This is a suit for recovery of Rs,37,01,836.58 and in the alternative for accounts filed by the plaintiff Rice Export Corporation of Pakistan (now Trading Corporation of Pakistan) against the defendant.
According to the contents of plaint case of the plaintiff is that it is a duly registered Corporation under the Companies Act, performing its functions relating to receiving, storage, inspecting, handling, clearing, forwarding and shipment of rice for export for and on behalf of Government of Pakistan. Under a written contract dated 10th November, 1982 plaintiff appointed the defendant, a sole proprietorship concern, as its Handling Agent for the rice crop 1982-83 at TPX Rice Godown.
Initially the contract was made for a period of two years. However, as per agreement thereof, it was further extended for one year i,e, 24-10-1984 to 23-10-1985. After completion of contract period several letters/reminders were issued to the defendant to render accounts of the rice and gunny bags supplied to it under the contract but it failed. The plaintiff vide its letter dated 29th April, 1987 also informed the defendant about the quantity of outstanding rice and Bardana stocks, but the defendant did not render account and continued to gain time. The plaintiff, therefore, worked out costs of unaccount for rice and Bardana stocks as per market value, which is equivalent to suit amount, and filed the present suit for recovery against the defendant.
2. The defendant in its written statement did not dispute the material facts about entering into contract with the plaintiff, extension of contract period for one year and supply of total quantity of about 185,118 metric tons of rice to it for handling, but asserted that shortage of rice has occurred on account of handling process and due to natural causes beyond its control. Regarding supply of Bardana/gunny bags defendant denied the claim of plaintiff and stated that all Bardana was returned and there was no shortage. Maintainability of the snit was also challenged on various legal grounds.
3. On the pleadings of the parties initially on 27-5-1990 four issues were framed in the suit. However, subsequently on filing of an application under Order XIV, Rule 5, C.P.C. Being C.M.A. No,9108 of 1998, by consent, four other issues were added vide order dated 10-11-1998. All these issues are reproduced as under:-- "(1) Whether the suit is barred by time as alleged?
(2) Whether it is the contractual obligation of the defendant to have exercise all care in respect of stocks including. Its bye-products entrusted to them and are liable for and make good any loss or 'damages therein howsoever caused or arising?
(3) Whether defendant is liable for the value of the shortage of stocks or any part thereof as mentioned in paras. 14 and 18?
(4) Whether the plaintiff is/was the real custodian of the stocks and stores? If so, what is its effect?
(5) Whether any natural losses of rice do accrue during the contract period of handling of rice? If so, what is its effect and whether the defendant can be held responsible for such natural losses?
(6) What is the percentage of natural losses of rice during the handling period?
(7) Whether the losses of rice claimed in the suit come within the range of natural losses? If so, what its effects?
(8) What should the decree be?"
4. At evidence stage, plaintiff filed affidavit in evidence of S.Naseemul Haq, Manager of plaintiff Corporation who produced copy of agreement dated 10th November, 1982 along with tender form as Exh.P/1 and eleven letters regarding correspondence between the parties as Exh.P/2 to P/12.
During his cross-examination this witness further produced documents Exh.P/13 to P/15. From defendant's side its Manager Syed Irtaza Hussain Jaffery filed his affidavit in evidence along with documents annexures A to H and he was cross-examined by the counsel for plaintiff. Defendant also examined two other witnesses Mirza Khalid Baig as Exh.D/2 and Syed Salman Hassan as Exh.D/3. Both these witnesses were ex-employees of the plaintiff and were cross-examined by the counsel for plaintiff. Defendant's witness Syed Irtaza Hussain Jaffery also filed his additional affidavit in evidence and placed on record letter of authority in his favour executed by the proprietor of the defendant.
5. I have heard the arguments of Mr. Samiuddin Sami Advocate for the plaintiff and Syed Saeed Hassan Rizvi Advocate for the defendant.
