P L D 1966 Supreme Court 201 (PLP)

(b) Dealt with and used sub‑authorization No. RM000608 dated 10‑5‑55, Exh. 76, in contravention of its conditions and the provisions of the law in Pakistan and towards that and executing agreements Exh. 3 and Exh. 47 receiving Rs. 34,200 and Rs. 5,852 as profit in full from witnesses Mr. Fikri and Mr. Hashmatullah of said firms respectively in contravention of Pakistan Law, viz., section 6 of Essential Commodities (Distribution) Order of 1953 and section 3 of Imports and Exports Control Act of 1950 thereby committed the offence of dealing in Black Market within the meaning of section 2 (2) (ii) and (v) thereby committed an offence punishable under sections of the Hoarding and Black Market Order, 1956." There is here a degree of condensation in expression calling for some elucidation. It appears that the Special Judge, for the purpose of the charge, assumed that the agreements executed between Friederike Ltd., and the two buyers constituted offers for sale, or an attempt to sell scheduled articles, and that this was a contravention of section 6 of the Essential Commodities (Control of Distribution) Order, 1953. The second part of the charge that relating to section 3 of the Imports and Exports Control Act, 1950 has reference to an allegation of transfer of the sub‑authorisation permit. The sub‑authorization was expressly made subject to conditions earlier prescribed in a public notice by the Chief Controller of Imports and Exports, exercising a power relatable to the Imports and Exports Act, 1950. One of these conditions was that the sub‑authorization "was not transferable except with the permission of the Controller, Imports and Exports or a person duly authorised by him." The prosecution allegation on which the second head of charge was based was that these two transactions involved transfer of the licence pro tanto to the respective buyers. The findings of the Special Judge were as follows. He came to the conclusion that by the agreements themselves no sale in the legal sense was effected since acts remained to be done by the sellers up to the stage of obtaining release orders. He observed further that at the time of these agreements, forward contracts were not forbidden by the law in respect of goods imported under licence, (The law has subsequently been changed, but it is unnecessary to consider the change for the purposes of the present case). The reference to "forward contracts" by the Special Judge must be understood in relation to the precise allegation of illegal sale, for in the main, the Special Judge's view was that the parties designated as buyers in these transactions were really agents acting on behalf of Friederike Ltd., and such possession as they had in respect of the imported goods at each stage of the transaction prior to the issue of the release order was in the capacity of such agents. This becomes clear from the discussion in the Special Judge's Judgment regarding the second head of charge, namely, the transfer of the sub‑authorisation. The Special Judge started by saying that a forward contract was not a complete sale, and therefore, the goods were held by the buyers in the capacity of bailees. Consequently, use of the sub‑authorisation was not in fact a transfer thereof, and there was no contravention of the condition of non -transferability. The Special Judge discussing the question of utilization of the licence observed that whatever the buyers did throughout the transaction, they did in the name of and for Friederike Ltd., and as to their eventually coming into possession of the goods, he observed as follows:‑ "They held the goods in their own custody because they had advanced the finances and therefore they would have the lien on the goods. The sub‑authorisation was in no way sold to them." And with respect to the aspect of utilization of the licence within the meaning and purpose of the law relating to distribution of imported goods, he made the following observation which is of some significance:‑ As regards the indents, the importers would only import the goods, which could readily be sold to his customers and if Messrs Frederike Ltd., asked Messrs Western Motors and Star Motors as to the type of the goods, they would require and asked them to supply such indents, this was no violation of law nor a violation of the conditions of the sub‑authori sation." In other words, the underlying purpose of the laws controlling the import of foreign goods and their distribution in the Pakistan market was to use a limited supply of foreign currency to the very best advantage for meeting the requirements of the trade and of the public. Evidently, this purpose would be frustrated if the goods were not ordered on the basis of real knowledge of the detailed requirements of the trade and public; over a considerable future period. Therefore, postulating that Friederike Ltd., were not directly in touch with the retail or even the wholesale market for motor spare parts, (which appears to be the case) they were acting in consonance with the true purpose of the law controlling the import of such goods and their distribution, when they called in aid the special knowledge and judgment possessed by two firms such as Western Motors Stores and Star Motor Works for providing them with details of market requirements, which could be met within the available portion of their licence. Reference may with advantage be made here to a statement by Mr. Fikri of Western Motors Stores. He said:‑ "We entered for sale of these goods after we were notified by the accused Co., importers that release orders had been issued. There was no term of the agreement that we will sell the goods after release order because there was no incentive to sale quickly. The nature of the trade is such that we cannot sell quickly. If I could wait for 6 months to get the goods I could also wait for three or four days to get the release order." In his examination‑in‑chief, this witness went to the length of saying that "legally I could sell them the same day that I received the goods", but in cross‑examination it was brought out from his mouth that no sale by him could be valid until the release order was issued, and that by the clause obliging the sellers to do everything necessary "for the due completion of this sale", it was meant inter alia that "if it was necessary to obtain the release order they would get it." It was on these grounds that the Special Judge came to the conclusion that the case on the charges framed had not been made out against the accused persons and he accordingly acquitted them. The learned Judges in the High Court dealt with the case from a radically different point of view in both respects. They first observed that a mere offer to sell was not a black market deal unless it contravened some Pakistan law and that under section 