1986 PLP 222 (CLC)

The entire case, therefore, depends on the interpretation of certain provisions of law, the direction and instruction issued by the State Bank of Pakistan. The admitted facts are that the applicant had opened a letter of credit for import of pharmaceutical raw material and in that regard on 12‑12‑1973 it had obtained foreign exchange of pound Sterling 2,875 at the rate of Rs.22.589443 per pound for delivery on 30‑3‑1974. As the import contract could not be materialised the applicant asked the respondent on 1‑4‑1974 to sell in the following terms: "The foreign exchange booked against the above L/C may please be determined and settled as per prevailing rate and the difference, if any, may please be adjusted to our account under intimation to us." The appellant, therefore, wanted to sell the foreign exchange to the respondent Bank at the rate prevailing on the closing date i.e. 30‑3‑1974. Mr. Sohail Muzaffar the learned counsel for the applicant has contended that the State Bank of Pakistan had no authority under law to issue instruction to settle and determine the contract at the rate applicable at the date of purchase. The learned counsel further contended that in cases of sale the rate of exchange should be applicable which was prevalent on the day when the applicant surrendered it i.e. 30‑3‑1974 and in that regard reference has been made to Muhammad Rafiquddin v. Federation of Pakistan P L D 1960 Kar.

596. The judgment cited by the learned counsel is not applicable as it was not a case under the Foreign Exchange Regulation Act but in respect of compensation for breach of contract. In this case the appellant was sent abroad on Government expenses for studies on execution of a bond. As he committed breach of contract the respondent claimed compensation. It was held:‑ 'We consider that the rule is thus well‑established that in cases of payment of debts incurred or expressed in foreign currencies, and sought to be realised in the country of the debtor, the payment is to be made in national currency calculated at the rate of exchange prevailing on the date the debt became due. Now the question is when did it become due in the present case.' Mr. G.H. Malik the learned counsel for the respondent contended that the State Bank has full authority to issue instructions to close the contract at any rate, and as such instruction was issued, the question that the applicant is entitled to claim difference at the rate prevailing 30‑3‑1974 does not arise. In this regard reference has been made to section 4 of the Foreign Exchange Regulation Act which reads as follows:‑ "