6. Learned counsel for the plaintiff contended that the shortage of 1278.95 metric tons of rice from the total quantity of rice delivered to' the defendant during contract period has not been denied by ' the defendant, thus, defendant is bound to make this loss of the plaintiff good, which has been worked out in the sum of Rs,33,50,484.40 on the basis of prevalent price of same quality rice at the' time of institution of the suit. Referring, to the other part of the claim relating to shortfall in Bardana/gunny bags learned counsel contended that the receipts/GTN placed on record by the defendant to show return of all gunny bags to the plaintiff through its second -contractor Messrs Island Trading Company Ltd. Are forged documents which have been managed by the defendant through' the lower staff of the plaintiff. Therefore, same cannot be accepted as valid proof for return of all Bardana. Mr. Sarni placed. Reliance upon clause 20 of 'the agreement and sections 150 and 151 of the Contract Act to add force to his subinission that under no circumstances defendant is entitled, not to account for any shortfall in the quantity of rice supplied to it and that such loss of the plaintiff is to be borne by the defendant. In support of his arguments learned counsel placed reliance on the following cases:
(1) The Textile Trading Company v. Habib and others PLD 1956 Sindh 17;.
(2) . Qasim Ali Rajab Ali v. Municipal Corporation of Karachi PLD 1964 Karachi 108;
(3) Somar Purl v. Shyam Narain Gir and others AIR 1954 Patna 586;
(4) Punjab National Bank Limited and another v. S.B. Chaudhary AIR 1943 Oudh 392;
(5) U Thin and others v. DAW HMU and another AIR 1937 Rangoon 142;
(6) Michal Assely and others v. Messrs Abdul Sattar and Brothers PLD 1960 Karachi 346;
(7) Messrs Hafiz Abdul Aziz Yousufani and Company v. Messrs Rauf Oil Mills and Soap Industries PLD 1967 Karachi 714;
(8) Sri Narasimhaswa mi Namagiri, Amman and Sri Ranganathaswami Temples by its Exeutive Officer P. Rangaraju v. Muthukrishna Lyengar AIR 1962 Madras 244;
(9) Messrs Mastersons v. Messrs Ebrahim Enterprises and another 1988 CLC 1381;
(10) The Lahore Central Cooperative Bank Ltd. Lahore v. Messrs Haji Allah Dad Fida Hussain Merchants and Commission Agents 1987 CLC 1435;
(11) Q.B.E. Insurance Ltd. v. The Trustees of the Port of Karachi 1992 CLC 804.
7. A review of above cases shows that in the first case relating to the claim of damages arising out of a contract for the delivery of goods, Court held that the construction of deed of contract should be strict and literal and no deviation therefrom should be permitted. In the second case examining a dispute arising out of contract between a private party and Municipal Corporation of Karachi it was held that no obligation can be implied in contract inconsistent with its expressed terms. In the third case it was held that when there is no ambiguity in a document then the conduct of parties cannot be looked into in interpreting such document. In the fourth case the Court while taking into account proviso (6) to section 92 of the Evidence Act, 1872 observed that where terms of the document are perfectly plain and straight forward no extrinsic evidence is required to show in what manner the language of the document is related to existing facts. In the fifth case the Court while dealing with a case relating to some dispute arising out of a "will" and with reference to section 92 of the Evidence Act held that external evidence as to the intention of parties to deed is inadmissible. In the sixth case, where the contract contained a clause that the terms and conditions as contained at the back of contract deed would form part of the contract, it was held that parties were bound by such terms and conditions. It was further held that where differences arising in commercial matters are not capable of being solved with the help of terms of contract and relevant provisions of law recourse to custom and common practice' is permissible. In the seventh case the .Court taking into account provisions of sections 91 and 92 of the Evidence Act with reference to a written mercantile contract observed that when ambiguous terms or phrases are found in mercantile contract evidence of usage is admissible to explain the meaning of the expressions in the particular trade or locality; and where a contract is silent in respect of incidental terms or conditions which according to the course of business are established in a particular trade, it is customary to find it included in such a contract, and evidence of the usage is admissible to prove that such terms or conditions formed part of contract; unless the incorporation of the terms or conditions will have the effect of introducing something repugnant to or inconsistent with the spirit of the written agreement. In the eighth case the Court after taking into account scope of section 151 of the Contract Act observed that once the contract of bailment is proved and there is entrustment of the goods with the bailee the loss of the subject-matter of the bailment is itself prima facie evidence of the negligence of the bailee. In order to escape liability for the loss occurred the onus of proof will be upon the bailee to show that he had taken necessary standard of care as imposed upon him by the statute. In the nineth case Court examined the provisions of section 151 of the Contract Act, 1872 and observe that this section subjects a bailee to the duty of taking as much care of the goods entrusted to him as a prudent man would take of his own goods similar in quality and bulk. In the tenth case Court; taking note of section 151 of the Contract Act, 1872 observed that due care of the goods entrusted to the bailee is to be taken by him and for this purpose bailee is bound to take as much care of the goods as a man of ordinary prudence would under similar circumstances take of his own goods of the same bulk, quality and value as the goods bailed. In the last case again import of section 151 of the Contract Act was taken into consideration and it was observed that bailee is bound to take as much care of the goods as a man of ordinary prudence would under the similar circumstances take of his own goods.