6 of the Distribution Order, mere offering for sale was not a contravention, but they went on to observe that if an offer was of such 'a nature that if consummated, it would result in an offence under the Hoarding and Black Market Act, then, in their own words "it is perfectly clear to us that it will amount to an attempt to commit an offence of dealing in black market". They proceeded, as they said, to examine the question whether there was an attempt to sell, from this point of view. The first step in their argument is an interpretation of the expression "sell" and "sale" as used in the relevant instruments, and they came to the conclusion that "prohibition of selling as provided in these provisions of law is used in the general sense as is understood by a common man and not in the technical ‑sense". They went on to observe that there was "nothing technical" about a proceeding controlled by the statutory Order, namely, the Distribution Order in the present case. From this, they proceeded to say that if what transpired between Friederike Ltd., and the two buyers was in its "popular sense" a sale or "was likely to result in a sale in contravention of the prohibitory provisions", then there would be an offence under the specified law. They derived support for this mode of ascertainment of a sale in the circumstances of the case from a decision of the English Court of Appeal in the case of Lambert v. Rowe(1)‑(1914) 1 K B 38 . This was a case of evasion of a market toll under the Markets and Fairs Clauses Act, 1847, by the method of contracting for the purchase of pigs outside the market area while the goods were to be delivered and paid for within that area. The Court of Appeal found that the sale of the goods took place outside the market area notwithstanding that possession of the goods sold was transferred within the area. Two passages have been cited by the learned Judges from the judgments delivered in this case, and each of them makes it clear that the concept of sale adopted for the purposes of that case was applicable peculiarly to transactions at markets and fairs within the meaning of that Act. In the judgment of Ridley, J. the following passage occurs:‑ "This question arises upon an Act of Parliament, the use of the word "sell" in which is, according to previous decisions, not to be construed with reference to the niceties of the law of contract of sale, or to the distinction between a sale and an agreement to sell, or to the question whether the property in the goods has passed, but is to be understood in a popular sense." (The underlining is mine). This learned Judge went on to say that any lawyer would have said in the case that the sale took place inside the market area, but observed that "any ordinary person, not a lawyer, who was asked the same question would unhesitatingly say that the sale took place . . . at the farm house." The very special meaning of the expression `sale' within the context of the special Act, seems to appear even more clearly from the judgment of Scrutton, J. who said that in his opinion, "the justices in endeavoring to apply the law of the land have applied the wrong law". (The underlining is mine)and that they should have understood the word "sale" according to the "minds of farmers." The learned Judges of the Division Bench have accepted this special meaning, applied in special circumstances, following precedent decisions, as if it were applicable without qualification to the sale in the present case, and have said "in the light of the above observations it is quite clear to us that the questions whether the property in the goods in the legal sense passed to the buyers in the present case is not of such importance." Speaking with respect to this view; I think it is of great and real9 importance that what has fallen from the learned Judges in regard to the proper approach to the understanding of the concept of sale in relation to an intricate commercial transaction of sale; governed by a series of complicated procedures derived from the practices of commerce in more than one countries, supplemented by the complexities of a series of laws imposing controls at various stages, from the point of the provision of foreign exchange to cover the import down to the point of distribution in the general market, should not be allowed to pass unnoticed. There is, in the fullest sense, no comparison at all between a transaction such as that in the present case, and the sale of pigs at some English farm by a former to a butcher. If the Courts of the country were to introduce so loose an interpretation of the legal incidents of a sale into the appreciation of transactions of a commercial nature, within the broad context of the foreign and4 domestic trade of the country, a great and irremediable confusion would inevitably descend upon the entire law governing the vast variety of questions arising before the Courts in their task of determining legality, as between contracting parties, to transactions of sale. Even the processes of commerce themselves would be thrown into a state of uncertainty which would probably require many years for re‑adjustment of the procedures an instrumentalities in operation within the complex of the country's trade, to adapt to so new a concept of a sale as that which, in the present case, a Division Bench of the West Pakistan High Court has introduced into the whole system. The case was one lying in the international field. The goods ordered came from a number of different countries the United States, the United Kingdom, Japan. A number of different in these several countries were employed for effecting the transactions. Speaking with respect to the learned Judges of the Division Bench, it is probable that all such foreign agencies, being accustomed to act on the basis of generally accepted view of law as to what constitutes a sale in a commercial transaction, would suffer from a deep sense of confusion through being faced by the proposition that for the future, in Pakistan, the Courts would interpret such sales on the same principles as have been applied in a very special sense, and under the caution of carefully chosen words of distinction, by the English Court of Appeal, to the sale of a few pigs. I use words of emphasis and I do so because in my opinion the occasion demands the utmost emphasis to make it clear that in Pakistan as in all countries with which Pakistan has commercial relations, the concept of sale in the field of commerce is no crude or common place concept, but is one which is held in con sonance with the most generally accepted view in the world of trade at large, that is to say in a strictly legal sense, being governed by an elaborate set of laws, of which the Contract Act and the Sale of Goods Act, 1930 may be specially mentioned as being in force in Pakistan. The learned Judges