1980 PLP 2199 (CLC)

(4)(a) In support of the above application Mr. N. K. Jatoi, the learned counsel for the defendant has urged the following points ;

(i) that no injunction or status quo order can be passed as the termination of the agreement is in consonance with section 6 of the schedule to the agreement r/w Article 20 of the agreement which provided 60 days notice on either side. (ii) that in any case under Article 5 of the agreement the defendant was entitled to maintain its office in Pakistan at its own expenses inter alia for promotion including sale of transportation and, therefore, no injunction can be granted. (iii) that even if it is also to be presumed that the termination notice is invalid the remedy, if any, of the plaintiff is to sue for damages. (b) Whereas, Mr. Sharifuddin Pirzada, learned counsel for the plaintiff has urged the following points :

(i) that having regard to the quantum of investment and having regard to the other facts of the case and having regard to the fact that the agency was coupled with interest, it was irrevok able by virtue of section 202 of the Contract Act. (ii) that if at all the agency could be terminated, it could have been done by serving a reasonable notice and not a notice of 60 days as provided for in section 6 of the schedule to the agreement. (iii) that in England there has been a new trend lately inasmuch as that the English Courts have been granting ad interim injunctions even in those matters, in which previously the view of the English Courts was that compensation was adequate remedy and not interlocutory injunction and, therefore, this Court may also follow the above trend. (c) Referring to the first and second contentions of Mr. N. K. Jatoi that the notice of termination is prima facie valid in terms of the agree ment and that by virtue of Article 5 the defendant was entitled to have its own office for the purpose of sale promotion including sale of transporta tion, it will since to observe that in my view any observation on the above contentions may prejudice the parties to the suit. Furthermore, no decision is called for at this stage on the above contentions as the applications can be disposed of on the other ground. In my view the basic question, which is involved in the instant case is as to whether Te instant case is covered by section 202 of the Contract Act, or does it fall within the purview of sections 205 and/or 206 of the above Act. It may be pertinent to mention that under section 201, it has been provided that an agency is terminable either by the revocation by the principal or by the agent or upon the completion of the agency and on the happening of any other events specified therein. Since the arguments of the learned counsel for the parties are centred around the above sections 202,205 and 206, it will be advantageous to reproduce the same herein below which read as follows :

"Section 202.-Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot in the absence of an express contract, be terminated to the prejudice of such interest. (a) A gives authority to B to sell A's land and pay himself, out of the proceeds the debt due to him from A. A cannot revoke this authority, nor can it be teminated by his insanity or death. (b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself, out of the price, the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death. 203.

204. .

205. Where there is an express or implied contract that the agency should be continued for any period of time, the principle must make compensation to the agent, or the agent to the principle as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.

206. Reasonable notice must be given of such revocation or renuncia tion ; otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other." (d) Mr. Sharifuddin Pirzada, learned counsel for the plaintiff has urged that as the instant case falls within the above-quoted section 202 of the Contract Act, the agreement is irrevocable since the plaintiff has himself an interest in the property which formed the subject matter of the agency. Whereas Mr. N. K. Jatoi has contended that the above section has no application to the instant case. A perusal of section 202 prima facie indicates that in order to attract the provisions of the above section the agent should have an interest in the property, which is the subject matter of the agency. In the instant case the plaintiff was entitled td recover certain commission for rendering services specified in the agree ment, but in my view it cannot be urged that he had interest in the property which formed the subject matter of the agency. It is an admitted position that in the agreement it has not been provided that the plaintiff's agency shall continue till the tithe he recovers the investment made by him. If that would have been the case Mr. Sharifuddin has referred to the case of Seth Loon Karansethiya v. Ivan E. John and others (AIR 1969 S C 73) and the case of Syed Ashfaque Hussain v. Syed Abdul Qasim (P L D 1979 Kar. 22) in support of his contention that an agency, which is coupled with interest becomes irrevokable. In the former case the appellant was indebted to the bank- respondent, he executed a power of attorney in favour of the bank autho rising the bank to execute the decree obtained by him against the third person and to credit the realisation to the debtor's account. Conse quently, the execution application was filed in the name of the appellant but it was signed by the manager of the respondent bank, to which the appellant objected. It was held by the Supreme Court of India that the power given to the bank was coupled wit4 the interest and the same was irrevocable in view of section

