Suit No.655 of 2010
Date of hearing: 14.10.2010
For hearing of CMA No.4198/2010
Plaintiff: Lucky Cement Limited.
Defendants: HMS Bergbau AG & others
Mr. Rashid Anwer, Advocate for the plaintiff.
Mr. Shaiq Usmani, Advocate for defendant No.1.
Mr.Agha Zafar Ahmed, Advocate for defendant No.2.
Mr. M.Sarfraz Sulehry, Advocate for defendant No.4.
Mr. Mazhar Lari, Advocate for intervener.
Muhammad Ali Mazhar, J. This application is brought by the plaintiff under Order 39 Rule 1 & 2 CPC. The brief facts of this suit for specific performance, mandatory injunction, permanent injunction and damages are that the plaintiff is a cement manufacture and exporter. The defendant No.1 is engaged in the supply of coal to industrial users. The defendant No.2 is also engaged in the trading of commodities including coal and acts as an agent of defendant No.1 in Pakistan. The plaintiff required 40,000/- M.T. of coal, and entered into a negotiation for the purchase of aforesaid coal with defendant No.2. The non-coking scheme coal of certain specifications as required by the plaintiff was not readily available in Pakistan. The defendant No.1 issued a proforma invoice on 04.1.2010 to the plaintiff in which the details of coal quantity, price, number of shipments etc. were mentioned. The defendant No.2 acting on behalf of defendant No.1 entered into an agreement dated 08.2.2010. The plaintiff opened the L.C. on 13.2.2010 on the terms and conditions specified in the proforma invoice and the agreement. The above agreement also provided that defendant No.2 shall furnish bank guarantee in the sum of Rs.10 Millions in favour of the plaintiff and according to the agreed terms the defendant No.2 furnished the bank guarantee on 9th February 2010. First shipment was to be made between 01.3.2010 and 10.3.2010, second shipment between 01.4.2010 and 10.4.2010, but no shipment was made. It is also stated in the plaint that defendants No.1 & 2 both have avoided the performance on different pretexts. The plaintiff vide e-mail dated 20.2.2010, requested defendant No.2 to supply the details of first shipment which was to be made between 01.3.2010 and 10.3.2010. On 25.2.2010, a reply was received that the first shipment would be in the second week of March and the name of vessel and date of arrival in Karachi would be communicated to the plaintiff. However, on next day, the defendant No.2 communicated that the shipment would be made by Mid-March. It is further stated that on 08.3.2010, the plaintiff received an e-mail from defendant No.2 stating that its principal i.e. defendant No.1 requires an amendment in the LC, thereafter, the defendants No.1 and 2 sought two amendments on 29.3.2010 and 01.4.2010 with mala fide intent. The plaintiff executed all amendments in the same terms as demanded by the defendants No.1 & 2. In the meanwhile, the defendant No.2 informed the plaintiff that it will not be able to deliver 40,000/- MT of coal as per agreement and if the plaintiff agrees, then the defendants No.2 will help the same in procuring some other coal from an alternate source. It is further alleged that the defendants No.1 and 2 have committed breach of their obligation and if the defendants are allowed to get away with their flagrant breach of contract, the plaintiff will suffer irreparable loss as the coal with required specifications is not available in the market at present and the consequences of breach of contract on the part of defendants will destroy the plaintiff’s commercial reputation and credibility. In the injunction application the plaintiff has prayed that the defendants No.1 and 2 may be restrained from selling and or creating any third party interest or dealing with 32.667 MT of non-coking scheme coal which has been unloaded from “MS Gulf Shagra” at Karachi port. In the same application it has been further prayed that the defendants No.3 and 4 may also be restrained from clearing or releasing the consignment to the defendants No.1 and 2.