then proceeded to deal with the question whether issue of the release order was necessary for completion of the sale, and observed that even accepting this argument "it would not mean that if all conditions had been fulfilled namely that the profit had been taken and the goods had been delivered to the buyer in implementation of the agreements, the sale did not take place." On this foundation they held that an offence of selling the goods in contravention of the law had been committed. They went on to mention that the agreements contained no term relevant to the issue of release orders and referred to what had been said in this connection by Mr. Fikri of Western Motors Stores, for coming to the conclusion that on the point of the release order, there was no more than a verbal agreement that the buyers would not sell the goods in the open market until the release order had been issued. The learned Judges have referred to Mr. Fikri's evidence on this point as a "certain obliging statement." The description does less than justice to what was actually said by Mr. Fikri. He said that in the original draft agreement prepared by his firm, express mention was made of the release order, which was later deleted, but not by him, although he did not insist on its inclusion when it yeas explained that it was for the seller to obtain the release order and that this was included within their obligation to complete the sale‑ by doing all necessary acts. Mr. Fikri said "the sellers had to do it and if it was necessary to get release order they would get it . . . In case of breach of this the sellers would have returned the money and I would have returned the goods." There is nothing "obliging" about the statement. It seems clearly to be in consonance with the relevant express terms in the agreement. The learned Judges went on to consider this "verbal agreement" as if it were a distinct, collateral agreement between the parties to the sale, relating to the buyers' subsequent use or disposal of the things sold. They referred to a case from the United Kingdom, M Bain v. Wallace(1) (1881) 6 A C 588 . The contract there is described in the judgment under appeal as an "unqualified contract of sale . . . . by which the ship builder agreed to complete and deliver to the purchasers the vessel for a price to be paid in two instalments, with power to them, in the event of the ship‑builder failing to complete the contract, to enter into possession of the vessel and complete it or sell it." From certain correspondence between the parties, it appeared that in the event of the purchasers selling the ship further, and making a profit thereby, such profit would ensure to the benefit of the ship‑builder. The question raised was whether property in the ship had passed irrespective of the agreement contained in the later correspondence. In the judgment of Lord Selbrone in the House of Lords, expressions are used indicating the difficulty that was felt in determining whether the supplementary agreement created a merely moral obligation, or whether the matter had gone "beyond moral obligation, into a legal or equitable obligation, which the Courts would enforce." But, Lord Selborne was clear that this additional or supplementary agreement was "a bye‑agreement, a collateral agreement, not in the form of a regular back bond", but a consensus in respect of a possible subsequent sale, and there was therefore no ground for treating the first contract of sale as being anything other than a sale. What appears to me, speaking with respect, to be determinative of the question whether irrespective of the subsequent agreement, the earlier and "unqualified" contract of sale operated as a transfer of property is the circumstance that unless the purchaser had become seized of the property in the fullest sense, no subsequent sale could have been con templated. The stipulation in relation to a subsequent sale could therefore have no implication in reference to the acquisition of the right of property under the "unqualified contract." But I cannot see in what way the case of M Bain is at all relevant to the consideration of the present case. What is in question here is whether or not the complete proprietorship of the buyers in the goods concerned was dependent upon the sellers being armed with authority to convey the goods further, in the form of a "release order" expressly conferring that capacity on them, under the law controlling distribution of imported goods in the Pakistan market. Bearing in mind that the evidence is clearly to the effect that from the very outset, the fact that without a release order there could be no sale by the importers P was present to the minds of all concerned, it becomes impossible to regard the question of the capacity of the buyers to dispose of the goods further as being merely collateral to the true question under examination. The capacity could only be acquired if the sale in their favour was complete, and it could not be completed, whatever, acts might have been performed in relation to the goods themselves up to that point, unless the sellers had possessed the capacity to transfer the goods further. The fact should not be overlooked that the goods in the case were scheduled articles, and under the Distribution Order, by clause 3 (2), the Controller‑General was empowered by writing to "issue such incidental or supplementary instructions in writing if to any importer in regard to the sale of such articles as he deems fit". Clause 6 of the Order indeed states that if no instructions were given by the Controller‑General within 21 days of receiving the last item of information furnished under clause 5: the importer should be at liberty to dispose of the imported goods, but this was still "subject to the other provisions of this Order". Therefore, the powers of the Controller General exercisable in detail in respect of .any scheduled articles by instructions to importers were still available, so that if within 21 days of receiving the aforesaid information, the Controller -General should have intimated to Friederike Ltd., that they must act in a certain way in regard to any of the goods the had been received in the present case, such orders would have had to be obeyed, and if there were, in consequence, failure of fulfilment of the agreements with Messrs Western Motors Stores or the Star Motor Works, that would have ‑had to be ~accommo dated by other remedies at law. Therefore, it seems to me that the treatment by the learned Judges of the requirement of a release order as a matter collateral to the contract, is not in accordance with the facts and the circumstances of the case, and does not take into account the nature of the control over distribution under which all parties to the case, and in particular, the sellers Friederike Ltd., were obliged to act. As has been