Cancellation of Irrevocable Power of Attorney

PLJ 2004 Lahore 722

Present; MUHAMMAD GHANI, J.

JAVAID IQBAL-Petitioner

versus

PAKISTAN AGRICULTURAL STORAGE & SERVICES CORPORATION LIMITED, LAHORE through its Managing Director-Respondent

W.P. No. 13372 of 2003, decided on 23.12.2003. Contract Act, 1872 (IX of 1872)--

—-S. 55-Constitution of Pakistan, 1973 Art. 199-Agricultural Storage and Services Corporation Ltd. (respondent-PASSCO) entered into agreement with M/s Exporters (Regd.) Birdwood for sale of wheat for export through sea route-Petitioner could not lift wheat without stipulated period—Intervenors to save agreement hailed and agreement was amended—Quantity was reduced with 2% penalty—Early irrevocable special power of attorney was cancelled-Suit for declaration was filed- Interim injunction was granted-compromise between the parties-Suit decreed in terms of compromise and given effect by respondent-Request for further time by petitioner-Petition made all arrangements for export of wheat to foreign countries but respondents declined to accept export documents on the ground that period of three calender months-Held: Time was not essence of contract and for this reason impugned action of PASSCO could not be sustained in law-Further Held: That petitioner shall be entitled to a period of three calender months from the date of this judgment to export wheat stock purchased from PASSCO and to submit within that period of three months export documents which would be considered by respondent.  [Pp. 731, 750, 751 & 752] A, B, C & D

Mr. M.A. Karim Malik, Advocate for Petitioner. Kh. Muhammad Akram, Advocate for Respondent No. 1. Mian Khalid Jamil, Advocate for Respondent No. 2, Dates of hearing: 23.10.2003, 5 and 20.11.2003.

judgment

On 31st of March, 2003, Pakistan Agricultural Storage and Services Corporation Limited (herein mentioned as respondent-PASSCO) entered into an agreement with M/s The Exporters (Regd.), Birdwood Road, Lahore for sale of 25,000 metric tons of FAQ wheat (crop 2002) "for export through Sea Route." Since in order to resolve the present controversy, extensive reference will have to be made to the terms of the Agreement,'therefore, the same is reproduced,-for facility of reference:-

"AGREEMENT FOR SALE OF WHEAT FOR EXPORT

1.          Whereas Pakistan Agricultural Storage & Services Corporation
Ltd. (PASSCO) desired to sell wheat (hereinafter called the FIRST
PARTY) and M/s The Exporters (Regd.) Bird Wood Road, Lawrence
Road, Lahore (hereinafter called the SECOND PARTY) desires to
buy 25,000 M/Tons of FAQ wheat (crop 2002') ex-PASSCO storage
points for export through sea route.

2.          Whereas the parties through their authorized agents respectively
have agreed to the  terms and  conditions given below for the
performances of this agreement and in token hereof affix signatures.

3.    This agreement shall come into force at once i.e. on 31 March
2003 and shall remain valid for 60 days i.e. upto 30 May 2003 subject
to the conditions as per succeeding paras.

4.   The basic price of wheat stocks in fixed @ Rs. 8,625/- per M/Ton
ex-storage points. Second party will deposit @ Rs. 6,538/- per ton in
cash for  stock  cost for  every tranche  and balance amount of
Rs. 2,087/- per ton a refund claimed by the Second Party on account
of upgradation/export expenses shall be furnished by the Second
Party in the form of bank guarantee for the entire contracted
quantity of wheat stocks. (Not more than two instruments). Bank
Guarantee shall be returned by the First Party to the Second Party
soon on submission of valid prescribed export documents by the
Second Party claiming the refund and after realizing any recovery
from the Second Party due from them on account of lifting of wheat
at cascading refund rate or any other penalty etc.

5.    Delivery/lifting order will be issued by the First Party (Field
Wing) on confirmation of the deposit of stock cost @ Rs. 8,625/- per
•M/Ton in PASSCO's bank by the Second Party.

6.  Delivery/lifting period shall be 60 days from the date of signing of
the contract. Second Party shall be entitled for the refund on account
of upgradation/export expenses @ Rs. 2,087/- per M/Ton for the
quantity of wheat lifted.

7.    The Second Party can take delivery in lots of 500 M/Tons
(minimum) each either on upfront payment in'cash at the rate of Rs.
8,625/- per M/Ton

OR

Provide bank guarantee relating to refund amount on account of upgradation/export expenses @ Rs. 2,087/- per M/Ton for the entire contracted quantity of wheat and take delivery in lots of 500 M/Ton (Min) each by depositing upfront the cost of wheat stock @ Rs. 6,538/- per M/Ton.

8.          Sale of the Goods will mean and imply taking proforma invoice
and actual delivery of the goods by the Second Party in parts
(Tranches of at least 500 M/Tons of wheat) or whole contracted
quantity/shipment load.

9.          The First Party shall ensure availability of FAQ wheat crop 2002,
as per attached specifications at Anx-A, duly bagged in jute bags of
sound condition at the mutually agreed/designated PASSCO storage
points. As far as possible,  however, the Second Party may be
facilitated in this regard.

10.  Loading charges will be borne by the Second Party.

11.   The documents of export of wheat and/or wheat products i.e.

Atta, Mai da, Fine, Bran etc. have to be submitted within 3 calendar months after completion of the lifting as per clause-3. Export quantity of bi-products/milling products in lieu of wheat shall correspond to established rate of recovery from grains thereof and Second Party can export wheat bi-products accordingly.

12.           The Second Party shall provide Bank Guarantee as per the
specimen    enclosed    vide    Annex    "B"    for    the    amount    of
upgradation/export expenses per M. Ton for the full contracted
quantity to the first party, release of which shall be arranged upon
submission of valid export documents duly, verified by the bank i.e.
(a) Form-E (b) shipping bill/bill of export (c) B/L supported with
MR/TR as applicable (d) Copy of Commercial Invoice (e) Copy of LC
for export by sea route (f) Sale proceeds realization certificate issued
by the bank (g)  Customs Declaration or any other documents
PASSCO may solicit in support of export etc.

13.           If the Second Party fails to export and submit the prescribed
approved export documents within the stipulated period, their Bank
Guarantee will be encashed and forfeited in favour of PASSCO.

14.           The Second Party shall complete the lifting of the total quantity
of wheat within 60 days, failing which, the provisions of Clauses 16
& 17 as the case may be, shall operate.

15.                  The Second Party has provided Performance Money in the
shape of Bank Draft at the time of the signing of agreement @ 1% of
the cost of quantity contracted in favour of the First Party. The same
shall be released upon successful completion of the contract by the
Second Party.

16.                  In case the Second Party fails to take delivery of the total
quantity within the stipulated period, the First Party will be entitled
to impose a penalty at the rate of 1% of the value of undelivered
quantity for the first 10 days and at the rate of 2% for the next 10
days. Delayed lifting of wheat by the Second Party shall however not
affect the cut off date of submission of valid export documents
claiming refund amount as per Clause-11.

17.   If the Second Party defaults but deposits in lump sum the cost of
un-lifted/un-delivered quantity, then the penalty vide Clause-16 will
not be imposed and extension of 20 days may be granted.

18.      Performance  Bond/Security  of Second  Party  shall  stand
forfeited in favour of the First Party on non-performance of the
contract/agreement by the  Second Party within the  stipulated
period. First Party then have the option, if deemed necessary, to
rescind the agreement, arrange the sale/disposal Of the wheat stock
elsewhere and claim damages from the Second Party.

19.   First Party may facilitate the Second Party in the performance
of the agreement as far as possible, however, without .compromising
PASSCO's interest. Thus any provisions may be added^subsequently with mutual consent of the parties in the agreement ensuring such facilitation and for avoiding bottlenecks.

20. Regarding the issue of jurisdiction in case of litigation between parties hereto, the Court at Lahore shall have the exclusive jurisdiction to entertain such dispute.

Sd/-                                                  Sd/-

First Party.                              Second Party.

Col. (R) Shuja Ullah                        (Khalid Jamil)

PASSCO HQ, Lahore        For M/s The Exporters

(Regd.) LHR. Sd/-Ijaz Ahmed Khan."

