company registered and incorporated within six months from 3‑1‑1961, or that this company had been agreed to be incorporated within reasonable time from the date when Exh. 13 was executed.

26. The next point for consideration is whether defendants are in breach of their obligation to get the proposed company registered or incorporated within six months, as provided for in Exh.

10. For this purpose, the parties have referred ‑me to the correspondence consisting of Exhs. 17/8, 17/9, 17/31, 17/36, 17/37, 17/38,17/39,17/40, 17/41, 17/42,17/43,17/44,17/47 to 17/52, 17/56, 17/57 and 17/68. In Exh. 17/8, dated 2nd December 1961, the defendants take the stand that the P. I. D. C. was under contractual obligation to obtain the sanction for the expansion of the said Mills by 15000 spindles and 500 looms and that since this sanction has not been obtained, as also for audit reasons, the incorporation of the new company should be postponed until 31st December 1962. The P. I. D. C. replied to this letter on 23rd December 1961, by Exh. 17/9 in which the suggestion that the P. I. D. C. was under obligation to obtain this sanction was repudiated, and immediate action was urged for the formation of the new company. On 23rd January 1962, the defendants wrote Exh. 17/31, agreeing to submit to the P. I. D. C. drafts of the memorandum and articles of the association as soon as the same were ready without prejudice, however, to the defendants' stand with regard to the P I. D. C's. obligation to obtain sanction for the expansion of the Mills. This letter was replied to by Exh. 17/36, dated 12th March 1962, in which the P. I. D. C. complained that it still bad riot received the drafts of the memorandum and articles of the association, in spite of assurance given by the defendants and by their Advocate, Mr. Nasim Farooqi, that these documents would be available by 31st January 1962. This letter also repudiated the suggestion made in Exh. 17/31 that the P. I. D. C. had, in its discussions with the defendants, in any way accepted the obligation to obtain the sanction for the expansion of the Mills. Exh. 17/37, dated 21st March 1962, is the defendant's letter, under which they forwarded the draft of the memorandum of the association to the P. I. D. C. and in which they reiterated their contention on the question of P. I. D. C's. obligation to obtain sanction for the expansion of the Mills, on 12th April 1962, the defendants submitted the draft of the articles of association under their letter Exh. 17/35. The receipt of the drafts of the memorandum and articles of association was acknowledged by the P. I. D. C. by its letter Exh. 17/39, dated 14th May 1962, in which the defendants were also required to prepare a statement in lieu of prospectus and necessary applications for submission to the Controller of Capital issues, and on which the P. I. D. C. again denied the suggestion that it had accepted the position that it was under obligation to obtain the sanction for the expansion of the Mills. The defendants were further informed that the P. I. D. C: would resume the Management of the Mills if the new company was not formed within one month Exh. 17/40, dated 30th May 1962, repeats the defendants' contention with regard to the P. I. D. C's. obligation to obtain this sanction. Exh. 17/41 is plaintiff's letter dated 1st August 1962, suggesting amendments in the drafts of the memorandum and articles of the association received from the defendants, and urging incorporation of that new company within 30 days. In Eah. 17/42, dated 11th August 1962, the defendants stated that these amendments required consideration, and therefore it would not be possible to obtain incorporations of the company within 30 days. By Exh. 17/43, dated 14th September 1962 the plaintiffs agreed to extend the time for the incorporation of the company up to 30th September 1962. This letter was replied to by the defendants by Exh. 17/41, dated 26th September 1962, in which the defendants objected to the plaintiffs fixing a time limit for the incorporation of the company. The remaining exhibits, except Exhs. 17/67 and 17/68, consist of the correspondence between the Advocates of the parties. On behalf of the plaintiffs, this correspondence was conducted by Mr. A. K. Brohi and Mr. Dorab Patel, and on behalf of the defendants by Mr. Nasim Farooqi. In Exh. 17/47, dated 20th October 1962, Mr. Brohi called upon the defendants to accept the amendments suggested by the P.