seen, the learned Judges were of the opinion that there was not merelyan offer of the goods but an actual sale, but they proceeded to find that even if there was no sale in the legal sense, yet the sellers had been guilty of "disposing of" the goods by placing them at the disposal of the buyers, and they referred to a Bombay case of Amrit Banwspati Co. Ltd (1) A I R 1947 Bom. 306. where it was held that ,by crushing a quantity of groundnuts in addition to the quantity which the accused‑Company was permitted to crush, there had been a disposal of such additional quantity of the goods and thereby contravention of a rule in the Defence of India Rules, 1935. Here, there is no case of crushing or conversion of the goods into another form and the question remains strictly in the legal field as to whether the act of sale had been completed without the prior permission of the Controller‑General. Here the permission was given, and it was a permission to `supply' or `sell' to any person of the importer's choice. It was given under a law worded so as to override all the incidents of the general law in relation to the transfer of property in goods which are the subject of a contract of sale. Despite anything appearing in the Sale of Goods Act, or in any other law relating to such transfer of property where the control legislation provided in plain terms that no sale or transfer could be made except with the permission of a designated authority, it was not open to a Court to reach the conclusion that such transfer had taken place in the absence of such permission granted. At least in a case where it was clear (1) that between the parties to the contract, at the time when it was set down in writing, it was clearly understood that such a permission was!" sine qua non for completion of the sale, (2) that such permission was actually granted, and (3) until it was granted the party which was to be the transferee of the property deliberately any consciously in compliance with the law held itself under a restraint with regard to the further disposal of the goods, it should have been clear that to relate the transfer of property back to any time earlier than the grant of permission was not possible. There was positive realization of the need to comply with the controls and there was positive satisfaction of the obligation, before the buyers purported to act on the transfer, by further disposal of the goods. That was the first unequivocal act of. Proprietorship, all earlier acts, e.g. possession, being of a nature such that they could found a claim to proprietorship only by a process of construction of legal provisions,, when taken in conjunction with other facts. There is a principle applicable to the criminal jurisdiction which in my view, the circumstances of the present case require should be clearly and distinctly recalled. It is that no one shall be construed into a crime. Whereas here the law is one of absolute liability, that is to say, the requirement of mens rea is excluded, it is of special importance that the breach of a legal restraint on freedom should appear with similarly absolute clearness. It should not be one which has been ascertained by some process of involved legal construction, such as that appearing from the judgment under appeal in this case. It is to be noted further that the evidence shows that the agreements in this case were drafted after taking legal advice as to whether they were in consonance with the control legislation. The parties had not entered upon the transaction blindly, and moreover, at no stage of the transaction does anything appear to indicate that there was any attempt, by either sellers or buyers, at concealment of anything that passed, from the eyes of the control authorities. The last question dealt with in the judgment is that of contravention of the condition of non‑transferability of the licence. The learned Judges rejected the argument that contra vention was no offence, because this condition was imposed by the Chief Controller and not by the Central Government under the Imports and Exports Control Act. They considered that conditions incorporated in the licence were conditions imposed under the Act. The sub‑authorisation is in express and clear terms on this point, and if indeed there has been a transfer of the licence, it would be difficult to avoid the conclusion that there has been a violation within the meaning of section 3(2) of the Act. The argument presented before this Court on the point was that it was for the Chief Controller to issue licences, but the major power of regulating the grant, use and transfer of the licences etc. was reserved to the Central Government, which had not imposed any condition of non‑transferability in respect of the licences generally. It is however a tenable view that a power to issue a licence includes the power to impose conditions in respect of such licences either generally or individually, and on the view already expressed concerning the powers vested in the Controller‑General in respect of the imported goods, it is) reasonable to find that a licence‑holder acting upon a licence, issued by the Chief Controller, subject to express conditions, is acting in contravention of the law and inviting sanctions, if he fails to comply with the express conditions contained in the licence. On the point whether there was a transfer, the circumstances which weighed with the learned Judges may be enumerated as follows. Considering that the word "transferable" was a worn of the widest import including a sense of "every means by which the property may be passed from one person to another" they observed that a licence is by its nature personal to the licensee and went on to point out certain special features of the present transaction, namely, that (1) the indents and orders were prepared by the buyers, (2) the letters of credit were opened through their own bank, (3) the bank bills were retired by them, (4) the goods were cleared by them, (5) the goods were then taken to their own godowns, (h) the sub‑authorisation itself was sent. by the National Bank of Pakistan to the National Bank of India to be used for the benefit of the buyers, and (7) the sellers issued authority to the National Bank of India to deliver air shipping documents etc. to the buyers. In these circumstances in, the opinion of the learned Judges, the sellers were reduced to a mere dummy position. Although, all the documents were in their name, yet each document enured to the benefits of the buyers. The whole process was a "crude device to camouflage the real nature of the transaction" and there had in effect been "transfer of the use of the Sub‑authorisation without the permission of the Controller". The learned Judges agreed that it J such a case, the importer might use financial assistance, which they believed was not the case