2. It appears, Mian Khalid Jamil, representing M/s The Exporters (Regd.) being short of funds could not lift the wheat as per Agreement, within the stipulated period, which expired on 30th May, 2003. However, he had the blessings of PASSCO, since it admittedly elected not to put an end to the Agreement soon after 30th of May 2003 and in order to save his contract, Mian Khalid Jamil entered into an agreement, dated the 12th of June 2003 with Javed Iqbal (petitioner herein) and Muhammad Abrar, for lifting of wheat stock of PASSCO, at a mutually agreed rate of Rs. 7,600/- per M/Ton.. As the last date for lifting of wheat had already expired on 30th of May 2003, the above-named intervenors agreed to pay to PASSCO price of wheat at the rate of Rs. 8,797.50 per M/Ton, which amount was inclusive of 2% late delivery charges, levied in terms of afore-quoted Clause 16 of the Agreement. The excess amount payable by the petitioner was to be refunded to him by Mian Khalid Jamil, who had also executed an irrevocable Special Power-of-Attorney in favour of the above-named Muhammad Abrar for receiving the wheat from respondent-PASSCO. Moreover, by means of an amendment dated the 24th of June 2003, introduced in the original Agreement, at the request, of Mian Khalid Jamil, PASSCO had reduced the quantity of wheat from 25,000 M/Tons to 15,000 M/Tons. Whereas the remaining terms of the original Agreement were to remain intact, the amendment introduced provided that "M/s The Exporters shall remit the cost of the total/balance quantity of wheat upto 15,000 M/Tons (as the case may be) in cash @ Rs. 8,6257- per M/Ton alongwith 2% penalty and shall be bound to take delivery of stock/lifting from the designated PASSCO Storage points by 30th June 2003." Needless to point out that the period of'60 days, as originally stipulated in the Agreement, dated the 31st of March 2003 for lifting of entire agreed wheat stock had expired on 30th of May, and, as per Clause 17, only a grace period of 20 days could be given. Moreover,-PASSCO did not opt to exercise its power of forfeiture as contained in Clause 18 of the Agreement. Be that as it may, M/s The Exporters did not lift the wheat stock and, it appears, the petitioner was allow i y PASSCO, of course with the consent of the original purchaser, to liii the wheat. The petitioner then deposited with PASSCO the price of the wheat lifted by him, including 2% penalty (liquidated damages) in cash. When the petitioner had already deposited the amount as afore-mentioned, and had also lifted some quantity of wheat, Mian Khalid Jamil cancelled the irrevocable Special Power-of Attorney earlier executed in favour of Muhammad Abrar. This gave rise to a dispute between the parties and consequently Javed Iqbal (petitioner herein) and Muhammad Abrar filed on 28.6.2003 a suit for declaration and injunction, impleading M/s The Exporters (Retd.), Mian Khalid Jamil and PASSCO, respectively as Defendants 1, 2 and 3. Some of the averments in the plaint, relevant for the present purposes, were as follows:-

"Since the Defendants Nos. 1 and 2 did not have the financial resources, therefore, in order to save the contract with Defendant No. 3, the Defendant No. 1 through Defendant No. 2 entered into an agreement dated 12.6.2003 with the Plaintiff No. 1 for purchase of the above stated quantity of wheat at the rate of Rs. 7600/- per Metric Ton in terms of the agreement with the plaintiff. It was agreed between the parties that the party of the second party will be able to lift the wheat from the office of the Defendant No. 3 on behalf of the Defendants Nos. 1 and 2 after paying Rs. 8797/- per M.T which included 2% late delivery charges which stood levied in terms of the agreement of the Defendants Nos. 1 and 2 with the Defendant No. 3 on account of non lifting of the stock of wheat from the Defendant No. 3 by Defendants Nos. 1 and 2 within the stipulated period of time because of lack of financial resources of the Defendants No. 1 and 2. The Defendant No. 3 also in terms of the agreement with the plaintiff executed a special irrevocable power of attorney in favour of Plaintiff No. 2, the person nominated in the agreement by the Plaintiff No. 1 for being appointed as special irrevocable attorney of the Plaintiff No. 1 for receiving the wheat.

"That per terms of the agreement of the Defendants Nos. 1 and 2 with the plaintiff, the Plaintiff No. 1 had to originally deposit price of wheat i.e. 8797.5 per M/Ton which included Rs. 2087/- per M/Ton the amount to be deposited in the shape of bank guarantee. The Plaintiff No. 1 instead of depositing a bank guarantee," however, deposited the complete price of wheat in cash with the Defendant No. 3."

"It is pertinent to mention here that soon after, execution of agreement dated 12.6.2003 of the plaintiff with the Defendants Nos. 1 and 2, it was realized by the Defendant No. 2 that it would be difficult to replace the bank guarantee deposited by Plaintiff No. 1 with Defendant No. 3 on or before 20th August, 2003 in terms of the agreement, therefore, with the consent of the Plaintiff No. 1, the defendant acknowledged in black and white the alteration in terms of agreement whereby the Defendants Nos. 1 and 2 undertook to

supply the bank guarantee to the Defendant No. 3. The Defendant No. 2 submitted a bank guarantee. However, the plaintiff learnt that the Defendant No. 3 did not accept the bank guarantee of the Defendants Nos. 1 and 2 for the reasons known to Defendant No. 3. As already stated above the plaintiff No. 1, therefore, in order to save his interest had to deposit the amount of bank guarantee in cash to the Defendant No. 3 provisionally as per the term of original agreement of the Plaintiff No. 1 with the Defendants Nos. 1 and 2 which stood revived on non acceptance of the bank guarantee by the Defendant No. 3 submitted by Defendants Nos. 1 and 2. On the request of Defendants Nos. 1 and 2, the quantity of wheat was reduced from 25000 MT to 15000 MT by Defendant No. 3 which was mutually agreed between the plaintiffs and the Defendants Nos. 1 and 2."

"That the Plaintiff No. • 1 as per the terms of agreement received some quantity of wheat. However, the Defendant No. 2 on learning about the complete payment made by the Plaintiff No. 1 in order to defraud the plaintiff and to devour his amount illegally and fraudulently cancelled irrevocable power of attorney executed by him in favour of the Plaintiff No. 2 without issuing any prior notice to him bringing the same to his knowledge or notice. The plaintiffs have complete documentary proof of all the payments made by. the plaintiff to the Defendant No. 3 in pursuance of the agreement dated 12.6.2003 of the plaintiff with Defendants Nos. 1 and 2. These are being enclosed alongwith the plaint."

"That the plaintiff on learning about the fraud immediately through an express telegram sent to the Defendant No. 3 at 2 a.m. on 27.6.2003 requested the Defendant No. 3 not to allow lifting of the wheat stock by the Defendantsj Nos. 1 and 2. A detailed legal notice addressed to the Defendant No. 3 alongwith copies sent to Defendants Nos. 1 and 2 was also served on 27.6.2003. The plaintiff requested the Defendant No. 3 vide his notice to immediately stop the Defendants Nos. 1 and 2 from lifting the wheat on the basis of the permit issued by Defendant No. 3.

On the one hand, declaration was sought that the cancellation of irrevocable Special Power-of-Attorney by Mian Khalid Jamil was illegal, and was binding on him and, on the other, injunction was sought against all the three defendants in the following terms:—

"It is also prayed that a decree restraining the Defendants Nos. 1 and 2 may kindly be passed from lifting the wheat from the godowns of Defendant No. 3 and the Defendant No. 3 may kindly be restrained allowing the Defendants Nos. 1 and 2 to lift the wheat from the godown of Defendant No. 3".

When the suit came up before the learned Civil Judge, to whom it had been entrusted, he passed an interim injunctive order on 28.6.2003, restraining defendants "from lifting the wheat from PASSCO/from disputed zones". During pendency of the suit, the plaintiff-petitioner and the first two defendants entered into a compromise on 3rd of July 2003, some of the terms whereof took the following form:-

"Whereas the party of the Second Part (petitioner herein) has offered for the total payment of Rs. 61,56,250/- to the party of the first -part (M/s The Exporters through Mian Khalid Jamil) as consideration for purchase of the complete rights of the party of the first part with .M/s PASSCO."

"The party of the second part will be under obligation to export 15000 MT of wheat."

"All the documentation in terms of the export of wheat and wheat products will be done by the party of the second part exclusively and the party of the first shall assist the party of the second part."