8. On the other hand Syed Saeed Hassan Zaidi, learned counsel for the defendant referred various documents produced by defendant along with the affidavit in evidence of witness S. Irtaza Hussain Jaffery to show that on the basis of Internationally recognized conventions 3.5% to. 6% shortfall in the quantity of foodgrains, during the process of transportation, handling and storage has been accepted as normal and natural phenomena. He also referred some other documents from the office of plaintiff to fortify his claim. Learned counsel submitted that in the instant case during the contract period of three years total quantity of rice handled by the defendant was 1,85,118.00 metric tons while the shortage of rice found by the plaintiff is only 1,278.95 metric tons, which is only 0.69% of the total quantity of rice handled by the defendant, therefore, as per well recognized business convention and mercantile usage defendant is not liable to bear the loss for such shortage. As to the other claim of the plaintiff regarding shortage of some Bardana/gunny bags learned counsel referred paras. 11 to 17 of the affidavit in evidence of defendant's witness Syed Irtaza Hussain Jaffery and the documents annexures A to C annexed with it to show that there was no shortfall in the Bardana/gunny bags supplied to the defendant. Learned counsel in this regard also placed reliance on the evidence of witnesses Mirza Khalid Baig and Syed Salman Hassan, who were ex- employees of the plaintiff and had supported the case of the defendant with reference to genuineness of annexures "A" to "C". In support of his arguments learned counsel placed reliance upon Messrs Rice Export Corporation v. Messrs A.H. Corporation and three others 2002 CLC 607. In this case learned Single Judge of this Court, dealing with an identical case of same plaintiff examined all the relevant aspects of the matter, with reference to more or less same set of documents as relied by the defendant, considered similar contentions raised by the learned counsel for the parties and held that the loss of (sic) of the total quantity handled by the Contractor is natural incident of contract, therefore, plaintiff cannot be said to have suffered loss or the defendant/bailee cannot be held responsible for such loss.
9. I have carefully considered the arguments advanced by learned counsel for the parties and perused the case record. My findings on the above issues are as under:-- ISSUE NO.1.
10. This issue has been framed on the plea raised by the defendant. However, during the course of his arguments learned counsel for defendant stated that the present suit, inter alia, being a suit for accounts and having been filed within three years from the date of the letter dated 14th January 1989 whereby the defendant was finally called upon for settlement of accounts and payment of outstanding claim of the plaintiff, is within time, therefore, he is not pressing this issue. Accordingly this issue is answered in the negative. ISSUE NOS. 2 TO 7:
11. Since all these issues are interconnected, therefore, same are being discussed together.
12. The case of the plaintiff is that during the contract period of three years, 1,85,118.00 metric tons of rice was handled by the defendant at its TPX Godown, Karachi. After the contract period/extended period was over plaintiff called upon the defendant to settle the accounts but it failed to do so. The plaintiff vide its letter dated 29th April, 1987 also informed the defendant about the shortage in the quantity of rice and Bardana stocks but received no response. Thereafter plaintiff further reserved notices dated 13-8-1987 and 14-1-1989 and on failure of the defendant to render accounts filed the present suit for recovery of loss occurred due to such shortfall and in the alternative for rendition of accounts. The only witness who entered into the witness box on behalf of the plaintiff has also deposed on same lines.