here, but they were satisfied than if such a financier were also allowed firstly, to hold the goods and secondly to have full dominion over them, then in their own words:‑ "it is quite clear to us that it would be nothing else but amount to transferring the licence for all intents and purposes in favour of the purchasers." They expressed the opinions that "partial misuse of the licence is as bad as that of the entire licence". An aspect of the whole transaction which had been mentioned and acted upon by the Special Judge, namely, the aspect of agency, seems wholly to have escaped the attention of the learned Judges of the High Court. It is true that a correct appreciation of the agreements was apt to be observed by their being described as "agreements of sale", and by the contracting parties being described as "seller" and "buyers" respectively. But despite these appearances, the terms of the agreements clearly exhibit the features of an executory contract, with precise specifications of the respective functions of the contracting parties in the execution of the contract, and of penalties in case of non‑performance. The end‑result was to be a completed transfer of property, when functions on both sides were duly performed. The commercial advantage to Friederike Ltd., in terms of money, was indeed secured at the out‑set but it should not be overlooked that in certain eventualities, they were under obligation to refund it, and the terms made it clear that the obligations of the parties were, in no sense, determined by this payment, which has the character of being a pre‑condition of entering into the contract, as well as the full consideration that was to accrue to them upon the due completion of the whole series of steps involved in the execution of the contract. The matter may be put somewhat in this way. By the agreements themselves, provision was made for a great many of the necessary commercial steps in the transaction to be performed by the National Bank .of India, if the buyers should have so chosen. A case is easily conceivable in which the whole transaction from the placing of the orders themselves right up to the point of clearance of the goods from customs and Port Trust, might have been undertaken by the said Bank or another Bank, and the goods after clearance might have been stored in the Bank godown and all this might have been done under financial accommodation provided by the Bank. That would clearly be an agency transaction from start to finish on behalf of the buyers. Since under the law only the importer nominated in the licence could effect import and receipt, of the goods, all necessary documentation would be on behalf of, or in favour of the importer, with the Bank however acting as the importer's agent. The case so far put does not involve any direct interest in the goods being vested in the Bank, beyond the necessity of securing the monies they had expended and their agency charges. But agencies are of immense variety and an agent with an interest in the result of a commercial transaction is by no means a rarity and there might even be a Bank, which would undertake air executory responsibility in respect of an import of this kind, on terms better than merely having a lien on the goods for securing reimbursement of its expenses and the agency charges. There might, for instance, be a stipulation that the Bank would negotiate sale of the goods in the local market, retaining the major portion of the commercial profit for itself, and paying the balance to the importer, and in such a case it would be immaterial at what stage of the contract, the latter received his consideration. The statutory instruments themselves imply that the importer would ordinarily not undertake the Commercial function of releasing the imported goods in the local market. Here, the aid of the Bank was taken only for the purposes of the letters of credit, of receiving the shipping documents and of delivering them against payment received on behalf of the shippers, to the buyers upon instructions given by Friederike Ltd, who were the importers and as such vested with the property represented by the shipping documents. All actions in respect of clearance of the goods, through the customs and the Port Trust offices, were taken by the buyers, at their own expense, either directly or through agents, but in the name of Friederike Ltd. On the face of it, that is undistinguishable from an agency transaction, precisely as the actions of the National Bank of India in respect of the letters of credit and the shipping documents must be understood to be on their face, and in their essence, agency transactions. There is no question but that as security for their expenses and charges, the buyers, assuming that they were occupying the status of agent, were entitled to a lien on the goods received, which they would assert by retaining possession. In the premises, possession was received by them with the consent of the importers, but it is conceivable that in certain circumstances, they may have been obliged to take steps to obtain possession at law or otherwise. The question then arises whether the fact that the con sideration for the agency actions was not in the form of a percentage of the money outlay involved, with or without fixed charges for services but by the acquisition of a major interest in the end commercial result of the entire transaction, leaving a percentage worked only on the foreign exchange element involved byway of commission or profit for the importers, is sufficient to overcome in favour of the buyers, the subordination involved in an agency transaction, to such an extent as to elevate them to the position of quasi‑principals in respect of the licence, qua the true principals, namely, Friederike Ltd.? To effect, at law. a transfer of the licence, something should have been done which gave to the transferee, by substitution a status equivalent to that of the transferor at least in substance, if not in appearance, Something must appear to indicate that the subordination involved in becoming an agent for another, had been in substance removed, that, in fine, the agent was placed in a` position to operate the licence, substantially in independence of the licence‑holder, his principal. The only circumstances relied upon to produce that result is that at the end of the transaction, when the goods had been freed of all administrative controls, they became the property of the agent to negotiate in the open, market, for his own profit while the licence‑holder, who had at no time pointed with his power of operating the licence, ‑was content to receive a commission, by way of percentage as stated. It seems to me impossible to regard the single circumstance as destructive of the agency. Instances where an agent derives benefits (in) terms of money, from a transaction which