The defendant No.2 filed its counter affidavit in which it has been stated that the interim order passed by this court on 29.4.2010 is liable to be vacated, as the plaintiff is not entitled to any relief on accounts of its own breach. The coal lying under restraining order does not belong to either the defendant No.1 or defendant No.2 except 7000/- MT of the defendant No.2 (total 10,000/- MT out of which delivery of 3000/- MT has been taken before passing the restraining order). This 10,000/- MT coal was purchased through letter of credit by the defendant No.2 from one International Energy Resources FZC and rest of coal is owned by one M/s. Phoenix Commodities Private Ltd. It is further stated by the defendant No.2 in its counter affidavit that the plaintiff had already obtained performance bank guarantee from the defendant No.2 to the tune of Rs.10 Million and the same has also been encashed which shows that the money would be adequate compensation and therefore, there is no element of any irreparable loss. It if further mentioned in the counter affidavit that the coal of description claimed by the plaintiff is readily available in the local and international markets which can be purchased with a short notice. The defendant No.2 stated that the plaintiff approached to it for purchase of coal, thereafter defendant No.2 entered into a contract with the plaintiff at the price of US $ 84.65 per MT CNF and US $ 20 per MT being freight. Before entering into contract with the plaintiff, the defendant No.2 contracted with the defendant No.1 for the supply of coal to them at a price of US $ 62.50 MT. Due to this deal, the defendant No.2 was expecting a profit of US $2.15 per MT. The defendant No.2 informed the plaintiff that the consignment would be purchased from Indonesia through defendant No.1, who is a mine owner and payment through letter of credit is to be directly made in favour of defendant No.1. When the plaintiff failed to amend the letter of credit, the defendant No.2 had no other option but to sell the same to a third party. The defendant No.2 sold the cargo of M/s. Phoenix Commodities (Pvt.) Ltd. who opened a letter of credit directly in favour of defendant No.1. It is further alleged by the defendant No.2 that the plaintiff opened the letter of credit which was not in accordance with the agreement dated 08.2.2010. The plaintiff suggested many changes in material condition in the letter of credit and making it unworkable for the defendants No.1 and 2. The plaintiff firstly put a price/weight adjustment clause 17(B) relating to total moisture and according to which if total moisture will exceed 12% the price will be adjusted. Since in the agreement dated 8.2.2010, there was no such clause, therefore, the plaintiff was requested to delete such condition. In order to avoid any further delay, the defendant No.2 agreed to sign an addendum on 29.3.2010 to allow the plaintiff to put a price adjustment clause. The second condition was imposed by the plaintiff which was relating to volatile matter (VM). As per proforma invoice and agreement dated 8.2.2010, it was agreed that consignment will be liable to be rejected, if volatile matter exceeds 42% but the plaintiff inserted a clause 17(E) in the letter of credit with the condition that if volatile matter is below 32% or above 38%, then the coal is rejectable at the sole discretion of applicant without any obligation/liability. The defendants vide e-mail dated 8.3.2010 requested the plaintiff to change current wording with the modification that if volatile matter is above 42% then the local coal is rejectable at the sole discretion of applicant without any obligation or liability. In response to it, the plaintiff vide e-mail dated 09.3.2010 stated that the changes relating to volatile matter are not accepted on the ground that basis of Padang coal given to them was VM-32-38, hence the plaintiff did not agree to deviate from alleged given specs, therefore, the defendant No.2, once again replied the plaintiff on 16.3.2010 that their requested amendments are not acceptable to the defendant No.2. The defendant did not receive any reply, therefore, again vide e-mail dated 29th March 2010, the defendant No.2 informed the plaintiff that as discussed between Mr.Ameen Ghanny with Mr.Kamlesh Kumar, the contract between the plaintiff and defendant No.2 was for volatile matter (VM 38-42). The defendant No.2 already charted a vessel at demurrages rate of US $ 14000 per day, hence on 30.3.2010, the defendant No.2 insisted the plaintiff to amend the letter of credit in terms of agreement. The plaintiff and defendant No.2 entered into an addendum whereby it was agreed that the quality specifications for volatile matter (ADB) now to be read as 32-42 % approximately instead of volatile matter (ADB 38-42 %). The plaintiff failed to amend the letter of credit till close of business hour on 01.4.2010 and on 02.4.2010, the defendant No.2 had to arrange another buyer to open letter of credit in favour of defendant No.1. The plaintiff on 03.4.2010, amended the letter of credit with further conditions. The said amendments were also not in accordance with the contract and addendum thereto, therefore, the defendant No.2 vide letter dated 03.4.2010, clearly informed the plaintiff that no shipment can be made, as the plaintiff has failed to perform their obligations under the contract. The letter of credit was not workable or negotiable for the defendants No.1 and 2 and any amendment in the letter of credit after the close of business hour on 01.4.2010 was immaterial. It is further stated in the counter affidavit that the performance guarantee given by the defendant No.2 itself shows that the contract was revocable in nature and if the defendant No.2 fails to perform the contract, the plaintiff would be entitled to encash the performance bank guarantee.