13. It will be seen that claim of the plaintiff in this suit is twofold, first claim is for shortfall of 1278.95 metric tons of rice and the other is for shortfall in the Bardana stocks. So far as the question of shortage of Bardana/gunny bags is concerned as against the oral word from plaintiff's side the defendant has produced documentary evidence which shows that the whole quantity of left over Bardana/gunny bags was returned by it to Messrs Island Trading Company Ltd. Under the instructions of the plaintiff. The fact that the plaintiff has instructed the defendant for this purpose is not disputed. The documents produced by the defendant to show return of all Bardanas/gunny bags are further supported from the evidence of two witnesses Mirza Khalid Baig and Syed Salman Hassan who were ex-employees of the plaintiff. In such circumstances mere plea of the plaintiff that certain quantity of gunny bags was not returned by the defendant is not tenable. It is pertinent to note that as per annexures 'A' to 'C' of the affidavit in evidence of witness Syed Irtaza Hussain Jaffery remaining gunny bags were returned by the defendant through Messrs Island Trading Company Ltd. In case there was any doubt about the genuineness of these documents then to rebut this position it was necessary for the plaintiff to have examined some persons from Messrs Island Trading Company to fortify its claim that no Bardana was returned or such documents are forged, which has not been done in the instant case. Thus on facts I find that the defendant has satisfactorily discharged the burden of proof regarding return of all Bardanas/gunny bags of the plaintiff.
14. Reverting to other aspect viz. Shortfall of 1,278.95 metric tons of rice it may be observed that the shortage of such quantity of rice has not been disputed by the defendant but its case is that this shortage has not occurred due to any negligence or mishandling of rice by it but due to natural reasons beyond its control, which is common feature in the process of transportation, handling, and storage of foodgrains. The plaintiff's only witness S. Naseemul Haq was asked certain questions in his cross examination in this regard, his reply was as under:- It is correct that no handling agent can take out of the godown area any stocks and stores without the permission of the plaintiff. It is correct to suggest that there was no compliant about taking out of stock/stores outside the godown area unauthorisedly against the defendant. It is correct to suggest that during the handling of the crops in the godown handling losses occur. I cannot say as to whether any natural losses of stock and stores do occur during the handling of the same. It is correct to say that in February, 1983 a report was submitted by the Committee constituted by the plaintiff for the determination of transit, handling and processing of rice and in such report maximum 3% natural losses were suggested. It is correct of suggest that on 19-4-1995 a meeting of Board of Directors of the plaintiff was held wherein the Board agreed to allow 3% loss in handling and storage of stock. Voluntarily says that it was further suggested that 3% loss in handling losses can be agreed provided it is supported by an international standard and necessary approved by the Government. It is correct to suggest that M/s SGS in their report 30-5-1995 submitted that 3.5% to 6% natural losses occur during the contract period of handling of rice. It is correct that the claim of the plaintiff in the above suit regarding the rice/grain is 0.69% of the total handling of the rice by the defendant during the contractual period.
15. The above admissions of the plaintiff's witness make it clear that it is natural and unavoidable phenomena that due to drying of moisture from rice, growing of insects in the grains thereby causing damage to the crop, feeding of foodgrains by rodents and birds and during the transit, handling and storage process some shortfall in the rice stocks do occur. The defendant's witness in his evidence has produced the copy of report on determination of transit handling and processing loss in rice. Annexure D. In this detailed reported prepared by plaintiff's own officers after taking into consideration certain other reports regarding shortage of stock in rice in the other countries following view was taken by the committee:
(1) It is an established fact that the weight loss occurs in rice consignments in transit from the procurement centres to. Karachi Godowns and this loss can be to the extent of 5% on an average.
(2) Storage and handling losses due to various factors range in the world from 8 to 7% loss in weight can be higher if the storage period prolongs. In our storage conditions the loss may be around 2%.
(3) Re-processing/re-cleaning loss may be considered at 0.5 of the stocks which are mill processed.
(4) Total losses on account of all the above mentioned factors can be placed at 3% at maximum.
16. In the same context the other report annexure E is also relevant which reads as under:-- Item No,2: Loss in weight of Rice in RECP Godowns during prolonged storage, Multiple Handling process and Transportation before shipment. The Board, after going through the Working Paper and detailed deliberations, agreed in principle to allow 3% loss in handling & Storage etc. With the additions a & b of para 21, page 8 of Working Paper. The Board however, directed that Internationally reputed firms like SGS etc., may be approached in writing and International Standards on the subject if available with them may be obtained. The full facts of the case taking into account the recommendations of Committee appointed for the purpose may be sent to the Ministry for their consideration and approval.