greatly exceed those reaching the principal, are not far to seek. The proprietor of a factory for instance, may, employ an agent to operate it himself receiving a con sideration amounting to only a small percentage of the eventual profits, as the price of his being relieved of all the labour, the hardships and risks attendant on the successful operation of the factory. A Zamindar may employ agents to exploit his lands consideration of fixed payments, which may be only a small part of the profits derivable from those lands. In neither case would the position of the agent be thought in law to challenge com parison with that of the principal on the mere footing that the agent derives a greater profit from the agency than eventually reaches the principal. Therefore, in my view, on the point of transfer, the decision must turn upon whether, at any stage during the period that the statutory controls remained effective in respect of the transaction, the agents, namely the buyers, became vested themselves with the rights and liabilities under the licence; by act of the licence‑holder, or by the effect of the agreements themselves. I do not find it possible to come to such a conclusion in the facts and the circumstances of this case. The two transactions in their entirety appear to amount to no more than utilization of fortries of the licence, through agents, acting throughout in that capacity, and at no relevant time did such agents come to occupy the position of principals, qua the licence either nominally or substantially. Consequently, there was no transfer of the licence, or any part thereof, involved in these transactions. For, these reasons, I would allow this appeal and acquit the appellant on both counts. FAZLE‑AKBAR, J.‑I agree with the conclusion at which my Lord the Chief Justice has arrived. I would however, add that; the finding that there was no transfer of licence will be confined to the facts of this case. B. Z. KAIKAUS, J.‑I will not repeat the main facts which appear sufficiently in the judgment of my Lord the Chief Justice. I will take up first the question whether the agreement in dispute amounted to transfer of an import licence because the decision of this question will affect the decision of the other question, that is, whether there was an attempt to sell the goods in contravention of the Essential Commodities Control Order. On a consideration of the agreement I have come to the conclusion (I say so with great respect) that either we do away altogether with the law relating to illegality of transfer of a licence and hold that a person can never be guilty of a transfer of a licence or we hold this agreement to be such a transfer. If we hold the present agreement to be valid we will be granting to every holder of licence the free right of transfer of his rights under an import licence on receipt of a consideration. I bad questioned Mr. Brohi during arguments as .to when there would be a transfer of a licence if the present case was not one of such transfer. The answer Mr. Brohi gave was that there will be a transfer only in case the transferor executes an irrevocable power of attorney in favour of the transferee enabling him to do all the acts in connection with the import licence which the transferor could perform. I am unable to see how the mere absence of an irrevocable power of attorney can absolve the transferor of his liability in connection with the transfer of a licence if, though he does not execute a power of attorney, he undertakes to do everything in connection with the import licence which, has to be done by him on account of the fact that the licence is in his name. To say that without executing an irrevocable power of attorney this offence cannot be committed would amount to granting a free right of transfer of licence to licence holders if they just omit granting a power of attorney though otherwise under the deed that is executed the rights of parties are the same as they would be in case of a transfer. The main question to be asked in such cases is: Was this a genuine transaction of sale of goods which had been imported or were to be imported by the transferor and belonged to the transferor, and were sold to the transferee for consideration or was it a case where the transferee has become the true importer having paid consideration for the transfer of the licence and the name of the transferor is henceforth being used (like the name of a zenamidar) in connection with the import because the licence stands in his name and all action must necessarily be taken in his name. What I am going to say is in accord with and only in amplification of what was said in S. Sibtain Fazli v. Messrs Star Film Distributors (1)P L D 1964 S C337 as to the considerations which will govern a decision of the question of transfer of a licence. I will discuss this matter from various angles, but I will begin the discussion like this. If two persons agree that a licence held by one be transferred to the other for consideration what is the form that the transfer will take? Obviously they cannot write out a deed purporting to be a transfer of a licence, the transfer being prohibited and such a deed being of no legal effect. The agree ment that would be executed will necessarily take the form of an agreement in respect of sale of goods. The transferor will pose as the person who has either got the goods or is going to get them and who is transferring those goods to the other party. He will, however, take care that he gets the money which is the consideration for sale of licence and that henceforth he is not liable in the matter whatsoever: This is the crucial point in such cases. The transferor will on getting his consideration for transfer be relieved of all liability in respect of the matter, that is, the transferee will undertake that all the burden which may fall on the transferor because of the use of his name will be borne by him (the transferee). As the licence stands in the name of the transferor it is he who is liable for payment to the dealing bank as well as to the Government in respect of certain dues and taxes. The transferor will have to include some term in the agreement by which he may be secured against any failure on the part of the transferee to discharge his liabilities. Such a term may take the form that if the transferee failed to discharge all these liabilities the transferor will take over the goods and will recoupe himself to the extent to which it is necessary for discharge of those liabilities. Of course the transferor will not take any further benefit than the price which he is receiving for the sale of licence, but he wants to be insured against liabilities which may fall on him and may keep some control on the goods to meet such situation. While the transferor will make it plain in the document that all liabilities whatsoever