999 PLP 483 (CLC)

(4) What is the effect of P.O. No.2 of 1972 upon the contractual obligations of defendant No. l? (5) Whether the defendants failing to make the required arrangements upon termination of the Managing Agency by the operation of P.O. 2 of 1972 were not bound to buy‑back the shares within 30 days under clause 9 of the agreement and if so what is its effect? (6) Whether the plaintiff was not obliged under the Agreement with the defendants to sell the shares in the open market under clause 8 on the alleged default of 30 days of the defendants and if so what is its effect? (7) Did the shares stand repurchased by plaintiff on 2nd February, 1970 simultaneously with the sale by them in favour of the plaintiff and was the plaintiff holding the shares as security for the payment of the alleged price? (8) Whether the defendants liability stands admitted by them as alleged in para.9 of the plaint? (9) On what account and to what effect the payments referred to in para. 12 of the plaint were made? (10) What is the amount due to the plaintiff, if any?" The plaintiff examined one M. Yahya Amiwalla as Exh.5 who reiterated the contents of the plaint whereas the defendants examined Saleem Masud as Exh.6. I have heard Mr. Syed Irtaza Hussain Zaidi for the plaintiff and Dr. Pervez Hassan for the defendants. My findings on the aforesaid issues are as under:‑‑ Issue No. l Not pressed by the Advocate for the defendants. Issue No.3 It is an admitted position that after execution of agreement, dated 2‑2‑1970 (Exh.5/1) the Province of East Pakistan, on account of armed Indian intervention seceded from the State of Pakistan and assumed the statute of an independent State. Part of the agreement required to be performed by the defendants related to repurchase of shares of GHL by the defendants and as such contention of learned counsel for the defendants is that the agreement, dated 2‑2‑1970 to the extent of repurchase of shares of GHL by the defendants became void as on account of secession of East Pakistan the agreement in so far as it relates to the purchase of shares of GHL became impossible. My attention in this regard has been drawn by the learned counsel for the defendants to section 56 of the Contract Act which, for sake of reference, is reproduced below:‑‑ "

56. Agreement to do impossible act. An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful. A contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful." Section 56 of the Contract Act deals with agreements performance of which by a promisor is impossible in itself and as such agreement is void. It also encompasses within its ambit such agreements performance of which becomes possible at the time of execution of the same on account of subsequent events provided such impossibility or unlawfulness was not within the knowledge of the promisor. As stated above, a part of the agreement pertains to purchase of shares by GHL by the defendants at a future date and certainly the defendants could not have visulaised that on the date of its performance East Pakistan would secede from the State of Pakistan. Such being the position, I hold that the effect of secession of East Pakistan on the agreement which is subject‑matter of this suit is that in so far as the same related to the purchase of shares of GHL the agreement became impossible and, as such, is void as contemplated under the provisions of section 56 (ibid). In any event, it is an admitted position that defendant No. l was managing agent of JDL only and, as such, did not incur any liability in respect of repurchase of shares of GHL under the agreement which is subject‑matter of this suit. Issues Nos.4 and 5 It has been urged by the learned counsel for the defendants that under the provisions of President's order 2 of 1972, the defendant No. l which was a managing agency stood terminated and as such obligation of defendant No. l in respect of purchase of shares of JDL stood extinguished. Under section 4 of the President's Order 2 of 1972, all agreements or contracts entered into by a company with its managing agent stood terminated forthwith and the managing agent and directors of the company nominated by the managing agent ceased to hold their respective offices but under section 6(2)(b) of the President's Order 2 of 1972 rights and liabilities of a company or a managing agent did not extinguish and there is no force/substance in the contention of the learned counsel for the defendants that on promulgation of President's Order 2 of 1972 obligations of defendant No. l under the agreement stood extinguished and they were not bound to buy‑back the shares within thirty days under clause 9 of the agreement. Issue No.6 The learned counsel for the defendants has urged that under clause 8 of the agreement in case of default to perform contractual obligations by the defendants, the plaintiff was entitled to sell all the said shares including the right and bonus shares in open market without any notice or reference to the defendants at their (defendants) risk and cost and to recover the balance, due from them. It is further contended by the defendants' counsel that, admittedly, first breach of the agreement occurred on 31‑3‑1973 when the defendants failed to repurchase the shares from the plaintiff by making payment in respect of first lot of shares and as such a duty was cast upon the plaintiff, under section 73 of the Contract Act, to mitigate the alleged loss on account of default of the defendants by selling the shares in question in open market. For the sake of convenience, section 73 of the Contract Act is reproduced hereinbelow:‑‑ "