The petitioner had inter alia agreed to purchase the reduced quantity of wheat as per terms of the Agreement, dated 31st of March, 2003, in consideration of Rs. 61,56,250.00 The petitioner was made bound to export 15,000 metric tons of wheat of PASSCO and the documentation was to be in the name of the petitioner whereas Defendants 1 and 2 were to assist him. Besides, as per the said agreement/compromise, an account was to be. opened by the petitioner, though in the name of the firm "M/s the Exporters" but it was to be operated "exclusively" by the petitioner. Mian Khalid Jamil unequivocally undertook and made himself "bound to intimate and get registered the newly opened account with M/s PASSCO with a request in black and white to remit all amounts" in the said account which may be due to M/s. The Exporters under the original Agreement, dated the 31st of March 2003. The compromise was filed in Court and was recorded by- the learned Civil Judge who passed decree in terms thereof on 5-7-2003, operative part of which reads as follows:-

"Learned counsel for the Plaintiffs Nos. 1 and 2 has stated that compromise Ex-C-1 has been effected between the parties and Defendant No. 1 has received pay order No. 207441 of Rs. 26,00,000/- issued by the Habib Bank, Co-operative Branch, Lahore and Rs. 24,56,250/- through cross-cheque No. MIN6147891 to be drawn from Metropolitan Bank, Associated House, 7-Egerton Road, Lahore in the Court.

In the light of the compromise Ex-C-1 the suit is accordingly decreed in terms of compromise Ex-C-1 because the Defendant No. 3 (Passco) is proforma defendant. The Defendant No. 3 is directed to allow the plaintiffs to carry wheat within period of 5 days from today in terms and condition of compromise Ex-C-1."

3. Doubtless, PASSCO (respondent herein), though Defendant No. 3 in the suit, was not a party to the afore-mentioned agreement/compromise, in terms whereof the suit was disposed of, but PASSCO cannot plead lack of knowledge of the contents of the plaint in the suit of the petitioner or those of the agreement/compromise, dated the 3rd of July 2003 between the petitioner and Defendants 1 and 2. Moreover, it is not the case of the respondent that the afore-quoted order, dated 5-7-2003 of the learned Civil Judge was ever challenged by it. On the other hand, the decision of the Civil Hourt was accepted and given effect to in letter and spirit, by Respondent-³ASSCO inasmuch as it wrote the following letter on 17th of July 2003:--

PAKISTAN AGRICULTURAL STORAGE & SERVICES

CORPORATION LTD.

COMM WING 54 LAWRENCE ROAD, LAHORE FAX NO. 6370296

No. PASSCO/Comm/977          Dated: 17 Jul 2003

Muhammad Abrar S/o Joil Bakhsh Provincial Line Street No. 5 Bungalow No. 4-1 Attok Oil Company Rawalpindi.

Mr. Javed Iqbal S/o Muhammad Iqbal House No. 55-C, Jinnah Town Quetta.

SUB:    SALE OF WHEAT CROP 2002 FOR EXPORT TO M/S EXPORTERS

Reference agreement dated 31 Mar 2003.

In deference to the Court orders dated 05 July 2003 you are allowed to lift 2,987.026 M/Tons wheat crop 2002. Lifting of wheat shall be completed up to 22 July 2003 positively.

Sd/-

General Manager (Comm) Brig. (Retd.) Aftab Ahmed"

Pursuant to the afore-mentioned letter, thp petitioner lifted the remaining quantity of wheat on 17th_; 18th and 19th of July 2003, after making payment to the respondent-PASSCO of its purchase price, plus 2% penalty. It was so averred in paragraph 6 of the Writ Petition which, for facility of reference, is reproduced:-

"That in the meantime in pursuance of the Agreement dated 3.7.2003 the petitioner lifted the entire remaining quantity of 15,000 metric tons of wheat on 17th, 18th, 19th of July 2003 after paying to the PASSCO the entire purchase price plus 2% penalty as per terms of Agreement dated 31.3.2003.

In reply, the respondent has taken stance in the following terms:-

"Admitted that wheat stocks were lifted after payment of penalty. All actions however were in the wake of 31.3.2003 agreement and on behalf of the firm "The Exporters"/proprietor Mian Khalid Jamil. The petitioner as such did not figure in any individual independent capacity vis-a-vis Passco. He acted as an attorney."

4.     The  case  of the petitioner is that he had then  made all
arrangements for export of the wheat to foreign countries as per spirit of the
original Agreement, dated 31st of March 2003, but when approached, the
respondent declined to accept export documents on the ground that the
period of three calendar months as stipulated in Clause 11 of the said
Agreement, had expired inasmuch as in terms of Clause 3 thereof, the cut off
date was 30th of May 2003, and the period of three calendar months
reckoned from the cut off date, expired on 30th of August 2003. However,
before expiry of the said period, the petitioner, through his counsel's letter,
dated 28.8.2003, approached the Managing Director of respondent-PASSCO
with the request to enable him to export wheat, but nothing having been
heard from the respondent, the petitioner filed the instant Constitutional
petition on 25.9.2003.

5.  When the petition came up for hearing on the 25th of September
2003, respondent-PASSCO was directed to depute some responsible officer
to appear in this Court, alongwith the record. Khawaja Muhammad Akram,
Advocate, entered appearance on behalf of the said respondent and sought
adjournment to obtain instructions. On 6th of October 2003, learned counsel
for the respondent produced, before the Court, Minutes/Recommendations,
dated the 30th of August 2003 of Wheat Export Committee of Respondent-
PASSCO and the order of its Managing Director. The same are to the
following effect: ~

"MINUTES/RECOMMENDTIONS OF WHEAT EXPORT COMMITTEE MEETING HELD ON 30 AUG.-2003.

1. The Committee proceeded to examine the request of the parties for extension in shipment period. It may be recalled that number of parties were given the contract for export of 3,00,000 M/Tons of wheat in various quantities and parties had sufficient period spread over about five months to complete the export of PASSCO's contracted wheat. Besides the element of force major conjured up by the parties do not seem to be tenable. The Committee does not recommend to accede to the request of the parties for extension in shipment period beyond the contracted period.

Sd/-                                         Sd/-

Maj. (R) Muhammad Akram       Brig. (R) M. Parwaiz Akbar
GM (Audit)/Chairman.                       GM (Field)

Sd/-                                         Sd/-

Muhammad Shwkat Haidry           Brig. (R) Aftab Ahmed

GM (F&A)                              GM (Comm)

Sd/-

Ch. Abdul Majeed AGM (S&C)

2.     Submitted for approval of para 1 please.

Sd/- 30-8-2003 Brig. (Retd.) Aftab Ahmed General Manager (Comm).

M.D.

3.     Para 1 above approved.

Sd/-(Illegible) 30/8"

A photostatic copy of the following letter statedly issued pursuant to the afore-quoted decision, was also produced by the learned counsel for the respondent:—

"PAKISTAN AGRICULTURAL STORAGE & SERVICE CORP. LTD.

COMM WING 54 LAWRENCE ROAD LAHORE

FAX NO. 6370296

UMS No. PASSCO/Comm/3836   '     Dated 01 Sept. 2003.

M/s The Exporters (Regd.)

Mumtaz Abad.

Near Coca Cola Factory

.Multan

SUB:-   SALE   OF   WHEAT   FOR   EXPORT-REQUEST   FOR EXTENSION IlM SHIPMENT PERIOD.

Reference agreement dated 31 Mar. 2003 and your letter dated 25 Aug. 2003

It is to intimate you that your request for extension in shipment period beyond the contracted period was considered but has not been acceded to.

Sd/-General Manager (Comm)"

When confronted with the above situation, learned counsel for the petitioner, on instructions, emphatically denied receipt of any such letter by M/s The Exporters or by the petitioner. Be that as it may, in view of the changed position, learned counsel for the petitioner sought time to file an application to amend the Writ Petition. Consequently, the petitioner filed application under Order I, Rule 10 CPC and under Order VI, Rule 17 CPC, for arraying Mian Khalid Jamil of the Firm M/s The Exporters as Respondent No. 2 and for amendment of the Writ Petition, which was allowed, whereupon amended petition was filed, inter alia with the following prayer:--

"In view of the above submission, it is most respectfully prayed that it may kindly be declared that the petitioner is entitled to file the export documents within three calendar months after adjudication of the matter by this Hon'ble Court, in circumstances of the case".

The Writ Petition was admitted to hearing and notices were issued to both the respondents. Respondent No. 1 (PASSCO) has filed written statement.

6.  I have heard the learned counsel for the parties and have perused
the record.

7.     Kh.   Muhammad  Akram,   learned   counsel  for  respondent-
PASSCO has raised a preliminary objection to the maintainability of this
petition, by contending that the enforcement of contractual obligations
through a Constitutional petition is not permissible. In support of this
submission, reliance has been placed on Kaanay Construction Co. v. WAPDA
(2001 YLR 734), Maj. (Retd.) Shehzad Hussain Khan v. Government of the
Punjab   (2001  PLC  (CS)  249),  Mian Ansar Hayat v.  Punjab Mineral
Development Corporation (2001 YLR 2670) and Sqjjad Hassan v. Additional
Director-General, Lahore Development Authority, Lahore (2001 MLD 18).

8.   There is no hard and fast rule that Constitutional jurisdiction
cannot, at all, be invoked where the rights and obligations of the parties flow
from a contract. So far as the case-law, relied upon by the learned counsel for
the petitioner is concerned, Kaanay Construction Co. v. WAPDA (2001 YLR
734) is inapt for the reason that in the said case writ was refused on the
grounds that disputed questions of fact were involved; that there was an
arbitration clause, and the liability to pay regarding the amount claimed by
the contractor was also not admitted by WAPDA. The case reported as Maj.
(Retd.) Shehzad Hussain Khan v. Government of the Punjab (2001 PLC
(C.S.) 249) has also no bearing. It was a case of contractual service,' the
appellant having been employed as Chief Officer in Municipal Corporation,
Multan, on contract basis, his services were terminated prematurely before
the expiration of the contract period. Order of termination was assailed
through a Constitutional petition, which was dismissed by observing that in

such circumstances the only remedy available was action in tort for damages both in terms of monetary, and physical or mental loss, which could be quantified in money. It was further held that forcing an unwilling employer to allow the employee to complete the period of contract was legally as vulnerable in tort as the employer in the opposite situation could be. It.was also held that deciding of such a matter in the Constitutional jurisdiction was tantamount to making an order for specific performance of contract which was not possible in exercise of such jurisdiction. Sajjad Hussain v. Additional Director-General, Lahore Development Authority, Lahore (2001 MLD 18) was a case where contract was cancelled on the ground that the goods to be supplied were not according to the specifications. In the contract, there was an arbitration clause. It was also found that disputed questions of facts were involved. It was, therefore, held by this Court that enforcement of contractual liability in such circumstances through Constitutional jurisdiction was not permissible. In the case reported -as Mian Ansar Hayat v. Punjab Mineral Development Corporation (2001 YLR 2670), relying on All Sher alias Ajab Ali v. The State (1994 SCMR 1884), Project Director, Baluchistan Miner Irrigation and Agricultural Development Project, Quetta Cantt. v. Messrs Murad Ali & Company (1999 SCMR 121) and Mumtaz Ahmed v. Zila Council, Sahiwal (1999 SCMR 117), writ was refused for the reasons that the contract contained an arbitration clause; that disputed questions of facts were involved; that the petitioner had alternate remedies of appeal (which was provided by the Rules governing the matter), and to file a suit and that the material brought on record was deficient to record a finding with regard to alleged ulterior motives//ncz/a fides. It was further observed that the dispute between the parties could better be resolved through arbitration; that the suit filed by the petitioner having been dismissed, his appeal was pending before the learned District Judge;.'and that the petitioner had not approached the Court with clean hands. The writ petition was not entertained for yet another reason, the same being that the respondents acted in good faith and did not act against the petitioner with ulterior motives. It was found, as a fact, that the petitioner had failed to complete the contracted work within the prescribed period; that at the request of the writ petitioner time for completion of work was extended, but still he failed to abide by the revised schedule and could not complete the work even within the extended time.

9. In this case, the parties are not at issue so far as the facts are concerned. It is also not denied that the matter involved is of an urgent nature. Therefore, if the petitioner is directed to resort to the remedy of a suit, even the Court of first instance would take a long time to decide his fate, whereafter the process of appeal, revision etc., would start. In the circumstances, the remedy by itself would get frustrated. The Hon'ble Supreme Court has laid down the law in Nizamuddin v. Civil Aviation Authority (1999 SCMR 467) in the following terms:

"It is axiomatic principle of law that every case is to be adjudged on its own facts, circumstances and merits. If in a particular case both the parties admit the factual aspects which give rise to the dispute and the Court feels that the matter is of such an urgent nature that the veiy remedy would get frustrated, if the aggrieved party is directed to seek redress through alternative remedy available under the law, then in that case it would be proper for the Court to entertain the writ petition."

In M.H.Abidi v. State Life Insurance Corporation (1990 MLD 563), the view taken was:—

"On principle, contractual rights and obligations have to be enforced through Courts of ordinary jurisdiction. However, where rights are based on statute law or rules framed thereunder or when an obligation or duty vests in a public functionaiy or a statutoiy body, performing function in relation to the affairs of the Federation or a Province or a local authority, constitutional jurisdiction can be attracted. In such and allied situations even contractual rights and obligations may be enforced in constitutional jurisdiction. This, however, is subject to the important rider of corresponding absence of an adequate remedy."

"Thus merely, because a contract is involved in a constitution petition is not by itself sufficient to oust the constitutional jurisdiction under Article 199 of the Constitution."

In Anwar Muhammad Khan v. Director of Industries (PLD 1994 Lahore 70), it was observed as follows :--

"Arguments of the learned counsel for the respondents to the effect that the Writ Petitions having arisen out of contractual obligations,' hence no relief can be granted to the petitioner is misconceived. It is now well established legal proposition that a person has a right to come to the Court in Constitutional jurisdiction for issuance of a direction to the public functionaries to act strictly in accordance with law in case the public functionaries have not acted in accordance with the statute and have passed adverse orders even without issuing of a show-cause notice. Power of judicial review in such like cases is available to this Court even in cases where the grievance has arisen on account of violation of the contractual obligations."

In Wak Orient Power and Light Ltd. v. Government of Pakistan (1998 CLC 1178), after striking a note of caution viz:

"While exercising writ jurisdiction, which is essentially discretionary in nature, superior Courts in Pakistan will not hesitate a moment to refuse relief to a suitor seeking enforcement of contract against State or statutory Corporation, if the national interest is hereby likely to

be endangered, in the least, despite the fact that the legalistic right of such suitor for issuance of appropriate writ stood established. Relief would also be refused if the contract is shown to be unconscionable/ma/a fide /unreasonable or against public policy."

it was held:-

"Likewise, a situation may arise where the Constitutional jurisdiction of this Court under Article 199 may be permitted to be invoked by an aggrieved person for declaration of the act of representative of State/statutory Corporation, about entering into a contract with third party, to be without lawful authority, on the above grounds."

In view of above, the preliminary objection of the learned counsel for respondent-PASSCO fails, and is hereby repelled.

10.    Before dealing with the case on merits, there are certain important aspects of this case to which a reference seems to be necessary:-

(i) The contract of PASSCO with M/s The Exporters was an "AGREEMENT OF- SALE OF WHEAT FOR EXPORT". Thus, the Agreement itself made it abundantly clear that PASSCO was selling wheat for the purpose of its export.

(ii) In Clause 1 of the Agreement, the purpose of sale of wheat was re-iterated by unequivocally providing that M/s The Exporters were buying wheat "for export through sea route".

(iii) The life of the Agreement was limited to 60 days vide Clause 3 thereof, having come into force on 31st of March 2003, and expiring on 30th of May 2003, but the provisions of this Clause were made dependant on and subject to the conditions contained in the succeeding Clauses.

(iv) The basic price was fixed at Rs. 8,625.00 per metric ton, out of which an amount of Rs. 6,538.00 per metric ton was payable to PASSCO in cash for each tranche, and for the balance amount of Rs. 2,087.00 per metric ton, which was payable on account of upgradation/export expenses, the purchaser was required to furnish bank guarantee (not more than two instruments) for the entire contracted quantity of wheat stocks (returnable by PASSCO to the purchaser "soon on submission of valid prescribed export documents".

(v) While making refund, PASSCO could realize any recovery from the purchaser "on account of lifting of wheat at cascading refund rate or any other penalty etc."

 (vi) Field Wing of PASSCO was to issue delivery/lifting order only "on confirmation of the deposit of stock cost @ Rs. 8,625.00 per M/Ton in PASSCO's Bank" by the purchaser.

(vii) It was re-iterated in Clause 6 that the delivery/lifting period was 60 days from 31st of March 2003, and the purchaser was entitled for refund on account of upgradation/export expenses @ Rs. 2,087.00 per M/Ton "for the quantity of wheat lifted."

(viii) The purchaser was given option vide Clause 7 to take delivery in lots of 500 M/Tons (minimum) each "on upfront payment in cash at the rate of Rs. 8,625/- per M/Ton" or to lift wheat in terms of Clause 4, subject to the further condition that lifting of stocks in lots shall not be less than 500 M/Tons each.

(ix) Vide Clude 11, "documents of export of wheat" or its products specified therein were "to be submitted within 3 calendar months after completion of the lifting as per Clause 3".

(x) Whereas the release by PASSCO of the amount of upgradation/export expenses in favour the purchaser was made dependant on "submission of valid export documents duly verified by the bank" as specified and particularized in Clause 12, PASSCO retained power to ask for "any other document" "in support of export etc.". Such a stringent provision was made a part of the contract with a view to vouchsafe transparency of export and enswathing any effort on the part of unscrupulous elements resorting to fake exports.

(xi) In case of failure on the part of purchaser to take delivery of the quantity within the stipulated period, PASSCO was entitled vide Clause 16 to impose a penalty at the rate of 1% of the value of undelivered quantity for the first 10 days and at the rate of 2% for the next 10 days.

(xii) Delayed lifting of wheat by the purchaser was not to affect the cut off date of submission of valid export documents claiming refund amount as per Clause No. 11.

(xiii) In Clause 17 it was laid down that in the event of default of the purchaser, "but deposit by him in lump sum the cost of un-lifted/undelivered quantity" "the penalty vide Clause 16 will not be imposed and extension of 20 days may be granted." But, as shown above, this was not adhered to by PASSCO itself.

 (xiv) Clause 18 conferred on PASSCO the power of forfeiture, to rescind the contract and to get the Agreement performed by some one else at the risk and • cost of the other party/purchaser.

(xy) PASSCO retained power vide Clause 19 to facilitate the purchaser in the performance of the agreement as far as possible, without compromising its interest. It was provided in the said clause:-

"Thus any provisions may be added subsequently with mutual consent of the parties in the agreement ensuring such facilitation and for avoiding bottlenecks".

(xvi) It has come on record that due to financial constraints, it had become difficult for the original purchaser, i.e. M/s The Exporters to strictly adhere to the terms of the agreement inasmuch as PASSCO had expressed reservations to accept the bank guarantees furnished by the purchaser and the latter had failed to adhere to time in the matter of lifting of wheat stock.

(xvii) M/s The Exporters had executed an "Iqrarnama" in favour of the petitioner on the 12th of June 2003 and an irrevocable Special Power-of-Attorney of the same date authorizing the petitioner to do all the necessaiy acts for collecting wheat from PASSCO in terms of the Agreement, dated the 31st of March 2003. The said arrangement was followed by a formal Agreement dated the 3rd of July 2003 between M/s The Exporters and the petitioner whereby the latter had purchased "complete rights" of the' former "with M/s PASSCO" on terms and conditions stipulated in the Agreement just mentioned.

(xviii) According to the learned counsel for the petitioner all the documents mentioned above were filed with PASSCO and the same received its approval. The submission of the learned counsel finds support from the subsequent conduct of PASSCO to which reference will be made presently.

(xix) Pursuant to an agreement, dated 12th of June 2003, entered into between M/s The Exporters and the petitioner herein (including one Muhammad Abrar), the petitioner paid to PASSCO entire price of the un-lifted/un-delivered quantity of wheat in lump sum at the rate of Rs. 8,797.50 per M/Ton which was inclusive of Rs. 2,087.00 (for which amount bank guarantee was to be provided) and 2% penalty in terms of Clause 16 of the Agreement.

(xx) At the request of M/s The Exporters, PASSCO had also reduced the contracted quantity of 25000 M/Tons of wheat to 15000 M/Tons and had extended the period for lifting of wheat stock upto 30th of June 2003, though only a grace period of 20 days could be given vide Clause 17.

ixxi) After the payment had been made to PASSCO by the petitioner and he had also lifted a little more than 12000 M/Tons of wheat, the original purchaser proceeded to cancel the agreement, dated the 12th of June 2003 with him as well as the irrevocable Special Power-of-Attorney given to him, which compelled the petitioner to file a suit, against M/s The Exporters, its Proprietor, Mian Khalid Jameel, as well as against PASSCO. The learned trial Judge had passed an injunctive order, restraining the original purchaser from lifting wheat from PASSCO's storage points.

(xxii) During the pendency of the suit, the first two defendants entered into a compromise, terms whereof were reduced into writing in the form of Agreement, dated 3rd of July, 2003 on the basis of which the suit was disposed of vide order, dated 5.7.2003, reproduced in paragraph 3 above.

(xxiii) The plea of the petitioner that copies of the plaint, Agreement, dated 3rd of July 2003 and of the Court's order, dated 5.7.2003 were filed with PASSCO finds support from PASSCO's own letter, dated 17.7.2003.

.(xxiv) PASSCO permitted the petitioner (and Muhammad Abrar) to lift the remaining quantity of wheat, i.e. 2,987.025 M/Tons out of 15000 reduced quantity, vide its letters, dated 17.7.2003. Since the period of 60 days for lifting wheat, as originally stipulated in the Agreement dated 31.3.2003, had expired on 30.5.2003, the petitioner and Muhammad Abrar were bound down in the following terms:—

"Lifting of wheat shall be completed upto 22 July 2003 positively".

(xxv) It is common ground between the parties that the petitioner has lifted the remaining aforementioned quantity of wheat on 17th, 18th and 19th of July 2003, after payment to PASSCO of the entire purchase price plus 2% penalty.

It is in the above backdrop of events that the following contentions of the learned counsel for respondent-PASSCO, have to be attended to:--

(a)   That Javed Iqbal, petitioner has no privity of contract with the respondent-PASSCO; and

 (b) That Clause 16 of the Agreement, dated 31.3.2003 wherein it was provided that "delayed lifting of wheat by the Second Party shall not affect the cut off date of submission of valid export documents claiming refund amount as per Clause 11" does not entitle the petitioner to claim extension in time for submission of export documents.

11.          So far as the first contention that there is no privity of contract
between PASSCO and the petitioner is concerned, it is contradictory to the
preliminary objection raised by the learned counsel for the respondent
himself to the effect that contractual obligations cannot be enforced through
a Constitutional petition. Be that as it may, the general rule indisputably is
that no .one but the parties to a contract can be bound by it, or entitled under
it and this principle is known that of privity of contract. It would have been
perfectly fair and reasonable that PASSCO should not be bound by way of
agreement between the petitioner and M/s The Exporters, but here the
petitioner acted not only for the benefit of the original purchaser but also for
PASSCO inasmuch as not only the price of the wheat lifted was paid by the
petitioner, but 2% penalty over and above as well. Thus, all three had the
intention that the petitioner should have all the rights under the Agreement,
dated the 31st of March 2003. PASSCO cannot claim that it was entirely
ignorant of the arrangement between the petitioner and M/s The Exporters.
PASSCO has undeniably taken benefit of the Agreement, dated the 31st of
March 2003. It is also not the case of PASSCO that no consideration has
passed on to it from the petitioner. Thus the vinculum juris is not personal
to PASSCO and M/s The Exporters; PASSCO has received full benefit of the
Agreement dated the 31st March 2003 from the petitioner.

12.          The matter can be looked at from another angle. It was, in fact,
an assignment of original contract in favour of the petitioner with the tacit
knowledge,   rather  with  the   concurrence   of  PASSCO  that,   M/s  The
Exporters dropping out and petitioner taking their place, the burden of the
contract and liabilities arising therefrom were assigned to the petitioner-. If I
may say  so,  it was,  in  effect, the  rescission  of one  contract and the
substitution of a new one or, in other words, a novation. PASSCO having

, received not only the entire sale price of wheat, but also 2% over and above as penalty in terms of Clause 16, cannot be allowed to back out to perform its obligations arising out of the Agreement, dated 31st of March 2003, or to treat the petitioner differently, rather discriminately, as compared to the defaulting party, viz.: M/s The Exporters.

13.    There is yet another aspect. In the instant case, respondent-
PASSCO allowed the wheat to be lifted by the petitioner, knowing fully well
that it was for the purpose of export. If there was no intention on the part of
PASSCO to permit export thereof, it owed a duty to the petitioner-purchaser
to tell him in unmistakable terms that he would not be allowed to export the
wheat in accordance with the Agreement, dated the 31st of March 2003. The plea of respondent-PASSCO is that in the absence of its express contract with the petitioner that the latter would be allowed export of the wheat, there was no sufficiently close relationship between the parties to give rise to any such duty. It is not denied that Respondent-PASSCO sold the wheat to M s The Exporters whose obligation of lifting the wheat was assumed by the petitioner, for the purpose of export. PASSCO indubitably knew that the petitioner was a potential investor and was lifting the wheat on a clear understanding that it was meant for export. Therefore, apart from any express contract, the bare knowledge of facts by PASSCO paves the way for holding that it owed a duty of common honesty of having refully apprised the petitioner of its ultimate intention. PASSCO remained reticent, though it was under obligation to have made an adequate disclosure of its intention not to allow the petitioner to go ahead with the export of wheat. The contention that PASSCO acted from the best of its motives is no answer. Lest I am misunderstood to say that PASSCO had acted mala fide or dishonestly. I would make it clear that non-disclosure of its intention, translated into the impug-ned action, may have been quite innocent, or even due to misconception of legal position, which might not be on account of mala fides or with dishonest intention. What I mean to say is that it is a case of breach of duty in which dishonesty is not a necessary factor. Further, there can be no universal rule that in the absence of contract, an innocent but negligent act of non-disclosure cannot give rise to an action. It is a typical case where petitioner agreed to assume responsibility of M/s The Exporters with whom PASSCO had an express contract and, I think, any reasonable man in the petitioner's shoes would have believed that he would be meted out the same treatment by PASSCO to which his predecessor was entitled and he would not be discriminated. Even in the absence of any direct dealings between one person and another, there are many and varied situations in which a duty is owed by one person to another. Learned counsel for respondent-PASSCO submitted that in order that the petitioner may avail himself of relief on alleged breach of the duty of disclosure, he must show that there was such a proximate relation between him and PASSCO as to bring them virtually into the position of parties contracting with each other. The contention has no merit. The duty of care arising from implied as well as express contracts and duty of care arising from other special relationship which may be found to exist in particular cases, still remains, and I can see no logical stopping place short of all those relationships, where it is plain that one party was twisting the other to exercise such a degree of care to disclose as the facts and circumstances of a particular case required. In the instant case, PASSCO wrote the letter, dated the 17th of July 2003 to the petitioner not only to lift stocks, but gave a dead line also, wherefrom an inference could straightaway be drawn by any reasonable person of ordinary prudence as to the purpose for which he was being allowed to lift the wheat. In fact, the petitioner was indued to believe that he would be allowed to export the wheat and in the absence of a clear warning to the contrary, in point of law, PASSCO incurred a duty and obligation of care towards the

petitioner. Such a duty need not necessarily arise from a written contract; it may arise from circumstances and relations of the parties and may give rise even to an implied contract at law. Further, in a sphere where PASSCO is placed, petitioner would have reasonably relied on it and, therefore, the former should have taken reasonable care to avoid acts of omissions which one could reasonably foresee could be likely to cause loss to the petitioner. It is not PASSCO's sheet anchor that all that was being done by it was gratuitous and, therefore, it incurred no liability. It cannot capitalize its own negligence, arising out of its failure to indicate in its letter, dated 17th of July 2003, that the lifting of wheat by the petitioner would not mean that he would be allowed its export as well. By the impugned act of PASSCO, the petitioner is bound to suffer colossal financial loss, without any fault attributable to him. I am, therefore, clearly of the view that the petitioner is entitled to succeed against PASSCO even on account of breach of duty of disclosure.

14. PASSCO, in essence, performs functions which squarely fall within the executive authority of the State itself. Indisputably, the Government, which represents the executive authority of the State acts, through the instrumentality or agency of either natural or juridical persons to carry out its functions. It is of common knowledge that as incidental to or in aid of governmental functions in the fields of specialized and technical character, need was felt to forge a new administrative device, consequently the Government exercised its power to charter public corporations as its third arm. Such corporations, whether established by statutes or incorporated under the law but controlled by the Government and bound, in policy matters, by directions of the Government, are ex-hypothesi agencies of Government and manage public enterprises, which ordinarily should be carried.by Government itself departmentally. The corporations, such as PASSCO, acting as instrumentality or agency of Federal Government, because of enjoyment by it of monopoly status are impregnated with governmental character and are obviously subject to the same limitations in the performance of their functions as the Government itself, though in the eyes of law, they are distinct and independent entities. If Government, acting through its officers, in subject to certain Constitutional and public law limitations, it must follow a fortiori that Government,- when it acts through the agency of a corporation, the latter should equally be subject to the same limitations in the exercise of its power or discretion. The rule inhibiting arbitrary action by the Government applies equally to-a corporation which deals with the public, by way of entering into contracts, it cannot act at its sweet will and pleasure, but its actions must be in conformity with the principles which meet the test of justice, reason, fairness, equality of treatment, and must qualify standards and norms that are not arbitrary, irrational, whimsical and discriminatory. It must not be guided by any extraneous consideration. Every act of PASSCO respondent must be dictated by public interest and must not be unreasoned or unprincipled, and any

departure therefrom can certainly be held to be invalid. It can hardly be disputed by any one that for a society which claims to be organized, civilized and law abiding, it is imperative to stand by its commitments, undertakings and to be honest and fair in its dealings. It is moreso for any functionary believing in rule of law not to discriminate between the citizens, nor to exercise discretion at its pleasure. It is well settled rule that an authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. The principle of reasonableness and rationality which is an essential element of equality or non-arbitrariness is projected by Article 25 of our Constitution, and it must characterise every State action, whether it be under authority of law or in exercise of executive power. Article 25 speaks of equality before law and equal protection of law. PASSCO, as an instrumentality of the Government, in the sense brought out above, has to observe equality, and cannot exclude a person by discrimination. In the instant case, the petitioner is entitled to equal treatment with others similarly circumstanced. In this view of the matter also, the impugned action of respondent-PASSCO, since it offends against Article 25 of the Constitution, being discriminatory in character, is liable to be struck down.

15. The impugned action of respondent-PASSCO declining export of wheat by the petitioner is liable to be set at naught on yet another ground. When the petitioner was allowed to lift the remaining quantity of wheat vide letter, dated 17th of July 2003, a new time frame was provided. He was to complete lifting by 22nd of July 2003. Therefore, there was an implied promise that the terminus date in his case would be computed by giving him benefit of three calendar months as from the 22nd of July 2003. It would have been 21st of October 2003. When the original purchaser (M/s. The Exporters) defaulted in lifting the wheat within the stipulated period of sixty days, PASSCO, resorted to an amendment in the original Agreement, and extended the period upto 30th June 2003 although, as pointed out above, extension could not travel beyond twenty days commencing from 31st of May 2003. Moreover, the power of forfeiture and rescission of the contract.and getting the work done at the risk and cost of the original purchaser was not exercised, meaning thereby that there was no definite intention on the part of PASSCO to strictly press into service the terms of the Agreement. Therefore, while allowing the petitioner to lift the remaining wheat stock by 22nd of July 2003, an implied promise was held out to him, founded on the most invincible argument of common sense that he would not be required to account for the defaults of his predecessor which had been condoned by PASSCO for its own convenience, and, therefore, the condition of submission of export documents within three calendar months would not be pressed against him as from the 30th of May, but from 22nd of July 2003 which, in his case, could be the cut off date and to this extent the original Clause 3 of the Agreement, date the 31st of March 2003 stood superseded or, at least,

varied. Having given the petitioner time to lift remaining wheat stock by 22nd of July 2003, PASSCO cannot be allowed to count down three calendar months from 30th of May 2003. In this contest, the equitable doctrine of promissory estoppels can also be pressed into service against respondent-PASSCO. In Central London Property Trust Ltd. v. High Trees House Ltd. [(1956) 1 All ER 256)], by making reference to some of the earlier decisions, it was observed that:

"They are cases of promises which were intended to create legal relations and which, in the knowledge of the person making the promise, were going to be acted on by the party to whom the promise was made, and have in fact been so acted on. In such cases th& Courts have said these promises must be honoured. I prefer to apply the principle that the promise, intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply."

A very appropriate case from the Indian jurisdiction is Union of India v. Messrs Anglo-Afghan Agencies (AIR 1968 SC 718) wherein an export incentive Scheme had been notified to the public under Section 3 of the Imports and Exports (Control) Act, 1947 by the Export Promotion Bureau of the Indian Government. After the party had acted on the inducement, satisfied the required conditions, there was an attempt to resile. The relief was granted in that case in terms of the representation as hereunder reflected in para 23 of that judgment:

"Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex-parte appraisement of the circumstances in which the obligation has arisen. We agree with the High Court that the impugned order passed by the Textile Commissioner and confirmed by the Central Government imposing cut in the import entitlement by the respondents should be set aside and quashed and that the Textile Commissioner and the Joint Chief Controller of Imports and Exports be directed to issue to the respondents import certificates for the total amount equal to 100 per cent of the f.o.b. value of the goods exported by them unless there is some decision which falls within Clause 10 of the Scheme in question."

From our own jurisdiction reference, in the first instance, may be made to Army Welfare Sugar Mills Ltd. v. Federation of Pakistan (1992 SCMR 1652) wherein it was held as follows:

We are inclined to hold that the above SRO 560(1 )/82 contained standing representation to the effect that if a factory would manufacture sugar in a financial year exceeding from the average production in that factory for the proceeding two years, such an excess quantity of sugar shall he exempt from the payment of excise duty. The above representation could have been rescinded before it was acted upon or if it was acted upon, its effect could have been nullified by a statutory provision like Section 31-A of the Customs .Act (ibid) and not by an executive act. In the present case, the appellants acted upon the above representation before it was rescinded, to their detriment as, according to them, they went on with the production of sugar even when the recovery of sucrose from the sugarcane was comparatively low on account of change in the climate and thus, they had acquired vested right before the issuance of one of the two impugned SROs. However, if the appellants had passed on the additional burden of the exercise duty after the two impugned SROs were issued, they are not entitled to press into service the doctrine of promissory estoppels as it will be inequitable to deny the State excise duty on the excess quantity of sugar referred to hereinabove, in terms of Section 3-C of the Act. We may observe that doctrine of promissory estoppel has been evolved by the Courts as an equitable doctrine with the object to pre-empt suffering of any loss by a promisee and was not designed or intended to provide a windfall profit to him though Bhagwati, J. in the case of Motilal Padampat Sugar Mills (supra) had held that it wps not necessary in order to attract applicability .of doctrine of promissory estoppel, that the promisee, acting in reliance on the promise, should suffer any detriment, but this view was contrary to the Indian Supreme Court's earlier view and also to the subsequent view taken by Bhagwati, as C. J., in the case of Union of India v. Godfrey Philips India Ltd. (supra). It may be pertinent at this juncture to refer to a passage from Law of Contract by D.W. Grieg and J.L.R. Davis (supra) on the above aspect, at pages 165 and 166, which reads as follows:-

"8.    Promissory estoppel is based upon equitable principles, (a)   Founded in equity."

In Messrs M.Y. Electronics Industries (Put.) Ltd. through Manager v. Government of Pakistan through Ministry of Finance and 2 others (1998 SCMR 1404) it was inter alia held by the Hon'ble Supreme Court as follows:

"The doctrine of Promissory Estoppel is founded on equity. It arises when a person acting on the representation by the Government or a person competent to represent on behalf of the Government, changes his position to his detriment, takes a decisive step, enters into a binding contract or incurs a liability. In such case, the Government will not be allowed to withdraw from its promise or representation."

In Fecto Belarus Tractors Limited u. Pakistan (2001 PTD 1829), while reviewing earlier judgment, the Hon'ble Supreme Court authoritatively declared the law thus:

"It will be necessary to touch the true concept of the doctrine of Promissory Estoppel. Before proceeding further this doctrine has been variously called 'Promissory Estoppel', requisite estoppel, 'quasi-estoppel', and 'new estoppel'. It is a principle evolved by equity to avoid injustice and though commonly named 'Promissory Estoppel', it is neither in the realm of contract nor in the realm of estoppel. The true principle of Promissory Estoppel seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties and this would be so irrespective of whether there is any pre-existing relationship between the parties or not. The doctrine of Promissory Estoppel need not be inhibited by the same limitation as estoppel in the strict sense of the term. It is an equitable principle evolved by the Courts for doing justice and there is no reason why it should be given only ,a limited application by way of defence. There is no reason in logic or principle why Promissory Estopple should also not be available as a cause of action".

The following limitations for invoking the doctrine of Promissory Estoppel were laid down by the Hon'ble Supreme Court in the case of Pakistan v. Salahuddin (PLD 1991 SC 546):--

"(1) The doctrine of Promissory Estoppel cannot be invoked against the Legislature or the laws framed by it because the Legislature cannot make a representation.

(2)              Promissory Estoppel cannot be invoked for directing the doing
of the going which was against law when the representation
was made or the promise held m_it.

(3)              No agency or authority can be held bound by a promise or
representation not lawfully extended or given.

(4)       The doctrine of Promissory Estoppel will not apply where no
steps have been taken consequent to the representation or
inducement so as to irrevocably commit the property or the
reputation of the party invoking it; andC5) The party which has indulged in fraud or collusion for obtaining some benefits under the representation cannot be rewarded by the enforcement of the promise."

The aforementioned limitations were reiterated also in the cases of Messrs Gadoon Textile Mills Limited and 814 others v. WAPDA and others (1997 SCMR 641) Messrs M.Y. Electronics Industries, (Pvt.) Limited through Manager v. Government of Pakistan through Secretary, Finance and 2 others  1998 SCMR 1404), Collector of Customs and others v. Ravi Shipping Ltd. and others (1999 SC 412) and Government of Pakistan, through Ministry of Finance and Economic Affairs and another v. Fecto Belarus Tractors Limited (2000 SCMR 112). But none of them is attracted to the facts and circumstances of the present case. Relying on A.R. Khan v. P.N. Bogha through Legal Heir (PLD 1987 S.C. 107) it was held in Sajjad Hussain v. Mussarrat Hussain Shah (1989 SCMR 1826) as follows:--

"The compromise, its sanctity and efficiency in putting a stop to further litigation was considered by this Court in the case of A.R. Khan. In this case but for the compromise that was reached between the parties, the plaintiff would not have been prompted to deposit the amount asked for by the respondents as price of the land. Having thus entered into a compromise and prompted the appellant to deposit the amount the respondents could not challenge it on the ground that the suit was barred by limitation."

(Emphasis supplied by me.)

I have, therefore, no doubt that in the instant case whereas PASSCO will not suffer any financial burden, the petitioner is bound to suffer loss if he is not allowed to export the wheat purchased for the purpose by him from PASSCO. For this reason also the impugned action of respondent-PASSCO cannot be sustained.

16. So far as the second submission of the learned counsel for respondent-PASSCO, based on Clause 16 of the Agreement, dated 31.3.2003, that delayed lifting of wheat could not affect the cut off date of submission of export documents and, therefore, the petitioner is not entitled to extension of time is concerned, the same too is devoid of force. Besides what I have said above, the primary question that arises is whether time was of the essence of the contract. In Clause 17 of the basic Agreement, it was stipulated: "If the Second Party defaults but deposits in lump sum the cost of un-lifted/un-delivered quantity, then the penalty 'vide Clause 16 will not be imposed and extension of 20 days may be granted". Then, by virtue of Clause 16, PASSCO was entitled to impose penalty at the rate of 1% of the value of undelivered quantity for the first 10 days and at the rate of 2% for the next 10 days. Besides, by mutual consent of the parties, original Agreement could be amended to facilitate the purchaser in the performance of the Agreement and for avoiding bottlenecks. Moreover, rescission of the Agreement was optional with PASSCO, and it was not hedged by any compulsion to put an end to the Agreement once the purchaser had gone into default, particularly in the absence of time limit. As held above, defaults committed by the original purchaser were not visited with penalties, rather the same were condoned. Not only that, petitioner's substitution in place of the original purchaser received blessings of PASSCO, rather a new contract had come into being. Therefore, PASSCO cannot be allowed to bind the petitioner to time as originally stipulated vide Clause 11 of the Agreement. Even otherwise, the provisions of Clauses 16, 17 and 19 are inconsistent with the time being of the essence of the contract. To say in one breath that time is of the essence of the contract, but that the period provided in the contract may be extended and that the default to adhere to time could even be compensated, is a contradiction in terms. It is settled law that if in a contract, there is power of extension, and provisions for penalties/damages, time will not be of the essence of the contract. In Shambhulal v. Secretary of State (AIR 1940 Sind 1), after reviewing the case-law on the subject, it was held as follows:-

"It would appear therefore that the inclusion of clauses in a contract providing for extension of time in certain contingencies, and providing for the payment of a fine or penalty for every day or week the work undertaken under the contract remains unfinished on the expiry of the time provided in the contract is inconsistent with time being of the essence of a contract, and would be calculated to render ineffective an express provision in a contract to that effect. And this certainly accords with commonsense."

It appears to us that the question whether or not time is of the essence of a contract is a question of the intention of the parties to be gathered from the terms of the contract. Whereas in the case of Ex. 104 there is an express provision that time is of the essence of the contract and at the same time provisions for extension of time without limit or qualification and for the levy of penalty, it cannot be said that it was intended that time should be of the essence of the contract.

In Roberts v. Sheikh Hyder (AIR 1923 Nagpur 140) the condition as to the time at or before which the work was to be completed was:—

"The whole work will be completed in 4 months from the date of getting permission in writing from Mr. D.W. Roberts. A fine of Rs. 5/- per day will be exacted for every day after that date that the work is not completed within the above-noted time."

It was held as follows:-

"It seems to me that time was not of the essence of the contract in this case. The very fact that a penalty was stipulated for in case of failure to complete the work within the stipulated time indicates

that in case of such failure it was not the avoidance of the contract by the defendant that was contemplated but acceptance of performance after the stipulated time, subject to payment of damages which were fixed. The case in my opinion falls within paragraph 2 of S. 55 of the Contract Act and the only question is, what is the compensation to which the defendant is entitled for the loss occasioned by the plaintiffs failure to complete the work within the stipulated time."

The case reported as Pakistan v. Lodhi House (PLD 1968 Lahore 923) is almost on all fours. Relying on AIR 1940 Sind 1 (supra), it was held: "In the case before me, notwithstanding the provision that the time was of the essence of the contract, there were other clauses, which indicated that the intention of the parties was not to strictly enforce the clause regarding time. The clauses regarding suspension of the work, and the payment of penalty for the non-performance of the contract in time, clearly indicate that the parties never intended that the time was of the essence of the contract." In Aslam Khan v. Government of N.W.F.P. etc. (1985 CLC 814), the facts were that the petitioner, Aslam Khan was allowed to extract timber from Inder Sen Guzara, Compartment No. 1, Gilliant Forest Division. Under Clause 19(d) of the Contract Agreement the petitioner was to remove the timber beyond the limits of the Depot by 9.8.1970 and beyond the limits of Galies before 24.8.1970. The petitioner could not remove the entire timber within the stipulated period. Therefore, on his application the time was extended by 45 days on 5.9.1970. The time was once again extended by 40 days, but the petitioner was unable to remove the entire timber from the forests within the extended period. He applied third time for the extension of time but his application was refused. It was directed by the Conservator of Forests, Abbottabad, on 2-6-1971 that since a warning was administered while granting last extension that no further period will be granted, it was not a fit case for acceding to the request of the petitioner. It was also mentioned that if snowfall had occurred then it was the duty of the contractor to inform the Divisional Forest Officer to get the period of forest operations deferred appropriately. For these reasons it was directed that the balance stock in forests as well as in road side depots reverts back to the Government under Clause 9(d) of the Agreement. The contract was also terminated accordingly. Relying on AIR 1940 Sind 1 and PLD 1968 Lahore 923, it was held as follows:-

"In the case in hand it is also clear that time was not of the essence of the contract and there were circumstances which justified the request of the petitioner for the grant of further time to complete the operation and his request was turned down without any sufficient cause. *******************. Under Section 55 of the Contract Act, 1872 if it is not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss

occasioned to him by such failure. In the facts and circumstances of the case it can legitimately be inferred that the parties to the contract never intended the time to be of the essence of the contract and, therefore, the termination thereof was not justified in law".

Similarly, in Eskandar All v. Al-hamra Begum (PLD 1969 Dacca 214) the
following view was expressed:-                                   .

"The question whether the time mentioned in an agreement is or is not of the essence of the contract depends upon the intention of the parties to the agreement which is to be gathered from'the facts and circumstances of the case. The mere fact that certain time is mentioned in the Agreement for the performance of an act would not necessarily lead to the conclusion that the time specified was of the essence of the contract. The real intention of the parties to the Agreement is the determining factor, and it is to be deduced from all the surrounding circumstances of the case. The intention of the parties can be best ascertained from the Agreement itself. ***** As the time specified in the agreement for sale was subject to more than one condition, it cannot be said that the parties thereto intended the time mentioned therein to be of the essence of the contract."

UThus, the time was not of the essence of the contract, and for this reason IJ also, the impugned action of PASSCO cannot be sustained in law.

17. I have held above that on the facts established on record, to the extent of the petitioner, it was a case of novation of contract and that the cut off date, viz: 30th of May 2003, as originally provided in the Agreement, dated 31st of March 2003, stood substituted as 22nd of July 2003 and the petitioner was well within his right to claim the period of three calendar months in terms of Clause 11, to be reckoned with effect from 22nd of July 2003 and not from 30th of May 2003. Petitioner's substitution for the original purchaser was also permissible vide Clause 19 of the Agreement. PASSCO is, therefore, estopped by its own words and conduct to press into service the provisions of Clause 11 of the Agreement, compelling the petitioner to time as originally stipulated. Needless to add that the petitioner had approached, through his counsel's letter, dated 28th of August 2003, which was written even before the expiration of the target date, as per the original Agreement, viz: 31st of August 2003 (three calendar months reckoned from 31st of May 2003), wherein it was inter alia mentioned as follows:-

"As the aforesaid wheat was meant for export, my client had made arrangements to export it to foreign countries and as Clause 11 of the agreement dated 31.3.2003 stipulates that documents of export of wheat and or wheat products have to be submitted within 3 calendar months after completion of lifting of wheat therefore, it is understood that lifting having been allowed by you to be completed

by 22.7.2003, but these having been already completed by 19.7.2003, the period of 3 calendar months for submission of export documents to you shall be either ending on 19.10.2003 or 22.10.2003. It shall thus entitle my client to claim rebate of Rs. 2087 P.M.T."

"My client Mr. Javed Iqbal is making all efforts to export the Wheat without any loss of time. But firstly, due to litigation, as between the parties, as indicated above, secondly, recent rains at Karachi and thirdly, the problems created by disastrous episode of Greek oil tanker, Tasman Spirit, have all hindered the export performance of my client."

"My client understands that after the date of lifting of entire wheat stock export documents can be submitted within 3 calendar months so as to claim rebate."

During hearing of the petition, when questioned, Kh. Muhammad Akram, learned counsel for Respondent No. 1 frankly stated that PASSCO will suffer no loss if the petitioner exports wheat after the target date. On the other hand, the petitioner is bound to suffer loss if not allowed to export, after having lifted such huge quantity of wheat, upon payment not only of its price but 2% penalty as well, on clear understanding that it was meant for export and he would be entitled to the benefits arising out of the Agreement, dated the 31st of March 2003. In the circumstances, there is neither any legal nor moral justification to allow PASSCO being itself beneficiary of the said Agreement to push the petitioner to wall, when his turn has come to derive benefits therefrom.

18.   Needless to mention that on 27th of October 2003, during the
course of hearing of the case, learned counsel for PASSCO  raised an
objection that the petitioner has not approached the Court with clean hands
inasmuch as he had allegedly disposed of wheat in the market and no stocks
were left with him for export. The petitioner sharply reacted to this assertion
and besides filing an affidavit, dated 31st of October 2003 controverting the
allegation, offered for inspection of his stocks by a Local Commission to be
appointed by this Court. After submission of the said affidavit, since the
learned counsel for the respondent did not press the objection any further,
the necessity to appoint a Local Commission for the purpose stood obviated.

19.     As a last resort, learned counsel for' respondent-PASSCO
submitted that there is eveiy likelihood of the petitioner not exporting wheat
and by providing fake documents, he may get benefits under the Agreement,
dated the 31st of March 2003. The apprehension is not well-founded. The
draftsman of the said Agreement took special care in this behalf vide Clause
12, wherein production of almost all requisite documents was made a
condition precedent to the release of the amount of ungradation/export
expenses. Moreover, PASSCO retained authority to demand "any other
document" in proof of export from the petitioner. Even PASSCO can depute its own representative to be physically present at the time of shipment of wheat by the petitioner. This should, therefore, allay all apprehensions entertained by the said respondent.

20. For the foregoing reasons, this petition is allowed, the impugned letter, dated 1st of September 2003 is declared to be illegal and without lawful authority, consequently the petitioner shall be entitled to a period of three calendar months from the date of this judgment to export wheat stock purchased from PASSCO, and to submit, within the said period of three months, export documents which shall be entertained by the said respondent, and the petitioner shall be entitled to benefits in terms of the Agreement, dated the 31st of March'2003, as if no breach thereof has taken place. This order shall not, however, affect already recovered amount of penalty (liquidated damages) from the petitioner. There shall be no order as to costs.

(B.A.)                                                                                Petition allowed.