are to be discharged by the transferee, the transferee may insist that the right which he is going to purchase, that is, the right to import goods should be insured to him and that if he does not receive that right then he should not be liable to make payment. What I mean is that the transferee will want a true right to import the goods. If it turns out that the goods which he wants to import cannot be imported on the licence at all though the transferor is representing that they can be so imported then he should not be liable for any payment, because he is purchasing a right to import goods of his choice. These are the terms which will ordinarily be incorporated in an agreement which is truly an agreement for sale of a licence though it is in the form of an agreement for sale of goods. There may be some variations of this agreement to suit particular circumstances, but what I have stated above will be its substantive terms, Now if we consider the agreement in dispute in the light of what 1 have stated above it will be found that it is just the agreement which on a sale of a licence will be executed. The transferor has taken a fixed amount of consideration for the transfer of his rights which amount has no reference to the price of goods which are to be imported. He has made it a definite condition that this money which he gets as profit is his in all circumstances and that it does not in the least matter to him whether the goods are shipped at all or are damaged or lost in transit. He gets the sale price of the licence and his liability is only this that the goods which the transferee wants to import can be imported on this licence. The transferee has told him that he wants spare parts of particular makes of trucks, etc. The licence was not truly speaking applicable to such spare parts because it mentioned trucks and spare parts "thereof". It related to the spare parts of the trucks which were named in the licence but the transferee wanted to have spare parts of some other trucks. There was a doubt as to whether the spare parts which the transferee wanted to import could be imported on that licence and the transferee was not prepared to pay anything unless they could be imported. So the transferor agreed that if they could not be so imported then he would not be entitled to retain the profit. On the other hand if they could be imported the transferor was not liable if the transferee committed any mistake in preparing the list of goods to be imported. This is one method of looking at the matter and I will now go into the question as to what criteria can be employed for determining whether an agreement amounts to a transfer of a licence or an agreement for sale of goods. To me it appears clear that the question for consideration in such cases will be does the transferor get under the deed the same rights as he would have if he sold the licence or does this agreement subject him to the liability to which he would be subject if he really was the importer. 1f the rights which a person gets under an agreement are just the same or substantially the same as he would get if he sold a licence then it should be held that he is selling a licence. We are concerned with the effect of a. transaction. We know that this transaction cannot be put in the form of a licence and must necessarily be put in the form of sale of goods. The form therefore is immaterial and what we have to consider are only the legal effects which means the rights of the parties under it. Now is not the agreement in dispute giving to the transferor all the rights which he would have if he executed an agreement of sale of licence? There can be little difficulty in holding that he gets all and perhaps more than what he would get if he executed a deed selling the licence. Another method of determining this matter is to ask the question: who is the true importer? Is it a case where the goods which are being imported in fact belonged to the so‑called transferee, but he is using the name of the transferor for import or is, it a case where the transferor really owns the goods which were imported and then sold to the transferee. I have already referred to the fact that under the agreement the right of the transferor to that which is called profit is wholly unaffected by non‑shipment of goods or by loss partial or total of the goods. The clause speaks of relieving the transferor of all loss in connection with "shipments, partial shipments, shortages, damage or loss in respect of the consignments" and as my Lord the Chief Justice, has put it, in accordance with this clause, "all risks in these respects were to be borne by the buyers". This is by itself sufficient to show that the transferee was not regarding himself as the owner of goods. The other point to consider is that if he was the owner then what was being spent by the transferee in connection with the import, that is, payment to the exporter, to the shipping company, to the bank, and to the Government, should be a loan which was being advanced by the transferor to the transferee. It cannot be said that the goods belonged to the transferor who was importing them and yet the money with which these goods were purchased was not a loan. If the transferor was the importer all the money would be paid on his behalf and it would be a loan to him by the transferee: But there is not the slightest indication in the whole of this agreement that the transferor would in. any way be indebited to the transferee in respect of the payments he would be making. Also in such a case when the goods are not shipped at all or are lost during transit or for some reason they do not come to Pakistan and therefore are not delivered to the transferee, the transferee should be entitled to recover the loan from the transferor and yet under the agreement the transferor has not taken the slightest responsibility in this connection. There is no explanation at all as to how the transferor can be entitled to retain the "profit" paid to him as consideration and also not discharge the loan if there is only an agreement to sell the goods. This is a point which may properly be stressed. If there is just an agreement for sale of goods and the goods are not delivered to the vendee on what hypothesis can the seller retain the consideration and also refuse to re‑imbursed the vendee for what is spent by him? Let me repeat that if the seller was the owner of goods all payments made by the transferee were on behalf of the transferor. It is only if the transferee himself was the owner of goods and the transferor was simply allowing his name td be used that these terms of the agreement can be explained. Another question that arises in connection with this agreement is this: what was to happen if goods were not purchased at all? Goods may not be purchased for a number of reasons. The goods may