202. As regards the case of. 1979 Karachi, it may be observed that in the above case it has been held by my learned brother Abdul Hafaez Memon, J. that power of attorney executed on the date of the execution of the sale agreement in respect of an immovable property empowering the purchaser to get the sale-deed executed and registered is a case of agency coupled with interest covered by section

202. It has also been observed in the above judgment that as the language of section 202 of the Contract Act is wider, it is not necessary to mention the fact in the power of attorney that it was in pursuance of the sale agreement, but what is to be seen, is that the agent should have an interest in the property forming the subject matter of the agency which may be inferred either from the document or from the course of dealings between the parties or from the surrounding circumstances. In my view the above two cases are not directly on the point in issue inasmuch as pointed out herein above that the plaintiff was merely entitled to receive a specified commission for the services which were to be rendered by him under the agreement. It was not provided in agreement that the agency agreement was to continue till the time plaintiff recovered back his investment, and, therefore, it cannot be urged that the agency was coupled with interest. It was urged by Mr. Sharifuddin Pirzada that the right to run the agency is a property, and, therefore, the plaintiff has interest in the property, which is subject matter of the agency. It will suffice to observe that the right to receive certain remuneration for the services under the agency agreement cannot be equated with the interest in the property forming the subject matter of the agency. In this regard, it may be pertinent to refer to the case Palani Vannan and others v. Krishnaswami Kanar and others (A I R 1946 Mad. 9) in which a Division Bench of the Madras High Court quoted with approval the observation of Couch, C. J. in the case of Hurst v. Watson reported in 2 Bom. H.C.R. 400, while interpreting section 202 of the Contract Act. The above observation reads as follows;