The plaintiff filed its rejoinder, in which, beside reiterating other contentions, it was further added that when the interim order was passed by this Court, the title of the entire quantity of coal vested in the defendant No.1, therefore, there is no question of any other party claiming to have any interest in the said quantity of coal. It is further stated that the plaintiff had repeatedly requested the defendant No.2 to extend the date of expiry of the performance guarantee beyond 30.6.2010, but it refused to do so, therefore, the plaintiff had no option but to encash the guarantee failing which the same would have expired. The plaintiff is not interested in damages but the encashment has only been done to defeat the mala fide designs of the defendant No.2. As soon as the said guarantee was encashed by the plaintiff, the defendant No.2 approached this Court and took a plea that stay order be vacated on account of encashment of the guarantee.
The defendant No.2 did not file any counter affidavit to the injunction application but preferred to move another application under Order 7 Rule 11 CPC, in which a clear stand has been taken that the case of plaintiff against the defendant No.1 is based on a proforma invoice and letter of credit in which defendant No.1 has been shown as beneficiary. The defendant No.1 further stated that no payment has been made by the plaintiff against the said proforma invoice. It is further stated that the plaintiff has no privity of contract with the defendant No.1 and similarly no payment has been made by the plaintiff’s bankers to the defendant No.1 under the said letter of credit or on the basis of aforesaid proforma invoice. The plaintiff filed its counter affidavit and denied all allegations. It is further stated in the counter affidavit that the plaintiff opened the letter of credit in the favour of defendant No.1 and the same was duly accepted by the defendant No.1 but no payment made to the defendant No.1 as it did not perform its obligations. So far as this application under order 7 Rule 1 & 2 is concerned, it will be decided separately however, this has been only discussed and mentioned to show the plea of defendant No.1 against the plaintiff.
The defendant No.4, filed its counter affidavit in which it has been stated that prior filing suit against KPT, no statutory notice was served under Section 87 of the KPT Act. It has been further stated that the vessel has berthed at east wharf and started to discharge 32666.546 MT. The coal has been shifted to yard. KPT does not sell goods lying with it unless custom department does so. Where the KPT storage charges are not paid, then KPT has lien on goods as per KPT Act.
Heard the arguments. The learned counsel for the plaintiff, Mr.Rashid Anwer, argued that from the documents available on record, agency relationship is established between the defendants No.1 and 2. He further argued that the plaintiff never committed any default or breach of its obligation. When the interim orders were passed by this Court, the defendant No.1 was still lawful owner of the cargo. The coal is needed to run the plaintiff factory which is not readily available and without this coal, the plaintiff will not be able to meet its export order which will cause huge loss. The intervener/defendant No.2 are admittedly coal traders who will simply sell it to some other party according to prevailing market rate, while the plaintiff on the other hand needs this coal to run its own factory. The learned counsel further argued that the defendant No.2 bought the cargo from HMS at $ 62.50 per MT, but it claims that it sold the cargo at cost to the intervener to avoid the loss. The defendant No.2 in its pleading stated that he had already charted the vessel, therefore, their actual cost was US $ 62.50 + $ 20 ( for the freight), therefore, it should have sold it to the intervener at US $ 82.50 to avoid any loss, but it is stated by the defendant No.2 that it sold the cargo to the intervener US $ 62.50 CFR. The learned counsel argued that the entire transaction which said to have been entered into between the defendant No.2 and the alleged intervener is a false transaction to defeat the claim of plaintiff. The default was committed by the defendant No.2, as it failed to make shipments within the stipulated time frame. The main ground for termination of the contract was that the plaintiff failed to make the requested amendments on 1st April, which was physically impossible for the plaintiff, as the amendments were requested by the defendant No.1 to be made on the same day. Subsequently, the defendant No.2 sought an amendment in the letter of credit asking the coal should only be rejected if the volatile matter (VM) was above 42, which was actually new term hence it was rejected by the plaintiff. After addendum, the plaintiff instead of changing the acceptable range from 32-42, inadvertently change it 38-42. The learned counsel further argued that in relation to TM (total moisture) of the coal it was originally agreed by the parties that the maximum permissible limit for TM would be 12% and the coal could be rejected if the TM was more than 12%. The defendant No.2 asked the plaintiff that it should be given a buffer zone of 2% and the plaintiff will only be able to reject the coal if the TM (total moisture) would exceed 14%. When the plaintiff agreed to this buffer zone, its letter of credit laid down a formula for calculating the penalty if the coal TM exceeds the buffer zone.
