1984 PLP 370 (MLD)

"I have no personal knowledge about this matter because I joined this firm in January, 1964." Mr. Ranji Shah Patel (D.W.3 Exh.8), had also no personal knowledge about the promotion of the defendant-bank so as to rebut the claim of the plaintiff that he was the person mainly responsible for the promotion of the said bank. This witness admitted that according to the minute book of the defendant Bank brought by him a resolution was passed on 27-6-1963 by the Board resolving that Rs.20,000 be paid to the plaintiff in full and final settlement of his bill for Rs.80,000 "on account of expenses as a promoter. " In the light of the above evidence on record, Mr. Fasihuddin, the learned counsel for the defendants, finally argued that the Issue No.1 was irrelevant to the determination of the action brought by the plaintiff for recovery of the amount representing the salary for the unexpired portion of the period mentioned in the Agreement dated 28-5-1983 which received due confirmation of the Board of Directors of the defendant Bank. In view of the above discussion, while holding that there is sufficient evidence to show that the plaintiff was responsible for the promotion of the defendant-Bank, I dispose of this Issue agreeing with the learned counsel for the defendants with the observation that this issue is not relevant for the determination of the claim in suit.

6. Re: Issue No.2. (i) The execution of the agreement of service dated 28-5-1963 (Exh.5/2) executed by the parties, appointing the plaintiff as 'adviser' to the defendant-Bank "with effect 28-5-1963 for a period of five years only,' is admitted. The said agreement, inter alia, also provided:

"Clause:

3. That party of the first part shall pay to the party of the second part during the continuance of this agreement provided he shall duly observe and perform the terms and conditions of his employment therein mentioned a consolidated salary of fts.2,300 per month commencing from 28th May 1963. Clause:

6. That the party of the second part shall be entitled during his employment to leave on full pay for a period equal to 1/12th of the period of service rendered and to a further leave on half pay in case of illness or incapacity to be proved to the satisfaction of the party of the first part for a maximum period of 15 days in one year. Clause:

9. That if party of the second part has to undertake tours under the directions of the boards of Directors in such a case all reasonable expenses actually incurred in such tours shall be paid by the party of the first part against submission of the vouchers." (ii) A perusal of the agreement, particularly clauses referred to above, would show that the plaintiff was engaged and appointed as advisor for a fixed period of five years with effect from 28th May, 1963 on a consolidated salary of Rs.2,300 P.M. and that he would be entitled during his employment to leave on full pay (clause 6) and vide clause 7, it was expressly agreed that the defendant Bank shall not terminate his services before the expiry of the agreed period of five years. It was also expressly agreed that in case the plaintiff's services were terminated before the expiry of the said period of five years the bank shall be liable to pay to the plaintiff salary for the unexpired period at the same rate in lump sum by way of damages for breach of the agreement. (iii) Mr. Fasihuddin, the learned Advocate for the defendant admitted that the contract when formed was lawful and that the plaintiff under the said agreement continued to work till 14th April, 1964 when his services were terminated in view of the directions given by the State Bank of Pakistan. The learned Advocate for the defendants submitted that after the direction was received from the State Bank of Pakistan as mentioned above it was no longer possible for the defendant-bank to continue with the services of the plaintiff and the said contract of service dated 28th May, 1983 (Exh.5/2) became illegal, unenforcible and, therefore, stood frustrated under section 56 of the Contract Act. The learned counsel for the plaintiff placed reliance on section 41 of the Banking Companies Ordinance No.47 of 1962 as well in support of his argument that the defendant bank was bound to abide by the directions given by the State Bank of Pakistan. I fail to see the relevancy of Section 56 of the Contract Act to the question involved as it is admitted that the contract Exh.5/2 when made was lawful and was binding upon the parties. The only question which requires consideration under the issue framed is if the contract agreeing to pay the balance salary for the unexpired period of five years in case of earlier termination of the agreement, is a legal contract. The learned Advocate for the defendant was unable to show any law under which the provision made in a contract of service for a fixed period providing for payment of compensation in case the said contract is terminated before the expiry of the agreed period, is illegal. On the contrary I find from the case reported as Mr. Rahim Bux Munshi v. Pakistan P L D 1971 Kar. 833 that this Court held that the plaintiff would be entitled to remain in service for unexpired portion of his term of office and termination of his contract of service before it ran through its full term would be illegal and the plaintiff would be entitled to decree for the salary for remaining period at stipulated rate by way of compensation. Mr. Fasihuddin the learned counsel however, contended that after the direction was received from the State Bank of Pakistan for termination plaintiffs services, the defendant was left with no option but to terminate the services of the plaintiff and thus the contract of service made with the plaintiff, became frustrated and illegal. This submission of the learned counsel for the defendant cannot succeed for the reason that the services of the plaintiff were not treated by the defendant-Bank as having become unenforcible, illegal or frustrated. On the contrary the letter dated 14th July, 1974 (Exh.5/3) addressed to the plaintiff notified him:

"Your services are hereby terminated with immediate effect and salary for the balance period April, 1964 and the month of May, 1964 is enclosed in lieu of notice period." (iv) A bare perusal of the above notice would show that it was a case of termination of services simplicitor. The defendant even went to the extent of stating that the salary for the balance period of April, 1964 and the month of May, 1964 was enclosed in lieu of notice period. This letter Exh.5/3 completely knocks out the plea now raised that the contract of service had become illegal or frustrated. On the contrary according to the defendants themselves the plaintiff was entitled for the payment of the salary not only for the balance period of April, 1964 but also salary for the month of May, 1964 in lieu of notice period. Had there been any frustration of the contract as alleged the defendants would have been relieved of making any payment for the balance period of April, 1964, as well as for any payment for May, 1964 in lieu of notice period (if notice was at all necessary). The only question, therefore, remains is to see whether the plaintiff after payment of salary for the balance period of the month of April and May 1964 in lieu of notice, would also be entitled to payment of the salary for the unexpired period as provided in clause 7 of the agreement Exh.5/3. Reference may here be also made to the letter dated 27th April, 1964 (Exh.5/4) whereby the plaintiff called upon the defendants to send him a cheque of Rs.1,10,400 which amount according to him was due to him as the salary for the unexpired period of his contract. The defendants were warned by the plaintiff that in case his demand was not met he would seek the help of the Court of law. In reply to the plaintiffs aforementioned letter the defendants by their letter dated 8th May, 1964 Exh.5/5 informed that the plaintiff's said letter was receiving consideration and that a reply would be sent in due course. No reply however was sent by the defendants to the plaintiff. (v) I may now refer to the case of Hamara Radio and General Industries Ltd. Co. v. State of Rajasthan and another A I R 1964 Raj

205. The learned counsel for the defendants placed reliance upon the following observations made in the said case as to the principle upon which the rule of frustration of contracts is based:

"Now the doctrine of frustration is embodied in Section 56 of the Contract Act. The essential principle upon which it is based is the impossibility, or, rather, the impracticability in law or fact of the performance of a contract brought about by an unforeseen and unforseenable sweeping change in the circum stances intervening after the contract was made. In other words, while the contract was properly entered into in the context of certain circumstances which existed at the time it "fell to be made, the situation becomes so radically changed subsequently that the very foundation which subsisted underneath the contract as it were gets shaken, nay, the change of circumstances is so fundamental that it strikes at the very root of the contract, then principle of frustration steps in and the parties are excused from or relieved of the responsibility of performing the contract which otherwise lay upon them." The learned counsel for the defendants contended that the contract upon which the plaintiff has brought the suit was frustrated and became incapable of performance in February, 1964 when the Inspection Team appointed by the State Bank of Pakistan made the report. The said report was brought by Mr. Hasan Mustafa (D.W.1 Exh.6) in Court when he was examined on behalf of the defendants, but was not produced as the said witness claimed privilege. The learned counsel then referred to the resolution dated 13-4-1964 (Exh.8/2) which was passed by the Board of Directors of the bank and which read as follows:

"Resolved that as directed by the State Bank of Pakistan the services of Mr. M . A . Quasem be terminated forthwith and one month's notice pay be paid in advance and the Chairman is authorised to issue the Service Termination letter as noted below:- Your Services are hereby terminated with immediate effect and salary for balance period of April, 1964 and month of May is enclosed in lieu of Notice Period." This was followed by defendants letter of "termination of service" dated 14-4-1964 (Exh.5/3) notifying the plaintiff that his services were terminated with immediate effect and salary for balance period of April, 1964 and salary for the month of May, 1964 in lieu of notice period, was sent to the plaintiff. (vi) In the light of the resolution dated 13-4-1964 (Exh.8/2) it is obvious that the direction (if any) given by the State Bank of Pakistan was to the effect that the services of the plaintiff be terminated forthwith and one month's notice pay be paid in advance to him and that the Chairman was authorised to issue to the plaintiff the letter of termination of his service. Such a letter (Exh.5/3) terminating the services of the plaintiff was consequently issued on 14-4-1964. The alleged direction of the State Bank (which was not even produced or proved) for the termination of services of the plaintiff forthwith and to pay him one month's notice pay in advance, cannot be termed as a subsequent event which could be construed as rendering the performance of the contract impossible in law or fact. Here I may also refer to para 7 of the written statement of * the defendants which shows, that the defendant-Bank had made an application to the State Bank of Pakistan for declaring it as a 'Schedule' bank, which led to an inquiry in the conduct of its affairs The inspection team appointed by the State Bank of Pakistan it is alleged, recommended besides others, that the services of the plaintiff be terminated. It was then pleaded:

"It is submitted that unless the defendants carried out the various recommendations of the State Bank of Pakistan the question of scheduling the bank could not have been considered by the State Bank." The above plea of the defendant in my opinion is completely in consistent with the plea advanced by the learned counsel for the defendants for the first time during his arguments that the contract of service was frustrated. The statement made in the written statement on the contrary shows that the plaintiffs services were terminated by the defendants for the reason that they wanted the defendant-Bank to be declared as a 'schedule' bank and to achieve that object they terminated the plaintiff's services. The termination of the plaintiff services was thus a deliberate and motivated act on the part of the defendants and not because of any subsequent event which rendered the contract impossible of performance by any intervening circumstances beyond the control of the parties. The self-imposed alleged circumstances, neither rendered the contract Exh.5/2 impossible of performance nor any of the terms contained therein (including the clause whereby the defendant agreed to pay the plaintiff salary for un-expired period of five years in case of earlier termination) became illegal. This issue, therefore is answered in the negative.

7. Re: Issues Nos. 3 and 4: (i) The learned counsel for the defendant did not advance any separate arguments under these issues other than what was argued under Issue No.2. The defendants have not produced any witness or document in proof of the allegation that the services of the plaintiff were terminated on account of any advice tendered by the State Bank. The defendants witness Mr. Hasan Mustafa (D.W.1 Exh.6) brought the alleged report which it is alleged was made by the Inspection Team appointed by the State Bank but the said witness after claiming privilege did not produce the said report in his examination-in-chief. Thereafter, the said witness did not even appear or submit to cross-examination by the plaintiffs counsel. The defendants other witness Mr. Rajishah Patel (D.W.3 Exh.8) joined the defendant-Bank as an employee on 1-5-1966. He, therefore, had no personal knowledge about the events which led to the termination of the plaintiffs services. From the minute book which was brought, he produced the entry of the resolution dated 13-4-1964 (Exh.8/2) of the Board, which I have already reproduced above pursuant to which the plaintiffs services were terminated before the agreed period of five years for which the plaintiff was engaged as an adviser by agreement dated 28-5-1963 (Exh.5/2). The learned counsel could not point out any thing whereby on the termination of the plaintiffs services, before the expiry of the agreed period of service, would relieve the defendants from their liability "to pay to the party or second part (plaintiff) salary for unexpired period at the same rate in lump sum by way of damages for breach" as provided under clause 7 of the said agreement. It may be mentioned that if the defendants were so mindful, they ought to have provided for such a contingency in the agreement itself. They cannot now be relieved from the absolute liability, to make payment of the salary for the balance period as agreed. (ii) As regards the effect of the alleged advice of State Bank, in view of the finding given under Issue No.2, it is held that it had no effect on the contract between the parties. No such alleged advice, in fact has been proved. The Issues Nos. 3 and 4 are accordingly answered in the negative.