"Where an authority or power is coupled with an interest, it is irrevocable, unless there is an express stipulation to the contrary ; but the right of the agent to remuneration, although stipulated for in the form of part of the property to be produced by the exercise of the power, is not an interest in this sense." (e) Reverting to the second contention of Mr. Sharifuddin Pirzada that in any case the agreement could have been terminated by serving a reasonable notice which should have been for a reasonable length of time commensurating with the plaintiff's investment notwithstanding 60 days notice provided in section 6 of the schedule to the agreement, it may be observed that on the other hand it was urged by Mr. Jatoi that the parties by agreeing upon the period of 60 days notice, have adverted to this aspect, and, therefore, there is no question of a reason able notice and that in any case the termination at the most would be wrongful entitling the plaintiff to claim damages, from the defendant, but the agency agreement ceased to exist. Mr. Sharifuddin Pirzada has referred to the case of Martin Baker Aircraft Company Ltd. v. Canadian Flight Equipment Ltd. ((952) 2 All E. L R 722-(1955) 2 Q B 556 ). It may be observed that the facts of the above case were that by an agreement the plaintiff' an English company herein after referred to as M. B. which manufactured aircraft ejection seats designed by its Managing Director agreed to permit the Canadian company which had been formed at the instance of the English company and of which one Mr. R. M. a former employee of the English Company was the director, to manufacture, sell and exploit all M.Bs. products on the American Continent. The agreement contained no provision for its determination. By another agreement between M.B. and R.M., M.B. appointed R.M. their sole selling agent for their products on the American continent. Under clause 4 (iv) of the later agreement, it was provided that "without prejudice to any other remedy which either party may, have against the other for the breach of the non-observance of the provisions of the agreement either party shall be entitled summarily to determine this agreement". M.B. brought two suits for declaration that the above agreements were terminable by reasonable notice. After reviewing the case law Mcnair, J. held that a notice of 12 months would be a reasonable notice for terminating the above agency agreements notwithstanding the above clause 4 (iv) in the aforesaid second agreement. On the basis of the above case, it can be urged that a Court of law may attach an implied term of a reasonable notice even in a case in which under the agreement a summary termination of the agency agreement was contemplated but the above case does not lay down that an ad interim injunction can be granted for keeping an agency agreement intact. On the other in the judgment it has been observed that a commercial agreement is determinable and cannot be permanent. It may be advantageous to reproduce hereinbelow the relevant passage of the judgment on the above aspect; "Accordingly it appears to me that I have to approach the determination of this question without, any presumption in favour of permanence ; and, indeed, if there is any presump tion at all, it would seem to me to be a presumption the other way. It is to be borne in mind that this agreement is an agreement in a commercial or mercantile field. No case was cited to me where it has been held that this doctrine of irrevocability applies to a contract in the commercial or mercantile field, and I do not feel that the law merchant would normally look at such an agreement as this as being an agreement intended to constitute permanent relationships. For example, I have little doubt that the law merchant would regard a contract for the sale of a hundred tons of coal monthly at a fixed price, no period being specified as a contract determinable on reasonable notice. The common law, in applying the law merchant to commercial transactions has always proceeded, when filling up the gaps in a contract which the parties have made, on the basis of what is reason. able, so far as that does not conflict with the express terms of the contract, rather than on the basis of rigidity. There are abundant illustrations throughout the common law authorities which have subsequently found their place in the great codifying statutes of the Sale of Goods Act, 1893, the Marine Insurance Act, 1906, and the Bills of Exchanger Act, 1882, where this view of the law merchant has been adopted and a provision has been inserted to the effect that; where the contract makes no provision for fixing either, price, or premium, or time, at which an act has to be performed, then the law is that a reasonable price, or reasonable premium, or reasonable time, will be implied. It is, of course, quite true that this kind of consideration can in many cases be excluded by express provision ; but, where the contract leaves the matter open, I think that the common law approach would be to provide a solution which is reasonable. At the same time I bear in mind that it is not the function of the court to make 'a reasonable contract between the parties, and, in so far as the matter is one of implying terms, he can only imply terms which are reasonable to give business efficacy to the contract. To my mind, however, the question, whether a contract such as this is permanent or revocable does not depend on the insertion of an implied term, but depends on the true construc tion of the language used. This is certainly the view expressed by Lord MacDermott in the Winter Garden Theatre case. Accordingly, subject to there being anything in the agreements of August 26, 1951 and March 9, 1954, which is inconsistent with their being revocable, I would favour the view, that they are revocable." Mr. Jatoi has referred to the treatise on the law of Contract by Treitel 2nd Ed. at p. 557-9 and Anson 21st Ed. at 530 in support of his contention that even in case of wrongful termination of an agency agreement, the agency ceases to exist, subject to the right of the aggrieved party to claim damages It will suffice to observe that the learned authors of the above books on the Law of Contract support Mr. Jatoi's above contention. (f) It may be observed that section 205 of the Contract Act, quoted hereinabove, provides that where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause. Whereas section 206 lays down that reasonable notice must be given of such revocation or renunciation ; otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be given to one by the other in my view the instant case, prima facie falls either under section 205 or under

206. If it is to be held that there was an implied agreement for certain period, the case will be covered by section 205, but if it is to be held that there was no period for the agency, the case would fall under section

