IN THE HIGH COURT OF SINDH AT KARACHI

Suit No. 488 of 2001

M/s. Royal Group

Versus

Hubei Provincial Medicines &

Health Products I/E Corporation

BEFORE:

Justice Muharrem G. Baloch

Date of Hearing:

07.5.2009

Plaintiff:

Through Mr. S.M. Awan Advocate.

Defendant:

Declared exparte.

JUDGMENT

Muharrem G. Baloch, J:- Plaintiff named above has filed this suit for damages along with outstanding amount and permanent injunction against the defendant with following prayers:-

i) To grant damages for defamation to the plaintiff in a sum of Rs.100,000,000/-.

ii) To grant the sum of US$.118,975.33 in favour of the plaintiff.

iii) To grant permanent injunction restraining the defendant from making any false and frivolous statements against the plaintiff and from issuing any defamatory letters to any local or foreign authorities/agencies/bodies/ departments so as to defame the plaintiff in the competitive markets.

iv) Cost of the suit.

v) Any other relief that this Hon’ble Court deems fit and proper in the circumstances of this case.

2. Precisely, the facts of the plaintiff’s case are that the plaintiff is a partnership firm having its place of business at ONB-E/2, Mehar Sons Estates, Talpur Road, Karachi, and an importer of pharmaceutical products. The defendant is a company incorporated in China carrying on business as a trading house, engaged in import/ export of pharmaceutical, medicinal, health projects and surgical disposable (hereinafter referred to as the products) and having its place of business at 168, Jingwu Road, Hankou, China.

3. According to the plaint, the plaintiff being a leading firm meeting with the health standards devised by each respective importer country and specifically adhering with the current manufacturing standard set up by the World Health Organization (W.H.O), to Africa in addition to 56 countries since more than past 20 years, with principal office established at Uganda and Nigeria, thereby making valuable contributions towards Pakistan’s economy. The defendant being aware of the sound reputation and good-will of the plaintiff in the above business approached the plaintiff to act as defendant’s agent for the purpose of promoting/exporting and distributing the defendant’s products in Nigeria, Ghana, Uganda, Chile, Madagascar and Yemen (hereinafter referred to as the locations) and executed an exclusive agency and distribution agreement dated 27.9.1999 (hereinafter referred to as the agreement) with the plaintiff thereby appointing him as its sole and exclusive agent for selling the product at the locations on mutually agreed terms and conditions set out in the agreement. According to the plaintiff in order to establish the mutually beneficial long term relationship with the defendant, the plaintiff made substantial investment and incurred considerable expenses in registering, marketing and promoting the products of the defendants at the locations reflecting the plaintiff’s commitment to develop and continue a sound working relationship with the defendant. It is the case of the plaintiff that in the year 1999 the defendant supplied consignment of pharmaceutical products Chloroquine Phosphate Tablets and PPF 4 Mega, bound for Uganda to the plaintiff, which consignment upon inspection by the National Drug Authority Uganda (hereinafter referred to as NDA) were out rightly rejected by the N.D.A. for not complying with the prescribed standards. The consignments were rejected for the following reasons:-

Products

Reason for rejection

Chloroquine Phosphate Tablets

The Chloroquine Phosphate Tablets were not coated and hence did not comply with the British Pharmacopea Standards.

The order placed by the plaintiff to the defendant for the Chloroquine Phosphate Tablets clearly specified that the same should be according to BP standard. As later confirmed vide report by the British Pharmacopea Commission, Chloroquine Phosphate Tablets BP must be coated and the tablets do not comply with the British Pharmacopea Standards if they are not coated.

PPF 4 Mega

This product was rejected for bearing loose and creased labeling.

4. The plaintiff further pleaded that since the rejected products were fully paid for by the plaintiff, the plaintiff apprised the defendant of the terms and conditions of the agreement whereby the defendant warranted that the products supplied by the defendant to the plaintiff will be as per accepted British Pharmaceutical (BP) Standards and covenanted to indemnify the plaintiff for any loss caused to the plaintiff on account of the products being qualitative defective in addition to agreeing to reimburse to the plaintiff all costs of products and expenses of freights at Chinese Port to specified destinations and costs of return plus clearing/forwarding cost. The plaintiff further pleaded that despite of the fact that the products of the defendant were rejected by N.D.A. the defendant refused to reimburse and refund the cost of rejected goods and expenses of freights of the rejected goods at Chinese port to specified destinations to the plaintiff. The defendant time and again threatened to discontinue business with the plaintiff knowing that discontinuation of the business would expose the plaintiff to substantial loss of investment made by the plaintiff for marketing the defendant’s products at the locations.