1. D. C. in the drafts of the memorandum and articles of the association, or to put forth their own suggestions with regard to these amendments, and to appoint their representative to discuss with the representative of plaintiffs the various matters in difference between the parties. The defendants were further given notice that if they did not accept the suggestions contained in this letter, they would have to hand over the Management of the said Mills back to the plaintiffs. Eah. 17/49 is Mr. Dorab Patel's letter, dated 17‑11‑1962, by which the defendants were informed that the plaintiffs would take legal proceedings for resumption of the Management of the said Mill if the defendants failed to comply with Mr. Brohi's notice Exh. 17/47. Exh. 17/50 is Mr. Nasim Farooqi's reply, dated 21‑11‑1962, to the letters of Mr. Brohi and Mr. Patel, in which it was contended that no specific period had been agreed to in Exh. 13, dated 4‑7‑1961, for the incorporation of the new company; that the defendants had been induced to enter into the promoters agreement by the P. I. D. C's. assurance that it would obtain Government‑'s sanction for the expansion of the Mills; and that this expansion should precede, or be carried put simultaneously with, the incorporation of the new company. In Exh. 17/52, dated 30th November 1962, Mr. Brohi denied the allegations contained in Exh. 17/50 and requested Mr. Nasim Farooqi to obtain from the defendants the appointment of a representative to discuss the various matters at issue between them and the plaintiffs. Mr. Nasim Farooqi, by Exh. 17/53; dated 6‑12‑1962, requested Mr. Brohi to send "a draft of agenda for the proposed meeting" between the plaintiffs and the defendants. By Exh. 17/54, dated 7‑12‑1962, Mr. Dorab Patel referred to his telephonic conversation with Mr. Nasim Farooqi in which, he said, it had been decided that the agenda of the meeting would be the discussion of the differences between the parties with regard to the memorandum and articles of association. In Exh. 17/55, dated 17‑12‑1962, Mr. Patel set forth the history of the dispute between the parties in detail and contended that the terms of the promoters agreement bad been settled between the parties in May 1961, before the execution of the "handing over agreement" (that is, Exh. 1.0), and complained of the delays made by the defendants in the preparation of the memorandum and articles of association, and denied the allegations contained in Mr. Nasim Farooqi's letter that the P. I. D. C.; or the plaintiffs, were under contract with the defendants to obtain sanction of the Government for the expansion of the said Mills. This letter also referred to the defendant's failure to submit to the plaintiffs accounts, or even the balance‑sheets, of the Mills. Exh. 17/56 is Mr. Nasim Farooqi's reply to Exh. 17/55, denying the statements made in the latter document. Exh. 17/67 i3 Mr. Nasim Farooqi's letter to the Chairman of the plaintiffs suggesting a meeting between the parties to consider "recent changes in fiscal laws and introduction of new taxes" and "the effect of these taxes upon the mill and the impact thereof on formation of the Company . . . ." This letter was replied to by Exh. 17/68, in which the plaintiffs expressed their willingness to discuss with the defendants the various matters connected with the said Mills. Here the corres pondence ends. The plaintiffs now filed suit by presenting their plaint in this Court on 14-1‑1963.

27. Tire review .of the correspondence referred to in the preceding paragraphs leads to the following conclusions: (i) the defendants throughout insisted that the P. I. D. C. and the plaintiffs were under a contractual obligation to obtain sanction of the Government for the expansion of the said Mills ; (ii) the defendants' stand has been that the condition precedent to the formation and incorporation of the new company was that the P. I. D. C. should obtain this sanction ; and (iii) according to the defendants, the operative instrument regulating the relationship of the parties is Exh. 13, which does not specify any time limit for the incorporation of the new company. I have already held under Question No. 1 that there was no contract between the parties that the P. I. D. C, or the plaintiffs, should obtain the sanction 4 the Government for the expansion of the said Mills by 15000 spindles and 500 looms. The defendants were not therefore justified to impose the condition that the new company should be registered and ,incorporated only when this sanction was obtained. I have further held that Exh. 10 placed the defendants under duty to get the new company registered and incorporated within six months from 3rd July 1961, and that this was the consideration for which the defendants were given the possession and Management of the Mills. The agreement embodied in Exh. 10 was not superseded by Exh. 13, but being later in point of time, Exh. 10 modified the arrangements contained in clauses 1 and 2 of Exh.

13. However, immediately the defendants took over the management of the Mills, they went back upon their obligations contained in Exh.

10. They failed to get the new company incorporated right up to 14‑1‑63, when the plaintiffs filed their Suit No. 16 of 1963. They. refused to extend any co‑operation to the P. I. D. C., and later to the plaintiffs, to settle the drafts of the memorandum and articles of association and other relevant documents, including the "vending agreement" and the "managing agency agreement". They avoided, on one pretext or the other, to accept the plaintiffs' suggestions for meetings to settle the matters in dispute between the parties. Since the contention of the defendants, which in fact is their whole defence to the plaintiffs' suit, that the condition precedent for the incorporation of the new company was that the P. I. D. C. should obtain sanction of the Government for expansion of the Mills, has been rejected, the defendants have to be held to be in breach of the agreement, Exh. 10, which stipulated for the registration and incorporation of the new company within six months from 3rd July 1961. The defendants have been unable to show that the delay in the formation of the company was for reasons beyond their control. On the contrary, their conduct, as reflected in the correspondence between the parties, sufficiently establishes that the defendants' omission to this respect was wilful. The examination of the evidence documentary as well as oral, which has come on the record, creates the impression that the defendants were anxious to obtain the possession and management‑of the Mills at any cost, and for this purpose readily entered into the arrangement contained in Exh. 10, without, however, intending to carry out their under takings. It will not be an exaggeration to say that it was the P. I. D. C. which was induced into handing over the management and possession of the Mills to the defendants by the latters' wilful misrepresentations and promises which, as it has turned out, they had no intention to keep.

28. The conclusion that the defendants were not sincere in making the promises which are contained in Exh. 10, is further strengthened if account is taken on their conduct in the management of the affairs of the Mills. Exh. 10 provided that the defendants would consult the P. I. D. C. before taking major decisions in the management of the Mills, particularly with regard to the purchase of raw materials and production and sale of finished goods, and that they would also honour the commitments and liabilities made by the P. I. D. C. with respect to the said Mills as at 30th June 1961. These undertakings were not at all given effect to. The defendants failed to discharge the liabilities which had been incurred by the P. I. D. C. for the said Mills. They failed to settle the outstanding bills of various parties‑. In this connection, I would refer to Exh. 16/3, dated 29‑7‑1961, from the P. I. D. C. to the defendants, in which the P. I. D. C. stated that it had received complaints from various suppliers and contractors that the defendants had declined to make payments of their bills. According to Mr. Muhammad Bilal Faruqui, these bills had ultimately to be paid by the P. I. D. C. itself. At no time the P. I. D. C. and later the plaintiffs, were consulted with regard to the Management of the Mills. The P. I. D. C. left large stocks of yarn in the Mills when its possession was delivered to the defendants. The defendants sold these stocks, according to Mr. Faruqui, to a firm, Akbarji & Sons, which consisted of the Directors of the defendants as partners. These sales, being below market rates, were objected to by the P. I. D. C. by its letter Exh. 16/14 dated 14th July 1961, in which it was pointed out by Mr. Muhammad Bilal Faruqui that on his visit to the Mills he found that stocks of 40's Semi/combed yarn were sold out to Akbarji & Sons at Rs. 32.17 per bundle as against the production cost of Rs. 37.25 per bundle, thereby causing loss to the Mills of approximately Rs. 1 lac. The defendants' reply to this letter is dated 10th August 1961 and is Exh. 16/16, in which only the manufacturing cost of the yarn is given, but not the price at which the sales were made by the defendants. Further, immediately on taking over the possession of the Mills, the defendants changed its accounts to Gujrati system, which change, according to both Mr. Muhammad Bilal Faruqui and Mr. Muhammad Akram, made it difficult for the P. I. D. C. to check the working of the Mills. The defendants also failed to submit to the P. I. D. C. the accounts of the Mills, or even its balance-sheets, though demands were made by the P. I. D. C. in this connection several times, Mr. Brohi pointedly referred in his notice, Exh. 1,7/47, dated 20th October 1962, to the defendants' failure to supply information to the plaintiffs with regard the sales and purchases by the defendants since 1st July 1961, or to submit for the plaintiffs' inspection books of accounts of the Mills. Mr. Dorab Patel also raised this question in his letter Exh. 17/55 dated 17‑12‑1962, in which he stated that the accounts of the Mills and its balance‑sheets were being suppressed from the plaintiffs, and again called upon the defendants to give inspection of the books of account to the plaintiffs within 48 hours. It was only on receipt of this letter that the defendants sent the balance‑sheet for the year 1961‑62, together with the auditor's report, trading and profit and loss account and other statements to the plaintiffs. But these statements were not sufficient to give full information to the plaintiffs of the working of the Mills. Though Mr. Nasim Farooqui, the defendants learned Advocate, stated in Court on 8.2‑1967 that the defendants had no objection to rendering accounts of the Mills, yet no statements in this connection were sent to the plaintiffs during the trial of the two suits before me. More than this, the defendants have set up the case in their pleadings that the Mills has continuously been going in loss, though no effort was made to place material before the Court to sustain this plea. This particular stand of the defendants is surprising, because if there is recurring loss in the Mills, I fail to understand why the defendants should object to hand it over back to the plaintiffs.

29. One point which Mr. Nasim Farooqi vehemently put forth is that the stipulation in Eah. 10 for the incorporation of the new company within six months, was not of the essence of the contract, and therefore the defendant's failure in this respect should not be made a ground to require them to return the management and possession of the Mills to the plaintiffs. This approach to the question at issue is totally erroneous. A reading of Exh. 10, and the circumstances under which it was executed, does show that the period of six months was of the essence of the contract between the parties. Even if it be assumed that it was not so, the correspondence discussed above shows that the P.

1. D. C. and the plaintiffs waited for sufficiently long time for the defendants to proceed with the incorporation of the new company. The P. I. D. C. and the plaintiffs repeatedly urged the defendants to take urgent action in this connection, and in several of their letters, referred to above, even placed time limits for the incorporation of the company. But the defendants failed to do anything in this matter. They even failed to settle with the plaintiffs the drafts of the memorandum and articles of association and other connected documents for the formation of the company and to give effect to the promoters agreements. The plea that time was not of the essence of the contract is also not tenable for a further reason. The terms of Exh. 10 show that the defendants had to manage the Mills on behalf of the P. I. D. C., that is, as P. I. D. C's. agents. The defendants failure to get the new company incorporated within the stipulated period entitled the P. I. D. C., and the plaintiffs, to revoke this agency, and they in fact did so. The plea of time not being of the essence of the contract would not be applicable in these circumstances to the relationship of principal and agent which exists between the parties. The defendants are in Management of the Mills as the plaintiffs' agents. The plaintiffs, on the defendants' failure to abide by the terms of Exh. 10, are entitled to resume the Management, and the defendants are under obligation to return the Management to the plaintiffs. The next contention of Mr. Nasim Farooqi in this connection, that the defendants are in possession and Management of the Mills on account of their heavy investments therein, is also without substance. Under the promoters' agreement, the defendants' Management of the Mills was to commence after the incorporation of the new company. The defendants' Managements of the Mills before the formation of this company was only under Exh. 10, as agents of the P. I. D. C., and this Management was liable to be resumed from them if they failed to arrange for the registration of the Company within 6 months from 3rd July 1961. 30. 1n view of the foregoing discussion Question No. 2 also has to be answered against the defendants, and accordingly I would hold that the defendants are liable to deliver and hand over the possession and Management of the said Mills to the plaintiffs. In view of the conclusions under Questions Nos. 1 and 2, the decision of the issues in Suit No. 16 of 1963 and Suit No. 115 of 1964 is as follows: (i) Issues Nos. 5, 6 and 8 in Suit No. 16 of. 1963 and Issues Nos. 7, 8, 9, 10, 11, 12, 13 and 14 in Suit N. 115 of 1964. The plaintiffs did not hold out any assurance to the defendants to the effect stated in paragraphs 8 and 14 of the defendants' written statement in Suit No. 116 of 1963. The defendants are bound by Exh. 10 which, it is hereby declared, was not superseded or changed in any way by Exh.

13. It is further held that no assurance was given by the plaintiffs that the original sanction given to Mir Ghulam Ali Talpur to import 25,000 spindles and 500 looms would be transferred to the defendants or that sanction would be given by the Government in lieu of the sanction originally given to the Mir. Since there was no understanding given by the P. I. D. C. or the plaintiffs to obtain any such sanction, none of the defendants in Suit No. 115 of 1964 are under obligation to obtain or to give such sanction. Further, as no assurance in this behalf was given by the P.

1. D. C. or the plaintiffs, no question arises of the defendants Nos. 2 and 3 in Suit No. 115 of 1964 being bound by such assurances. It is further held that 2800 spindles were allocated to the said Mills out of the Japanese Credit and this allocation lapsed as the defendants failed to utilize the sanction to import these spindles. It is also held that the defendants themselves failed to make any application to the appropriate Government for the expansion of the said Mills. Further, the plaintiffs cannot, as of right, claim sanction to import the additional spindles and looms, nor has such sanction been withheld illegally by either the plaintiffs or the Central and Provincial Governments. (ii) Issues Nos. 6 and 8 in Suit No. 16 of 1963 and Issues Nos. 4 and 6 in Suit No. 115 of 1964.‑The document Exh. 10 was a separate and independent agreement and was not superseded by Exh. 13 and the defendants were under duty to get the new company registered and incorporated within the time prescribed by this document. The terms of the promoters agreement were settled between the parties on 12‑5‑1961 by writing Exh. 17/6, and this agreement became a concluded contract on 1st of July 1961, when the Government's approval thereto was conveyed to the P. I. D. C. (iii) Issues Nos. 1, 2 and 4 fn Suit No. 16 of 1963 and Issues Nos. 1, 2, 3 and 15 in Suit No. 115 of 1964. Issue No. 1 in Suit No. 16 of 1963, with regard to the jurisdiction of this Court, is concluded by the Judgment of Kharal, J., given in this suit on 30‑9‑1963. The other issues were neither pressed nor argued before me. All these issues are, therefore, decided against the defendants. (iv) Issues Nos. 9 and 10 in Suit No. 16 of 1963 and Issues Nos. 16 and 17 in Suit No. 115 of 1964.‑These relate to the reliefs to be given to such of the parties as are entitled thereto and will be dealt separately hereinafter.

31. Issue No. 16.‑The Central Government and the Pro vincial Governments are defendants Nos. 2 and 3 in Suit No. 115 of 1964 and have both claimed special costs against the defendants, namely, the Fateh Textile Mills, Ltd. The basis of the joinder of the two Governments to the suit is the defendants' contention that both the Governments' are under contractual obligation, together with the plaintiffs, to give sanction to import 15,000 spindles and 500 looms. It has already been held above that there was no agreement between the P. I. D. C. and the defendants that the P. I. D. C. would obtain this sanction, nor did the P. I. D. C , hold out any assurances to the defendants in this behalf. There is, therefore, no question of either the Central Government or that Provincial Government being bound by an agreement which does not exist. Even if it be assumed that there was such an agreement, then also Suit No. 115 of 1964 is not maintainable against the two Governments. There is no contractual relationship between the defendants on the one hand, and either, the Central Govern ment or tee Provincial Government on the other, with regard to the two agreements, namely, the promoters agreement and Exh.

10. Nor did either of the Governments bold out any assurance to the defendants that sanction will be given to the said Mills to import the number of spindles and looms mentioned above. It was contended by Mr. Nasim Farooqi that the Central Government, and ‑after bifurcation of the P. I. D. C , the Provincial Government as successor of the Central Government, is party to the promotors agreement as this agreement was made subject to the approval of the Central Government. This argument is, on the face of it, fallacious. The P. I. D. C. was a statutory corporation set up under the Pakistan Industrial Development Corporation Act, XLV of 1950. It was a separate legal person under section 3(2) of this Act; which provided that the corporation shall be a body corporate, having perpetual succession and common seal, with power to acquire and hold property both movable and immov able 'and to sue and be sued in its own name. The Central Government could not conceivably be treated as party to contracts entered into by the P. I. D. C. The promoter agreement was made subject to the approval of the Central Government by reason of the requirements of section 14 of the said Act, under which the P. I. D. C. was empowered, with the approval of the Central Government, to sponsor public companies to give effect to industrial schemes, with P. I. D. C as managing agents of such companies, unless otherwise directed by the Central Government. The promoters agreement made provision for the formation of a public company with P. I. D. C. as holder of 49 per cent. shares and with the defendants as Managing Agents. Such an agreement required the approval of the Central Government. But this requirement could not make the Central Government a party to the pro moters agreement, which was entered into by the P. I. D. C.; as an independent and separate legal person. The defendants' Suit No. 115 of 1964, is, therefore, vexatious as far as the Central and Provincial Governments are concerned, who are both entitled to special costs under section 35‑A, C. P. C., a claimed in their written statements. I would fix these coats at Rs. 5,000.00 each for the Central Government and the Provincial Government.

32. Issues Nos. 9 and 10 in Suit No. 16 of 1963 and Issues Nos. 17 and 18 of Suit No. 115 of 1954.‑The conclusion of the foregoing discussion is that there was no agreement between the P. I. D. C. and the defendants to the effect that the former shall obtain Government's sanction to import the number of spindles and looms mentioned above and that no assurance in this respect was held out to the defendants either by the P. I. D. C. or the plaintiffs, or the Central and Provincial Governments. Consequently, the defendants' Suit No. 115 of 1964 is dismissed with separate costs in favour of each of the defendants in this Suit, and the costs of the Central and Provincial Governments are fixed at Rs. 5,000.00 each. I would further decree with costs the plaintiffs' Suit No. 16 of 1963 as follows :‑ (a) that the defendants shall forthwith deliver and hand over to the plaintiffs the management and possession of the said Mills ; (b) that the defendants shall render accounts to the plaintiffs of the business of the said Mills from 1‑7‑1961 up to the date the Management and possession of the said Mills is delivered to the plaintiffs and, further, the defendants shall pay to the plaintiffs the latter's proportionate share in the profits of the business of the said Mills ; (c) that the defendants shall further pay to the plaintiffs such sums as may be found by the Commissioner, to be appointed for taking accounts, to have been paid by the P. I. D. C., or the plaintiffs towards discharge of the liabilities of the said Mills as at 30th June 1961, which liabilities were agreed to be discharged by the defendants under the promoters agreement or under Exh. 10.