The crux of the arguments of the learned counsel was that the plaintiff is entitled to injunctive relief and the interim orders passed by this Court on 29.4.2010 may be confirmed. In support of his argument, the learned counsel for the plaintiff relied upon following case law:-
1. 2009 CLD 1524, (M/s Dada Steel Mills vs. Metal Export and others). In this judgment, the learned division bench of this court in High Court Appeal, discussed sections 19, 20, 21 and 22 of the Specific Relief Act and section 73 of the Contract Act. The brief facts of this case were that the appellant filed suit for specific performance of contract and injunction, when the respondents had refused to carry out their part of agreement and negotiating for the sale of vessel to the other party. The learned Single Judge came to the conclusion that from the evidence it was clearly established that the appellants were ready and willing to perform their part of contract but the respondents wrongly backed out from the agreement and committed breach of agreement. Instead of granting relief of specific performance, the learned Judge awarded a sum of Rs.20,36,628/- as damages. The learned divisional bench after appreciating the evidence on record held that the appellant has not purchased vessel for the purpose of selling scrap in the open market but for the purpose of using in his re-rolling factory and if the delivery was not effected then same may result closure of the factory and other problems like labour problem, breach of contract etc. In the same judgment the court has also held that while exercising power under Section 19 of the Specific Relief Act, if court comes to the conclusion that the plaintiff is entitled for specific performance but instead of granting such relief of specific performance it can grant relief of compensation for the breach of contract or further while granting relief of specific performance to meet the ends of justice in addition to the relief it can grant compensation also. It was further held in the same judgment that where the court comes to the conclusion that plaintiff was entitled to specific performance, on the ground of unfair advantage over the defendant or hardship of the defendant which he did not foresee, court can refuse to grant relief of specific performance and can award compensation for which plaintiff is entitled on the date of judgment.
2.1990 CLC 609, (Molasses Export Company Limited vs. Consolidated Sugar Mills Limited). In this judgment, the learned single judge of this court held that where in a suit for specific performance of agreement, plaintiff seeking temporary injunction had proved that he would suffer irreparable loss in case agreement was not specifically performed by the defendants, temporary injunction, could not be refused to plaintiff merely for reason that plaintiff could be compensated by awarding damages, if plaintiff ultimately would establish his case.
3.1997 CLC 302, (Agha Saifuddin Khan vs. Pak Suzuki Motors Company Limited). In this judgment, the learned single judge of this court discussed section 58 of the Sale of Goods Act, 1930 which empowers a court in a suit for breach of contract on an application filed by the plaintiff, to deliver specific or ascertained goods and direct the performance of the contract subject to provisions of Chapter II of the Specific Relief Act. Section 58 of Sale of Goods Act further empowers the court to pass a decree unconditional or upon such terms and conditions as to damages while passing order on the application of plaintiff which can be made at any time before the decree.
4.American Jurisprudence Volume 49 page 151, specific performance, Section 128. According to this annotation, the remedy of specific performance is available where relief by way of damages is inadequate and incomplete as where the plaintiff would be impeded in his business plans and subjected to loss of profits and the complainant proves a contract having the requisite elements of certainty and definiteness to be enforceable such as a contract to furnish gas, water, or other necessary material to a manufacturing establishment where the things contracted for is not immediately available from other sources and breach of the contract would stop operations of the complainant’s establishment.
5.AIR 1979 Bombay 214 (M/S Jolly Steel Industries vs. Union of India). This matter pertains to the scrap steel rails disposed of by Central Railway, Bombay through tenders. Bombay High Court held that the rail scrap not being available freely in the open market, case falls under the exception contemplated under section 58 of the Sale of Goods Act and Section 10 of the Specific Relief Act. In this matter, the award of Arbitrator was under discussion whereby the respondent was directed to deliver 1567 (M.T) in terms of the contract.
6.AIR 1996 Calcutta 67 (Vijaya Minerals vs. Bikash Chandra). In this Judgment, the Calcutta Court held that manganese and Iron Ore are only available in certain areas where such mines are located and, therefore, it can not be said to be an ordinary article of commerce.