17. The defendant has also placed on record copy of letter dated 30th May 1995 of SGS (Pvt) Ltd which is addressed to the Manager (M&M) of the plaintiff Corporation as annexure F wherein the said company has informed the plaintiff as under:- "In a controlled warehousing system these losses add up 3.5% to about 6%. Consideration for shortage by moisture loss is estimated per annum around 2% specially under tropical conditions unless due care is given for dunnaging and proper ventilation. This includes loss of moisture in jute bags. Apart from above, difference of weight plus/minus occurs also from co-efficient of variation between two co-efficients of variation between two devices of scale weighing. Based on data gathered to different parts of the world the co-efficient of variation of 0.01 % applies at each weighing operation. We trust the foregoing will be found of assistance and with best regards. Yours truly.
18. The case of the defendant regarding natural causes for shortfall in the quantity of food grains is further supported from the report annexure "G" to the affidavit of defendant's witness which reveals as under:- "The rice, after receiving at Karachi is stored in three godowns of the RECP which are QRG, Landhi and TPX. Yearwise storage losses at these godowns during the period 1990-1996 is given as under:- - TABLE-IX YEAR-WISE STORAGE LOSSES Year QRG LANDHI TPX 1990-91 1.7% - 9.4% 1991-92 4.4% 6.7% 4.3% 1992-93 3.5% 2.3% - 1993-94 3.6% - 3.5% 1994-95 - - - 1995-96 - - - (Annual Average Loss) 3.3% 4.5% 5.7% The above table shows that the storage losses are higher than that indicated by the Committee appointed in 1983 which is 2.5%
19. It is pertinent to mention here that authenticity of none of the above referred reports/documents has been disputed by the plaintiff.
20. In view of the above discussed evidence it is clear that the shortfall in the handling of rice in the present case, which seems to be about 0.69% of the total quantity of rice handled by the defendant is much below the well recognized standard and it is due to natural causes which wen beyond the control of defendant and not due to any A negligence or act or omission of the defendant. When the plaintiff being specialized in dealing with such transactions, was aware of all these eventualities but still it did not bother to incorporate any specific clause in the agreement to meet such situation, it cannot claim benefit of its own unfair, rather dishonest attitude. In another case of the plaintiff M/s. Rice Export Corporation v. A.H. Corporation and three others (2002 CLC 607) when same controversy came up for consideration before the learned Single Judge of this Court he examined the relevant provisions of Contract Act, various clauses of agreement executed between the parties and same set of documents which have been placed on record in the present suit by the defendant and on that basis came to the conclusion that even shortage of stock to the extent of 1.6% of the B total quantity is natural incident of contract therefore the defendant was not saddled with the responsibility to meet such loss. Mr. Samiuddin Sami, learned counsel for plaintiff did not dispute that in the said case contract executed by the plaintiff was on the same terms as in the instant case and the documents taken into consideration by the learned Single Judge to record his conclusion in favour of defendant were 'also same. However, he attempted to make distinction on the grounds that in the present case as per the terms of the contract process of transportation was not involved and that case referred by him at the bar were not considered in that case. To rebut these submissions, suffice it to observe that no doubt process of transportation was not involved in the contract with the defendant but undisputedly transportation of rice (sic) the time of loading/unloading and storage of rice in the godown (may be through some other contractor), which must have resulted in usual loss of quantity.
21. There is no cavil to the principles of law discussed in various cases referred by Mr. Samiuddin Sami but in the facts and circumstances discussed above. Ratio of these cases goes in favour of defendant and not in favour of plaintiff's case. Further the ratio of judgment in the case of M/s. Rice Export Corporation v. M/s. A.H. Corporation (2002 CLC 607) is attracted to the present case with all force.
22. In the light of above discussion, issues Nos. 2 to 7 are separately answered as under:-- Issue No,2: It was contractual obligation of the defendant to have exercised all care in respect of stocks including its bye-products entrusted to it. However, in the instant case there was no breach of such obligation by the defendant and the shortfall of 1278.95 metric tons of rice has occurred due to natural causes, which were beyond the control of defendant. The defendant is therefore, not liable to make good any such loss or damages. Issue No,3. This issue is answered in negative.
Issue No,4. After entrustment of rice stocks and Bardana to the defendant, defendant was the custodian of the same as bailee, and not the plaintiff.
Issue No,5. As discussed above natural losses occurred during the contract of handling of rice but for such losses defendant cannot be held responsible. Issue is answered accordingly.
Issue No,6. Percentage of loss in the quantity of rice during the handling period was approximately 0.69%.
Issue No,7. This issue is answered in the affirmative.
Issue No,8. In view of my findings on issues Nos. 1 to 7 suit of the plaintiff is dismissed with no order as to costs.