8. Re: Issue No.5: I have already reproduced above the resolution dated 13-4-1964 (Exh.8/2) as well as the letter dated 14-4-1964 (Exh.5/3) and find that the same do not slightly indicate that the plaintiff at any time gave up or agreed to forego his claim as consideration for the bank not instituting a regular inquiry against him. The defendants have not produced a single witness to prove that the plaintiff agreed to forego his claim as a consideration for the defendant-Bank not instituting a regular inquiry as alleged. I may also mention here that the plaintiff in his letter dated 27-4-1964 (Exh.5/4) addressed to the defendant-Bank in response to the letter dated 14-4-1964 (Exh.5/3) terminating his service expressly made a claim for salary for balance period. He wrote:- "It also appears that you have completely ignored the terms of my contract of employment under which I am entitled to my full salary in lump sum for the entire unexpired period of my contract. I shall be obliged if you would kindly send me a cheque for Rs.1,10,400 which amount is due to me as my salary for the unexpired period of my contract within seven days otherwise I shall seek help of Court of law." The defendants on receipt of the above letter informed the plaintiff by their letter dated 8-5-1964 (Exh.5/5) that his letter was under their consideration and that a reply would follow in due course. No reply however followed. Had there been any agreement or undertaking on the part of the plaintiff to forego his claim as alleged, such an important event would have been mentioned immediately in the reply on receipt of the alleged claim and the regular inquiry against him would have been started forthwith. It may also be mentioned here that finally a legal notice dated 19-5-1964 (Exh.5/6) on behalf the plaintiff was given by Mr. Hasan Ali Abdul Rahman, Advocate wherein after referring to plaintiff's claim for promoting the Bank, and pointing out clause 7 of the agreement (Exh.5/2) the defendants were notified as follows:- "That my client according to clause 7 of the agreement is entitled to receive and you are bound to pay a sum of Rs.1,10,400 being his salary for unexpired period of 4 years. He is further entitled to receive and you are bound to pay sum of Rs.2,300 being the salary for earned leave. I, therefore, through this notice call upon you to pay a sum of Rs.1,12,700 (Rupees one lac twelve thousand and seven hundred only) within a week failing which I have definite and positive instructions to take legal action for the recovery of the same through Court of law as against your risk as to costs and consequences which please be noted." Thereafter, the defendants wrote letter dated 14-8-1965 (Exh.5/7) wherein certain querries were made from the plaintiff to which lie replied vide Exh.5/8, but we find that no plea was even then raised by the defendants that the plaintiff had at any time foregone his claim. In view of the discussion as above, I have no hesitation in holding that the defendants have miserably failed to prove that the plaintiff at any time gave up his claim as a consideration for the Bank not instituting a regular inquiry against him. The Issue No.5 is accordingly answered in the negative.

9. Re: Issue Nos. 6 &

7. The last question which now remains to be determined is as to amount to which the plaintiff is entitled. Clause 7 of the agreement of service dated 28-5-1963 (Exh.5/2) provides that the defendants shall not terminate the services of the plaintiff before the expiry of the five years period of the said agreement, and that:- "In case party of, the first part (the defendant) in violation of the terms and condition of the terms and conditions of this agreement terminates services of the party of the second part (plaintiff) before the expiry of five years period as hereinabove mentioned it shall be liable to pay to party of second part (the plaintiff) salary for unexpired period at the same rate in lump sum by way "of damages for breach of this agreement." The legality of the above convenant is unquestionable, as found earlier while disposing of the Issue No.2. I may refer here once again to the case of Mr. Rahim Bux Munshi v. Pakistan P L D 1971 Kar. 833 wherein it was held:

"The second defendants were bound to keep the plaintiff in employment until the expiry of his tenure of office, and they were bound to do so under a valid and subsisting contract between the plaintiff and the second defendants. Hence the termination of the plaintiffs contract of service before it ran through its full term is illegal." Having observed as above, the learned Judge further held that the plaintiffs contract of service was for a definite period and had been terminated before its completion, he was, therefore, entitled to a salary for the remaining part of the period at the stipulated rate. Applying the principle as laid in the case of Mr. Rahim Bux Munshi v. Pakistan (ibid), I hold that the plaintiff is entitled to payment of Rs.1,10,400 being the salary for the remaining period of service. As regards claim for Rs.2,300 being the salary for the period of earned leave, I find nothing on the record that the plaintiff had applied for leave but the same was refused. He, therefore is not entitled to payment of any salary on this account. This suit is accordingly decreed for Rs.1,10,400 with proportionate costs and interest @ 6% p.a. on the amount decreed as claimed, from the date of suit till payment. M.B.A. Suit decreed.