7.1927 K.B 649 (Behnke vs. Bed Shipping Company Limited). In this matter, the plaintiff was a German ship owner who brought an action against the defendants, the owners of the British Steamship City, claiming declaration that he purchased it through a contract and an order for specific performance of that contract and injunction restraining the defendants from parting with the Steamship to anyone but the plaintiff. The Court held that Section 52 of the Sale of Goods Act gives the Court a discretion, if it thinks fit, in any action for breach of contract to deliver specific or ascertained goods to direct that the contract shall be performed specifically.
8.1909 Chancery Division 440 (James Jones and sons vs. Earl of Tanker Ville). In this matter, the plaintiff entered into a contract with the defendant for the purchase of certain timber growing on his property. The defendant repudiated the contract and forcibly ousted the plaintiffs. The plaintiffs brought actions against the defendants asking for injunction. The court held that it has ample jurisdiction to grant the injunction asked for but though, of course it is in its discretion, if it so thinks fit, to award damages in lieu of relief by way of injunction.
9. 1 All E. R 1954 (Sky Petroleum Limited vs. VIP Petroleum Limited). In this matter, it was held that an interlocutory injunction would be granted for the Court could order specific performance of contract to sale and purchase chattels which were not specific or ascertained in cases where damages would not provide a sufficient remedy, and on the evidence damages would not be an adequate remedy for plaintiff company.
10.AIR 1985 Allahabad 265 (U.P. State Electricity Board vs. Ram Barai Prasad). In this matter, the plaintiff had filed a suit for declaration that they were entitled to the extension of time limit to lift coal ash under the terms of agreement. The plaintiff was allowed a month’s time to remove remaining quantity of coal ash subject to the payment of price to the appellant as agreed under the contract. The Court held that coal ash is not ordinary articles of commerce. It is also not easily available in the market, therefore, compensation in money not adequate relief for breach of such contract.
In rebuttal, learned counsel for defendant No. 2 argued that the plaintiff obtained performance bank guarantee and has also encashed the same which shows that money would be adequate compensation hence, there is no element of irreparable loss to the plaintiff. The letter of credit opened by the plaintiff was not in accordance with the agreement dated 8.2.2010. Despite repeated requests made by the defendant No. 2, the plaintiff failed to amend/alter letter of credit in accordance with the agreed terms, therefore, it was the plaintiff which itself breached the terms of contract. The plaintiff put two material conditions in the letter of credit making it unworkable. The plaintiff firstly put a price/weight adjustment relating to total moisture (T.M) and the second condition was further inserted relating to volatile matter (V.M). Both such conditions were never agreed in the contract. The Import Manager of defendant No. 2 visited the office of the plaintiff and requested for immediate amendment so that vessel can be loaded without any loss of time but no proper response was given. On receiving no positive response from the plaintiff regarding amendment of letter of credit within time, the defendant No. 2 was forced to look for another buyer on 2.4.2010. The defendant No. 2 vide agreement dated 3.4.2010 entered into a deal with M/s Phonenix Commodities Private Limited for the sale of coal. The contract with the plaintiff was stood cancelled due to breach of plaintiff on the close of office hours on 1.4.2010 which fact was again communicated to the plaintiff on 2.4.2010, therefore, question of performance of any such contract does not arise. The learned counsel further argued that the contract of sale of goods are not capable of being specifically enforced for the reason that damages can be easily ascertained. The plaintiff has failed to show the uniqueness and peculiarities of the coal. The coal of the description claimed by the plaintiff is readily available in the local and international market which can be supplied in a very short notice. There is no letter of credit of plaintiff is in field, therefore, it cannot be said that the plaintiff is ready and willing to fulfill the contract. The plaintiff has not paid a single penny towards the cost of coal. The letter of credit of plaintiff has also been expired. Learned counsel concluded that since the damages and/or compensation is an adequate relief in the matter, therefore, the plaintiff has no prima facie case, the balance of convenience also does not lie in favour of plaintiff and there is no question of irreparable loss when not only the plaintiff has encashed the performance guarantee but has also claimed huge damages in the plaint, therefore, injunction application is liable to be dismissed.
In support of his arguments, learned counsel for defendant No. 2 relied upon the following case law:-
1. PLD 1998 Karachi 1 (Petro commodities Private Limited vs. Rice Export Corporation). In this Judgment, the learned divisional bench of this court held that once contract was willfully broken, it was relegated to the status of dead letter and no question of its performance would arise. The contract for sale of goods was not capable of being specifically performed, therefore, permanent injunction in terms of section 56 (f), Specific Relief Act could not be issued.
2.1991 MLD 2697 (Haji Abdul Sattar vs. Secretary, Karachi Grains and Seeds Merchants). In this Judgment, the learned single judge of this Court held that goods in question being not such that their substitute could not be found nor they were of same peculiar value to plaintiff and same be easily available in market, plaintiff could recover price of such goods which he has paid plus extra amount he would have to spent when such goods are available at the high price.
3.(1873) Law Reports 17. Equity 132 (Fother Gill vs. Rowland). In this case, it was held that the court will not interfere by injunction to restrain a breach of contract for the sale and delivery of chattels which it could not specifically perform.
4.1980 CLC 1228 (Al-Farooque Shipping vs. Vasa shipping company). In this matter, it was held that the plaintiffs entered into an agreement for purchase of vessels for scraping it. The plaintiffs have neither pleaded nor pointed out any peculiarity or uniqueness in the vessel. Section 58 of Sale of Goods Act which empowers a Court to grant specific performance of contract relating to a sale of goods expressly also provides that the above section is subject to provisions of chapter II of the Specific Relief Act.
5.2004 SCMR 1092 (Puri Terminal Limited vs. Govt. of Pakistan). In this case, the honorable supreme court has held that injunction is a form of equitable relief is to be issued in aid of equity and justice but not in aid of injustice. For grant of such relief, it is mandatory not only to establish that petitioner has a prima facie case but also that balance of convenience is on his side and that he would suffer irreparable injury/loss unless he is protected during the pendency of the suit.
After hearing the arguments of learned counsel, I have to determine whether the plaintiff is entitled to injunctive relief. Section 58 of the Sale of Goods Act (III of 1930), provides that subject to provisions of Chapter II of the Specific Relief Act 1877, in any suit for breach of contract to deliver specific or ascertained goods, the court may, if thinks fit, on the application of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option or retaining the goods on payment of damages. In order to see Chapter II of the Specific Relief Act 1877, recourse has to be made to Section 12 and onwards. Section 12 of the Specific Relief Act provides the contracts which may be specifically enforced. It is further provided in the same section that the specific performance of any contract may in the discretion of the court be enforced (a) when the act agreed to be done is in the performance, wholly or partly, of a trust; (b) when there exists no standard for ascertaining the actual damage caused by non-performance of the act agreed to be done; (c) when the act agreed to be done is such that pecuniary compensation for its non-performance would not afford adequate relief; or (d) when it is probable that pecuniary compensation cannot be got for the non-performance of the act. The explanation attached to this section further provides that unless and until the contrary is proved, the court shall presume that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money and that the breach of contract to transfer movable property can be thus relieved. In contrast, Section 21 of the Specific Relief Act, provides the contracts which cannot be specifically enforced. Clause (a) pertains to a contract for the non-performance of which compensation in money is an adequate relief while clause (b) speaks about a contract which is in its nature revocable. Section 19 of Specific Relief Act gives right to sue for specific performance of contract with compensation of its breach either in addition or substitution, however it is further provided that if in any such suit the court decides that specific performance ought not to be granted, but there is a contract between the parties which has been broken by the defendant and that the plaintiff is entitled to compensation, the court shall award compensation accordingly. Section 22 of the Specific Relief Act further makes it clear that the jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so, but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal.
The main document in this case is the coal purchase agreement dated 08.2.2010 executed between the plaintiff and defendant No.2 and Clause 9 of the agreement provides that the defendant No.2 will give a bank guarantee in the sum of Rs.10 Million on account of following:-
9.1 Performance and Quality Guarantee.
9.2 Lucky Cement factory/plant report will be followed for final quality. Awan Trading can have witness supervision over loading from port and discharge at factory, and sampling & analysis of factory lab.
9.3 Coal to be lifted from port in 45 days after completion of discharge from vessel.
9.4 Handling loss 0.5% maximum, but if the cargo is not lifted within 45 days the addition transit loss of 0.10% on remaining quantity shall be charged for every 15 days.
9.5 50 Kcal/kg difference in GCV will be ignorable between load port report and factory report. But if the coal is not lifted within 45 days, than addition 25GCV difference in load port and factory lab on balance quantity shall also be ignored for every 30 days”.
In pursuance of aforesaid clause, the defendant No.2 furnished performance guarantee to the plaintiff on 09.2.2010. It was further mentioned in the guarantee that it will remain valid till 30th June 2010 and liability under the guarantee is restricted to Rs.10 Million only. Besides claiming the specific performance, the plaintiff has also claimed damages/compensation in the sum of Rs.500,000,000/- along with markup/profits/charges at the rate of 15% per annum from the date of filing of the suit till realization. The ad-interim order was obtained by the plaintiff on 29th April 2010, but it is an admitted fact which is clearly reflecting from the affidavit in rejoinder filed by the plaintiff to the counter affidavit of injunction application that the performance guarantee has been encashed by the plaintiff. The plaintiff claims that it is not interested in damages/compensation but requires specific performance of the contract but facts remains that it has got encashed the same. In my view the purpose of incorporating specific clause for performance guarantee was to ensure the performance of contract and in case of refusal or denial by the defendant No.2, shield of bank guarantee was secured to safeguard the interest of the plaintiff by way of compensation in case of non-performance of the contract. Besides the performance guarantee, the plaintiff has also claimed huge amount of damages and compensation in the suit. In the plaint it is no where stated by the plaintiff that if the consignment in question is not released to the plaintiff by way of specific performance but it is only mentioned that the plaintiff will suffer irreparable loss and due to breach of contract, the plaintiffs commercial reputation and credibility will be destroyed. It is also not stated in the plaint that except the consignment in question, the plaintiff has no other coal stock available in its inventory to run the factory. It is also clear from the available document that after entering into coal purchase agreement dated 08.2.2010, the plaintiff by its own changed the condition in letter of credit. In the agreement, the rejection limit of volatile matter (VM) was agreed below 38 and above 42. While in the L.C. the plaintiff has mentioned the range of volatile matter below 32% and above 38%. Similarly, the percentage of total moisture was agreed in the agreement 14% maximum for rejection while in the L.C. the plaintiff mentioned that if total moisture exceeds 12% then the weight will be adjusted according to formula mentioned in the L.C. The case file shows that the plaintiff and the defendant No.2 entered into an addendum No.1 (Annexure-N, page 159 of the plaint), in which the percentage of volatile matter (ADB) was reduced to 32-42% from 38-42%, below 38/above 42 and it was further agreed in the same addendum that if total moisture exceeds 12%, the weight will be adjusted according to the formula which is itself provided and agreed in the addendum. The plaintiff amended the letter of credit and instead of changing the acceptable range from 32-42, changed it to 38-42% due to alleged inadvertence. The defendant No.1 asserted in paragraph 2 of its application moved under Order 7 Rule 11 C.P.C that no payment was made to it by the defendant. The plaintiff in its counter affidavit responded that defendant No.1 failed to comply with its obligation to ship the coal against the LC, hence no payment was made by the plaintiff’s bankers. In rejoinder, the defendant No.1 clearly stated that the letter of credit opened by the plaintiff in favour of defendant No.1 was returned by the defendant No.1 bankers to the plaintiff’s bankers and also attached annexure “Y”, a letter of Deutsche Bank in which it is stated that “beneficiary informed us, that your lc will remain unutilized we have closed our file”.
The case law relied upon by the learned counsel of the plaintiff are distinguishable. In non of the case, performance guarantee was secured in the contract as compensation of its non-performance but in this case, not only the performance guarantee of a huge amount was agreed and encashed but the plaintiff has also claimed huge amount of damages and compensation against the defendants. On one hand, the plaintiff is asserting its right of specific performance and showing disinterest in bank guarantee amount or damages but on the other hand got encashed the bank guarantee on the ground that it was being expired. If the plaintiff was so keen in the specific performance then it should not have encashed the guarantee, no matter it was being expired. The encashment of bank guarantee after obtaining the interim order of this court shows the lack of prima facie case in favour of the plaintiff and amounts to surrender/relinquish the right to maintain injunction till final adjudication of the case. When the defendant No.2 disclosed to this court that the plaintiff has already got encashed the bank guarantee and also attached copy of pay order with the counter affidavit, then in order to cover up the matter, the plaintiff in its rejoinder first time stated that it is willing to deposit amount in this court. In all fairness, the plaintiff should have applied leave of this court prior encashing the bank guarantee but no such effort was made. In the judgment reported in 2009 CLD 1524, the learned divisional bench after appreciating the evidence on record held that the appellant has not purchased vessel for the purpose of selling scrap in the open market but for the purpose of using in his re-rolling factory and if the delivery was not effected then same may result closure of the factory. Nothing has been said or claimed in the plaint that if the stock in question is not delivered to the plaintiff, it may result the closure of factory. In another judgment reported in 1990 CLC 609, the learned single judge of this court held that where in a suit for specific performance of agreement, plaintiff seeking temporary injunction had proved that he would suffer irreparable loss in case agreement was not specifically performed by the defendants, temporary injunction, could not be refused to plaintiff merely for reason that plaintiff could be compensated by awarding damages, if plaintiff ultimately would establish his case. In this matter injunction application was allowed on the ground that the defendant Consolidated Sugar Mills received financial benefit of Rs. 68,25,526 and Hyesons sugar mills received a sum of Rs.51,53,100 from the plaintiff which exceed the value of molasses to be supplied for the year 1985-1986 to the plaintiff.
