1989 PLP 1194 (CLC)

(b) to further declare that the plaintiffs are not in breach of clause (vi) of para 8 of the contract and the contract and not the allocation of foreign exchange could be cancelled/ withdrawn; (c) to also declare that when the contract having been performed cancellation of loan and withdrawal of foreign exchange allocation on the said ground causes irreparable harm and injury to the plaintiff ; (d) to grant consequent relief by directing IDBP through appropriate order/judgment/decree that they do specifically perform the contract; (e) to grant a sum of Rs.5 crore for a year's delay which the project has suffered due to illegal act and action of the defendants and to make it recurring for each year of delay; (f) In the alternative to grant a compensation of Rs.50 crore, being the estimated profit and appreciation envisaged in 10 years working of the textile mills; (g) to grant costs to the plaintiffs and also exemplary cost in the sum of Rs.10 lacs for the vexatious and frivolous act of the defendants; (h) to grant such other/further/additional relief or reliefs, direction /directions, order/orders, as this Hon'ble Court may deem fit or appropriate in the circumstances mentioned hereinabove." I have heard the learned counsel for the parties. In order to appreciate the contentions of the respective counsel for the parties, it is advantageous to reproduce clauses (iii) and (vi) of sanction letter dated 25‑3‑1987 which is annexed to the plaint as Annexure ,C,. (iii) In case of individual machine/ equipment using imported components of CIF costs more than 20$ but not more than 80$ of FOB value of individual machinery equipment the financing under LFM Scheme shall be limited to the extent of difference between F.O.B. value of the individual machinery/ equipment an(' CIF cost of the imported component; (vi) The sponsors will clear overdues if any in respect of their units financed by IDBP." A perusal of clause 8(vi) of the Sanction Loan shows that the sponsors will clear overdues, if any, in respect of their units financed by I.D.B.P. The defendants by their letter dated 13‑4‑1988 called upon to clear the overdues not only of the plaintiffs but also of three borrowers of I.D.B.P. The names of three borrowers are Central Cotton Mills Ltd., Shahyar Textile Mills Ltd., and Fazal Sugar Mills Ltd. It is an admitted position that Gulzar Ahmad and Munir Ahmad are common directors in these companies. The defendants called upon the plaintiffs to clear the dues within 15 days from the date of letter otherwise the defendants would withdraw the foreign exchange allocated to the plaintiffs. In the words of Lord Justice Bowen in Whaley Bridge Calico Printing Company v. Green and Smith (1880) 5 QDB 109 the term 'Promoter' is a term not of law but of business, usually summing up in a single word a number of business operations familiar to commercial world by which a company is generally brought in existence. The plaintiffs instead of clearing the dues of the aforesaid companies, filed Constitutional Petition No. D‑83 of 1988 in this Court challenging order dated 13‑4‑1988. The petition was dismissed by a Division Bench of this Court in limine. It is seen that the defendants wrote a letter dated 3‑11‑1987 to the plaintiffs wherein it was stated that "as the sponsoring directors of M/s. Central Textile Mills Ltd., hold substantial interest in M/s. Shahyar Textile Mills Ltd., and Fazal Textile Mills Ltd., M/s Shahyar has to pay the IDBP dues and also the issue of Fazal Textile Mills, Ltd. , still has to be settled by you with the bank. Moreover, it has also been clearly stipulated in our sanction letter that the sanction will also be governed by all other general terms and conditions of IDBP." On 22‑11‑1987 another letter to the plaintiffs was written which reads thus:‑ "In this connection we have to advise you that IDBP would not open letter c f credit without clearance of overdues in respect of units financed by Bank despite approval of machinery by the Capital Cost Evaluation Committee constituted by the Federal Government. You are, therefore, requested to clear overdues in respect of M/s. Shahyar Textile Mills Ltd. Amounting to Rs.6.692 million as on 30‑9‑1987 and also settle issue of Fazal Sugar Mills Ltd., with the bank." On 29‑11‑1987 the defendants again wrote to the plaintiffs advising to clear the overdues in respect of M/s. Central Cotton Mills Ltd., M/s. Shahyar Textile Mills Ltd., and M/s. Fazal Textile Mills Ltd. Again on 26‑1‑1988 another letter was issued to the plaintiffs. Again on 13‑4‑1988 a letter was issued to the plaintiffs to the effect that if the plaintiffs and other three companies failed to clear the dues, they would withdraw the Foreign Exchange allocation. Instead of clearing the dues, the plaintiffs insisted that the other three companies are not units of the plaintiffs. This brings me to the consideration of the rival contentions of the parties as regards the terms and conditions of the sanction letter and whether the above named three companies are associated companies or units of the plaintiffs company. Very elaborate arguments were addressed by the learned counsel for the parties. It is, however, exhaustive that at this stage it is necessary for the plaintiffs to show a prima facie case by which is meant an arguable case or a serious question to go to trial. Unless the factual controversies are inquired into open evidence led by the parties, it is difficult to arrive at conclusion as to which side is stating correct facts. At this stage, it is neither possible nor necessary to determine the correct legal position. The principles guiding the grant of interlocutory injunctions are fairly well‑settled. The relief is both temporary and discretionary. In cases of interlocutory injunctions, in aid of the rights the party seeking it, the Court will first consider whether the plaintiffs has established prima facie case, the expression 'prima facie' in this context being understood in the sense that it is not a frivolous or vexatious A claim but involves a serious matter to be investigated. The rules guiding the administration of this form of discretionary relief admit of being formulated in the following three sequential propositions. (1) Discover whether the plaintiff's case is frivolous or vexatious; (2) If it is not decided, in whose favour the balance of convenience lies; (3) If the balance is fairly even then. it may not be improper to take into account in tipping of balance the relative strength of each party's case as revealed by the affidavits filed on the heading of the application. In the present case, the plaintiffs contended in the plaint that Central Cotton Mills Ltd. Shahyar Textile Mills Ltd., and Fazal Textile Mills Ltd. , are not units of the plaintiffs even though some of the directors are common and I proceed on the assumption that the plaintiffs have made out, what according to their learned counsel is "a very strong prima facie case". The question that arises is as to the balance of convenience between the parties and imminent and uncompensable disadvantage of some irreversible detriment that may result to the plaintiffs by the denial of the relief. In this context, it is not necessary for the Court to find a case for the plaintiffs which would entitle them to relief at all events, but is it quite sufficient if the Court finds that the case shows that there are substantial questions to be investigated and the matter has to be preserved in status quo until the question can be finally disposed of. The consequences resulting from freezing and/or restraining the defendants from allowing allocation of foreign exchange to third party as urged and envisaged by Mr. Mansoor Ahmad, learned counsel for the plaintiffs proceeds on the assumption that these three companies are not units of the plaintiffs and clause (vi) is not applicable to the plaintiffs in the circumstances of the case. To hold so, at this stage, and proceed on that assumption would, in my opinion, amount to prejudging the matter. The House of Lords in American Cyanamid Company v. Ethicon Ltd., '(1975) 2 WLR 316 (1975) 1 AER 504 observed:‑ "It is no part of the Court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law that call for detailed arguments and mature considerations. These are matters to be dealt with at the trial. One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that "it aided the Court. in doing that which was its great object, viz. abstaining from expressing any opinion upon the merits of the case until the hearing." The important question is of the balance of convenience. The subject of litigation is the cancellation of allocation of foreign exchange The result of granting injunction would be to restore the allocation of foreign exchange and to hold that the plaintiffs are not in breach of clause (vi) of para 8 of the contract. The plaintiffs are liable to be re instituted and the cancellation of contract be set aside. The C apprehension expressed by the counsel for the plaintiffs in their arguments is that if the cancellation is not restored, the plaintiffs will be seriously prejudiced. Under clause (vi) of para 8 of the sanction letter, the plaintiffs have to clear the dues of the aforesaid companies. Whether the ‑clause is illegal or the aforesaid companies are units or associated or sister companies of the plaintiffs is the subject‑matter of this suit. In the said case, the House of Lords also emphatically negatived the existence of the supposed rule that the Court is not entitled to take any account of the balance of convenience unless it has been satisfied that if the case went to trial upon no other evidence than is before the Court at the hearing of the application, the plaintiffs would be entitled to judgment for a permanent injunction in the same terms as the interlocutory injunction sought. It was also pointed out in the said case that the use of the expressions such as "a probability", "a prima facie case" or "a strong prima facie case" in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The Court, no doubt, must be satisfied that the claim is not frivolous or vexatious, in other words, that there is a serious question to be tried. When once the Court comes to the conclusion that there is a serious question to be tried, what is material is the consideration of the balance of convenience and if the balance of convenience is fairly even, then it may not improper to take into account in tipping the scales, the relative strength of each party's case. In assessing the balance of convenience the nature of injury which the plaintiffs would suffer if the injunction is not granted and they turned out to be right at trial on the one hand should be juxtaposed with the hardship that the defendant ~ would suffer if the injunction is granted and if they turned out to be right at the trial. Again the words of Lord Diplock in the America Cyanamid case are worth recalling:‑ " ....The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiff's need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff's undertaking in damages if the uncertainty were resolved in the defendant's favour at the trial. The Court must weigh one need against another and determine where "the balance of convenience" lies." In Marghoob Siddiqui v. Hamid Ahmed Khan 1974 SCMR 519 their Lordships of the Supreme Court have emphasised the need on a case for grant of temporary injunction of the consideration of question. of balance of convenience or irreparable loss and observed that an injunction is not to be granted only on the basis that a prima facie case exists but it is incumbent upon the Court to take into account the other questions. The burden of establishing that the inconvenience which the plaintiffs will suffer by the refusal of injunction is greater than that the defendants will suffer, if it is granted lies clearly on the plaintiffs. After a careful and anxious consideration of the matter, I am of the opinion that the defendants have prima facie established that the plaintiffs have not complied with the terms and conditions of the sanction letter. Therefore, I hold that this burden has not been discharged by the plaintiffs. The plaintiffs have not shown as to how and in what manner the species of injury known to law as irreparable would be occasioned to them if the allocation of foreign exchange is not restored. They are also unable to establish that the injury and hardship resulting to the defendants by issue of an order of injunction would not be greater than the injury that may result to the plaintiffs by the denial of the order. The learned counsel contended that the cancellation of allocation of foreign exchange is mala fide. I am of the humble view that it is precisely the matter to be gone into at the trial and as stated earlier what is of materially. at this stage is the consideration as to the balance of convenience or inconvenience and hardship. I, therefore, hold that the plaintiffs have not made out a case for an order restraining the defendants from canceling the allocation and/ or restoration of the allocation of foreign exchange. For all these reasons stated hereinbefore, in my view, it has been prima facie established that as the plaintiffs contravened the terms and conditions of the sanction letter, no order should be made H on these applications. These applications are, therefore, dismissed. Interim order dated 3‑8‑1988 is hereby recalled. M.Y.H./C‑71/K Applications dismissed.