5. The plaintiff further pleaded that its Senior Manager Procurement and GMP consultant finally managed to visit the defendant at China at the plaintiff’s cost and expense, the defendant again delayed inspection by renegotiating the agreed terms and conditions of the agreement and pressurizing the plaintiff to adhere to their arbitrary terms followed vide letter dated 30.4.2000. However, despite prompt clarification of all issues by the plaintiff vide letter dated 8.5.2000 the defendant continued with their rigid attitude and delayed the inspection. After much concerted efforts on the part of the plaintiff and extra expenses incurred in the extended visit to defendant at China, the defendant agreed to inspection of the manufacturing unit which upon inspection to the utter shock and dismay of the plaintiff were found to be contrary to the GMP standards for which the plaintiff provided written GMP guidelines to the defendant.

6. Instead of the concentrating upon bringing the manufacturing unit with the compliance with the prescribed GMP the defendant continued with its arbitrary demands. In that inter alia the defendant pressurized the plaintiff to accept arbitrary amended payment terms along with other terms of agreement and threatened to keep inspection of the manufacturing units by NDA officials in abeyance so as to pressurize the plaintiff to heed to their unreasonable demands being fully aware that due to delay in NDA inspections, plaintiff’s business will continue to be suspended, which fact was repeatedly communicated by the plaintiff to the defendant. The defendant continued to exert undue pressure upon the plaintiff to accept their arbitrary demands and threatened to cancel the agreement in addition to accusing the plaintiff of being dishonest vide letter dated 23.6.2000.

7. It is further pleaded by the plaintiff that the defendant entered into a sale contract No.99HBMP C-131 dated 10.11.1999 (hereinafter referred to as the contract) with the plaintiff for supplying their commodities specified in the said contract as per order placed upon the plaintiff with the defendant (hereinafter referred to as the order) against which the defendant promptly received 10% advance payment amounting to US$.4146.00 from the plaintiff. However, as reflection of the defendant’s usual course of practice to hinder the plaintiff’s business, despite having received prompt advance vide letter dated 23.2.2000, the defendant refused to honour the contract and failed to supply the order to the plaintiff as agreed in terms of the contract. The defendant’s refusal to honour its commitment resulted in substantial loss to plaintiff and consequently the plaintiff’s business continued held up at Nigeria.

8. Due to non-compliance of the terms of the agreement on the part of the defendant and providing the plaintiff rejected products, the plaintiff has suffered loss with the following claim against the defendant:-

i)	Difference of purchase price and sale price of Chloroquine Phosphate Tablets 10x10 and PPF 4 Mega.	US$.7,929.03
ii)	4000 Chloroquine Phosphate Tablets 1000’s @ 4.90	US$.19,600-00
iii)	Brokers Commission	US$.938-00
iv)	Cost of registration of products at Uganda	US$.10,550-00
v)	Renewal fee for each product @ US$.200/-	US$.2,600-00
vi)	Cost of registration of 3 products at Ghana and facilitation fee.	US$.3,000-00
vii)	Travelling and inspection expenses by the plaintiff’s senior marketing officer and GMP consultant plus professional fee of GMP consultant.	US$.5,881-00
viii)	Royalty of 10% of total business with the defendant on account of discontinuation of plaintiff business	US$.60,916-30
ix)	Freight charges from Mombasa to Kampala for rejected goods	US$.1,915-00
x)	Other expenses for clearing freight for rejected goods.	US$.1,500-00
xi)	10% advance payment made to the defendant under sales contract dated 10.11.1999	US$.4,146-00
	Total sum payable by the defendant to plaintiff.	US$.118,975-33

9. According to the plaintiff the defendant admitted the plaintiff’s claim for US$.19,600 and US$.7,929.03 in terms of letter dated 11.8.2000.

10. The plaintiff further pleaded that the defendant has started defamation campaign against the plaintiff as admitted in letter dated 30.9.2000 and the said acts of the defendant harmed the plaintiff’s reputation and business.