206. It may be pertinent to mention that according to Mr. Sharifuddin Pirzada the notice in question is not a reasonable notice, whereas according to Mr. Jatoi the notice is reasonable inasmuch as instead of serving a notice of 60 days as provided in section 6 of the Schedule to the agreement the defendant in fact had given about 7 months' notice. I have deliberately refrained myself from commenting upon the above contentions of the learned counsel for the parties, as it will not affect the conclusion which I am inclined to take, on the other hand, it may prejudice the case of the parties at the trial of the suit. (g) Reverting to the last contention of Mr. Sharifuddin Pirzada that there has been a change lately in the trend of English Courts inasmuch as they have been granting interlocutory injunctions, in those matters in which previously it was not done, it may be observed that Mr. Sharifuddin Pirzada has referred to the case of Hill v. C. A. Parsons & Co. ((1971) 3 All E L R 1345) and the case of London Borough of Hounslow, v. Twickenham Garden Developments Ltd. ((1970) 3 All E L R 326). In the first case the plaintiff was a chartered engineer aged 63 years. He had been employed by the defendant for 35 years and was due to retire at the age of 65 years. The defendant company in pursuance of an agreement entered into between it and the employees Union asked the plaintiff to become a member of the union which request, he declined to accede. Thereupon, his services were terminated by serving one month's notice on the ground that he declined to become a member of the union and that the defendant company was obliged under the agreement with the union to ask the plaintiff to become a member. The majority view of the Court of appeal (Stamp I-J dissenting) was that in the above case there was special circumstances justifying the grant of injunction in the exercise of court's discretion and that the damage would a quite inadequate remedy. In the second case the plaintiff Borough applied for an injunction for restraining the defendant contractor from entering upon the site on the ground, that his licence was revoked. Megharry, J. declined to grant the prayer of the plaintiff and in the judgment it has also been observed that if the defendant (contractor) would have prayed for an injunction he might have been granted. It is true that from the above two 'cases, it seems that there is some change in the trend of the English Courts and that interlocutory injunctions are being granted in the matters, in which normally they were not granted previously. But in my view the above case cannot be pressed into service, in order to claim an ad interim injunction for keeping the agency agreement intact, particularly when there are express provisions in the form of sections 205 and 206 of the Contract Act, entitling the plaintiff to claim damages, and when the plaintiff has himself assessed the amount of damages and has claimed a money decree in the alternative in the suit. Furthermore, he cannot overlook the tact that in England, Law of Contract is based on common law (i.e. the body of principles embodied by the decided cases) except that there are certain special enactments dealing with special subjects like English Sale of Goods Act, but in Indo-Pak the entire law of contract is codified, and, therefore, in the presence of express provisions in the Contract Act a Court of Law cannot act in disregard of the enactment. I cannot be unmindful of the West Pakistan' Industrial Development Corporation Karachi v. Aziz Kureshi (P L D 1973 S C 222), which is a case inter aria on sections 205 and 206 of the Contract Act, and in which inter aria it has been held that in case of termination of agency before the expiry of agreed term the aggrieved party is entitled to recover damages and that a stipulation not expressed in written contract should not be implied because the court thinks it would be a reasonable thing to imply it. (h) I am therefore, of the view that the status quo order cannot be confirmed. However, the question which remains, to be considered is what should be the order in the instant case. It may be observed that the plaintiff' has inter aria claimed in the alternative a decree for Rs. 1,39,40,998.56, or any other amount and, whereas the defendant in the counter suit, viz. Suit No. 1111 of 1979 filed by it after the plaintiff's above suit, has claimed a decree, for Rs. 29,40,483.07 and accounts from the plaintiff. So the question as to who is entitled to recover any amount is to be adjudicated upon. I am, therefore, of the view that it will be just and proper to restrain the defendant from encashing the Bank guarantee of Rs. 5 lacs referred to hereinabove on the condi tion that the plaintiff shall furnish a bank guarantee of an equal sum to the satisfaction of the Nazir of this Court within four weeks. I accord ingly vacate the order of status quo but restrain the defendant from encashing the above bank guarantee on the aforementioned condition till the disposal of the above suit. The plaintiff's C. M. A. 4820/79 and the defendants' C. M. A. 4960/1979 stand disposed of in the above terms.