not have remained available in the market at all for purchase. The company which was manu facturing the goods may have failed or for some reason may have ceased manufacturing those goods. How is the transferee in such a case entitled to retain what he calls profit? Obviously if the goods are not available they cannot be purchased and there cannot be a sale. If there was only an agreement to sell the goods there would in fact be a failure to perform the agree ment by the transferor if the goods are not purchased and the transferee would be entitled to sue the transferor ‑for damages on account of failure of the transferor to perform his contract. The transferor would be pleading that on account of some unforeseen events he was unable to purchase the goods and therefore he should be relieved of the liability for damages but surely there would be no question of the transferor retaining the amount of profit which he received at the time of the execution of the agreement. Bat the provision in this agreement is that even if the goods are not shipped at all the profit is to be retained by the transferor. The only hypo thesis on which the retention of profit by the transferor in such a case can be justified is that it was an agreement for sale of a licence. Even if the goods were not purchased because the transferee did not provide the funds still the transferor cannot be entitled to retain profits on an agreement to sell when he is unable to sell the goods whatever the reason therefor what can be said in favour of the transferor in such a case is that the transferee agreed to advance a loan but failed to perform his contract. The transferee may in that case be liable to damages for not advancing the loan to the transferor for purchase of goods, but in respect of the agreement to sell the transferor cannot be entitled to retain the consideration. Let me repeat here that the purchase was to be made according to the contention of the appellant for his benefit. The contention before us was that the transferee was acting as a financier, because the appellant, the holder of a licence had not sufficient money to buy the goods himself. Now if he for failure of the financier to advance the money the goods are not purchased the transferor cannot retain the profit on goods which have never come into existence and can only sue the transferee for damages for failure to advance a loan. Take next the case where goods are purchased and money is paid by the transferee for. the purchase, but through the fraud of the exporter they are not shipped at all or instead of goods stones or a similar material is put in a consignment. How again the transferor is entitled to retain the amount of profits on goods which are neither shipped nor received by him nor ever delivered by him to the transferee? I may state that the fact that the goods would be covered by insurance does not appear to be of any relevance. We are concerned with the rights of parties under the agreement. There is no reference in the agreement to an insurance, but in any case the nature of the transaction is to be decided with reference to rights and liabilities created by the agreement and not with reference to the question whether the loss of one of the parties is recoverable from a third party or not. I may also point out that the insurance company may fail or it may refuse to pay and a suit may take twenty years or it may not be possible due to lack of jurisdiction to sue a foreign company at all or war or some other unforeseen event may destroy the chances of recovery of the amount insured. We are really concerned with the implications of the agreement. Why does this agreement say that the loss will fall on a person who is still to purchase goods which may or may not come into existence and not on the person who is the owner of goods? From the above discussion it should be clear that though of necessity the agreement in dispute had to be put in the form of an agreement for sale of goods it grants to the transferor all the rights which he would have had if he had sold the licence and relieves him of all liabilities which he would have had if he was himself purchasing and importing goods from the foreign market. I am not inclined with great respect to my Lord the Chie Justice to accept that in such a case the transferee should be regarded as acing all the time only as an agent of the transferor and therefore he cannot be regarded as a transferee of the licence. The rights which the parties have under the agreement are wholly inconsistent with the transferee being only an agent of the transferor in relation to import. If the transferee was only an agent there would be no basis for the transferee retaining the profit if no goods were shipped at all or if for any reason they could not reach Pakistan nor would the transferee be liable for the loss if they were partly or wholly damaged during transit. If the transferee had paid to the bank as well as to the Government only as an agent of the transferor then, in case of non‑shipment or loss of goods he would be entitled to receive the whole amount he spent from the transferor along with the profit. In the' preceding discussion I have shown that the terms of the agreement are consistent only with the transferee being the true importer of goods. We are to consider the substance of a thing and not its form. The form necessarily had to be that of an agreement for sale. The transferee cannot have it both ways. He cannot enter into an agreement which absolves him of all risks and liabilities to which he would be subject if he himself was the importer and which grants him just the benefit he will have if he sold the licence and yet escape liability for sale of a licence. If an agreement like the present is not hit by the law then there is no bar to a sale of a licence. Such an agreement is all that the holders of licences need in order to sell the licences. I would hold that there has been a transfer of a licence. The Chief Controller of Imports had power, as my Lord the Chief Justice has found to impose a condition in respect of the transfer of the licence. The appellant having violated a condition of the licence was guilty under section 3 of the Hoarding and Black Market Order and I would uphold his conviction on this ground. On the view that I take no question arises as to whether the appellant sold or attempted to sell goods in contravention of legal provision. There was just a transfer of a licence and there was in fact no agreement to sell goods. While I would uphold the conviction I would considering that a release order had subsequently been issued by the Chief Controller of Imports and Exports reduce the sentence to a fine of Rs. 1,

000. ORDER OF THE COURT In accordance with the view of the majority we acquit the appellant on both the counts. A. H. Appellant acquitted.