33. That for the purposes of clauses (b) and (c) of paragraph 32, a Commissioner shall be appointed by the Court in consultation with the plaintiffs and the defendants to take accounts of the matters specified in the said sub‑clauses, and in taking these accounts the Commissioner shall give effect to the following directions and to such other and further directions as may be given by the Court from time to time; (i) that the Commissioner shall divide accounts of the said Mills into three parts (a) manufacturing account ; (b) trading accounts ; .and (c) Stores account, and into such other heads as the Commissioner may consider convenient for taking accounts of the said Mills under this decree, and in taking accounts, the Commissioner will be at liberty to go behind the entries in the books of account ; (ii) that the Commissioner shall take account of the opening stocks as on 1‑7‑1961, and thereafter of the opening and closing, stocks at the commencement and of each financial year of the Mills. (iii) that in taking the manufacturing accounts, the Com missioner is directed to adopt the following procedure; (a) to calculate and work out the average production per spindle working for 8 hours a day for each count of variety of cotton yarn produced by the said Mills. (b) to calculate and work out the average number of days and shifts per year for the period during which the defendants have worked the said Mills. (c) to ascertain which quality of cotton has been used for manufacture of each quality of yarn produced by the said Mills, and to determine whether a particular cloth or variety of yarn warranted the use of a particular quality of cotton and if not, then to calculate and work out the difference in costs of manufacture. (d) to ascertain and determine the ratio of the cost and weight of raw cotton per pound of cotton yarn produced by the said Mills. (e) to ascertain and determine the wastage of cotton per pound of yarn produced by the said Mills. (f) to ascertain and determine for each financial year the total quantity of cotton and other materials purchased by the defendants for the said Mills and to .find out whether such quantity tallies with the cotton consumed and with cotton wastage, and the cost of the production of each pound of cotton yarn. (g) to ascertain the stations from which cotton had been purchased by the defendants for the said Mills, and to find out whether these purchases mere in accordance with the market rates and were made from genuine sellers, or from companies, firms and concerns in which the defendants or their directors or shareholders had or have any interest, and if so the effect of such an accounting and the rights of parties. (h) to calculate and work out the ratio of expenditure (includ ing cost of labour, management, electricity, etc.), for each pound of yarn produced and sold by the said Mills. (iv) that in taking the trading accounts the Commissioner shall ascertain whether the sales of the finished goods were according to the market rates and whether these sales were made to genuine purchasers, or to companies, firms and concerns in which the defendants, or their directors or shareholders had or have any interest, and if so the effect of such procedure on accounting and rights of the parties and whether the sales tally with the quantities of raw materials used in the said Mills. (v) that in taking the accounts under, the head were made according to the market rates and whether they have been properly valued in the Mills' books of accounts. (vi) that in taking the accounts as aforesaid the Commissioner may take into consideration the capacity tax imposed or proposed to be enforced on the said Mills by the Govern ment of Pakistan and the reports of the Cotton Committees and other documents and reports with regard to the working of, sad production by, the textile mills in Pakistan, and the market reports of prices of raw materials and finished goods published in Karachi or elsewhere in the country. (vii) that in taking accounts as aforesaid, the Commissioner shall have regard to the manufacturing costs, expenditure "` on labour, management, electricity, etc., and trading results of other textile mills in the country. (viii) that the Commissioner shall calculate and work out L the depreciation and other allowances which were or are available to the said Mills and to allocate the benefits of ‑these allowances between the plaintiffs and the defendants according to the ratio of their respective investments in the said Mills. (ix) that the Commissioner may, if he considers necessary apply to the Court for assistance of a qualified accountant or auditor in carrying out his duties under this decree and each party, that is, the plaintiffs and the defendants, shall be at liberty to place at the Commissioner's disposal such assistance, including clerical and other assistance, as the Commissioner may consider necessary..

34. The plaintiffs and the defendants are each directed; to file within two days lists of persons from amongst whom the Commissioner would be appointed by the Court for the purposes aforesaid. Suit decreed.