73. Compensation for loss or damage caused by breach of contract.‑‑‑ When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract.‑‑‑ When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Explanation. In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non‑performance of the contract must be taken into account." A bare reading of section 73 of the Contract Act demonstrates that when a contract has been breached the party who suffers by such breach is entitled to receive from the party who has committed such breach the compensation for any loss or damage caused to him but under the explanation to section 73 of the Contract Act, in estimating the loss and damage arisen from a breach of contract the means which existed of remedying the inconvenience caused by non‑performance of the contract are to be taken into account meaning thereby that the party claiming damages on account of breach is required to take steps for mitigating the damages that have arisen on account of breach of contract. In case of breach of contract, the plaintiff is entitled, as far as possible, to be put in the same position as it would have been in case the contract had not been breached. Under explanation to section 73 of the Contract Act a duty is cast upon the plaintiff to take steps to mitigate the loss/damages. A perusal of clause 8 of the agreement (Exh.5/1) reveals that plaintiff was at liberty to sell the shares in question in open market in case of breach of the agreement by the defendants, but no evidence has been led by the defendants to prove that on account of failure of the plaintiff to sell the shares in question in open market, to what extent the damages could have been mitigated. In fact, the statement of the witness of the defendant is completely silent on this point. In any event, the obligation of the defendants to pay compensation in case of breach of agreement cannot be termed to be conditional on plaintiff's selling the shares in question in open market in case of breach of agreement as under clause 8 of the agreement it was discretionary with the plaintiff to do so. Issue No.7 It has been contended by the learned counsel for the defendants that the agreement, dated 2‑2‑1970 executed between the plaintiff and defendants is simple agreement of sale of the shares by the plaintiff to the defendants and there is no simultaneous resale of the same between the parties. It has further been urged by the defendants' counsel that the plaintiff was not holding the said shares with them as security for payment of the sale price of the shares in question. Clause 7 of the agreement between the parties in clear terms stipulated that the defendants shall right shares issued in respect of the said shares in the manner and on the dates specified in the said agreement. It is, in my view, in fact a buyback agreement in respect of the shares in question and as such there is no force in the contention of the learned counsel for the defendants that the said agreement Wes not postulate repurchase of the shares in question by the defendants. Since the obligation under the agreement in respect of buy‑back the shares in question was on a future date there, is no escape from the conclusion that the same were held by the plaintiff as security for the payment of repurchased price of the shares in question. Issues Nos.2 8 and 9 It has been contended by the learned counsel for the defendants that under clause 7 of the agreement the defendants were required to repurchase the shares in question in three different lots on 31‑3‑1973, 31‑3‑1974 and 31‑3‑1975 on payment of proportionate agreed sale consideration. According to the learned counsel for the defendants, in the given facts of this case three successive breaches of the agreement have occurred. The first breach in respect of first lot occurred on 31‑3‑1973, second breach on 31‑3‑1974 and the third and the last breach has occurred on 31‑3‑1975 and as such separate and independent cause of action in respect of successive breaches has accrued to the plaintiff and period of limitation for each of the breach shall be reckoned from the date of such breach. In this view of the matter, it is urged by the learned counsel that at least to the extent of the breach, which occurred on 31‑3‑1973 and 31‑3‑1974, the claim of the plaintiff is barred by limitation as the suit having been filed on 19 3‑1978 is barred under Article 115 of the Limitation Act, 1908 which provides a period of three years for filing a suit for compensation for breach of contract. On the other hand, contention of Mr. I.H. Zaidi, learned counsel for the plaintiff is two‑fold. Firstly, it has been urged by the learned counsel for the plaintiff that the defendants vide their letters (Exhs.5/3 to 5/5) have admitted their liability to pay the amount outstanding against them. I have perused the aforesaid three letters and find that all these letters are in respect of forwarding cheques by the defendants to the. plaintiff for payment of dividend and as such the same cannot be termed to be an acknowledgment in writing of the claim of the plaintiff against the defendants. Furthermore, all these three letters were written by the defendants to the plaintiff in the year 1971 and as such even if the same are to be treated as an acknowledgment of liability, such letters cannot bring the suit of the plaintiff within the limitation as in case the period of limitation is calculated from the date of writing of these letters, the claim of the plaintiff would become time‑barred in the year 1974. Secondly, it has been contended by Mr. I. H. Zaidi that the defendants have made part payment, to the plaintiff on the dates as mentioned in para. 12 of the plaint. Such payments were made by the defendants to the plaintiff between 24‑7‑1970 and 30‑4‑1975. The defendants in their written statement have specifically denied such payments being part payments towards 'the claim of the plaintiff. It has been stated by the defendants in their written statement that the payments referred to by the plaintiff in their written statement were towards payment of dividends. Such being the position a duty was cast upon the plaintiff to prove through cogent evidence that such payments made by the defendants were towards part‑payments of plaintiff's dues in respect of non‑payment of sale consideration of the repurchased shares under the agreement which the plaintiff has failed to do. I am, therefore, of the considered view that the payments indicated in para. 12 of the plaint do not bring the suit of the plaintiff within the limitation to the extent of plaintiff's claim in respect of payment of repurchased price of the lot of shares which became due. Issue No. 10 Having held above that the obligation of the defendants in respect of repurchase of shares of GHL stood frustrated in view of fall of East Pakistan, the claim of the plaintiff in respect of repurchase of shares to the extent of GHL is not maintainable. In so far as the claim of the plaintiff in respect 'of repurchased price of shares of JDL, I am of the considered view that claim of the plaintiff in respect of payment of repurchased price for first two lots of shares due on 31‑3‑1973 and 31‑3‑1974 is barred by limitation. In view of the above discussion, this suit is decreed against the defendants, jointly and severally for a sum of Rs.4,62,226.66 being repurchased price of the third lot of shares plus agreed minimum return of 10% per annum of the face value of shares of JDL from 31‑3‑1975 till filing of the suit. The plaintiff shall also be entitled to mark‑up and/or equalizer in depreciation of money value from the date of filing of the suit till its realisation and cost of the suit. H. B. T./S‑170/K Suit decreed