4. Restrictions on dealing in _foreign exchange. (1)‑‑Except with the previous general or special permission of' the State Bank, no person other than an authorised dealer shall in Pakistan, and no person resident in Pakistan other than an authorised dealer shall outside Pakistan, by or borrow from or sell or lend to, or exchange with any person not being an authorised dealer, any foreign exchange. (2) Except with the previous general or special permission of the State Bank, no person whether an authroised dealer or otherwise, shall enter into any transaction which provides for the conversion of Pakistan currency into foreign currency or foreign currency into Pakistan currency at rates of exchange other than the rates for the time being authorised by the State Bank. (3) Where any foreign exchange is acquired by any person other than an authorised dealer for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange the said persons shall not use the foreign exchange so acquired otherwise than for that purpose or as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or, as .the case may be, the conditions cannot be complied with the said person shall without delay sell the foreign exchange to an authorised dealer. (4) Nothing in this section shall be deemed to prevent a person from buying from any post office, in accordance with any law or rules made thereunder for the time being in force, any foreign exchange in the form of postal orders or money orders. A perusal of the provisions of Foreign Exchange Regulation Act makes clear that it controls and regulates the payment and dealing in foreign exchange and security which according to the preamble of the Act is necessary and expedient in the economic and financial interest of Pakistan. Such control is necessary for the purposes of conserving and proper uses of the limited supply of foreign exchange available to the country. Under the Act only such persons are entitled to deal with the foreign exchange who have been specifically authorised by the State Bank of Pakistan and except with the permission of the State Bank of Pakistan no person other than authorised dealer can buy, borrow, sell or lend or exchange in foreign exchange; even any authorised dealer is not entitled to enter into any transaction at the rate of exchange other than the rate authroised by the State Bank. Therefore, the authorised dealer also have to follow the rates of exchange which is specified and fixed by the State Bank from time to time. According to section 4(3) of the Act if a person has acquired any foreign exchange then he has to abide by the conditions on which it has been provided to him and he is prohibited from using it in any other manner and if it cannot be so used or the conditions cannot be complied with such person shall immediately sell foreign exchange to an authorised dealer at the rate fixed by the State Bank of Pakistan for sale and purchase of foreign exchange. Under section 20(3) of the Foreign Exchange Regulation Act the State Bank of Pakistan for securing compliance with the provision of the Act, Rules and Orders can issue direction to banks, authorised dealers and other persons who are authorised by the State Bank to do anything in pursuance of their business. It, therefore, seems clear that the State Bank of Pakistan has full authority to issue directions rules and orders for regulating the sale and purchase or dealing of foreign exchange by the banks authorised dealer or any other persons who may obtain foreign exchange. Mr. Sohail Muzafar the learned counsel for the appellant contended that as the applicant could legally sell the foreign exchange it was entitled to claim sale‑proceed at the rate prevailing on 30‑3‑1973. In this regard the learned counsel for the respondent has referred to para. 26 of Chapter 4 of Exchange Control Manual which reads as follows: ‑ "In all cases of closure of forward contracts, authorised Dealers should charge the difference between the contracted forward rate excluding the element of usance and the buying T.T. clean or selling T. T. Spot rate, as the case may be, ruling on the date of the closing out of the forward contract. The forward contract should be closed out without charging any difference if the rates move in favour of the customers on the date of the closure. Under subsection (2) of section 4 of the Act, the State Bank, however, reserves the right to direct that all forward contracts or any particular forward contract or class of forward contracts shall be closed out at the rate ruling on the day on which they were looked or on any other day within the currency of the contract(s) at their discretion and not necessarily at the rate ruling on the day on which they are closed out." For purposes of the present case suffice to say that under para. 26 in case of closure of forward contracts if the rate on the date of closure is higher than the rate on the date of purchase, the customer would not be entitled to charge any difference. In such cases the forward contracts are to be closed on the date of booking and not closure. Under section 4(3) of the Act, the customer, in certain circumstances is permitted to sell the foreign exchange obtained by him. However, the rate at which it is to be sold is to be fixed by the State Bank of Pakistan. The State Bank has the discretion to close it at the rate on the date when foreign exchange was booked or any date during the currency of the forward contract or on the date of closure but in no case a customer can claim to close it on the date of closure or any other date at his option. From the correspondence it is clear that the State Bank of Pakistan referring to these provisions has confirmed the action of the respondent closing the contract without charging difference in favour of the applicant. According to learned counsel for the applicant there was no condition attached to the contract to close it at the rate claimed by the respondent. This contention overlooks the important legal aspect that such dealings are governed by the Foreign Exchange Regulation Act, the directions rules and orders made and issued by the State Bank of Pakistan from time to time. In the face of the aforestated provisions governing the closure of forward contract and the rate at which it is to be closed it was not necessary to incorporate it in the contract. Any other terms contrary to these provisions will not be legal and binding as no person is allowed to contract out of statute particularly such statutes which regulate public policy. The regulation of foreign exchange is within the control of the State Bank of Pakistan. The respondent had booked the foreign exchange for the purposes of its import at a future date. As import did not materialise it closed the contract and wanted to sell it. No person is allowed of his own free will to sell the foreign exchange at the rate of his choice. Such dealing as claimed by the applicant is likely to encourage speculation in foreign exchange which is not permitted in law. The direction to fix the rate on which the foreign exchange is to be sold is vested in the State Bank of Pakistan. Section 4(3) clearly contemplates that when foreign exchange is acquired by any person for any specified purpose or on certain conditions then it cannot be used for any other purpose. If he is unable to utilise it for that purpose or the conditions cannot be complied with then the foreign exchange should be sold to authorised dealer. The rate for selling the foreign exchange is*fixed by the State Bank at its discretion. The action of the respondent closing the forward contract on the date of booking was legal and justified. Mr. G.H. Malik has raised a preliminary objection that the revision application is not maintainable because from reading of the impugned judgment it cannot be said that the interpretation of law or appreciation of evidence is completely illegal, perverse and such a view cannot be taken. In this regard reference has been made 40 B L R 125, A I R 1943 Nag.

117. A I R 1933 All. 373 and 1981 C L C

675. It is contended that the jurisdiction of the High Court under section 25 of the Small Causes Court Act is limited. As the question involved in this case was the interpretation of the provisions of Foreign Exchange Regulation Act which was necessarily to be considered even for purposes of determining the extent of revisional jurisdiction under section 25 of Small Causes Court Act, and as the same has been dismissed above, I do not think it necessary to entertain this preliminary objection. The Revision Application is dismissed. M . B . A???????????????????????????????????????????????????????????????????? ??????????? Application dismissed.