At this juncture, I would like to refer to a judgment reported in 2010 SCMR 1217, (Atlas Khan vs. Muhammad Nawaz) in which the honorable supreme court held that the court of equity is not bound to grant a decree for specific performance of an agreement, even though the agreement is proved, and the Court has to take into consideration the circumstances surrounding the transaction to decide whether equitable relief of specific performance should be granted or not. In another judgment reported in 2010 SCMR 1507, (Shakeel Ahmed vs. Mst.Shaheen Kausar), the honorable supreme court held that discretion under S.22 of Specific Relief Act, 1877, has been given to court to grant specific performance of contract arrived at between the parties. Such discretion must be exercised on sound judicial principles of equity, fairness and good conscious and not on erroneous assumption or presumption. Court is not bound to grant relief merely because it is lawful to do so irrespective of the conduct of contracting parties and no unfair advantage to be given to a party or to the other in the suit for specific performance. In Petro commodities Private Limited vs. Rice Export Corporation, supra, the learned divisional bench of this court held that once contract was willfully broken, it was relegated to the status of dead letter and no question of its performance would arise. The contract for sale of goods was not capable of being specifically performed, therefore, permanent injunction in terms of section 56 (f), Specific Relief Act could not be issued and in the case of Puri Terminal Limited vs. Govt. of Pakistan, supra, the honorable supreme court held that injunction is a form of equitable relief is to be issued in aid of equity and justice but not in aid of injustice. For grant of such relief, it is mandatory not only to establish that petitioner has a prima facie case but also that balance of convenience is on his side and that he would suffer irreparable injury/loss unless he is protected during the pendency of the suit. It is further observed in the same case that the petitioner irrespective of seeking declaration, permanent injunction, compensation also claimed damages as an alternative relief. By claming damages as an alternative relief, the petitioner seemed to be not confident about the grant of other relief.
In my view, the plaintiff has failed to make out any prima facie case, the balance of convenience also does not lie in its favour and there is no question of any irreparable loss when not only the bank guarantee has been encashed due to non performance of the agreement but the plaintiff has also clamed huge amount of damages/compensation. In case, the plaintiff succeeds to prove the breach of contract and court comes to the conclusion that the contract was broken by the defendant No.2, the damages/compensation may be awarded to the plaintiff. So far as another claim of plaintiff that the coal is not readily available, the defendant No.2 filed a list of cargo position along with a statement submitted in court on 27th August 2010. This statement is said to be prepared on the basis of KPT Traffic Department Data to show that the plaintiff is importing foreign coal regularly and since January 2010 till August 2010, the plaintiff has imported 16 vessels. The defendant No.2 also attached list of vessels with name, IGM number, IGM date, importer name, bill of lading number etc. It is further stated that approximately, 2000,000 MT Non-coking coal owned by the plaintiff is lying at the port. The defendant No.2 has also attached with its counter affidavit, copies of IGM No.451, dated 2.4.2010, IGM No.632, dated 3.5.2010 and IGM No.698, dated 14.5.2010 and in the goods description, Non-coking steaming coal is mentioned and importer name is Lucky Cement Limited. No denial of the plaintiff is on record to challenge or dispute the authenticity of aforesaid IGMs and statement.
For the foregoing reasons, I am of the view that the plaintiff is not entitled to injunctive relief. Consequently, C.M.A No. 4198/2010 is dismissed.
Dated. 24.12.2010 Judge