11. The above facts gave cause to the plaintiff to bring suit against the defendant on 27.9.1999 when the agreement was executed between the plaintiff, on 18.9.2000, 22.9.2000 and 28.9.2000 when the defendant made malicious and defamatory remarks, allegations against the plaintiff, on 6.9.2000, 7.9.2000 and 30.9.2000 and by another letter, when the plaintiff sent letters to Consulate General of Peoples Republic of China at Karachi and NDA and on all such occasions when the defendant continued with its derogatory practice against the plaintiff.

12. The notices/summons of the suit were issued against the defendant at the given address of China and the diary of the Assistant Registrar dated 31.5.2002 reveals that the summons issued against the defendant through D.H.L. returned served as per confirmation report, therefore, the defendant was required to file the written statement within four weeks but the same was not filed, therefore, the summons were again issued against the defendant through Secretary, Ministry of Foreign Affairs, Islamabad, and at last the matter was placed before the Court on 4.8.2008 on which date the defendant was declared exparte and it was ordered that the suit against it will proceed exparte. In view of the above order the matter was placed for final disposal on 20.8.2008.

13. I have heard the arguments of Mr. S.M. Awan, learned counsel for the plaintiff, and with his assistance perused the material available on record.

14. The claim of the plaintiff is based on agreement dated 27.12.1999 executed between the plaintiff and the defendant. In the said agreement the address of the defendant is shown as “168, Jingwu Road, Hankou, China”. Besides, the agreement is for supply of products of defendant by the plaintiff to various foreign and African countries including Uganda. It is the case of the plaintiff that in the year 1999 the defendant supplied consignment of pharmaceutical products Chloroquine Phosphate Tablets and PPF 4 Mega, bound for Uganda to the plaintiff, which consignment upon inspection by the National Drug Authority Uganda (NDA) were out rightly rejected by the N.D.A. for not complying with the prescribed standards and the plaintiff time and again approached the defendant to indemnify the plaintiff for the loss as it had paid for the consignment which was rejected by the NDA, Uganda. The plaintiff also claimed cost of freights and other expenses from the defendant but no heed was paid by the defendant. On the contrary the defendant started malicious and derogatory campaign against the plaintiff which harmed the reputation in business of the plaintiff, therefore, the plaintiff has brought this suit.

15. I have given my anxious consideration to the submissions made by learned counsel for the plaintiff in respect of the jurisdiction of this Court. Admittedly, the defendant is a firm situated in China and carrying on its business there. The agreement, as admitted by the plaintiff, has partly been executed at China. It is also an admitted fact that the consignments of the products which were supplied to the plaintiff were for African countries including Uganda where the consignment was out rightly rejected in the year 1999. Under such circumstances, the plaintiff at the best had a cause action either at Uganda where the consignment delivered to it by the defendant was rejected or at China where the defendant is carrying on its business. Besides, the agreement dated 27.9.1999 which is filed and relied upon by the plaintiff contains clause/ condition No.10 in respect of jurisdiction. In the above mentioned clause it is stated that all disputes arising in execution of or in connection with this agreement shall be settled amicably through friendly atmosphere and/or Economic and Trade Arbitration Commission of China Council for the promotion of International Trade Beijing for Arbitration in accordance with its Provisional Rules of Procedure. If either party do not satisfy with the decision as taken by the China Council for the promotion of International Trade Arbitration Commission of China Council for the promotion of International Trade Beijing, either party have the right to go to any Chinese Court for proceeding of their case and resolve their dispute by the Court. Hence, in terms of the said agreement, the plaintiff could have approached to the Chinese Court but instead it has filed the suit in this Court.

16. Furthermore, Section 20 of CPC is in respect of jurisdiction, which is reproduced as under:-

“Sec. 20—Other suits to be instituted where defendants reside or cause of action arise.- Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction—

(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or

17. Perusal of the above section reveals that where the defendant is residing or carrying on business then that Court has the jurisdiction. Admittedly, the defendant is a company which carries on its business at China, therefore, the Court having jurisdiction would be China and not at Pakistan. Besides, the claim of the plaintiff that the consignment of the products were rejected by N.D.A. Uganda, therefore, it had cause of action at a Court of Uganda.

18. In view of the above, I am of the considered view that this Court has no jurisdiction, therefore, the suit is not maintainable in law, which is hereby dismissed, however, with no orders as to costs.

Karachi. Judge

Dated: